RARIDON ASSOCIATES ORTHOPEDICS INC v. SCHMIDT (2023)

ORDER ON DEFENDANT'S MOTION TO DISMISS

Plaintiff Raridon & Associates Orthopedics, Inc. (“Raridon”) hired Defendant Robert Schmidt (“Schmidt”) as an independent contractor to sell rehabilitation devices. Many years later, Schmidt allegedly convinced a doctor to use the products of Defendant Midwest Medical Resources (“MMR”) instead of the products of Raridon. Raridon filed a lawsuit against MMR and Schmidt on September 21, 2021. [ECF No. 1]. On November 28, 2022, MMR filed a Motion to Dismiss. [ECF No. 73]. For the reasons below, the Motion to Dismiss is GRANTED.

I. BACKGROUND

A. Factual Background 1

On January 1, 2016, Raridon and Schmidt entered into an Independent Contract Agreement (“the Agreement”). [ECF Nos. 58 at 1 (Second Amended Complaint)]. Under the Agreement's terms, Schmidt would market and sell Raridon's orthopedic products and receive compensation based on his sales. Id. at 20 (Compensation Structure). This contract required Schmidt to use his “best efforts to sell the Products” and “develop the assigned territories and accounts to their fullest potential.” Id. at 9. The contract also mandated that Schmidt “not represent or sell Competitive Products.” Id. at 10.² It also prohibited him from engaging in “Competitive Activities without prior written approval.” Id. at 10.³

In his role, Schmidt sold many Raridon products to surgeons at Stormont Vail Hospital in Topeka, Kansas. [ECF No. 58 at 3, 19 (List of Accounts)]. An individual named Elijah Jimerson worked as a sub-contractor for Schmidt to distribute products to Stormont Vail. Id. at 3. In early to mid 2021, Schmidt, Jimerson, and other staff attempted to persuade Dr. Mumford, a surgeon at the hospital, to switch from Raridon's DePuy knee and hip joints to products created by MMR. Id. at 4. These efforts included staff organizing a cadaver lab on June 23, 2021 for Dr. Mumford to examine and trial products by Don Joy Orthopedic (“DJO”), i.e., MMR. Id.

On June 25, 2021, Dr. Mumford decided to use the hip and knee joints of DJO. [ECF No. 58 at 4]. Schmidt allegedly asked Jimerson to not mention the changes to David Jandric, the individual at Raridon who oversaw Schmidt's sales. Id. Dr. Mumford implanted six DJO products instead of Raridon's equivalent products on June 29, 2021 and June 30, 2021. Id. at 4–5. Dr. Mumford continued to use the DJO products moving forward. Id. at 5.

Jandric attempted to contact Jimerson and Schmidt shortly after Dr. Mumford completed the procedures. [ECF No. 58 at 5]. While Jandric did not hear from Schmidt, Jimerson informed Jandric about Dr. Mumford's decision to use DJO products rather than Raridon's products. Id. Jimerson spoke with Schmidt on July 1, 2021 and stated that he told Jandric about Dr. Mumford trialing DJO's products. Id. Raridon terminated its agreement with Schmidt the following day.

B. Procedural Background

On September 21, 2021, Raridon filed this lawsuit against Schmidt. [ECF No. 1]. On March 10, 2022, Raridon filed an amended complaint. [ECF No. 24]. On October 3, 2022, Raridon filed a second amended complaint, asserting four claims for relief against the Defendants. [ECF No. 58]. First, Raridon asserts Schmidt breached his contract because Schmidt was obligated to not sell competing products or interfere with Raridon's sales, but organized the sale of MMR products to a Raridon customer. Id. at 5–6. Second, Raridon alleges MMR engaged in tortious interference with an existing contract because CEO John Tarantino asked Schmidt to engage in certain behaviors and eventually hired Schmidt as an independent contractor. Id. at 6. Third, Raridon contends MMR was unjustly enriched because it received the benefit of Dr. Mumford's use of the DJO implants following its interference with the relationship between Raridon and Stormont Vail. Id. at 7. Fourth, Raridon argues that Schmidt and MMR engaged in a conspiracy to interfere with Raridon's contract with Schmidt as well as its relationships with Dr. Mumford and Stormont Vail. Id.

On November 18, 2022, MMR filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b). [ECF No. 73]. Specifically, the Motion seeks dismissal of the claims against MMR on three grounds: 1) the Court lacks personal jurisdiction over MMR; 2) the United States District Court for the Southern District of Iowa is an improper venue; and 3) the second amended complaint fails to state a claim upon which relief could be granted. Id. After engaging in discovery on the issue of personal jurisdiction, Raridon filed its resistance on April 5, 2023. [ECF No. 91]. MMR filed its reply on April 12, 2023. [ECF No. 93]. The parties provided supplemental briefing on the impact of Mallory v. Norfolk Southern Railway Co., 600 U.S. ––––, 143 S. Ct. 2028, ––– L.Ed.2d –––– (2023) on this case in July 2023. [ECF No. 96; 97]. The Motion is fully briefed and ready for review. For the reasons below, the Motion to Dismiss is GRANTED.

II. GOVERNING LAW

A party may assert that an ongoing lawsuit was filed in the “improper venue” as a defense to litigation. Fed. R. Civ. P. 12(b)(3). The appropriateness of the selected venue is governed by statute. Atl. Marine Constr. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49, 55, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013) (citing 28 U.S.C. § 1391) (“this section shall govern the venue of all civil actions brought in district courts of the United States.”). The statute provides that a “civil action may be brought” in: “(1) a judicial district in which any defendant resides, if all defendants are residents of the state in which the district is located; (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred.” 28 U.S.C. § 1391(b)(1–2). The statute explains, “if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.” 28 U.S.C. § 1391(b)(3). Venue only needs to be proper under one of the sections of the statute. Atl. Marine, 571 U.S. at 56, 134 S.Ct. 568. Venue is improper if not covered under the statute, at which point the case “must be dismissed or transferred.” Id. Transfer is appropriate when it is “in the interest of justice.” 28 U.S.C. 1406(a).

III. ANALYSIS

The parties dispute whether the United States District Court for the Southern District of Iowa is an appropriate venue for the dispute between Raridon and MMR. The record demonstrates that the United States District Court for the District of Kansas is the appropriate venue for the case. Raridon has not provided an explanation why the case should be transferred to the District of Kansas instead of being dismissed. Accordingly, the Court will grant the Motion to Dismiss.

A. Residence of Defendants

The relevant statutory provision provides that venue is proper in “a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located.” Bomkamp v. Hilton Worldwide, Inc., No. 4:13-CV-1569 CAS, 2014 WL 897368, at *5 (E.D. Mo. Mar. 6, 2014) (quoting 28 U.S.C. § 1391(b)(1)). Defendant Schmidt resides in Kansas. [ECF No. 58 at 1, 16 (Raridon Contract), 35 (MMR Contract)]. MMR is a corporation that is headquartered in Kansas and has its principal place of business in the same state. [ECF No. 58 at 1, 35]. Because the Defendants only share Kansas residency, venue is proper there. Spanier v. Am. Pop Corn Co., No. C15-4071-MWB, 2016 WL 1465400, at *11 (N.D. Iowa Apr. 14, 2016). Because Kansas only has a single federal jurisdiction, the appropriate venue is the District of Kansas. In short, 28 U.S.C. § 1391(b)(1) means that the Southern District of Iowa is an improper venue.

B. Substantial Part of the Events

An action may also be brought where “a substantial part of the events or omissions giving rise to the claim occurred.” 28 U.S.C. § 1391(b)(2). When conducting this analysis, a court “must focus only on Defendants' alleged wrongful activity.” Steen v. Murray, 770 F.3d 698, 702 (8th Cir. 2014) (citation omitted). Specifically, a court must ask, “whether the district the plaintiff chose had a substantial connection to the claim, whether or not other forums had greater contacts.” AG Spectrum Co. v. Elder, No. 3:15-cv-00007-JEG, 2015 WL 11117311, at *1 (S.D. Iowa Apr. 22, 2015) (quoting Pecoraro v. Sky Ranch for Boys, Inc., 340 F.3d 558, 563 (8th Cir. 2003)).

The Second Amended Complaint asserts that Schmidt signed an Agreement that prohibited him from engaging in competitive activities or selling competing products. [ECF No. 58 at 3]. In 2021, Schmidt and MMR personnel worked to persuade Dr. Mumford, a surgeon at Stormont Vail in Topeka, Kansas, to switch from Raridon to MMR products.⁴ Id. at 4. In June 2021, Schmidt and the MMR staff organized a cadaver lab in Kansas for Dr. Mumford to examine DJO's products. Id. Following this exhibition, Dr. Mumford switched from Raridon products to DJO products. Id. He began implanting the new products on June 29, 2021 while still employed at Stormont Vail Hospital. Id. On July 1, 2021, Schmidt and MMR signed an agreement in Kansas for Schmidt to be an independent contractor and exclusively sell MMR products. Id. at 21, 38. The record shows that all events related to MMR's alleged misconduct, not just a substantial portion, occurred in Kansas, which means venue is only proper in the state. Steen, 770 F.3d at 704 (citing 28 U.S.C. § 1391(b)(2)).

C. Summary

The primary provisions of 28 U.S.C. § 1391(b) both support a conclusion that the Southern District of Iowa is an improper venue for this suit and the proper venue is the District of Kansas.⁵ Raridon provided no argument or evidence to support a finding that the interests of justice support transferring the case to the District of Kansas. See generally [ECF No. 92]. Thus, the Court finds that dismissal is appropriate. Rare Breed Triggers, LLC v. Garland, ––– F. Supp. 3d ––––, ––––, Case No. 3:22-cv-85, 2022 WL 17175089, at *2 (D. N.D. Nov. 4, 2022) (citing 28 U.S.C. § 1406(a)) (discussing the potential options for a district court in cases where venue is improper).

IV. CONCLUSION

For the reasons discussed in detail above, Defendant's Motion to Dismiss is GRANTED. Defendant MMR is hereby DISMISSED from the case.

IT IS SO ORDERED.

FOOTNOTES

2.   The contract later defines competitive products to mean “any Product or service that competes with a Product set forth in Exhibit 1 or any modification or amendment to Exhibit 1.” [ECF No. 58 at 12]. This definition includes “any orthopedic, spinal, sports medicine, bracing, biocomposites neurosurgical or trauma product or service” as well as “any other product or service similar to or intended for a similar use as those offered or provided by the Company.” Id.

3.   The term “Competitive Activities” means “selling, offering for sale, promoting, receiving, or soliciting orders for Competitive Products or accepting remuneration of any kind from any person providing such goods or services.” [ECF No. 58 at 12].

4.   At some point between the beginning of these efforts and the cadaver lab, MMR allegedly offered Schmidt a full-time sales position. [ECF No. 58 at 4].

5.   The final section of the statute is inapplicable to this case because there are other districts where the action “may otherwise be brought.” 28 U.S.C. § 1391(b)(3); see Coug & Company, Inc. v. Cougar Paws, Inc., No. 4:21-cv-271-JAJ-HCA, 2022 WL 1439848, at *7 (S.D. Iowa Jan. 5, 2022) (finding that “venue cannot be exercised under § 1393(b)(3) because there is at least one other district where the action could properly be brought pursuant to § 1391(b)(1)”); see also Kendhammer v. AW Distrib., Inc., Case No. 20-CV-1539 (NEB/TNL), 2021 WL 1600474, at *2 (D. Minn. Apr. 23, 2021) (citing Atl. Marine, 571 U.S. at 56, 134 S.Ct. 568 (noting that 28 U.S.C. § 1391(b)(3) is a “fallback” provision)).

STEPHANIE M. ROSE, CHIEF JUDGE