Beijing Fito Med. Co. v. Wright Med. Tech.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 19a0063n.06
Case Nos. 17-6530/6531
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Feb 07, 2019
BEIJING FITO MEDICAL COMPANY, LTD., ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellant / Cross-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE WESTERN DISTRICT OF
WRIGHT MEDICAL TECHNOLOGY, INC., ) TENNESSEE
)
Defendant-Appellee / Cross-Appellant. ) OPINION
)
BEFORE: THAPAR, BUSH, and NALBANDIAN, Circuit Judges.
NALBANDIAN, Circuit Judge. In this case, we consider whether Wright Medical
Technology (“Wright”) breached its distribution agreement with Beijing Fito Medical Company
(“Fito”), which covered Fito’s distribution of Wright’s medical device products throughout China.
Much of this dispute turns on whether Wright’s removal of three products from the agreement
breaches the implied covenant of good faith and fair dealing under Tennessee law. We conclude,
as a matter of law, that it does not. Because the contract gave Wright broad discretion to remove
products—and because Wright did not act in bad faith when it did so—Wright did not breach the
implied covenant of good faith and fair dealing. Accordingly, we affirm the district court’s grant
of summary judgment on Fito’s claims. We also hold that the district court properly exercised its
discretion when it issued an anti-suit injunction to enjoin a substantially similar lawsuit that Fito
filed in a Chinese court. We AFFIRM.
Nos. 17–6530, 17–6531, Beijing Fito Med. Co. v. Wright Med. Tech.
I.
A.
Tennessee-based Wright manufactures medical devices, and Fito, a Chinese company,
distributes medical devices throughout China. In October 2012, Wright and Fito executed a three-
year contract, under which Fito agreed to serve as Wright’s exclusive distributor of hip, knee, foot,
ankle, and biologics products in twenty Chinese provinces. The arrangement was straightforward:
Fito would purchase products from Wright and then resell them under its own name to purchasers
in its distribution network.
Several provisions in the contract gave Wright the ability to modify its relationship with
Fito. First, Wright could terminate the contract outright, but only if one of these four events
occurred: (1) Fito failed to perform its obligations under the contract; (2) Fito failed to meet its
minimum sales requirement; (3) Fito dissolved, ceased commercial activity, or underwent judicial
reorganization or bankruptcy; or (4) a competitor acquired Fito. Second, Wright could remove
individual products from the contract as long as Wright gave Fito 90 days’ notice. Third, Wright
could assign any part or all of the contract to a third party.
In May 2013, less than five months after the contract took effect, Wright entered into a
different contract with Shanghai CIIC, making CIIC its exclusive “logistics distributor” of foot,
ankle, and biologics products in China. Around the same time, Wright sold Fito more than
$920,000 in foot, ankle, and biologics products and more than $270,000 in hip and knee products.
Wright announced plans to sell its hip and knee business to MicroPort Orthopedics, another
Tennessee-based medical device manufacturer in June 2013. Under that agreement, Wright
transferred many of its distribution contracts to MicroPort, including its contract with Fito. This
created a problem: the original contract gave Fito the right to distribute hip and knee products—
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as well as foot, ankle, and biologics products. But MicroPort had no interest in distributing
Wright’s foot, ankle, and biologics products. Thus, Wright informed Fito in an August 29, 2013,
letter that it planned to delete the foot, ankle, and biologics products from the contract before
completing the MicroPort transaction. In the same letter, Wright proposed a new contract covering
the foot, ankle, and biologics products. Fito alleges—and Wright does not contest—that the
proposed contract would have required it to purchase more of the foot, ankle, and biologics
products than under the old contract. Fito never agreed to the proposed contract, nor did it make
a counterproposal, and on May 16, 2014, Wright wrote Fito to revoke its proposal.
Wright insists that Fito lost the right to distribute the foot, ankle, and biologics products on
November 27, 2013, 90 days after it informed Fito that it was deleting those products. And Wright
contends that its contractual relationship with Fito ended altogether on January 9, 2014—the day
that Wright completed the sale of its hip and knee business to MicroPort. But Fito alleges that
sometime in late 2013, Wright began to contact its customers and falsely claim that Fito could no
longer sell Wright’s products. And neither party disputes that Wright contacted Fito’s Chinese
customers through an August 13, 2014, letter, which informed them that Fito no longer had the
right to distribute Wright’s foot, ankle, and biologics products.
B.
Under the contract’s forum selection clause, Fito filed this action in the Western District
of Tennessee in April 2015, alleging that Wright breached the contract and tortiously interfered
with its business relationships. Wright responded with counterclaims that Fito also breached the
contract by using Wright’s name and distributing Wright’s products after the contract had ended
and by using Wright’s confidential information to manufacture and distribute copies of Wright’s
products. Wright also alleges that Fito tortiously interfered with Wright’s business relationships
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when it contacted Wright’s customers and informed them that Wright breached the contract and
defrauded Fito. Separately, Wright pleads three breach of contract claims in the alternative, all
related to Fito’s use of Wright’s proprietary information after the contract ended. Wright agrees
to pursue its alternatively pleaded claims only if this court determines that its contractual
relationship with Fito remained in effect after January 9, 2014—that is, the date that Wright
completed the sale of its hip and knee business to MicroPort.
Wright moved for summary judgment on Fito’s breach of contract and tortious interference
claims, and in June 2017, the district court granted that motion. Because the district court
determined that Wright and Fito’s contractual relationship ended on January 9, 2014, it did not
reach Wright’s alternatively pleaded claims. Finally, in November 2017, the district court granted
Fito’s summary judgment motion and dismissed Wright’s remaining claims for breach of contract
and tortious interference. Wright asks this court to reverse that judgment only if we reverse the
court’s grant of summary judgment on Fito’s breach of contract and tortious interference claims.
While the Tennessee litigation was ongoing, Fito filed a parallel lawsuit against Wright in
January 2017 in the Beijing Huairou District People’s Court of the People’s Republic of China.
Fito’s claims in the Chinese litigation are substantially similar to its claims in the Tennessee
litigation: Fito alleges that Wright breached the contract by terminating the distribution agreement
without cause and by entering into an exclusive distribution agreement with Shanghai CIIC. And
Fito alleges that Wright falsely represented to Fito’s customers that the distribution agreement was
no longer in effect. Wright did not learn about the Chinese litigation until it received service on
August 22, 2017, two months after the district court granted its summary judgment motion.1
1
Fito’s counsel in the Chinese litigation said in a sworn statement that the Chinese court denied
Fito’s request to serve Wright by courier, thus requiring Fito to serve Wright in accordance with
the Hague Service Convention. Fito’s counsel insisted that the delay in serving Wright “was not
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Shortly after being served, Wright filed a motion for an anti-suit injunction in the Western District
of Tennessee to enjoin the Chinese litigation, and the district court granted that motion in
November 2017.
II.
We review de novo an order granting summary judgment. Peffer v. Stephens, 880 F.3d
256, 262 (6th Cir. 2018). This court must take the evidence in the light most favorable to the
nonmoving party and ask whether there is any “genuine dispute as to any material fact” that
requires submission to a jury. Fed. R. Civ. P. 56(a). “Summary judgment is appropriate only
when there is no genuine issue of material fact ‘such that a reasonable jury could return a verdict
for the nonmoving party.’” Wasek v. Arrow Energy Servs., Inc., 682 F.3d 463, 467 (6th Cir. 2012)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
A.
The center of this dispute involves section 3.3 of the contract between Fito and Wright,
which addresses Wright’s ability to remove products available for distribution:
[Wright] may, after having given ninety (90) days prior notice to [Fito], delete any
of the Products, provided that the orders received and accepted before the effective
date of such notice shall be filled and provided further that if [Fito] within sixty
(60) days of receipt of such notice provides [Wright] with documentary evidence
of any invitation for tender for such Products for which [Fito] has already submitted
its bid, then [Wright] will undertake to continue to supply such Products directly
only nine (9) months after the date of such original notice.
(R. 26-1, Contract ¶ 3.3.) This section gives Wright significant discretion to delete products from
the distribution contract. It imposes no express limits on Wright’s ability to delete products, and
a plain reading would suggest that Wright could delete any product for any reason. But Fito
the result of any intentional act by Fito; rather, it was the result of the complicated and lengthy
process of obtaining service of process through the Hague Convention.” (R. 351-1, Decl. of Qing
Li.)
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contends that Wright’s discretion is not boundless. Indeed, Fito argues that both the contract’s
construction and the implied covenant of good faith and fair dealing cabin Wright’s discretion to
delete products from the distribution agreement—and that Wright breached the contract when it
deleted the foot, ankle, and biologics products to complete the MicroPort transaction. We consider
each argument in turn.
Under Tennessee law, courts must construe all contractual terms harmoniously “to give
effect to all provisions and to avoid creating internal conflicts.” D&E Constr. Co., Inc. v. Robert
J. Denley Co., 38 S.W.3d 513, 518–19 (Tenn. 2001) (quoting Wilson v. Moore, 929 S.W.2d 367,
373 (Tenn. Ct. App. 1996)). Thus, an individual provision “must be interpreted in the context of
the entire contract.” Id. at 519. Given that principle, we must read section 3.3 in conjunction with
the entire contract, including section 11.2, which identifies four discrete conditions that justify
early termination of the contract. Reading those two sections together necessarily cabins Wright’s
discretion to delete products under section 3.3. If Wright could delete all of the products through
section 3.3 without cause, then that section would serve as an alternative termination clause,
rendering section 11.2 superfluous. But when we construe a contract, we must avoid “giv[ing]
effect to one provision while rendering another provision superfluous or without meaning.”
Stonebridge Life Ins. Co. v. Horne, 2012 WL 5870386, at *6 (Tenn. Ct. App. Nov. 21, 2012)
(quoting 16 Williston on Contracts § 49:14 (4th ed.)). Thus, we conclude that Wright could not
delete all products from the distribution agreement under section 3.3.
That conclusion squares with one of our earlier decisions, Karl Wendt Farm Equipment
Co. v. International Harvester Co., in which we interpreted a similar contract between a
manufacturer and dealer of farm products. 931 F.2d 1112 (6th Cir. 1991). That contract, a
distribution agreement, referenced a list of products that the parties agreed to distribute; it also
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gave the manufacturer the right to add and delete products from the list. Id. at 1120. After a
slowdown in the farm equipment market, the manufacturer sold its farm products business to a
third-party, which declined to pursue a distribution relationship with the dealer. When the dealer
sued the manufacturer for breach of contract, the manufacturer raised frustration of purpose as an
affirmative defense and claimed that the contract authorized it to withdraw completely from the
farm equipment market. Id. at 1120. The manufacturer argued that because it could delete
individual products from the distribution agreement, it could delete all products from the
distribution agreement and effectively exit the market altogether. We rejected the manufacturer’s
argument, explaining that it would be “quite a stretch to believe that the parties intended this
provision to function as an alternative means for termination of the contract.” Id. at 1120–21.
Instead, we embraced the district court’s conclusion that the manufacturer could “eliminate or
change certain products or product lines, but not [] eliminate its farm products altogether.” Id. at
1120.
Thus, Wright could not have deleted all products from the contract under section 3.3. But
because Wright deleted only the foot, ankle, and biologics products—leaving the hip and knee
products in place—it did not breach the contract by circumventing section 11.2’s termination
provision. Still, we must determine whether the implied covenant of good faith and fair dealing
limits Wright’s ability to delete some—but not all—products from the distribution agreement.
In Tennessee, every contract contains an implied covenant of good faith and fair dealing in
its performance and its enforcement. Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc.,
395 S.W.3d 653, 661 (Tenn. 2013) (collecting cases). This rule is not inviolable. Parties may
contract around the implied covenant with express language that establishes a different standard
of performance, such as one giving a party “sole, absolute, unfettered discretion” over certain
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matters. Id. at 669; see also Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684, 686 (Tenn.
1996). But unless the parties expressly disclaim the implied covenant, the covenant governs their
performance. Dick Broad., 395 S.W.3d at 669. Because section 3.3 is silent on this matter, the
implied covenant governs the parties’ performance.
Under Tennessee law, there is no standalone claim for breach of the implied covenant—it
does not form an independent basis for relief. See, e.g., Berry v. Mortg. Elec. Registration Sys.,
2013 WL 5634472, at *7 (Tenn. Ct. App. Oct. 15, 2013). Instead, a party contending that there
has been a breach of the implied covenant of good faith and fair dealing must connect that
contention to a claim for breach of a specific contractual provision. A breach of the implied
covenant “may be an element or circumstance” of a breach of contract, but a party alleging a breach
must identify a provision of the contract that the other party has breached. Solomon v. First Am.
Nat. Bank of Nashville, 774 S.W.2d 935, 945 (Tenn. Ct. App. 1989). Here, Fito succeeds where
few plaintiffs do: its properly pleaded claim identifies a provision of the contract, section 3.3, that
Wright allegedly breached. The question is whether Wright’s deletion of the foot, ankle, and
biologics products violated the implied covenant and thereby breached section 3.3.
Wright restates the principle that a party cannot breach the implied covenant of good faith
and fair dealing when it performs as specifically allowed under the contract. See, e.g., Maverick
Grp. Mktg., Inc. v. Worx Envtl. Prods. Ltd., 2015 WL 8335153, at *7 (W.D. Tenn. Dec. 8, 2015)
(internal quotations omitted), aff’d, 659 F. App’x 301 (6th Cir. 2016). And Wright argues that
section 3.3 specifically allows it to delete products from the distribution agreement, which
forecloses any claim that it breached the implied covenant. But if we read that principle too
broadly, it would swallow the competing rule that the implied covenant applies to all contracts
unless the parties expressly disclaim the covenant.
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Dick Broadcasting reveals this tension. In that case, the Tennessee Supreme Court held
that there was a genuine factual dispute on whether one party breached the implied covenant by
withholding its consent to the assignment of a right-of-first-refusal agreement. Dick Broad.,
395 S.W.3d at 672. The contract in that case granted Dick Broadcasting Company the right-of-
first-refusal to purchase Oak Ridge FM’s radio station assets. Id. at 656. Dick Broadcasting could
assign that right to a third party, provided it received Oak Ridge’s prior written consent. Id. at
657. The contract imposed no conditions on Oak Ridge’s ability to refuse consent. When Dick
Broadcasting entered into a purchase agreement to sell its assets, including the right-of-first-
refusal, Oak Ridge refused to consent to the sale. Id. at 658. Oak Ridge’s president later
acknowledged that, on the advice of his counsel, he “refused to agree to the assignment without
additional consideration” and hoped to broker a “separate and more profitable agreement” with the
purchaser of Dick Broadcasting’s assets. Id. Although Oak Ridge acted as specifically allowed
by the contract when it refused its consent, the Tennessee Supreme Court held that the implied
covenant “requires a party to act with good faith and in a commercially reasonable manner in
refusing consent to assign the agreement” and thus vacated the trial court’s grant of summary
judgment to Oak Ridge. Id. at 672. Dick Broadcasting therefore makes clear that a party may
breach the implied covenant of good faith and fair dealing—and therefore breach a contract—even
when it exercises discretion that the contract confers.
Whether a party has breached the implied covenant can be fact-specific, and courts often
defer resolving that question to the jury. Id. at 671. But courts have a role to play, too. Indeed,
determining “what is required by the duty of good faith in a given case turns on an interpretation
of the contract at issue.” Lamar Advert. Co. v. By-Pass Partners, 313 S.W.3d 779, 791 (Tenn. Ct.
App. 2009). When interpreting the contract, the court must “look to the language of the instrument
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and to the intention of the parties, and impose a construction which is fair and reasonable.” Id.;
see also Wallace, 938 S.W.2d at 686.2
Here, the contract expressly contemplates the possibility that Wright could sell some or all
of its assets to a third party. Section 14.3 states that Wright “may freely assign any or part of its
rights and obligations” under the contract. (R. 26-1, Contract ¶ 14.3.) And of course, the contract
gives Wright the discretion to delete products from the distribution agreement. When the parties
signed the contract, they could have reasonably expected that Wright might sell part of its business
to a third party. Less likely—but still conceivable—was the possibility that Wright might delete
some products under section 3.3 to prepare for such a sale. Fito argues that section 3.3 allows
Wright to delete products only for supply chain-related issues, such as Chinese import restrictions
or product discontinuations. But the contract contains no language limiting the deletion of
products to those scenarios, and we see no reason why supply chain-related issues were any more
foreseeable than the possibility that Wright might sell its business to a third party.
Wright’s conduct may strike some as aggressive. But sophisticated parties such as Wright
and Fito “pursue their own self-interest and understand and expect that the parties with whom they
are dealing are doing likewise.” SecurAmerica Bus. Credit v. Schledwitz, 2014 WL 1266121, at
*29 (Tenn. Ct. App. Mar. 28, 2014) (quoting Dick Broad., 395 S.W.3d at 674 (Koch, J.,
concurring)). When it was negotiating the contract, Fito could have insisted on language that
limited Wright’s discretion to delete products under section 3.3. And if it did not succeed, Fito
could have declined to execute the contract. But Fito cannot rely on the implied covenant to “avoid
or alter the terms of an agreement,” Jackson v. CitiMortgage, 2017 WL 2365007, at *9 (Tenn. Ct.
2
The Tennessee Supreme Court has suggested that a court must look to the “objectively reasonable
expectations of parties,” rather than the parties’ subjective intent, when evaluating the claim.
Wallace, 938 S.W.2d at 687 (quoting Tolbert v. First Nat’l Bank, 823 P.2d 965, 970 (Or. 1991)).
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App. May 31, 2017), and we will not read new conditions into a contract that the two sophisticated
parties willingly brokered, simply because Fito has come to regret not bargaining harder.
Relatedly, we note that commercially reasonable, self-interested business tactics do not, by
themselves, breach the implied covenant of good faith and fair dealing. Tennessee courts readily
acknowledge that the duty of good faith and fair dealing is not “specifically defined.”
SecurAmerica, 2014 WL 1266121, at *26. And the majority opinion in Dick Broadcasting does
not address the scope of the implied covenant, prompting Justice Koch’s separate concurrence to
“address this important point.” Dick Broad., 395 S.W.3d at 673 (Koch, J., concurring). That
concurrence cautions against a broad definition of good faith that undermines parties’ freedom to
contract and instead suggests a narrower definition: the absence of bad faith. Id. at 674. Bad faith
is “not simply bad judgment or negligence.” Id. at 675 (internal citations omitted). Rather, bad
faith “involves a dishonest purpose” and may include fraud, deceit, or the refusal to fulfill a
contractual obligation. Id. (internal citations omitted); see also SecurAmerica, 2014 WL 1266121,
at *29.
Fito has not advanced sufficient evidence to suggest that Wright’s conduct rises to the level
of bad faith. We can trace the origin of the parties’ conflict to one event: Wright’s agreement to
sell its hip and knee business, including its contract with Fito, to MicroPort. There is no dispute
that the distribution agreement permitted Wright’s transaction with MicroPort.3 To prepare for
this transaction, Wright deleted the foot, ankle, and biologics products from the contract. The
record contains no evidence that Wright sold its hip and knee business as pretext for deleting the
foot, ankle, and biologics products or for harming Fito’s business.
3
We note that the parties expressly disclaimed the implied covenant of good faith and fair dealing
in section 14.3, giving Wright the “sole discretion” to sell any or part of its rights and obligations
under the distribution agreement. (R. 26-1, Contract ¶ 14.3.)
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To be sure, Wright sold Fito more than $900,000 in foot, ankle, and biologics products less
than four months before Wright told Fito that it was deleting those same products from the
distribution agreement. Nonetheless, we underscore the absence of any evidence suggesting that
Wright made this sale in bad faith. The record suggests that Wright was eager to meet internal
goals in the Asian market and thus “push[ed] hard” to close transactions with multiple distributors,
including Fito. (R. 222-5, Email.) To do so, Wright offered Fito a discount on the sale by
providing $1.4 million in inventory—for which Fito paid less than $1.2 million. Fito may have
come to regret placing such a large order, and indeed, Fito executive Wayne Yue described the
purchase as a “mistake” and a “wrong decision that I had made.” (R. 263-1, Dep. of Wayne Yue
at 106:24–107:4.) But just because one party regrets making a transaction does not mean that the
other party to the transaction acted in bad faith. We also note that Wright proposed a new contract,
covering the same three deleted products, after it announced it was selling its hip and knee
business. True, the proposed contract would have required Fito to purchase more of the foot,
ankle, and biologics products than under the old contract. Wright’s proposal might have been be
hard-nosed, but it was far from fraudulent, deceitful, or dishonest, nor does Fito contend that it
ever sought to negotiate more favorable terms to the proposed contract. The mere presentation of
a proposed contract—which itself is an invitation to negotiate—does not amount to bad faith.
Without evidence of bad faith, Fito’s claim for breach of the implied covenant of good faith and
fair dealing cannot survive summary judgment.
We conclude that Wright did not breach the implied covenant of good faith and fair dealing
and affirm the district court’s grant of summary judgment on this claim.
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B.
Fito raises a separate but related breach of contract claim regarding Wright’s deletion of
the foot, ankle, and biologics products under section 3.3. Fito argues that while Wright may delete
a product under section 3.3 and then cease selling that product to Fito, Wright cannot compel Fito
to stop selling or distributing a deleted product. As Fito notes, some clauses in the contract make
clear when Fito must cease distributing and promoting Wright products. Section 12, for example,
says that if the parties do not renew their agreement or if one party triggers a termination condition,
Fito “must cease promoting and reselling the Products as from the effective date of termination or
expiry of the Contract . . . .” (R. 26-1, Contract ¶ 12.1.) And section 2.4 allows Wright to “delete
specific areas within a Territory or delete exclusivity rights granted to areas within a Territory” if
Fito fails to meet its sales quotas. (Id. at ¶ 2.4.) By contrast, section 3.3 does not address Fito’s
exclusive rights to promote, distribute, and resell deleted products. Fito asks this court to infer
that section 3.3 only affects Fito’s ability to purchase products from Wright—but does not affect
Fito’s ability to distribute deleted products Fito had already purchased.
The plain language of the contract does not support Fito’s argument. When read together
with the rest of section 3, section 3.3 prevents Fito from distributing deleted products (with the
exception of orders placed before the product was deleted). Section 3.1 states that Fito’s
“exclusive right of distribution is granted for the ‘Products’ listed in Exhibit 1 to the Contract” and
that Fito “may not promote or distribute other products of Wright unless authorization to do so is
granted in writing by Wright.” (Id. at ¶ 3.1.) In essence, section 3.1 gives Fito the right to promote
and distribute only the products listed in Exhibit 1 of the contract—i.e., hip, knee, ankle, foot, and
biologics products—unless Wright says otherwise. And section 3.3 allows Wright to delete
products from the Contract, effectively striking those products from Exhibit 1. Because Fito
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cannot promote or distribute products not listed in Exhibit 1—and because section 3.3 allows
Wright to delete products from Exhibit 1—Fito cannot promote or distribute products that Wright
has deleted under section 3.3, unless Wright gives written authorization to the contrary.
Relatedly, Fito argues that Wright breached section 11.2, the contract’s termination clause,
when it deleted the foot, ankle, and biologics products from the distribution agreement and
divested Fito of the right to distribute those products. According to Fito, section 11.2 prevents
Wright from divesting Fito of its distribution rights unless either party triggers one of four
conditions justifying early termination of the contract. The record contains no evidence that either
party triggered any condition, yet Fito nonetheless lost its right to distribute the foot, ankle, and
biologics products. Fito’s argument, however, is unavailing. Section 11.2 outlines the grounds
for a complete termination of the contract. But Wright never terminated the contract with Fito.
Wright deleted the foot, ankle, and biologics products from the contract—thus divesting Fito of its
ability to distribute those products—but it transferred its hip and knee business to MicroPort. All
along, Fito retained the right to distribute hip and knee products, either on behalf of Wright or
MicroPort. Because Wright never fully terminated the contract, Fito’s argument fails.
As a result, we affirm the district court’s interpretation of section 3.3 and conclude that
Fito lost its right to distribute the foot, ankle, and biologics products after Wright deleted those
products from the distribution agreement. And we hold that Wright did not breach section 11.2 of
the contract when it divested Fito of its right to distribute the foot, ankle, and biologics products.
C.
Next, we consider whether Wright breached section 2.1 of the contract, which gives Fito
exclusive distribution rights in twenty Chinese provinces. Fito’s argument is straightforward: so
long as it remained Wright’s exclusive distributor, Wright could not appoint anyone else to
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distribute its products in the same territory. Fito alleges that Wright did exactly that when it entered
into a “Logistic Distributorship Agreement” with Shanghai CIIC on May 8, 2013. That agreement
named CIIC as Wright’s “select, Exclusive, independent logistics distributor,” and covered the
same foot, ankle, and biologics products—and some of the same Chinese provinces—as Wright’s
earlier contract with Fito. Wright, by contrast, contends that the agreement was a matter of
logistical convenience, with CIIC merely acting as the entity from which Fito purchased Wright’s
products. And Wright claims that the contract allows this kind of agreement. Indeed, section 2.2
states that Fito “shall purchase the Products exclusively from [Wright] or from entities as directed
by [Wright], which may be communicated to it at any time by [Wright].” (Id. at ¶ 2.2.)
Setting aside the nature and purpose of Wright’s agreement with CIIC, we must first
determine when Fito lost the right to distribute Wright’s foot, ankle, and biologics products. Under
section 3.3, Wright had to give Fito 90 days’ notice that it was deleting a product from the
distribution agreement. Wright essentially did so with its August 29, 2013, letter, which informed
Fito of the asset sale to MicroPort and the impending deletion of the foot, ankle, and biologics
products from the contract.4 Thus, Fito retained the exclusive right to distribute Wright’s foot,
ankle, and biologics products for 90 days after receiving Wright’s letter—that is, until November
27, 2013. Fito offers no evidence to suggest that CIIC distributed Wright’s products before that
date. To be sure, the record contains evidence that CIIC sold foot, ankle, and biologics products
to Fito’s customers in 2014 and 2015, but that does not help Fito’s case. By 2014, Fito no longer
had any right—let alone the exclusive right—to distribute Wright’s products. Because Fito cannot
4
We note that although the August 29, 2013, letter purports to immediately delete the foot, ankle,
and biologics products from the distribution agreement, Wright could not delete any product under
section 3.3 without giving Fito 90 days’ notice. Thus, the deletion was not effective until
November 27, 2013. Fito has never challenged the adequacy of this notice.
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show that it suffered any damages, its breach of contract claim necessarily fails. See, e.g., Haynes
v. Bass, 2016 WL 3351365, at *6 (Tenn. Ct. App. June 9, 2016) (“[F]or a claim for breach of
contract, a plaintiff must prove damages caused by the breach of the contract.”) (citation omitted).
Separately, Fito argues that Wright breached the implied covenant of good faith and fair dealing,
simply by executing the agreement with CIIC while the contract with Fito was still in effect. But
this claim suffers from the same flaw as Fito’s breach of contract claim: Fito cannot show that it
suffered damages from the mere existence of Wright’s agreement with CIIC. See id.
For these reasons, we affirm the district court’s grant of summary judgment on this breach
of contract claim.
D.
In addition to its breach of contract claims, Fito brings a claim for tortious interference
with business relations. To prevail, Fito must show:
(1) an existing business relationship with specific third parties or a prospective
relationship with an identifiable class of third persons; (2) the defendant’s
knowledge of that relationship and not a mere awareness of the plaintiff’s business
dealings with others in general; (3) the defendant’s intent to cause the breach or
termination of the business relationship; (4) the defendant’s improper motive or
improper means . . . and finally, (5) damages resulting from the tortious
interference.”
Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002). Fito alleges that
twice, Wright contacted Fito’s customers to discourage them from purchasing Wright’s products
from Fito. We consider each communication in turn.
Fito first alleges that Wright told Fito’s customers in “late 2013” that Fito “ha[s] a problem
with Wright on our contract,” and that Fito was no longer authorized to sell Wright’s products.
(R. 223-3, Dep. of Yu Tian & Nannan Liu at 221:12–222:2.) But Fito retained the right to
distribute Wright’s foot, ankle, and biologics products until November 27, 2013, and Wright’s hip
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Nos. 17–6530, 17–6531, Beijing Fito Med. Co. v. Wright Med. Tech.
and knee products until January 9, 2014. Nonetheless, this allegation—by itself—is not enough
to survive summary judgment. Fito has not identified who at Wright made such representations
or which of Fito’s customers heard such representations, nor has Fito specified when in “late 2013”
the representations occurred. At summary judgment, we must construe the evidence in the light
most favorable to the nonmoving party, but that party—here, Fito—must still “set forth specific
facts showing there is a genuine issue for trial.” Guarino v. Brookfield Tp. Trustees, 980 F.2d 399,
405 (6th Cir. 1992) (internal quotations and citation omitted; emphasis in original). Fito has not
done so. Moreover, wholly apart from this problem, the testimony Fito offers is hearsay and thus
cannot support its tortious interference claim on summary judgment anyway. See U.S. Structures,
Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1189 (6th Cir. 1997).
Fito points to a separate instance of tortious interference. In an August 13, 2014, letter to
Fito’s customers, Wright explained that its contract with Fito “has been officially terminated and
Fito has not had the right to distribute Wright products under the Distributor contract since
November 27, 2013.” (R. 26-10, Cooke Letter.) The letter also stated that there was no existing
contract between Fito and Wright and that any representations to the contrary were false. Although
Fito lost the right to distribute Wright’s foot, ankle, and biologics products in November 2013,
Fito retained the right to distribute Wright’s hip and knee products through January 9, 2014. That
discrepancy is immaterial, however: by August 2014, when Wright sent the letter, Fito had lost
all rights to sell Wright’s products. A party does not act with improper motive or means—a
necessary element of tortious interference—when it makes a truthful statement. See Molloy v.
Hrisko, 2015 WL 4323028, at *11 (Tenn. Ct. App. July 14, 2015) (holding that the statement’s
truthfulness negated the improper motive or means necessary for intentional interference with
business relations claim); Restatement (Second) of Torts § 772 cmt. b (1979) (“There is of course
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Nos. 17–6530, 17–6531, Beijing Fito Med. Co. v. Wright Med. Tech.
no liability for interference with a contract or with a prospective contractual relation on the part of
one who merely gives truthful information to another.”). Thus, Fito’s second allegation cannot
support its claim for tortious interference. For these reasons, we affirm the district court’s grant
of summary judgment to Wright on Fito’s tortious interference claim.
E.
Because we affirm the district court’s grant of summary judgment on Fito’s breach of
contract and tortious interference claims—and thus hold that Wright is not liable to Fito—we need
not address Fito’s arguments about the scope of the contract’s liability clause. Nor do we address
Wright’s counterclaims, which it agreed to drop if this court upholds the district court’s summary
judgment order.
III.
A.
Next, we consider whether the district court erred in granting an anti-suit injunction to
enjoin Fito’s parallel litigation in China. We review that decision for abuse of discretion. Gau
Shan Co. Ltd. v. Bankers Tr. Co., 956 F.2d 1349, 1352 (6th Cir. 1992). “A district court abuses
its discretion when it relies on clearly erroneous findings of fact or when it improperly applies the
law or uses an erroneous legal standard.” Id. (quoting N.A.A.C.P. v. City of Mansfield, 866 F.2d
162, 166–67 (6th Cir. 1989)). That standard is deferential: “the district judge’s weighing and
balancing of the equities should be disturbed on appeal only in the rarest of cases.” Id. (quoting
N.A.A.C.P., 866 F.2d at 166).
The anti-suit injunction is an equitable remedy that allows one court to “control the conduct
of persons subject to their jurisdiction to the extent of forbidding them from suing in foreign
jurisdictions.” Gau Shan, 956 F.2d at 1352 (quoting Laker Airways Ltd. v. Sabena, Belgian World
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Nos. 17–6530, 17–6531, Beijing Fito Med. Co. v. Wright Med. Tech.
Airlines, 731 F.2d 909, 926 (D.C. Cir. 1984)). Courts “rarely issue[]” the injunction because that
relief contravenes the general principle of allowing parallel proceedings on the same in personam
claim, “at least until a judgment is reached in one [jurisdiction] which can be pled as res judicata
in the other.” Id. (alteration in original) (quoting Laker Airways, 731 F.2d at 926–27). But there
are limited circumstances when the need for the injunction outweighs concerns about international
comity. In this circuit, which adopts the same standard as the Second and D.C. Circuits, courts
may grant an anti-suit injunction to prevent threats to the forum court’s jurisdiction or to stop one
party from evading an important public policy of the forum court. Gau Shan, 956 F.2d at 1355;
see also China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 37 (2d Cir. 1987); Laker
Airways, 731 F.2d at 931 n.73.
Parallel proceedings rarely threaten a forum court’s jurisdiction. In Gau Shan, which
considered the propriety of an anti-suit injunction that the district court issued before reaching a
judgment on the merits of the case, we concluded that only two scenarios might threaten the district
court’s jurisdiction: (1) when the district court’s jurisdictional basis is in rem or quasi in rem; or
(2) when the foreign court attempts to carve out exclusive jurisdiction to divest the district court
of all jurisdiction. Id. at 1356. Neither situation existed in Gau Shan, and neither situation exists
here.
Because the Chinese litigation does not threaten the federal court’s jurisdiction, the only
proper basis for awarding the anti-suit injunction would have been to prevent Fito from evading
an important public policy. Wright argues that the district court properly issued the injunction to
enforce the contract’s forum selection clause.5 The question on appeal, then, is whether enforcing
5
Section 18.2 of the contract states, “[f]or all litigation which may arise out of the Contract and/or
its effects, relating to its validity, interpretation, performance or termination and their effects, the
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Nos. 17–6530, 17–6531, Beijing Fito Med. Co. v. Wright Med. Tech.
a forum selection clause is an important enough public policy to warrant an anti-suit injunction.
Gau Shan tells us that this is a high bar. In that case, the plaintiff filed a complaint in Tennessee
asking for rescission of a promissory note. Id. at 1352. The plaintiff also sought treble damages
for negligence and common law fraud and deceit, as provided by Tennessee statute. Id. Because
the defendant had threatened to sue the plaintiff over the same promissory note in a Hong Kong
court, the plaintiff sought an anti-suit injunction to preemptively enjoin any foreign litigation. The
plaintiff argued, in part, that the injunction would prevent the defendant from obtaining a favorable
judgment in Hong Kong, which did not provide for treble damages, and then asserting that
judgment as res judicata in Tennessee. Id. at 1357. The district court granted the anti-suit
injunction, but we reversed. Although we recognized Tennessee’s policy interest in awarding
treble damages, we noted that every Tennessee statute represents an expression of the state’s policy
goals, and we questioned whether “the public policy of one state could ever outweigh” the
principles of international comity that disfavor anti-suit injunctions. Id.
While Gau Shan involves a state statute, we acknowledged that a party’s evasion “of an
important national policy” might warrant an anti-suit injunction. Id. (emphasis added). This court
has never addressed whether enforcing a forum selection clause is a sufficiently important national
public policy to warrant an anti-suit injunction. But the Supreme Court has recognized a “federal
policy favoring enforcement of forum selection clauses,” Wong v. PartyGaming Ltd., 589 F.3d
821, 826 (6th Cir. 2009) (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 587, 591
(1991)); see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972), and other circuits
have held that an anti-suit injunction is an appropriate remedy to enforce a forum selection clause.
Parties grant exclusive competence to the United States District Court for the Western District of
Tennessee.” (R. 26-1, Contract ¶ 18.2) (emphasis added).
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Nos. 17–6530, 17–6531, Beijing Fito Med. Co. v. Wright Med. Tech.
The Second Circuit affirmed the district court’s decision to issue an anti-suit injunction to protect
the validity of a forum selection clause, Farrell Lines Inc. v. Ceres Terminals Inc., 161 F.3d 115
(2d Cir. 1998), where the district court described the parallel litigation as a clear effort to “evade
an important public policy.” Farrell Lines Inc. v. Columbus Cello-Poly Corp., 32 F. Supp. 2d 118,
130 (S.D.N.Y. 1997). And the Ninth Circuit has, on multiple occasions, held that a district court
may grant an anti-suit injunction on this ground. See, e.g. Applied Medical Distribution Corp. v.
Surgical Co. BV, 587 F.3d 909, 918–19 (9th Cir. 2009) (reversing district court’s denial of anti-
suit injunction); E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 991 (9th Cir. 2006)
(same).
Given these decisions, which recognize the important national policy interest in enforcing
forum selection clauses, we conclude that the district court did not abuse its discretion when it
issued the anti-suit injunction.
IV.
We AFFIRM the district court’s grant of summary judgment on Fito’s breach of contract
and tortious interference claims, as well as the court’s entry of an anti-suit injunction to enjoin the
Chinese litigation.
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