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Intuitive Surgical Operations, Inc. v. Midbrook, LLC

United States District Court, E.D. Michigan, Southern Division

June 25, 2018

MIDBROOK, LLC, Defendant.


          STEPHEN J. MURPHY, III United States District Judge

         On February 7, 2017, Plaintiff Intuitive Surgical Operations, Inc. ("Intuitive") filed a two-count complaint against Defendant Midbrook, LLC ("Midbrook"). Based upon successor-liability and breach-of-contract theories, Intuitive claimed that Midbrook owed monetary payment and attorney's fees pursuant to a loan agreement. The parties each filed a motion for summary judgment. The Court closely reviewed the briefs and finds that a hearing is unnecessary. For the reasons stated below, the Court will grant in part and deny in part Plaintiff's motion for summary judgment, and grant in part and deny in part Defendant's motion for summary judgment.


         Midbrook, Inc. ("MINC") produced washer products. Intuitive was interested in an ultrasonic medical device washer product. MINC did not have the money to produce it. Intuitive loaned MINC $583, 120 pursuant to a loan agreement ("Loan") dated December 30, 2013. The loan required MINC to repay Intuitive the full amount plus interest within twelve months.

         During 2014, MINC experienced financial hardship. Two banks sought to protect their interests; MINC and the banks stipulated to placing MINC into a receivership. The receiver's responsibilities included marketing and selling MINC's assets and liabilities.

         On December 18, 2014, Defendant Midbrook-known as MDBRK at the time- entered into an $872, 000 Asset Purchase Agreement ("APA") with the receiver. Midbrook purchased some of MINC's assets, but excluded assets related to MINC's medical division. Midbrook and the receiver completed the deal at a closing the next day.

         The APA included provisions related to Midbrook's purchase of assets and assumption of liabilities. Midbrook purchased the following "Business Assets": (1) all of MINC's tangible personal property; (2) $175, 000 in cash, other cash equivalents, and receivables; (3) all intangible property used in the Business; (4) certain naming rights; and (5) "all other assets" of MINC "that exist as of the Closing excluding those . . . described in Exhibit J hereto and/or otherwise excluded" by the APA. ECF 21-6, PgID 165-67 (referencing clauses 1.1.1-1.1.3, 1.1.5-1.1.6).[1] The APA thus covered certain tangible personal property, id. at 180, and certain intangible business properties, id. at 181. The APA's assets provisions excluded certain medical assets associated with a list of products, including the product developed with the money from Intuitive's Loan. Id. at 183.

         Midbrook also assumed liabilities under the APA. First, it assumed all "leases, contracts, agreement, and commitments" related to a postage machine and two Xerox copiers. Id. at 166, 182.

         Then, Midbrook disclaimed liability for any of MINC's other liabilities "except only for" the following set of liabilities:

1.3(a)-"those trade payables and other liabilities specifically identified on Exhibit F," and
1.3(c)-"any executory obligations of [MINC's] continued performance arising in the ordinary course of business under any contracts and commitments that become performable or payable on or after the Closing Date[.]"

Id. at 167. Exhibit F, however, did not identify any specific liabilities. Id. at 184.

         Under the terms of the Loan, MINC owed payment no later than December 30, 2014. When MINC failed to repay the loan, Intuitive on June 17, 2016 obtained a default judgment against MINC in the United States District Court for the Northern District of California. After receiving the default judgment against MINC, Intuitive sued Midbrook and alleged that Midbrook assumed MINC's payment obligations for the Loan either as a successor to MINC or pursuant to provision 1.3(c) of the APA. The parties filed cross-motions for summary judgment, which the Court addresses now.


         Summary judgment is warranted "if the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is "material" for purposes of summary judgment if proof of that fact would establish or refute an essential element of the cause of action or defense. Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984). A dispute over material facts is "genuine" "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To show that a fact is, or is not, genuinely disputed, both parties are required to either "cite[] to particular parts of materials in the record" or "show[] that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1).

         In considering cross-motions for summary judgment, a court "must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party." Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003).


         I. Plaintiff's Motion for Summary Judgment

         Plaintiff moved for summary judgment only for its breach-of-contract claim. See ECF 21, PgID 139. The Court applies Michigan Law because of the APA's choice-of-law provision. ECF 21-6, PgID 175. See DP Precise, LLC v. Phoenix Ins. Co., No. 13-cv-12397, 2014 WL 12572733, at *4 (E.D. Mich. Mar. 31, 2014).

         Contract interpretation seeks "to give effect to the parties' intention at the time they entered into the contract." Innovation Venture v. Liquid Mfg., 499 Mich. 491, 507 (2016) (quotation marks omitted). "Absent an ambiguity or internal inconsistency, contractual interpretation begins and ends with the actual words of the written agreement." Id. (quoting Universal Underwriters Ins. Co. v. Kneeland, 464 Mich. 491, 496 (2001)). Courts examine "the language of the contract according to its plain and ordinary meaning." Miller-Davis Co. v. Ahrens Const., Inc., 495 Mich. 161, 174 (2014).[2]

         The examination should consider the contract "as a whole, 'giving harmonious effect, if possible, to each word and phrase.'" Superior Comm'cns v. City of Riverview, 881 F.3d 432, 438 (6th Cir. 2018) (citing Wilkie v. Auto-Owners Ins. Co., 469 Mich. 41, 50 n.11 (2003)). Further, courts "avoid an interpretation that would render any portion of the contract nugatory." Miller-Davis, 495 Mich. at 174. Summary judgment is appropriate if the contract is clear and unambiguous. Superior Comm'cns, 881 F.3d at 438 (citing City of Grosse Pointe Park v. Mich. Mun. Liab. & Prop. Pool, 473 Mich. 188, 198 (2005)).

         Plaintiff contends that a single sentence in the "Liabilities Assumed" section of the APA provides evidence that Midbrook assumed liability for the Loan. Defendant responds that-taken as a whole-the contract precludes Plaintiff's interpretation. Defendant further argues that the Loan is not an executory obligation and is not of MINC's continued performance.

         To resolve the dispute, the Court must answer two questions. First, does the APA include liabilities unrelated to the Business? Second, if so, is the Loan a qualifying liability?

         A. The APA Covers Liabilities Unrelated to the Business.

         Both 1.3(c) and the APA as a whole indicate that Midbrook assumed even those ...

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