Court Opinion

ID: 5134714
Source: CourtListenerOpinion
Date Created: 2021-12-14 17:03:02.242263+00
Date Added: 2024-06-11T08:23:45.509543
License: Public Domain

SUPERIOR COURT
                                   OF THE
                             STATE OF DELAWARE
ABIGAIL M. LEGROW                                           NEW CASTLE COUNTY COURTHOUSE
      JUDGE                                                  500 N. KING STREET, SUITE 10400
                                                              WILMINGTON, DELAWARE 19801
                                                                      (302) 255-0660

                                 December 13, 2021

 Brian M. Rostocki, Esq.                        Patricia A. Winston, Esq.
 Nicholas R. Rodriguez, Esq.                    Kirsten A. Zeberkiewicz, Esq.
 Alexandria P. Murphy, Esq.                     Barnaby Grzaslewicz, Esq.
 John T. McDonald, Esq.                         Morris James LLP
 Reed Smith LLP                                 500 Delaware Avenue, Suite 1500
 1201 N. Market Street, Suite 1500              Wilmington, DE 19801
 Wilmington, DE 19801

              RE: Axogen Corp. v. Integra LifeSciences Corp.
                  C.A. No. N21C-04-202 AML CCLD

 Dear Counsel:
       After considering Axogen Corporation’s Motion to Dismiss Integra
 LifeScience Corporation’s Counterclaims and the parties’ briefs and arguments with
 respect to that motion, I have concluded that the motion should be denied without
 prejudice to Axogen raising its arguments at a later date based upon a more complete
 factual record. For the reasons explained briefly below, I agree with Axogen that
 some or all of Integra’s claims likely are barred by the Noerr-Pennington doctrine
 or because Integra cannot establish any non-protected action by Axogen that
 interfered with Integra’s contractual or prospective business relationships. At this
 stage of proceedings, however, the Court must assume the truth of Integra’s
 allegations and draw inferences in its favor. Under Delaware’s minimal pleading
 standard, Integra’s claims survive, for now.
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 2 of 11

                              FACTUAL BACKGROUND
       I will not belabor the point reciting in detail the facts alleged in Axogen’s
complaint or Integra’s counterclaims.              Briefly summarized, the parties are
competitors in the development and sale of medical technology.1 Integra planned to
develop a nerve allograft device to compete with a similar device developed by
Axogen.2 To that end, Integra formed a Nerve Advisory Board (“NAB”) tasked with
analyzing the market, developing trial protocols, and guiding research.3                    The
members of the NAB included Dr. Kyle Eberlin and Dr. Ian Valerio.4 Both doctors
were subject to noncompete agreements with Axogen and Integra through prior
consulting work they performed for each entity.5
       After learning about Integra’s plans to develop a competing device and intent
to utilize Drs. Eberlin and Valerio to assist in that endeavor, Axogen brought an
action in the Court of Chancery seeking to enjoin the doctors’ employment with
Integra, among other things.6 The doctors ultimately resigned from the NAB.7 The
parties to the Chancery proceeding entered into a stipulation regarding the interim
relief Axogen sought, after which the action was transferred to this Court pursuant
to 10 Del. C. § 1902.8

1
  See Counterclaims at ¶¶ 10–21 (D.I. 3).
2
  See id. at ¶¶ 18–21.
3
  See id. at ¶¶ 55–59.
4
  Id.
5
  See id. at ¶¶ 22–54 (describing Integra’s history with the doctors); Complaint at ¶¶ 35–43, 54–
61, 77–84 (describing Axogen’s history with the doctors) (D.I. 1).
6
  Counterclaims at ¶ 64.
7
  Id. at ¶ 65.
8
  Integra’s Answering Br. in Opp. to Axogen’s Mot. to Dismiss at 13–14 (D.I. 14); see also
Complaint, Ex. 1 (Transfer Order).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 3 of 11

       Axogen filed its Complaint in this Court in April 2021. Axogen’s five claims
center on Integra’s alleged conduct in violating or causing Axogen’s consultants and
employees to violate their contractual relationships with Axogen.9
       Integra brought three counterclaims.          First, Integra alleges tortious
interference with contract based on Axogen’s “induc[ing] [Eberlin and Valerio] to
breach their contractual obligations to Integra, including the obligations not to
disclose confidential information, not to compete with Integra, and continuing to
service Integra.”10 Second, Interga alleges tortious interference with a prospective
economic advantage, claiming Axogen undermined Integra’s future business
relationships with Eberlin and Valerio.11 Third, Integra alleges unfair competition
based on Axogen’s (1) “improperly seeking to maintain its monopoly in the nerve
allograft market,” (2) “filing and maintaining this litigation in which Axogen asserts
claims motivated by its desire to impose a collateral, anticompetitive injury rather
than to obtain a justifiable legal remedy,” (3) “obtain[ing] Integra’s confidential and
proprietary information in direct competition with Integra in an effort to obtain an
improper advantage in the market place,” and (4) “causing Drs. Valerio and Eberlin
to resign from their positions.”12
       Axogen moved to dismiss Integra’s counterclaims under Rule 12(b)(6) on
July 7, 2021.13 The Court heard argument on October 15, 2021 and took the motion
under advisement.14

9
  See Complaint at ¶¶ 283–334.
10
   See Counterclaims at ¶¶ 70–77.
11
   See id. at ¶¶ 78–85.
12
   See id. at ¶¶ 86–90.
13
   Axogen’s Motion to Dismiss (D.I. 8).
14
   D.I. 25; see also D.I. 26 (Hearing Transcript).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 4 of 11

                                        ANALYSIS
       Dismissal is appropriate under Rule 12(b)(6) if the complaint fails to state a
claim upon which relief can be granted.15 In considering a motion to dismiss, the
Court must: “(1) accept all well pleaded factual allegations as true, (2) accept even
vague allegations as ‘well pleaded’ if they give the opposing party notice of the
claim, (3) draw all reasonable inferences in favor of the non-moving party, and (4)
[not dismiss the claim] unless the plaintiff would not be entitled to recover under
any reasonably conceivable set of circumstances.”16
       Delaware’s pleading standard is “minimal.”17 But “the benefits of liberal
construction afforded [a plaintiff] do not extend to ‘conclusory allegations that lack
specific supporting factual allegations.’”18 Accordingly, the Court will dismiss a
complaint if the plaintiff fails to plead specific allegations supporting each element
of a claim or if no reasonable interpretation of the alleged facts reveals a remediable
injury.19
       In support of its motion to dismiss, Axogen advances two main arguments.
First, Axogen contends Integra fails to state a claim as to any of its three
counterclaims because it has not adequately pleaded one or more of the requisite
elements for those claims. Second, Axogen argues the Noerr-Pennington doctrine

15
   See Del. Super. Ct. Civ. R. 12(b)(6).
16
   Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535 (Del. 2011).
17
   Id. at 536 (citation omitted).
18
   Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, 2021 WL 117036, at *6 (Del. Super. Ct.
Jan. 13, 2021) (quoting Ramunno v. Cawley, 705 A.2d 1029, 1034 (Del. 1998)).
19
   Surf’s Up, 2021 WL 117036, at *6 (quotation marks and citations omitted); see Malpiede v.
Townson, 780 A.2d 1075, 1083 (Del. 2001); see also Price v. E.I. DuPont de Nemours & Co., Inc.,
26 A.3d 162, 166 (Del. 2011) (observing that a court need not draw “unreasonable inferences in
favor of the non-moving party”), overruled on other grounds by Ramsey v. Ga. S. Univ. Advanced
Dev. Ctr., 185 A.3d 1255, 1277 (Del. 2018).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 5 of 11

completely bars Integra’s claims. That doctrine precludes a finding of liability for
damage caused by inducing, inter alia, judicial action.
     A. Integra adequately pleads it claims.
        1. Count I – Tortious Interference with Contract
        To state a claim for tortious interference with contract, a plaintiff must plead
(1) the existence of a contract, (2) about which the defendant knew, (3) an intentional
and unjustified act that was a significant factor in causing the breach, and (4)
damages.20 Axogen argues Integra fails to plead breach of contract and that Axogen
acted with intention and without justification in a way that caused a breach.21 The
Court disagrees.
        Integra entered into a Master Service Agreement (“MSA”) with each doctor.
The MSAs contained a non-compete agreement and several Statements of Work that
covered various time periods (individually, a “SOW”). Axogen argues both non-
competes have expired because a new SOW was not entered when the preceding
SOW expired.22 But Integra alleges it entered into several SOWs with each doctor
and each expressly referenced the MSA.23 Moreover, the descriptions of the doctors’
responsibilities outlined in the SOWs were sufficiently broad to encompass work
related to nerve products.24 At this stage of the proceedings, Integra has presented a
reasonable interpretation of the contracts and adequately has alleged that Integra

20
   Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013).
21
   Axogen’s Opening Br. in Supp. of Mot. to Dismiss at 17.
22
   Specifically, Axogen argues Valerio’s MSA expired on November 3, 2016 and his non-compete
expired one year later, on November 3 2017. Id. at 14–15. Axogen similarly argues Eberlin’s
MSA expired on May 12, 2019 and his non-compete expired on May 20, 2020. Id. at 16.
23
   See Counterclaims at ¶¶ 22–54.
24
   See id. at ¶¶ 37, 53.
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 6 of 11

caused the doctors to breach the contracts by refusing to do any additional work for
Integra relating to nerve repair products.
       Whether Axogen’s conduct was improper or unjustified is a fact-intensive
question that cannot be resolved on a motion to dismiss.25 For now, it sufficient that
Integra alleges facts from which the Court reasonably may infer that Axogen sought
to cause the doctors to breach their contracts with Integra by obtaining from them
Integra’s confidential information in an effort to gain improper competitive
advantage.
       2. Count II – Tortious Interference with Prospective Economic
          Advantage
       To state a claim for tortious interference with prospective economic
advantage, a plaintiff must plead (1) the existence of a reasonably probable business
opportunity, (2) intentional interference by the defendant with that opportunity, (3)
proximate causation, and (4) damages.26              Axogen contends Integra has not
adequately pleaded the first and second elements.27 Again, the Court disagrees.
       Integra adequately alleges the reasonable probability of future business
opportunities with both doctors and with other individuals that Integra was

25
   See Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, at *25–27, 2019 WL
4927053 (Del. Ch. Oct. 7, 2019) (denying motion to dismiss because justification is a fact-
intensive inquiry not amenable to resolution at the pleading stage); WaveDivision Holdings, LLC
v. Highland Cap. Mgmt. L.P., 2010 WL 1267126, *7 (Del. Super. Ct. Mar. 31, 2010) (same);
Grunstein v. Silva, 2009 WL 4698541, at *16 (Del. Ch. Dec. 8, 2009) (“The question of whether
an action is improper is a factual determination not readily amenable to assessment by way of a
motion to dismiss.”).
26
   Organovo Holdings, Inc. v. Dimitrov, 162 A.3d 102, 122 (Del. Ch. 2017) (citing DeBonaventura
v. Nationwide Mut. Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)).
27
   Axogen’s Opening Br. in Supp. of Mot. to Dismiss at 24–26.
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 7 of 11

considering for inclusion in the NAB.28 Contrary to Axogen’s argument, Integra’s
allegations are sufficiently definite to survive dismissal.29 “[Although] the plaintiff
must ultimately prove the reasonable probability of a business opportunity, the
‘existence of such a business expectancy is a question of fact not suitable for
resolution [on a motion to dismiss].’”30
       Furthermore, Integra adequately avers Axogen interfered with those business
opportunities through its allegedly defamatory statements regarding Integra and its
threat to sue the doctors and other others.31 Again, whether this conduct was justified
is a fact-intensive question unfit for resolution at the pleading stage.32
       3. Count III – Unfair Competition
       To state a claim for unfair competition, a plaintiff must allege “a reasonable
expectancy of entering a valid business relationship, with which the defendant
wrongfully interferes, and thereby defeats the plaintiff's legitimate expectancy and

28
   See id. at ¶¶ 23, 26, 39, 42, 55–59 (describing Integra’s repeated business relationships with the
doctors over several years); see also id. at ¶¶ 22, 55, 80–81 (describing Integra’s reliance on
consultants and plans to add additional consultants to the NAB).
29
   See Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at * 7–8 (Del. Ch. Jan. 20, 2009) (counter-
claim plaintiff adequately alleged reasonable probability of business opportunity even though it
did not specifically name the affected customers); EIS, Inc. v. WOW Tech Int'l GmbH, 2020 WL
7027528, at *8 (D. Del. Nov. 30, 2020) (rejecting argument that the plaintiff’s failure to identify a
lost customer was a basis for dismissal).
30
   Chapter 7 Tr. Constantino Flores v. Strauss Water Ltd., 2016 WL 5243950, at *12 (Del. Ch.
Sept. 22, 2016) (quoting Gill v. Del. Park, LLC, 294 F. Supp. 2d 638, 646 (D. Del. 2003)).
31
   See Counterclaims at ¶¶ 1–9, 62–69.
32
   Elder v. El Di, Inc., 1997 WL 364049, at *14 (Del. Super. Ct. Apr. 24, 1997) (“[W]hether
[defendant’s] alleged interference was justified or privileged is an issue of fact that cannot be
resolved on a motion under Rule 12(b)(6)”); Hursey Porter & Assocs. v. Bounds, 1994 WL
762670, at *16 (Del. Super. Ct. Dec. 2, 1994) (noting “privilege to compete” has the same meaning
as “justification”).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 8 of 11

causes him harm.”33           “The essential distinction between legitimate market
participation and ‘unfair competition’ is ‘unfair action’ by a defendant that prevents
‘the plaintiff from legitimately earning revenue.’”34 Here, Axogen contends Integra
does not sufficiently plead a reasonable expectancy of entering into a valid business
relationship or that Axogen acted wrongfully.35
       As previously stated, Integra adequately pleads it had a reasonable expectancy
of entering a valid business relationship. And Integra adequately pleads wrongful
interference by Axogen.          Unfair competition “includes fraud, intimidation, or
disparagement,”36 and that is what Integra alleges.37 Consequently, Integra has
stated a claim for unfair competition.
     B. The Court cannot conclude whether Noerr-Pennington bars some or all
        of Integra’s claims without further development of the facts.
       Alternatively, Axogen contends all Integra’s counterclaims should be
dismissed because they violate the Noerr-Pennington doctrine. “Noerr-Pennington
provides broad immunity from liability to those who petition the government,

33
   Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at *5 (Del. Ch. Jan. 20, 2009) (internal
citations omitted).
34
   GWO Litig. Tr. v. Sprint Sols., Inc., 2018 WL 5309477, at *12 (Del. Super. Ct. Oct. 25, 2018)
(quoting Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *19 (Del. Ch. May
18, 2009)).
35
   Axogen’s Opening Br. in Supp. of Mot. to Dismiss at 27.
36
   Int’l Bus. Machines Corp. v. Comdisco, Inc., 1993 WL 259102, at *21 (Del. Super. Ct. June 30,
1993) (internal quotations omitted); see also NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 34
(Del. Ch. 2009) (“[M]isrepresentations of fact ‘are not legitimate vehicles of competition.’”)
(internal citations omitted).
37
    See Counterclaims ¶¶ 1–9, 62–65, 68, 87 (describing Axogen’s alleged wrongful conduct,
including making false statements about Integra and interfering in Integra’s relationship with the
doctors).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 9 of 11

including administrative agencies and courts, for redress of their grievances.”38
“Immunity under the Noerr-Pennington doctrine extends to business torts due to the
doctrine’s foundation on a First Amendment right of petition.”39 The doctrine is not
absolute, and it can be overcome by application of the “sham exception,” which
applies if the lawsuit is “a mere sham to cover what is actually nothing more than an
attempt to interfere directly with business relationships of a competitor.”40 To
determine whether the sham exception applies, the court first must determine
whether the lawsuit is “objectively baseless in the sense that no reasonable litigant
could realistically expect success on the merits.”41
       Axogen correctly and persuasively argues that Integra’s counterclaims are
based upon, and inextricably intertwined with, the litigation Axogen filed in the
Court of Chancery. Although Integra argues in passing that the “sham exception”
may apply, that argument is unpersuasive given that the Court of Chancery entered
an injunction granting Axogen at least some of the relief sought. Although the
parties stipulated to the injunction, there is no reasonable basis in the Counterclaims’
allegations to conclude the sham exception applies when Axogen achieved success
on the merits of its claim.
       The parameters of Noerr-Pennington are not endless, however, and the
counterclaims rely at least in part on conduct that may not fall within the doctrine.

38
   Hanover 3201 Realty, LLC v. Village Supermarkets, Inc., 806 F.3d 162, 178 (3d Cir. 2015)
(citing Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972)).
39
   Nuance Commc'ns, Inc. v. MModal LLC, 2018 WL 6804488, *2 (D. Del. Dec. 27, 2018) (internal
citations omitted), report and recommendation adopted, 2019 WL 181322 (D. Del. Jan. 11, 2019).
40
   Id. at *3 (citing E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144
(1961)).
41
   Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 10 of 11

For example, Integra alleges Axogen threatened litigation against the doctors and
other Integra employees, consultants, or prospective consultants.42 Integra also
alleges Axogen made defamatory statements outside the litigation about Integra and
its products, including statements to current and prospective employees and
consultants.43 There is, at a minimum, a factual issue as to when those statements
were made, to whom, and for what purpose. Axogen has a persuasive argument that
statements made in the Court of Chancery litigation, even if defamatory, fall within
Noerr-Pennington. The mere fact that the statements were made in the litigation,
however, would not protect similar statements if they also were made outside of, and
wholly unrelated to, the litigation. Moreover, although there is some precedent to
support the idea that threatened litigation may fall within Noerr-Pennington,44 the
parties have not explored adequately the scope of that threatened litigation
protection.
       Finally, there is an unresolved issue regarding the choice of law between
Delaware and Florida, which was not raised until oral argument.45 If Florida law
applies, it is possible Noerr-Pennington does not afford Axogen any protection
based on the law in that state.46 The Court is not prepared to rule on this issue until
it has been briefed properly.

42
   Counterclaims at ¶¶ 2–6, 80–84.
43
   Id. at ¶¶ 2, 62, 68.
44
   See Magnetar Techs. Corp. v. Six Flags Theme Parks Inc., 2011 WL 678707, at *2 (D. Del. Feb.
18, 2011) (applying Noerr-Pennington to counterclaims based partially on a threat of litigation);
see also Nuance, 2018 WL 6804488, at *4–5 (analyzing Magnetar).
45
   See Hearing Transcript at 28:3–29:16; 39:18–40:12.
46
   See Bobcat N. Am., LLC v. Inland Waste Holdings, LLC, 2019 WL 1877400, at *15 (Del. Super.
Ct. Apr. 26, 2019) (explaining how “Florida law simply has not adopted—in fact, it has somewhat
resisted—the Noerr-Pennington doctrine”).
Axogen Corp. v. Integra LifeSciences Corp.
C.A. No. N21C-04-202 AML CCLD
December 13, 2021
Page 11 of 11

                                 CONCLUSION
      For the foregoing reasons, Axogen’s motion to dismiss Integra’s
counterclaims is denied without prejudice to Axogen raising those arguments in a
summary judgment motion after the completion of relevant discovery.

      IT IS SO ORDERED.

                                                 /s/ Abigail M. LeGrow
                                                 Abigail M. LeGrow, Judge

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