Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02077/USCOURTS-casd-3_13-cv-02077-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

NUVASIVE, INC, a Delaware 

corporation,

Plaintiff,

vs.

MADSEN MEDICAL, INC., a 

Nevada corporation; KRIS 

MADSEN, an individual residing in 

Nevada; and DOES 1-10, 

inclusive,

Defendants.

Case No.: 13cv2077 BTM(RBB)

ORDER GRANTING IN PART 

AND DENYING IN PART 

CROSS-MOTIONS FOR 

SUMMARY JUDGMENT

[To be filed with access 

restricted to case participants 

only until ordered otherwise]

MADSEN MEDICAL, INC., a 

Nevada corporation,

Counterclaimant,

vs.

NUVASIVE, INC., a Delaware 

corporation,

Counterdefendant.

Defendants Kris Madsen and Madsen Medical, Inc. (“MMI”) (collectively 

“Defendants”), have filed a motion for partial summary judgment. Plaintiff and 

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Counterdefendant NuVasive, Inc. (“NuVasive”), has also filed a motion for partial 

summary judgment. For the reasons set forth below, Defendants’ motion is 

GRANTED IN PART and DENIED IN PART, and Nuvasive’s motion is 

GRANTED IN PART and DENIED IN PART. 

I. FACTUAL BACKGROUND

This action arises out of a soured business relationship between NuVasive 

on the one hand, and MMI and Kris Madsen on the other. 

NuVasive manufactures medical devices for use in spine surgeries. MMI, a 

company founded by Kris Madsen, distributes medical devices. MMI began 

distributing NuVasive devices in 2004. In January 2011, NuVasive and MMI 

entered into an Exclusive Sales Representative Agreement. (“ESR Agreement” 

– Pl. Ex. A in Support of Opp. to MSJ.) Under the ESR Agreement, MMI became 

NuVasive’s exclusive sales representative in certain territories within Nevada, 

Arizona, Utah, and California. 

The ESR Agreement provides that it will remain in effect for three years 

unless terminated earlier as allowed under the agreement. Section 11 of the 

Agreement sets forth the circumstances under which the ESR Agreement can be 

terminated. Section 11.3 provides that NuVasive has the right to terminate the 

Agreement at will if MMI is deemed to be in “Poor Standing.” As defined in § 6.1, 

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“Poor Standing” occurs when (1) MMI fails to secure orders for 95% of its 

aggregate Quota Commitment in any two consecutive calendar quarters, or 

(2) fails to secure orders for 95% of its aggregate Quota Commitment for any 

given year. 

It is not disputed that MMI fell short of its sales quota in 2011 (87% of 

aggregate Quota Commitment) and also failed to reach 95% of its aggregate 

Quota Commitment for the first two quarters in 2012. On August 31, 2012, 

NuVasive gave notice to Kris Madsen and MMI that it was terminating MMI’s 

distributorship effective immediately. (Ex. Q in Support of NuVasive’s MSJ.)

As soon as MMI was terminated, NuVasive hired almost all of MMI’s 

personnel, including MMI’s sales representatives, both of MMI’s inventory control 

specialists, and MMI’s administrative assistants. Kris Madsen and her sister 

were not hired by NuVasive. 

The parties disagree on the motives behind NuVasive’s termination of MMI 

and dispute whether NuVasive was contractually authorized to solicit and hire 

MMI’s employees after the termination. NuVasive claims that as a result of 

payment to MMI of $1,756,876, the “Stated Percentage” set forth in § 11.6 of the 

ESR Agreement, NuVasive obtained the right to solicit and hire MMI’s 

employees. Nuvasive further claims that MMI and Ms. Madsen engaged in 

wrongdoing after the termination, including failure to return or pay for inventory, 

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making threats and false and disparaging statements about NuVasive and MMI’s 

former employees, and disclosing confidential information of NuVasive.

Defendants disagree with NuVasive’s interpretation of the ESR Agreement 

and accuse NuVasive of tortious conduct in connection with what they believe

was a plot to cut Ms. Madsen out of the distribution chain and steal MMI’s 

employees and business. MMI also claims that NuVasive has failed to pay MMI 

earned commissions. 

II. DISCUSSION

A. Defendants’ Motion for Partial Summary Judgment

Defendants move for summary judgment on NuVasive’s first (conversion), 

second (common count), third (breach of contract), fifth (breach of contract –

nondisclosure agreement), sixth (unfair competition), seventh (breach of contract 

– change of control), eighth (breach of covenant of good faith and fair dealing), 

ninth (intentional interference with contractual relations – ESR Agreement), and 

tenth (intentional interference with contractual relations – employment 

agreements) causes of action. Defendant MMI also moves for partial summary 

judgment on MMI’s fourth cause of action (breach of contract relating to failure to 

pay commissions) in its Amended Counterclaim. The Court grants Defendants’ 

motion as to NuVasive’s first, second, and third causes of action to the extent 

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that they are based on allegedly missing sets, NuVasive’s sixth cause of action to 

the extent it is based on alleged threats and disparagement by Defendants, as 

well as Nuvasive’s seventh, eighth, ninth, and tenth causes of action. 

Defendants’ motion for partial summary judgment is otherwise denied.

1. Claims Based on Missing Inventory

NuVasive’s claims for conversion (first cause of action), common count

(second cause of action), and breach of contract (third cause of action) are 

based on allegations that after the ESR Agreement was terminated, MMI failed to 

return inventory to NuVasive. The inventory at issue consisted of (1) “sets” of 

medical instruments and implants used in spine surgeries; and (2) “disposables,” 

such as needles and endotracheal tubes that are used during surgery and then 

thrown away. 

With respect to the allegedly missing sets, Defendants move for summary 

judgment on the ground that NuVasive has admitted that 16 of the 23 missing 

sets were actually in NuVasive’s possession all along, and NuVasive cannot 

prove that the remaining six sets were taken by Defendants. NuVasive concedes 

that many of the missing sets have been located and that NuVasive cannot 

reliably establish that MMI did not return the remaining sets. Therefore, 

NuVasive does not oppose Defendants’ motion to the extent it seeks judgment 

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on NuVasive’s claims to recover for the sets.

As for the unreturned disposables, Defendants contend that they are 

entitled to summary judgment because Plaintiff cannot prove that the allegedly 

missing disposables were taken by Defendants. NuVasive’s MB58 Report 

reflected the disposables sent to MMI and also showed the items that were used 

and charged to clients as reflected on “charge sheets” submitted by sales 

representatives. (Dep. of Derrick Von Stein (NuVasive Ex. 8) 27:15-31:4.) 

However, if sales representatives did not record on charge sheets all of the 

disposables that they had used, then NuVasive would not have any way of 

knowing that the disposables were used. (Id. at 31:5-9.) Other than training, 

NuVasive did not have any procedure in place to make sure that the sales 

representatives properly recorded all of the disposables that they used. (Id. at 

37:14-18.)

 Defendants argue that because NuVasive cannot prove that the MB58 

Report accurately accounts for all of the disposables used in the field, NuVasive 

cannot prove that the disposables that were not returned and were not charged 

to clients were kept by Defendants. However, it is not NuVasive’s burden to 

prove where all of the disposables have gone. According to the ESR, 

“Representative understands and agrees that following termination for any 

reason, Representative will be responsible for returning any outstanding 

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inventory items and will be held responsible for missing items.” (Nuvasive Ex. A 

at § 11.1.) 

It appears that MMI did not have a reliable system in place to track the use 

of disposables. According to Jerrold Tsuneta, former inventory manager of MMI, 

the disposables were kept in boxes in a closet in MMI’s offices, and MMI’s sales 

personnel were free to take the items whenever they wanted. (Tsuneta Dep. 

(NuVasive Ex. 5) 37:23-38:3.) Sales representatives would keep disposables in 

their cars. (Id. at 42:2-22.) For a short period of time, there was a log on a 

clipboard that sales personnel were supposed to fill out when taking disposables 

from the shelves. (Id. at 45:25-47:20.) However, sales personnel stopped filling 

out the log. (Id. at 46:8-14.) Tsuneta does not recall any other procedures that 

were implemented by MMI to track the inventory. (Id. at 49:10-12.)

Based on the evidence before the Court, it seems that MMI did not keep 

track of the quantity of disposables that each sales representative had in his or 

her possession. MMI should have kept records of disposables taken off the 

shelves by each sales representative and should have held the sales 

representatives responsible for disposables that they could not account for 

through charge sheets. MMI’s failure to do so has made it difficult if not 

impossible for MMI to account for disposables that are not reflected on the 

charge sheets and are not in MMI’s possession. These disposables are “missing 

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items” and are MMI’s responsibility under the terms of the ESR Agreement. 

Defendants argue that the MB58 Report does not reflect disposables used 

after August 31, 2012, by sales representatives then in the employ of NuVasive. 

However, it is unclear whether disposables taken from MMI’s shelves were used 

by sales representatives after August 31, 2012. In his deposition, Tsuneta 

testified that presumably sales representatives were using disposables for 

procedures over the weekend. (Tsuneta Dep. (Def.’s Ex. 23) 205:2-4.) At any 

rate, as discussed above, if MMI had kept track of disposables in the possession 

of each sales representative, MMI could have made the sales representatives 

account for outstanding inventory, whether they were still in the employ of MMI or 

not. 

There are triable issues of fact with respect to whether Defendants 

breached the ESR Agreement by failing to return disposables or pay for missing 

disposables after MMI’s termination. There are also triable issues precluding 

summary judgment on NuVasive’s claims for conversion and common count. 

Conversion is “the wrongful exercise of dominion over the property of 

another” – questions of good faith, lack of knowledge, and motive are immaterial. 

Irving Nelkin & Co. v. South Beverly Hills Wilshire Jewelry & Loan, 129 Cal. App. 

4

th 692, 699 (2005) (internal quotation marks and citations omitted). “It is not 

necessary that there be manual taking of the property; it is only necessary to 

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show an assumption of control or ownership over the property, or that the alleged 

converter has applied the property to his or her own use.” Messerall v. Fulwider, 

199 Cal. App. 3d I324, 1329 (1988) (internal quotation marks and citation 

omitted). Even if MMI is not intentionally using the disposables at issue for its 

own benefit, if MMI cannot return them to NuVasive and cannot account for them, 

it can fairly be said that MMI has wrongfully exercised dominion over them. 

Under California law, a common count may be stated “whenever the 

plaintiff claims a sum of money due, either as an indebtedness in a sum certain, 

or for the reasonable value of services, goods, etc., furnished.” Kawasho Int’l, 

U.S.A. Inc. v. Lakewood Pipe Service, Inc., 152 Cal. App. 3d 785, 793 (1983) 

(internal quotation marks and citation omitted). NuVasive has presented 

sufficient evidence that MMI is indebted to NuVasive for the value of the missing 

disposables. 

Therefore, Defendants’ motion for partial summary judgment is granted as 

to NuVasive’s claims for conversion, common count, and breach of contract to 

the extent that the claims are based on the allegedly missing sets, but is denied 

to the extent the claims are based on the missing disposables. 

2. Claims Based on Alleged Threats and Disparagement 

The following claims by Nuvasive are based on alleged threats and alleged 

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false and disparaging statements made by Kris Madsen and/or MMI about 

NuVasive and MMI’s former employees: unfair competition (sixth cause of 

action),1 breach of contract (seventh cause of action), breach of covenant of 

good faith and fair dealing (eighth cause of action), intentional interference with 

contractual relations – i.e., the ESR Agreement (ninth cause of action), and 

intentional interference with contractual relations – i.e., the employment 

agreements between NuVasive and former MMI employees (tenth cause of 

action). The Court finds that NuVasive has failed to produce sufficient evidence 

to create a genuine issue of material fact with respect to its claims that Madsen 

and/or others acting on behalf of MMI made threats or disparaging statements 

that caused harm to NuVasive. 

NuVasive argues that Defendants have failed to carry their initial burden of 

production on their motion for partial summary judgment on these claims. The 

Court disagrees. A moving party without the ultimate burden of persuasion at 

trial may carry its initial burden of production by (1) producing evidence negating 

an essential element of the nonmoving party’s case; or (2) after a sufficient time 

and opportunity for discovery, by showing that the nonmoving party does not 

have enough evidence of an essential element of its claim or defense to carry its 

 

1 NuVasive’s unfair competition claim is based on the alleged threats and 

disparagement made by Kris Madsen/MMI as well as the alleged disclosure of NuVasive’s 

confidential information. NuVasive’s claims based on the alleged disclosure of confidential 

information are examined in the next section of this Discussion. 

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ultimate burden of proof at trial. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz 

Companies, Inc., 210 F.3d 1099, 1106 (9th Cir. 2000). “A moving party may not 

require the nonmoving party to produce evidence supporting its claim or defense 

simply by saying that the nonmoving party has no such evidence.” Id. at 1105.

 Defendants do not merely claim that NuVasive lacks evidence of threats 

or disparaging statements made by Ms. Madsen and/or MMI. Defendants point 

to the deposition testimony of key witnesses who stated that they were unaware 

of threatening or disparaging statements made by Ms. Madsen. (Smith Dep. 

(Def.’s Ex. 24) 181:8-21; Kordonowy Dep. (Def.’s Ex. 26) 108:6-20; Hannon Dep. 

(Def.’s Ex. 28) 86:12-89:3.) Although Frank Orlando stated that he heard from 

someone that Ms. Madsen made a statement during a meeting regarding his 

criminal background, Orlando was in the employ of MMI at the time, and the 

statement was made to NuVasive employees not third parties, so no harm could 

have been done to NuVasive. (Orlando Dep. 190:16-191:22.) Defendants also 

point out that although Orlando claimed in his deposition that Dr. Bruce Burnett, 

Ms. Madsen’s husband, made threatening statements to him or others, Orlando 

acknowledged that the statements had no effect on NuVasive’s business 

relationships. (Orlando Dep. 184:6-17; 185:24-186:2; 187:22-24; 190:7-13.) 

The Court is satisfied that Defendants have carried their initial burden of 

production. Therefore, NuVasive must produce sufficient evidence to create a 

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genuine issue of material fact. Nissan, 210 F.3d at 1103. NuVasive has failed to 

do so.

The only evidence against Ms. Madsen is the alleged statement Ms. 

Madsen made at the sales meeting regarding Orlando’s criminal background. 

However, this evidence is inadmissible hearsay. Orlando does not remember 

who told him Ms. Madsen made this statement. (Orlando Dep. 191:15-22.) 

Furthermore, as mentioned above, the statement was allegedly made to 

NuVasive employees while Orlando was employed by MMI. Therefore, even if 

Ms. Madsen made such a statement, it would not have interfered with 

NuVasive’s business relationships. 

The rest of NuVasive’s evidence pertains to alleged threatening or 

disparaging statements made by Dr. Burnett. (Opp. at 11:22-12:10.) According 

to Orlando, Dominic Gonzales told Orlando that an unidentified nurse told him 

that Dr. Burnett stated to a NuVasive customer, “I can’t believe you’re working 

with those criminals.” (Orlando Dep. 186:15-187:10.) This alleged statement is 

inadmissible hearsay.

The remaining threatening or disparaging statements reported by Orlando 

consist of vague, passing comments to Orlando and other former MMI 

employees, along the lines of “You’re going down,” “You’re going to be screwed,”

or “You might be lucky to have a job in a few months.” (Orlando Dep. 184:22-

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186:4, 189:9-190:4, 254:19-256:4.) Orlando also felt threatened by a comment 

Dr. Burnett allegedly made about how he liked to go to the gun range and 

imagine certain people as the targets. (Orlando Dep. 181:20-183:24.)

Even if Dr. Burnett’s alleged statements rise to the level of threats or 

disparagements, NuVasive has not presented any evidence establishing that Dr. 

Burnett was acting as an agent for MMI or Ms. Madsen when he allegedly made 

the statements at issue. See Keys v. Washington Metropolitan Area Transit 

Auth., 408 F. Supp. 2d 1, 4 (D.D.C. 2005) (“A corporation is only liable for the 

torts of its employees if those acts are committed within the scope of their 

employment.”); Villa Glas G.M.B.H. v. Everstone Pty. Ltd., 2006 WL 3498163, at 

*5 (M.D. Fla. Dec. 4, 2006) (“Plaintiff cites no authority for the novel proposition 

that, absent evidence of corporate authority establishing an actual or apparent 

agency, a corporation is liable for the personal torts of its shareholders. Indeed, 

the law is to the contrary.”) That Dr. Burnett was a shareholder of MMI and was 

retained by MMI as a consultant and advisor to Ms. Madsen since June 10, 2012, 

does not establish that Dr. Burnett was acting within the scope of his employment 

or as an agent for MMI and/or Ms. Madsen when he made the alleged 

statements. At most, the evidence shows that Dr. Burnett was angry about the 

way his wife and MMI had been treated and made some unprofessional 

comments to the former MMI employees.

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Furthermore, NuVasive has failed to raise a genuine issue of material fact

with respect to the issue of damages. Because Orlando previously admitted in 

his deposition that he had no knowledge of Dr. Burnett’s statements interfering 

with NuVasive’s business relationships, NuVasive attempts to establish damages 

another way. NuVasive has submitted a declaration of Orlando in which Orlando 

claims that due to Dr. Burnett’s statements, Orlando has chosen to arrange his 

schedule so that he does not participate in surgeries where Dr. Burnett is the 

anesthesiologist. (Orlando Decl. ¶ 4.) According to Orlando, over the past year 

and a half, he has spent about 40 hours rescheduling cases and preparing for 

other NuVasive spine specialists to take his place. (Id. at ¶ 5.) Orlando states, 

“That time was not available for me to spend on other productive tasks for 

NuVasive.” (Id.) However, it is unclear whether NuVasive was paying Orlando 

for the time he spent rearranging his schedule. If Orlando was not being paid for 

such time, then NuVasive did not incur any loss.

In his declaration, Orlando also states that because of his level of 

experience, “I typically provide more input and suggestions to surgeons, resulting 

in approximately 10 percent more revenue on each case that I handle.” (Orlando 

Decl. ¶ 6.) Thus, Orlando reasons, NuVasive earned about $30,000 less in 

revenue on the 60 to 70 cases where a substitute took his place because he was 

avoiding Burnett. (Id.) However, there is no evidence supporting Orlando’s 

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claim that he earns 10 percent more revenue on each case that he handles. It is 

unclear whether Orlando is basing his claim on actual and fair comparisons – i.e., 

revenue figures from the same type of surgeries with the same doctors – or pure 

speculation. Based on the record before the Court, there is no basis for 

concluding that each time a substitute took Orlando’s place at a surgery, the 

substitute, no matter how seasoned he or she was, failed to make sales of 

equipment that Orlando otherwise would have made.

NuVasive has failed to produce sufficient evidence to create a genuine 

issue of material fact on its claims based on alleged threats and disparagement 

by Madsen and/or MMI. Therefore, the Court grants Defendants’ motion for 

partial summary judgment on Nuvasive’s claims for unfair competition (to the 

extent that it is based on alleged threats and disparagement), breach of contract, 

breach of covenant of good faith and fair dealing, intentional interference with 

contractual relations (ESR Agreement), and intentional interference with 

contractual relations (employment agreements between NuVasive and former 

MMI employees).

3. Claims Based on Disclosure of Confidential Information

 NuVasive’s fifth cause of action for breach of contract and sixth cause of 

action for unfair competition allege that Defendants improperly disclosed 

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confidential information of NuVasive. Defendants seek summary judgment on 

these claims on the ground that NuVasive has no evidence that MMI or Ms. 

Madsen disclosed NuVasive’s confidential information to any third parties at any 

time or that, even assuming there was a disclosure of confidential information, 

NuVasive suffered damages.

The Court denies Defendants’ motion on these claims because Defendants 

have not satisfied their initial burden of production. Defendants present evidence 

that the reason that MMI was terminated was because of its failure to meet the 

sales quota. (Def.’s Mem. of P &A at 21:1-12.) However, the fact that MMI was 

terminated for failure to meet the sales quota does not mean that Defendants did 

not disclose confidential information after the termination. Defendants do not 

point to discovery or other materials that demonstrate that NuVasive does not 

have enough evidence to carry its burden of persuasion at trial. 

Similarly, with respect to the issue of damages, Defendants merely state, 

“NuVasive has no evidence of any damages that it purportedly suffered from that 

alleged disclosure.” (Def.’s Mem. of P & A at 21:14-15.) Defendants’ statement 

that NuVasive lacks evidence of damages is not sufficient to carry Defendants’ 

initial burden of production. Nissan, 210 F.3d at 1105. Therefore, NuVasive has 

no obligation to produce any evidence in support of its claims, id. at 1102, and 

the Court does not reach Defendants’ arguments regarding the sufficiency of 

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NuVasive’s evidence. Defendants’ motion is denied as to NuVasive’s fifth cause 

of action for breach of contract and sixth cause of action for unfair competition (to 

the extent it is based on disclosure of confidential information).

4. MMI’s Claim for Failure to Pay Commissions

MMI moves for partial summary judgment on its fourth cause of action for 

breach of the ESR Agreement by failing to pay sales commissions. It is not 

disputed that the amount of unpaid commissions totals $38,489. (Opp. at 14:19-

20.) However, NuVasive contends that partial summary judgment on MMI’s

claim is inappropriate because NuVasive has pled offset as an affirmative 

defense.

The right to an equitable offset is based on the principle that “either party to 

a transaction involving mutual debts and credits can strike a balance, holding 

himself owing or entitled only to the net difference.” Granberry v. Islay 

Investments, 9 Cal. 4th 738, 744 (1995) (internal quotation marks and citations 

omitted). “It is well settled that a court of equity will compel a set-off when mutual 

demands are held under such circumstances that one of them should be applied 

against the other and only the balance recovered.” Harrison v. Adams, 20 Cal.2d 

646, 648 (1942). 

Because the issue of whether NuVasive is entitled to an equitable offset 

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remains pending, the Court finds that it would be premature to grant judgment on 

MMI’s claim for commissions. Therefore, the Court denies Defendants’ motion 

as to this claim.

B. NuVasive’s Motion for Partial Summary Judgment

NuVasive moves for partial summary judgment on MMI’s first cause of 

action (intentional interference with business and contractual relationships), 

second cause of action (breach of contract), third cause of action (intentional 

interference with prospective economic advantage), fifth cause of action (unfair 

competition), sixth cause of action (breach of the implied covenant of good faith 

and fair dealing), and seventh cause of action (unjust enrichment). The Court 

grants NuVasive’s motion as to MMI’s claims for breach of contract and breach of 

the implied covenant of good faith and fair dealing only. NuVasive’s motion is 

otherwise denied.

1. Breach of Contract

In its second cause of action, MMI alleges that NuVasive breached the 

ESR Agreement, specifically § 11.5(d) of the ESR Agreement, by soliciting, 

contracting with, and hiring MMI’s sales representatives. 

//

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Section 11.5(d) provides:

If NuVasive should terminate this Agreement due to a material breach 

by Representative of any of their obligations under Section 2.4, 6.13, 

6.15, 9 or 10 of this Agreement, then in addition to any other legal or 

equitable remedies available to NuVasive, NuVasive shall have the 

right in its sole discretion and for no additional consideration to 

Representative: to direct Representative to immediately assign to 

NuVasive all Compliance Agreements or similar agreements 

described in Section 6.13 above; and to solicit, contract with, or hire 

any sales representatives of Representative.

NuVasive’s stated reason for terminating the Agreement was not for breach 

of MMI’s obligations under § 2.4 (conflicts of interest), § 6.13 (agreement 

regarding competitive products and non-solicitation, § 6.15 (interaction with 

health care professionals), § 9 (trademarks), or § 10 (confidentiality). Rather, 

NuVasive terminated MMI under § 11.3 for being in “Poor Standing.” Section 

11.3 provides: “NuVasive shall have the right to terminate this Agreement at will 

if Representative is deemed to be in ‘Poor Standing’ per Section 6.1. . . .” 

Notably, § 11.3 does not say anything about NuVasive having a right to solicit, 

contract with, or hire sales representatives

Defendants contend that § 11.5(d) is the only provision that allows for 

NuVasive to solicit and hire MMI employees and that, therefore, NuVasive 

breached the ESR Agreement by soliciting and hiring MMI employees outside of 

the limited circumstances set forth in § 11.5(d). The Court disagrees. Although 

§ 11.3 does not permit solicitation or hiring of MMI employees, it does not prohibit 

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it either. The drafters of the contract knew how to expressly permit solicitation 

and hiring of MMI employees and presumably also knew how to expressly

prohibit the practice. However, they chose not to expressly prohibit the 

solicitation and hiring of MMI employees. 

Furthermore, there is no basis for implying a contractual prohibition. Under 

California law, a contract term will be implied only where the term is 

“indispensable to effectuate the expressed intention of the parties,” and the term 

must be implied “upon grounds of legal necessity.” Ben-Zvi v. Edmar Co., 47 

Cal. App. 4th 468, 473 (1995) (internal quotation marks and citations omitted). 

Contract terms may be implied only if the following conditions are met:

(1) the implication must arise from the language used or it must be 

indispensable to effectuate the intention of the parties; (2) it must 

appear from the language used that it was so clearly within the 

contemplation of the parties that they deemed it unnecessary to 

express it; (3) implied covenants can only be justified on grounds of 

legal necessity; (4) a promise can be implied only where it may be 

rightfully assumed that it would have been made if attention had been 

called to it; and (5) there can be no implied covenant where the 

subject is completely covered by the contract.

Addiego v. Hill, 238 Cal. App. 2d 842, 846-47 (1996). There is no language in 

the ESR Agreement that supports implying a contractual prohibition against 

soliciting and hiring MMI employees. Whether such practices constitute tortious

conduct is a different question. 

NuVasive contends that the terms of the ESR Agreement actually 

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authorized NuVasive to solicit and hire the MMI employees. NuVasive points to 

§ 11.6 and § 11.7 of the Agreement. Section 11.6 pertains to a “Change of 

Control” of NuVasive and a “Change of Control Payment” that may be owed to 

the Representative (MMI) in the event there is a “Change of Control.” The 

amount of the “Change of Control Payment” is determined by the “Stated 

Percentage,” defined as 8.75% of all sales generated by the Representative 

during the most recently-completed fiscal year, to be increased or decreased 

under specific circumstances set forth in the Agreement. In connection with a 

“Change of Control,” the Representative is entitled to one half of the “Change of 

Control Payment” upon closing of the “Change of Control,” and the remaining 

portion (“Second Payment”) following exercise of NuVasive or the Acquiring 

Party to terminate the Agreement under the Change of Control provisions. If the 

Representative is in “Poor Standing,” the Representative shall be entitled to half 

of the First Payment and half of the Second Payment. 

Section 11.7 provides:

Additional Provisions Regarding Change of Control. In the event the 

Second payment is made, all Compliance Agreements (or similar 

agreements then in effect) shall be immediately assigned to 

NuVasive or the Acquiring Party (at NuVasive’s discretion) and all 

other reasonable steps (not to include significant cash payments by 

Representative) shall be taken by Representative to ensure that the 

services of all Representative Affiliates are continued uninterrupted 

on behalf of the Acquiring Party of NuVasive (as appropriate). 

Further, NuVasive may at any time Representative is in Poor 

Standing, upon payment of the Stated Percentage, elect to terminate 

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this Agreement and have all Compliance Agreements assigned to it 

(and require that all other reasonable steps (not to include significant 

cash payments by Representative) be taken by Representative to 

ensure that the services of all Representative Affiliates are continued 

uninterrupted on behalf of NuVasive). 

(Emphasis added.)

The Compliance Agreements are described in § 6.13 of the Agreement. 

Under § 6.13, MMI represents and warrants that each of its sales personnel has 

executed a Compliance Agreement, in which the employee agrees, for the term

of the Agreement and a period of one year following the expiration of termination 

of the Agreement, not to (1) develop, promote, or sell competing lines or products 

in the Territory; (2) solicit any current of former customers of NuVasive to 

purchase any products or lines that are, in NuVasive’s judgment, competitive with 

the Products covered by the Agreement; or (3) solicit or offer work to any of 

NuVasive’s employees, agents or representatives. Section 6.13 provides, “each 

Compliance Agreement will name NuVasive as an intended third party 

beneficiary with full right to directly enforce provisions necessary to comply with 

this Section 6.13 . . . .”

According to NuVasive, because it paid, and MMI accepted, the Stated 

Percentage payment, NuVasive had the right to solicit and hire MMI’s employees 

under §11.7. MMI argues that § 11.7 does not even apply because it pertains to

change-of-control situations only. The Court is not persuaded by this argument. 

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Although the section bears the title “Additional Provisions Regarding Change of 

Control,” the pertinent language (the second sentence of §11.7) is not limited to 

change-of-control circumstances: “Further, NuVasive may at any time 

representative is in Poor Standing, upon payment of the Stated Percentage, elect 

to terminate this Agreement and have all Compliance Agreements assigned to it 

(and require that all other reasonable steps (not to include significant cash 

payments by Representative) be taken by Representative to ensure that the 

services of all Representative Affiliates are continued uninterrupted on behalf of 

NuVasive).” (Emphasis added.) 

Moreover, the first sentence of § 11.7 provides that when the Second 

Payment (in the event of a Change of Control) is made, all Compliance 

Agreements shall be immediately assigned to NuVasive and all other reasonable 

steps taken by Representative to ensure uninterrupted services of all 

Representative Affiliates. If the second sentence only applies to change-ofcontrol situations, the second sentence adds nothing to the first sentence and is 

extraneous. “Courts must interpret contractual language in a manner which 

gives force and effect to every provision, and not in a way which renders some 

clauses nugatory, inoperative or meaningless.” City of Atascadero v. Merrill 

Lynch, Pierce, Fenner & Smith, Inc., 68 Cal. App. 4th 445, 472 (1999).

Although the Court agrees with NuVasive that the second sentence of 

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§ 11.7 applies, the Court does not agree that this provision necessarily gave 

NuVasive the contractual right to solicit and hire MMI’s employees. The express 

language only gives NuVasive (1) the right to have all Compliance Agreements 

assigned to it and (2) require that MMI take reasonable steps to ensure that the 

services of all Representative Affiliates (defined in § 6.13 as MMI’s partners, 

employees, sub-contractors, sales personnel, affiliates or agents) are continued 

uninterrupted on behalf of Nuvasive. 

NuVasive argues that § 11.7 must be read as allowing NuVasive to solicit 

and hire MMI employees upon payment of the Stated Percentage because 

NuVasive already has the right to enforce the Compliance Agreements as an 

intended third-party beneficiary. NuVasive reasons that it would be nonsensical 

for it to pay over $1.7 million to obtain rights that it already has. However, it is 

possible that the parties believed that assignment of the Compliance Agreements 

would confer some additional benefit on NuVasive. In addition, it appears that 

upon payment of the Stated Percentage, NuVasive obtained the right to require 

MMI to take steps to ensure that the services of MMI’s sales personnel continued 

uninterrupted. It is unclear what uninterrupted services means in the context of 

termination – i.e., whether sales representatives must fulfill outstanding 

contracts, cooperate in transferring business to a new Representative, and/or do 

something else. But it seems that NuVasive obtained some sort of benefit that it 

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would not otherwise have had if it terminated MMI without payment of the Stated 

Percentage. Whether the benefit is worth $1.7 million is not for the Court to say. 

See Frankel v. Board of Dental Examiners, 46 Cal. App. 4th 534, 545 (1996) (“It 

is not enough to say that without the proposed implied covenant, the contract 

would be improvident or unwise or would operate unjustly. Parties have the right 

to make such agreements.”)

In sum, based on the record before it, the Court does not find a basis for 

implying in the ESR Agreement either a prohibition against solicitation and hiring 

of MMI employees under the circumstances of this case or an authorization to do 

the same. Therefore, NuVasive is entitled to summary judgment on MMI’s 

breach of contract claim.

2. Intentional Interference with Business and Contractual Relationships

MMI’s first cause of action alleges that NuVasive intentionally induced 

breaches of (1) an independent contractor agreement with Matthew Smith’s 

company, Cosmo Medical, Inc., (2) an employment agreement with Frank 

Orlando, and (3) an employment agreement with Stephen Kordonowy. MMI 

alleges:

Induced by NuVasive, MMI’s sales representatives breached their 

contracts with MMI by, among other things, failing to devote their best 

efforts to providing services to MMI; failing to maintain MMI’s goodwill 

and reputation; failing to advance MMI’s business interests; 

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breaching their representation and warranty that they are not parties 

to other employment or non-disclosure agreements that could affect 

their performance under their contracts with MMI or pose any actual 

or potential conflicts of interest; failing to abide by their confidentiality 

obligations; breaching their agreement not to induce or attempt to 

induce any cutomer, prospective customer, vendor, supplier 

(including NuVasive), MMI employee, or MMI salesperson to 

discontinue or limit his or her relationship with MMI during the term of 

their agreements and for one year thereafter.

(Am. Counterclaim ¶ 37.)

NuVasive argues that to prevail on its claim, MMI is required to show that 

NuVasive engaged in some independently wrongful conduct. NuVasive further 

argues that (1) NuVasive was expressly permitted to solicit and hire the MMI 

employees by the ESR Agreement; and (2) there is no evidence that prior to the 

termination of MMI, NuVasive encouraged MMI’s employees to sever their 

relationship with MMI by promising them employment with NuVasive.

Contrary to NuVasive’s assertions, MMI actually does not need to show 

that NuVasive engaged in wrongful conduct to prevail on its interference with 

contract claim. In Reeves v. Hanlon, 33 Cal. 4th 1140, 1152-53 (2004), the 

California Supreme Court held that a defendant is not subject to liability for 

intentional interference with an at-will employment relationship unless the 

defendant engaged in an independently wrongful act. That is, “a defendant is not 

subject to liability for intentional interference if the interference consists merely of 

extending a job offer that induces an employee to terminate his or her at-will 

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employment.” Id. at 1153. Here, however, MMI does not complain of just 

interference with an at-will employment relationship, which is viewed under 

California law as an interference with a prospective economic advantage. Id. at 

1152. MMI’s claim is premised on the breach of specific contractual terms.

“Because interference with an existing contract receives greater solicitude 

than does interference with prospective economic advantage, it is not necessary 

that the defendant’s conduct be wrongful apart from the interference with the 

contract itself.” Quelimane Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 55 

(1998) (internal citation omitted). The elements of a claim for intentional 

interference with contractual relations are: (1) a valid contract between plaintiff 

and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s 

intentional acts designed to induce a breach or disruption of the contractual 

relationship; (4) actual breach or disruption of the contractual relationship; and 

(5) resulting damage. Id. 

MMI had valid contracts with Smith, Orlando, and Kordonowy. NuVasive 

knew of the contracts and had copies of the contracts. (Answer to Amended 

Counterclaim [Doc. 86], ¶ 35.) Among other things, the contracts prohibit, for a 

twelve-month period following the employment term, the sales representatives

from selling competitive products or otherwise engaging in a competing business 

in the assigned territories and from soliciting or accepting any business from any 

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customer of MMI. (Exs. 2, 3, & 4 to Madsen Decl., §§ 5.4 and 5.5.)2 

There is a triable issue whether, by hiring Smith, Orlando, and Kordonowy, 

NuVasive intentionally induced a breach of the contracts. The tort of intentional 

interference with performance of a contract “does not require that the actor’s 

primary purpose be disruption of the contract” - it is sufficient if the actor knows 

that “the interference is certain or substantially certain to occur as a result of his 

action.” Quelimane, 19 Cal. 4th at 56. If NuVasive knew about the noncompetition and non-solicitation clauses in the contracts, then NuVasive arguably 

knew that those clauses would be breached if Smith, Orlando, and Kordonowy 

accepted employment with NuVasive.3 

NuVasive argues that MMI cannot claim that its former employees 

breached their contracts by working for NuVasive when the ESR Agreement

gave NuVasive the right to solicit and hire these same employees and continue 

its services with them. However, as discussed above, based on the record 

before it, the Court cannot conclude that the ESR Agreement authorized 

NuVasive to solicit and hire MMI employees. Therefore, NuVasive’s motion is 

 

2

In its Opposition, MMI alleges breaches of various other provisions of the contracts as 

well. However, the Court does not deem it necessary to analyze each of these provisions at 

this time. 

3 Although non-competition and non-solicitation clauses like these would be void as a 

matter of law under California law (Cal. Bus. & Prof. Code § 16600), such provisions are 

permitted under Nevada law as long as the restraints on trade are reasonable in scope and 

duration and supported by valuable consideration. Camco, Inc. v. Baker, 113 Nev. 512, 518 

(1997). The contracts at issue provide that they are governed by the laws of the State of 

Nevada.

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denied as to MMI’s intentional interference with contract claim.

3. Intentional Interference with Prospective Economic Advantage

MMI’s third cause of action alleges that MMI interfered with MMI’s 

prospective business relationships with physicians and hospitals by improperly 

depleting MMI of its personnel. MMI alleges that but for NuVasive’s action, MMI 

would have continued selling products to these customers and would have 

gained future economic benefit from its relationships from these customers. 

To prevail on a claim for interference with prospective economic 

advantage, a plaintiff must establish that the defendant engaged in an 

independently wrongful act. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 

4th 1134, 1158 (2003). An act “is independently wrongful if it is unlawful, that is, 

if it is proscribed by some constitutional, statutory, regulatory, common law, or 

other determinable legal standard.” Id. at 1159. 

NuVasive moves for summary judgment on MMI’s intentional interference 

with prospective economic advantage claim on the ground that NuVasive did not 

engage in independently wrongful conduct. However, as discussed above, there 

is a genuine issue of material fact regarding whether NuVasive intentionally 

interfered with MMI’s contracts with its employees. Intentional disruption of a 

contract is tortious conduct that would be “independently wrongful.” Accordingly,

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the Court denies NuVasive’s motion as to MMI’s third cause of action.

4. Unfair Competition 

In its fifth cause of action, MMI alleges that NuVasive has violated Cal. Bus. 

& Prof. Code §17200, et seq., by violating various provisions of the ESR 

Agreement, publicly disparaging MMI, disrupting MMI’s relationships with its 

personnel, interfering with MMI’s prospective business relationships with 

customers, and dismantling MMI’s business operations by hiring away its sales 

representatives.

Under the California Unfair Competition Law, “unfair competition” is “any 

unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code 

§ 17200. “By proscribing ‘any unlawful’ business act or practice, the UCL 

‘borrows’ rules set out in other laws and makes violations of those rules 

independently actionable.” Zhang v. Superior Court, 57 Cal. 4th 364, 370 (2013) 

(internal quotation marks and citations omitted). 

NuVasive argues that MMI has failed to establish that NuVasive engaged in 

the type of conduct that would support a § 17200 claim. But as discussed above, 

MMI’s claims for intentional interference with contract and intentional interference 

with prospective economic advantage survive summary judgment. These claims 

can form the basis of an unlawful practice claim under § 17200. See CRST Van 

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Expedited, Inc. v. Werner Ent., Inc., 479 F.3d 1099, 1107 (9th Cir. 2007) (holding 

that plaintiff adequately stated UCL claim by alleging that defendant engaged in 

intentional interference with plaintiff’s employment contracts). 

NuVasive also argues that MMI cannot prove a causal connection between 

MMI’s economic injury and the alleged unfair conduct. NuVasive reasons that 

NuVasive’s termination of the ESR Agreement and subsequent solicitation and 

hire of MMI employees was caused by MMI’s Poor Standing, not NuVasive’s 

alleged wrongful actions. Although NuVasive was within its rights in terminating 

MMI for Poor Standing, MMI’s alleged damages are not solely from being 

terminated. MMI alleges damages from NuVasive gutting MMI’s business by 

hiring almost all of MMI’s employees. Because there is a triable issue regarding 

whether NuVasive engaged in tortious conduct by hiring away MMI’s employees, 

there is also a genuine issue of material fact with respect to damages on MMI’s 

UCL claim.

5. Breach of Implied Covenant of Good Faith & Fair Dealing

MMI’s sixth cause of action alleges that NuVasive breached the implied 

covenant of good faith and fair dealing by depriving MMI of the benefits of the 

ESR Agreement. Specifically, MMI claims that NuVasive’s communications with 

and solicitations of MMI’s sales force rendered it difficult or impossible for MMI to 

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meet its sales quota. The Court finds that NuVasive is entitled to summary 

judgment on this claim.

MMI offers little more than speculation in support of its conclusion that 

NuVasive’s actions interfered with MMI’s ability to reach its sales quota. The 

evidence shows that beginning in the Spring of 2012, MMI employees, including 

Matt Smith, James Pinto, and Steve Kordonowy began complaining to Jeff Moore 

and Ed Graubert of NuVasive about problems with Kris Madsen’s leadership and 

other employment issues at MMI. (Smith Dep. (Ex. 1 to Huang Decl.) 146:4-

147:22; Pinto Dep. (NuVasive Ex. 9) 37:3-38:3; 43:9-17; 137:10-138:25; 151:7-

156:6; Kordonowy Dep. (NuVasive Ex. 4) 36:10-42:13; 46:17-48:22; Moore Dep.

(NuVasive Ex. 5) 54:5-56:18; 137:24-140:25; Graubert Dep. (NuVasive Ex. 6)

75:2-78:11.) Clearly, there was a sense of dissatisfaction and unrest among 

these employees. MMI fails to show that it was NuVasive’s alleged meddling in 

MMI’s affairs as opposed to the underlying employee unhappiness that 

negatively affected sales.

Moreover, even though MMI made the quota for January and February of 

2012, it is not disputed that MMI fell below 95% of the quota for the first, third, 

and fourth quarters of 2011. (Ex. 2 to Expert Report of Elaine E.L. White.) 

According to MMI, its failure to achieve quota in the second half of 2011 was due 

to the fact that two key customers decided to stop using NuVasive products. 

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(Madsen Decl. ¶ 10.) Even if this is so, the fact that MMI failed to make quota 

before any alleged wrongdoing by NuVasive raises questions regarding 

causation. Many factors — e.g., how the quota was determined, the state of the 

economy, competing products, customer satisfaction, etc., — would have played 

a role in whether MMI met the sales quota at any given time.

Based on the evidence before the Court, the Court cannot conclude that 

reasonable jurors could find by a preponderance of the evidence that MMI is 

entitled to a verdict on its claim for breach of the implied covenant of good faith 

and fair dealing. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986) 

(“Thus, in ruling on a motion for summary judgment, the judge must view the 

evidence presented through the prism of the substantive evidentiary burden.”). 

Accordingly, the Court grants NuVasive’s motion as to this claim.

6. Unjust Enrichment

MMI’s seventh cause of action alleges that NuVasive has been unjustly 

enriched because it is profiting from the sale of its products by MMI’s former 

employees within MMI’s former territory. NuVasive moves for summary 

judgment on this claim on the ground that the ESR Agreement expressly allowed 

NuVasive to terminate the agreement and, upon payment of the Stated 

Percentage, to solicit and hire MMI’s employees. However, as discussed above,

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the evidence in the record does not support NuVasive’s interpretation of the 

contract. Therefore, NuVasive’s motion is denied as to MMI’s unjust enrichment 

claim.

7. Limitation of Damages

NuVasive requests a ruling that MMI’s damages, if any, are limited to the 

term of the ESR Agreement — i.e., through 2013. Citing to Martin v. U-Haul, 204 

Cal. App. 3d 396, 409 (1988), NuVasive argues that recoverable damages are 

limited to those foreseeable by the parties at the time of contracting, and that 

awarding damages beyond the term of the ESR Agreement would put MMI in a 

better position than if both parties had performed in accordance with the contract. 

Martin is inapposite because it concerns damages for breach of contract. 

Here, MMI seeks damages for tortious conduct. “The measure of damages for 

intentional interference with contractual relations or prospective economic 

advantage is ‘an amount that will reasonably compensate plaintiff for all loss or 

harm, providing that you find it was [or will be] suffered by plaintiff and caused by 

the defendant’s conduct.’” Sole Energy Co. v. Petrominerals Corp., 26 Cal. App. 

4th 212, 232 (2005) (quoting BAJI No. 7.89). See also Korea Supply, 29 Cal. 4th 

at 1165 (explaining that the plaintiff, who claimed that but for the defendant’s 

interference plaintiff would have been awarded contract, sufficiently satisfied the 

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requirement that the economic harm it suffered was proximately caused by the 

acts of the defendant). 

There is a genuine issue of material fact regarding whether the ESR 

Agreement would have been renewed for an additional three years or another 

time period. There is evidence that specialized knowledge was needed to be a 

sales person for NuVasive’s products and that it would take at least a year to 

properly train a sales person. (Moore Dep. (Ex. 17 to Huang Decl.) at 219:6-23.) 

Furthermore, continuity of sales personnel was important because individual 

sales representatives developed relationships with surgeons and built up trust 

and credibility. (Id. at 220:6-12.) Given this information, it is possible that 

without the option of hiring MMI’s sales personnel, NuVasive would have 

extended its relationship with MMI beyond 2013.4 NuVasive’s motion is denied 

as to this issue.

III. CONCLUSION

For the reasons discussed above, Defendants’ motion for partial summary 

judgment [Doc. 92] is GRANTED IN PART and DENIED IN PART. The Court 

 

4 The evidence offered by MMI regarding other distributors who failed to meet quota and 

were not terminated is not persuasive evidence that NuVasive would have renewed the ESR 

Agreement. There is no evidence regarding the terms governing the agreements between 

NuVasive and these other distributors. Furthermore, a decision not to renew would not 

necessarily be based solely on sales performance but could also take into account NuVasive’s 

assessment regarding the health and future of MMI.

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grants Defendants’ motion as to NuVasive’s first, second, and third causes of 

action to the extent that they are based on allegedly missing sets, NuVasive’s 

sixth cause of action to the extent it is based on alleged threats and 

disparagement by Defendants, as well as Nuvasive’s seventh, eighth, ninth, and 

tenth causes of action. Defendants’ motion for partial summary judgment is 

otherwise denied.

NuVasive’s motion for partial summary judgment [Doc. 98] is also 

GRANTED IN PART and DENIED IN PART. NuVasive’s motion is GRANTED

as to MMI’s second cause of action for breach of contract and sixth cause of 

action for breach of the implied covenant of good faith and fair dealing. 

NuVasive’s motion is otherwise DENIED.

IT IS SO ORDERED.

Dated: July 20, 2015

Case 3:13-cv-02077-BTM-RBB Document 163 Filed 07/20/15 Page 36 of 36