SS White v. Guidance Endodontics ( 2019 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT November 27, 2019
_________________________________
Elisabeth A. Shumaker
Clerk of Court
SS WHITE BURS, INC.,
Plaintiff - Appellant,
v. No. 19-2049
(D.C. No. 1:18-CV-00698-WJ-KBM)
GUIDANCE ENDODONTICS, LLC, (D. N.M.)
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before PHILLIPS, McHUGH, and EID, Circuit Judges.
_________________________________
SS White Burs, Inc. (“SS White”) and Guidance Endodontics (“Guidance”) are
embroiled in a licensing dispute over “V-Taper,” a patented endodontic file used in
root canal procedures. The district court denied SS White’s motion for injunctive
relief and granted Guidance’s cross-motion to compel arbitration, applying an
arbitration clause within the parties’ License Agreement. It also denied SS White’s
motion to reconsider.
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
On appeal, SS White contends arbitration is not appropriate because the
License Agreement was superseded by a handwritten “Settlement Agreement” that
makes no mention of arbitration. At the same time, SS White faults the district court
for assessing the validity and enforceability of that subsequent agreement.
Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
I. Background
SS White is a longtime manufacturer of dental products, including endodontic
files used for root canals. SS White hoped to develop minimally invasive root canal
products, so it pursued a license for V-Taper from Guidance, the patent holder.
Tom Gallop is the Chief Executive Officer (CEO) and co-owner of SS White.
Dr. Charles Goodis, an inventor and endodontist, is the founder, CEO, and sole
member of Guidance, as well as the founder and CEO of Edge Endo, LLC.
In March 2015, SS White and Guidance executed a License Agreement, by
which Guidance granted SS White a non-exclusive license to intellectual property,
including the V-Taper patents. In exchange, SS White agreed to pay royalties to
Guidance according to a designated schedule. Relevant to this appeal, the License
Agreement contains an arbitration provision, which states that “[a]ny disputes by and
between the parties arising under this Agreement, other than [certain claims for
injunctive relief], shall be resolved by arbitration.” Aplt. App. at 26. The License
Agreement also contains a modification provision, which specifies that it “may be
modified only by a written instrument that specifically refers to this Agreement and
is signed by an authorized official of each Party.” Id. at 28.
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In January 2016, the parties executed a document entitled “2016 Amendment
to License Agreement” (“2016 Amendment”), which extends by one year the
deadlines for (1) SS White’s royalty payments and (2) the termination of the License
Agreement if SS White fails to meet its minimum sales requirements. Id. at 31-36.
The parties made handwritten changes to a copy of certain sections of the License
Agreement and attached the marked-up document as Exhibit A to the
2016 Amendment. Per the requirements of the License Agreement’s modification
provision, the 2016 Amendment specifically references “the March 26, 2015 License
Agreement,” id. at 31, and is signed by an authorized official of each party. The final
paragraph of the 2016 Amendment states that “[a]ll other terms and conditions of the
License shall remain unchanged” and incorporates “all the rights and obligations
contained in the License [Agreement].” Id. at 31.
Ultimately, the relationship between the parties soured, and SS White stopped
making royalty payments. After some back and forth without a mutually satisfactory
resolution, Gallop and Goodis met during an endodontist conference in Denver in
April 2018. There they signed a handwritten document containing the following text:
SS White pays Accrued royalties per Agreement
+
$175k/yr Next 5 years
2018, 2019, 2020, 2021 & 2022
In Exchange for this
Edge Endo grants SSW Ownership
Of all V Taper Patents
[Signature]
Chuck Goodis CEO
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[Signature]
Tom Gallop SSW CEO
Id. at 38.
The parties present very different versions of this document’s origin and
significance. SS White states that it was a product of negotiations between Goodis
and Gallop and repeatedly calls it a “Settlement Agreement.” See Aplt. Opening Br.
passim. According to SS White, the document reduced to writing Goodis’s offer to
sell Guidance’s ownership of the V-Taper patents outright to SS White1 if SS White
paid the accrued royalties for 2016 and 2017 and made yearly payments of $175,000
from 2018 through 2022. Guidance, by contrast, characterizes the document as a
“proposal” stemming from a “very brief and rushed” conversation between the
companies’ leaders, for which “key terms and details would need to be negotiated
before any contract was formed.” Aplt. App. at 93-94. We refer to this document as
the “2018 Handwritten Document.”
On May 11, 2018, SS White sent Guidance a draft document entitled, “Second
Amendment to License Agreement” (“Second Amendment”), prefaced with a cover
e-mail from Gallop asking, “How does this work?” Id. at 122-36. The Second
Amendment references the License Agreement and the 2016 Amendment by title and
date. It contains three amendments to the License Agreement, which relate to
1
The document actually states that “Edge Endo grants SSW Ownership,” Aplt.
App. at 38 (emphasis added). In one allegation of the complaint, SS White states that
“Guidance is an alter-ego of Edge Endo” and that “Goodis . . . uses these entities
interchangeably.” Id. at 8. But elsewhere in the complaint, SS White calls the
reference to Edge Endo a “drafting error.” Id. at 13.
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royalties and the assignment of patents and trademarks. First, by May 2018, SS
White must pay $236,360.89 in royalties accrued before December 31, 2017, and
“upon such payment being made no royalties shall be due by [SS White] for any
period thereafter.” Id. at 123. Second, by the effective date of the Second
Amendment, Guidance and Goodis must transfer and assign their rights to the
V-Taper patents and trademarks to SS White through an Assignment Agreement and
Trademark Assignment Agreement, for which drafts were attached. Third, in
consideration for the assignments, SS White must make yearly payments of $175,000
to Guidance from 2018 through 2022. The draft Second Amendment confirms that
“[a]ll other terms and conditions of the [License] Agreement shall remain in full
force and effect,” id. at 124, thereby leaving the arbitration provision in place. In an
e-mail dated May 24, 2018, Gallop urged Goodis to “memorialize” their agreement
because “[a]mbiguity can lead to disputes.” Id. at 137. The parties never executed
the Second Amendment.
In July 2018, SS White filed a complaint in district court, asserting a breach of
contract claim and seeking injunctive relief and specific performance based on an
anticipatory breach of the 2018 Handwritten Document. Shortly thereafter, Guidance
filed a demand for arbitration with the American Arbitration Association, alleging
that SS White breached the License Agreement and the 2016 Amendment. SS White
then filed a motion for a preliminary injunction in district court. Guidance opposed
that motion and filed a cross-motion to compel arbitration and dismiss the lawsuit.
The district court denied SS White’s motion and granted Guidance’s cross-motion. It
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held that the 2018 Handwritten Document did not supersede the License Agreement
and the 2016 Amendment because it is not a valid and binding contract, so the
arbitration provision from the License Agreement is still enforceable.
SS White next filed a motion to alter or amend the judgment under Federal
Rules of Civil Procedure 59(e) and 60, asking the district court to reconsider its
ruling that the 2018 Handwritten Document was not a valid contract, to allow the
parties to pursue discovery as to whether the parties intended to be bound by that
document, and to permit a jury to resolve whether that document is a valid contract.
SS White also challenged the district court’s finding that there were no material facts
in dispute. The district court denied the motion to reconsider as well, echoing its
original ruling.
SS White filed this timely appeal.
II. Standard of Review
Our review is governed by two separate standards. We review the district
court’s denial of SS White’s motion for a preliminary injunction and motion to
reconsider for an abuse of discretion. See Planned Parenthood Ass’n of Utah v.
Herbert, 828 F.3d 1245, 1252 (10th Cir. 2016) (motion for a preliminary injunction);
Jennings v. Rivers, 394 F.3d 850, 854 (10th Cir. 2005) (post-judgment motion).
We review de novo the district court’s grant of Guidance’s motion to compel
arbitration. See Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261
(10th Cir. 2012). In reviewing whether arbitration is required, we apply the same
legal standard the district court employed, Avedon Eng’g, Inc. v. Seatex, 126 F.3d
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1279, 1283 (10th Cir. 1997), which resembles the summary judgment standard, see
Hancock, 701 F.3d at 1261. If “the parties dispute the existence of an agreement to
arbitrate, a court may grant a motion to compel arbitration if there are no genuine
issues of material fact regarding the parties’ agreement.” Id. (internal quotation
marks omitted). The opposing party receives “the benefit of all reasonable doubts
and inferences that may arise.” Id. (internal quotation marks omitted).
III. Analysis
Applying these standards, we affirm for substantially the same reasons
provided by the district court in its (1) Memorandum Opinion and Order Denying
Plaintiff’s Motion for Preliminary Injunction and Granting Defendant’s Cross-Motion
to Compel Arbitration and Dismiss Case, dated February 27, 2019, see Aplt. App.
at 191-206; and (2) Memorandum Opinion and Order Denying Motion to Alter or
Amend Judgment, dated March 19, 2019, see id. at 259-63.
The district court thoroughly traced the history of the parties’ relationship and
carefully considered the contents of the License Agreement, the 2016 Amendment,
the 2018 Handwritten Document, the parties’ correspondence, and the Second
Amendment. After parsing through the evidence submitted by the parties, the court
found that the 2018 Handwritten Document “is not a valid and binding contract”
because it “was never meant to constitute a complete and exclusive document fully
expressing the intent of the parties.” Id. at 202. Therefore, “the arbitration provision
from the License Agreement is still intact, valid and enforceable.” Id. The district
court also noted that SS White’s incorporation of an arbitration provision into written
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agreements that preceded the 2018 Handwritten Document and the draft agreement
that succeeded it “belies its claim that it is being ‘forced’ to arbitrate” this dispute.
Id. at 203. We have nothing to add to the district court’s thoughtful analysis as to
why arbitration is required, and we discern no abuse of discretion with regard to its
denial of SS White’s motion for a preliminary injunction or its motion to reconsider.
We are also not persuaded by SS White’s arguments on appeal. The crux of its
argument here is that even if the underlying matter is arbitrable (which it continues to
dispute), the district court erred in going beyond the threshold question of
arbitrability when it found the 2018 Handwritten Document to be invalid and thus
reached the merits of its breach of contract claim. As explained below, however, a
ruling on the validity of the 2018 Handwritten Document was central to the district
court’s resolution of the parties’ competing motions given the arguments presented.
In fact, SS White affirmatively sought such a ruling by repeatedly arguing in the
district court that the dispute was not arbitrable because the 2018 Handwritten
Document was (1) a valid, enforceable agreement that (2) superseded the License
Agreement and the 2016 Amendment in their entirety. The two concepts went hand
in hand. SS White also moved for an injunction on these grounds.
In its complaint, for instance, SS White defined the License Agreement and the
2016 Agreement as “the ‘Superseded Agreement’” and alleged that “[t]he Settlement
Agreement superseded [them] in their entirety as the parties intended.” Aplt. App.
at 7, 11. Then, in its motion for a preliminary injunction, SS White argued that it was
substantially likely to succeed on its claim for injunctive relief because “the
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Settlement Agreement and facts attendant thereto evince all of the essential elements
of a valid and enforceable contract” and “[t]he Settlement Agreement supersedes the
Prior Agreements.” Id. at 51-52; see also id. at 51 (stating that “the Settlement
Agreement is a valid, binding contract”); id. at 148 (“SS White will likely succeed on
the merits because it has established that the Settlement Agreement both: (1) is a
valid and enforcement [sic] contract; and (2) supersedes the Prior Agreements.”).
Similarly, in opposing arbitration, SS White argued that “[t]he contract under which
[its] claims arise—the Settlement Agreement—is a valid and enforceable contract
that does not contain an arbitration provision.” Id. at 145; see also id. at 50-51 and
148-53 (detailing SS White’s argument that the 2018 Handwritten Document is a
valid and enforceable contract). It also argued that the arbitration provision in the
License Agreement and the 2016 Amendment did not survive because those
agreements “were superseded in their entirety . . . as a matter of law” by the alleged
2018 contract. Id. at 145.2
Having unequivocally asked the district court to rule that the 2018
Handwritten Document was a binding and enforceable contract that superseded the
parties’ earlier agreements as a matter of law, SS White cannot now complain about
the district court addressing this very issue. Furthermore, the legal justification for
its argument is misplaced. SS White relies on the proposition that district courts
2
Notably, in making this argument, SS White did not reconcile the fact that
the License Agreement expressly states that it “supersedes all prior agreements,
negotiations, and understandings of the Parties,” Aplt. App. at 28, whereas the 2018
Handwritten Document contains no such provision.
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cannot consider challenges to the entirety of a contract containing an arbitration
provision, such as challenges based on fraud in the inducement of a contract or
illegality of a contract. Aplt. Opening Br. at 22. But we face a very different
scenario, in which an entirely separate agreement that does not contain an arbitration
provision is under scrutiny. The district court did not strike down an agreement
containing an arbitration provision; it declared invalid an agreement that did not
contain an arbitration provision, which was sandwiched between multiple agreements
and a proposed agreement that did.
SS White also argues on appeal that the district court “improperly resolved
material disputes of fact in Guidance’s favor when it concluded that the parties’
dispute must be resolved in arbitration.” Id. at 4. We reject this argument too. In its
briefing before the district court, SS White maintained that it had “presented
undisputed facts—i.e., the text of the Prior Agreements and Settlement Agreement,”
such that “the issues before the [district court were] susceptible to resolution as a
matter of law.” Aplt. App. at 163. Even so, in case the district court disagreed, SS
White requested a summary trial and narrowly targeted discovery to resolve the issue
of arbitrability. Id. The district court found the material facts to be undisputed and
explained that it “needed to decide only the legal significance of the facts.” Id. at
205. Consequently, it denied SS White’s request for a summary trial and
concomitant discovery.
SS White now tries to create a factual dispute by pointing to the Declarations
that SS White’s CEO prepared for this litigation, which “aver[] that, at the time of
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execution, the parties intended for the Settlement Agreement to be binding and to
supersede the License Agreement in its entirety.” Id. But SS White is only entitled
to receive the benefit of reasonable doubts and inferences under the applicable
standard. See Hancock, 701 F.3d at 1261. Additionally, “[a]ffidavits must contain
certain indicia of reliability. . . . We do not consider conclusory and self-serving
affidavits.” Ellis v. J.R.’s Country Stores, Inc., 779 F.3d 1184, 1201 (10th Cir. 2015)
(internal quotation marks omitted). Notwithstanding Gallop’s Declarations, it is clear
from the record evidence, particularly the flurry of communications and proposed
agreements that SS White sent to Guidance after the April 2018 meeting, that the
2018 Handwritten Document was a proposal and not a meeting of the minds.
Significantly, as the district court emphasized when it found no material factual
disputes exists, SS White did not initially acknowledge these important events,3 let
alone contest them:
[W]hile Plaintiff never mentioned those subsequent proposals or the
circumstances surrounding them, it did not dispute them, either.
Strangely, the factual allegations in Plaintiff’s amended complaint do
not venture past the dates relevant to the 2018 Handwritten Document,
and make no reference to subsequent events, and none of these
proposals are included as exhibits to the complaint. . . . Similarly, in its
motion to reconsider, Plaintiff simply pretends these subsequent events
and proposals do not exist.
Aplt. App. at 262.
3
Ultimately, SS White referred to the arguments based on events post-dating
the 2018 Handwritten Document as “no more than a distraction.” Aplt. App. at 153
(emphasis omitted).
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Because no material factual disputes exist, it follows that the district court did
not err in denying SS White’s perfunctory request for a summary trial and narrowly
targeted discovery to resolve the issue of arbitrability.
IV. Conclusion
Accordingly, we affirm the district court’s decisions denying SS White’s
motion for a preliminary injunction, granting Guidance’s motion to compel
arbitration and to dismiss this lawsuit, and denying SS White’s motion to alter or
amend the judgment against it.
Entered for the Court
Allison H. Eid
Circuit Judge
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