United States District Court, N.D. Texas, Fort Worth Division
FERRIS MANUFACTURING, and SESSIONS PHARMACEUTICALS, INC., Plaintiffs,
THAI CARE, CO. LTD., et al., Defendants.
O'CONNER UNITED STATES DISTRICT JUDGE
United States Magistrate Judge made Findings, Conclusions,
and a Recommendation (the “FCR”) in this case.
May 23, 2019 FCR, ECF No. 222. The FCR recommended that this
Court deny Reliable's Partial Motion for Partial Summary
Judgment and grant in part and deny in part the KCI
Defendants' Motion for Summary Judgment. Reliable filed
objections to the FCR (ECF No. 240) on June 6, 2019, and
Plaintiffs filed objections to the FCR (ECF No. 242) on June
Court conducts a de novo review of the portions of
the FCR to which a party objects. Anything that Plaintiffs or
Defendants did not specifically object to is reviewed for
plain error. To be specific, an objection must identify the
specific finding or recommendation to which objection is
made, state the basis for the objection, and specify the
place in the Magistrate Judge's report and recommendation
where the disputed determination is found. An objection that
merely incorporates by reference, or refers to, the briefing
before the Magistrate Judge is not specific. Failure to file
specific written objections will bar the aggrieved party from
appealing the factual findings and legal conclusions of the
Magistrate Judge that are accepted or adopted by the district
court, except upon grounds of plain error. See Douglass
v. United Services Automobile Ass'n, 79 F.3d 1415,
1417 (5th Cir.1996).
following reasons, the Court modifies the FCR (ECF No. 222),
and Reliable's Partial Motion for Summary Judgment (ECF
No. 154) is hereby GRANTED in part and DENIED in
Ferris Mfg. Corp and Sessions Pharmaceuticals Inc.
(“Plaintiffs”) bring this suit against Defendants
Thai Care Co. Ltd. (“Thai Care”), Reliable
Healthcare Solutions Inc. a/ka RHS Healthcare Inc.
(“Reliable”), Santo Giglia (“Giglia”
together with Reliable, “RHS Defendants”), K.
Carlton International Inc. d/b/a KCI Shipping Line
(“KCI”), and Jose Martinez (“Martinez,
together with KCI, “KCI Defendants”),
(collectively, “Defendants”) claiming violations
of §§ 32 and 43 of the Lanham Act, 15 U.S.C.
§§ 1051 et seq., tortious interference with a
contract, breach of contract, fraud, conversion, unfair
competition and misappropriation, and common law conspiracy.
See Am. Compl., ECF No. 46. This Court dismissed
Plaintiffs' Lanham Act claims against Giglia
individually. See Jan. 23, 2019 Order, ECF No. 101.
Reliable moved for partial summary judgment (ECF No. 154) and
the KCI Defendants moved for summary judgment (ECF No. 151).
The Magistrate Judge recommended that this Court deny
Reliable's Motion for Partial Summary Judgment and grant
in part and deny in part the KCI Defendants' Motion for
Summary Judgment. May 23, 2019 FCR, ECF No. 222.
Subsequently, the KCI Defendants filed a notice of settlement
and are expected to file the appropriate dismissal papers
soon. See Not. Settlement, ECF No. 236. Accordingly,
the Court need only analyze Reliable's partial motion for
otherwise noted, the following facts are undisputed. When
disputed, the facts are viewed in the light most favorable to
Plaintiffs, the nonmoving party. In 1988, Sessions
Pharmaceuticals Inc. (“Sessions”) formulated and
patented a wound care dressing named PolyMem which is used
for covering numerous types of wounds. Sessions subsequently
obtained the federally registered trademark
“POLYMEM” on September 1, 1992 under registration
no. 1, 711, 093. Sessions also owns other PolyMem-formative
marks, all of which are licensed to Ferris Mfg. Corp
is based in Fort Worth, Texas and has created and
manufactured wound care products since approximately 1977. In
addition to the PolyMem family of products, Ferris
manufactures and sells other wound care products. All PolyMem
products, which come in a variety of lines and sizes, are
manufactured in Fort Worth. To distribute PolyMem throughout
the United States and abroad, Ferris engages various medical
supply distributors. In 2010, Ferris entered into an
exclusive international distribution agreement (the
“IDA”), with a company in South East Asia called
Thai Care. Pursuant to the IDA, Thai Care became Ferris'
exclusive distributor of PolyMem in Thailand, Laos, Cambodia,
and Myanmar (the “Territory”).
exchange for preferential pricing and the exclusive right to
distribute PolyMem throughout the Territory, Thai Care was
prohibited from, among others, (1) marketing any other wound
care products that compete with Ferris' PolyMem; (2)
selling, directly or indirectly, PolyMem outside of the
Territory; and (3) changing or modifying the PolyMem product
or packaging. Thai Care was, among other requirements,
obligated to maintain a specific annual dollar sales volume;
to use best efforts to promote and sell PolyMem, including
providing sufficient sales personnel; and to pay for overhead
in performance of the IDA. The IDA was amended at least once
in 2015 to update Thai Care's performance objectives, and
the exclusivity provision remained.
allege that Thai Care acted in concert with Reliable, a
medical product retailer and distributor, and KCI Shipping, a
shipping company, to sell PolyMem in the United States
through Reliable's distribution channels in violation of
the IDA. Sometime in June or July 2014, Ferris began labeling
select PolyMem with labels that stated, “Distributed
for use in Thailand by Thai Care Co., LTD Thailand”
(referred to herein as the “labels”). Reliable
does not dispute that it subsequently removed these labels
and resold the packages in the United States. Eventually,
Ferris learned that PolyMem sold to Thai Care for
distribution in Southeast Asia was then being sold in the
United States market, and it terminated the IDA.
judgment is proper when the pleadings and evidence on file
show “that 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). “[T]he
substantive law will identify which facts are
material.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A genuine dispute as to any
material fact exists “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.” Id. The movant makes a showing that
there is no genuine dispute as to any material fact by
informing the court of the basis of its motion and by
identifying the portions of the record which reveal there are
no genuine material fact issues. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986); Fed.R.Civ.P. 56(c).
reviewing the evidence on a motion for summary judgment, the
court must decide all reasonable doubts and inferences in the
light most favorable to the non-movant. See Walker v.
Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.
1988). The court cannot make a credibility determination in
light of conflicting evidence or competing inferences.
Anderson, 477 U.S. at 255. As long as there appears
to be some support for the disputed allegations such that
“reasonable minds could differ as to the import of the
evidence, ” the motion for summary judgment must be
denied. Id. at 250.
plain language of Rule 56(c) mandates the entry of summary
judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to
establish the existence of an element essential to that
party's case, and on which that party will bear the
burden of proof at trial.” Celotex, 477 U.S.
at 322. “In such a situation, there can be ‘no
genuine issue as to any material fact,' since a complete
failure of proof concerning an essential element of the
nonmoving party's case necessarily renders all other
facts immaterial.” Id. at 322-23. Therefore,
the moving party is ‘entitled to judgment as a matter
of law' because the nonmoving party has failed to make a
sufficient showing on an essential element of his case where
he has the burden of proof. Id. at 323 (comparing
the standard for granting summary judgment to the standard
for a Rule 50(a) directed verdict). A mere scintilla of
evidence to support a non-moving party's position is
insufficient to defeat a summary judgment motion; there must
be evidence on which the jury could reasonably find for the
non-moving party. Anderson, 477 U.S. at 252.
ANALYSIS OF OBJECTIONS
Court will conduct a de novo review of the
objections to the FCR raised by Plaintiffs and Reliable.
Reliable moves for partial summary judgment on Ferris'
Lanham Act claims, arguing that Reliable's sale of
Thai-bound PolyMem is protected by the first sale doctrine
because there are no material differences between PolyMem
products manufactured for distribution in Southeast Asia and
those destined for sale in the United States. Reliable's
Mot. Summ. J. 15-24, ECF No. 155. Alternatively, Reliable
argues if the Court were to find that Ferris' labeling of
PolyMem was the only triable issue related to its material
difference argument, the Court should otherwise grant summary
judgment on Ferris' claims regarding all PolyMem products
sold without the labels. Plaintiffs assert that a
fraudulently induced first sale, such as the one alleged in
this case, does not qualify for the first sale doctrine.
Pls.' Resp. 53-57, ECF No. 16. Additionally, Plaintiffs
contend that PolyMem intended for sale in Southeast Asia was
not covered by Ferris' warranty and could not be tracked
sufficiently in case of a recall; the products differed in
price; and their labeling was different. Id. at
analysis, the Magistrate Judge reasoned that “[i]n the
absence of binding authority to the contrary . . . the
circumstances of the sales from Ferris to Thai Care does not
prevent the first sale doctrine from otherwise applying to
the facts of this case.” FCR 10, ECF No. 222 citing
Am. Int'l Pictures, Inc. v. Foreman, 576 F.2d
661, 664 (5th Cir. 1978). Additionally, the Magistrate Judge
found that Plaintiffs' claims that Thai-bound PolyMem is
not covered by a warranty or is covered by a warranty
different from domestically distributed PolyMem are not
supported by summary judgment evidence. Id. at 15.
Similarly, the Magistrate Judge explained that Plaintiffs
failed to present sufficient evidence to establish that the
warranties and recall procedures were materially different
for PolyMem sold domestically and that sold to Thai Care.
Finally, the Magistrate Judge found no evidence of a material
difference between the products related to price disparity.
Id. at 17. However, the Magistrate ...