United States District Court, D. Connecticut
RULING RE: PLAINTIFF'S MOTION FOR SUMMARY
A. BOLDEN UNITED STATES DISTRICT JUDGE.
Co., Ltd. (“Plaintiff, ” or “GEOMC”)
filed this lawsuit on August 22, 2014 and claims that Calmare
Therapeutics, Incorporated (“Defendant, ” or
“CTI”) failed to pay for or return certain
medical devices that GEOMC manufactured and supplied to CTI.
Complaint, ECF No. 1; Sec. Am. Compl., ECF No. 137. CTI
raises several affirmative defenses and counterclaims,
including claims that GEOMC has already been paid all amounts
owed and that the contractual agreement for repossession of
the devices is invalid.
now moves for summary judgment on all claims. As explained in
further detail below, GEOMC's motion is GRANTED
IN PART AND DENIED IN PART.
GEOMC's breach of contract claim, the motion is GRANTED
with respect to CTI's liability for failing to pay GEOMC
for the medical devices sold after 2011, and the motion is
DENIED with respect to CTI's liability for any medical
devices that have not been sold. The motion is GRANTED as to
GEOMC's claims of replevin, wrongful detention,
conversion, and unjust enrichment, and the motion is DENIED
as to GEOMC's claim under the Connecticut Unfair Trade
Practices Act (“CUTPA”). Disputes related to the
amount of damages owed under the applicable contracts will be
determined at trial.
STATEMENT OF FACTS
Co., Ltd. (“GEOMC”), formerly known as Daeyang
E&C Co., Ltd., is a South Korean corporation with its
principal place of business in South Korea. L.R. 56(a)(1)
¶¶ 1-2. GEOMC manufactures, distributes and sells
medical devices. Id. Calmare Therapeutics
Incorporated (“CTI”), formerly known as
Competitive Technologies, Inc., is a Delaware corporation
with its principal place of business in Connecticut.
Id. at ¶¶ 3-4.
Agreements Regarding Medical Devices
October 2007, GEOMC and CTI entered into a “Territory
Exclusive License Agreement for Intellectual Property”
(“2007 Agreement”). Id. at ¶¶
5-7. The 2007 Agreement granted GEOMC an exclusive, worldwide
license to manufacture and supply certain medical devices
(“the Devices”) that incorporated a patented pain
management technology. Id.; 2007 Agreement, Oh Dec.
Ex. A, ECF No. 171-1.
language of the 2007 Agreement provides for profit-sharing
between GEOMC and CTI in connection with the sales of the
Devices: “DAEYANG [(GEOMC)] and CTT [(CTI)] will share
profits of 50% each from sales of Licensed Products produced
by DAEYANG.” Id. at ¶ 3.2. The agreement
also provides that “[p]ayments of royalties shall be
made in United States Dollars within thirty (30) days
following the end of each monthly royalty period, and such
payments shall include all royalties that have accrued during
said monthly period.” Id. at ¶ 4.2.
Therefore, under the 2007 Agreement, if CTI sold a number of
Devices in a given month, CTI would owe GEOMC fifty per cent
(50%) of the sale price for those Devices at the end of the
2007 Agreement also required GEOMC to perform a regular
accounting detailing the quantity and prices of all Devices
sold: “All royalty payments hereunder shall be
accompanied by a report certified by an officer of DAYEANG
setting forth the quantity and prices of Licensed Product
sold by DAEYANG. Such report shall also be made if no
royalties are due in any such monthly period.”
Id. at ¶ 4.3. The agreement does not specify
any corresponding requirement for CTI to provide GEOMC with
any such reports regarding Devices sold by CTI. CTI alleges
that GEOMC never provided CTI with any of the reports
required under this agreement. L.R. 56(a)(2) at p. 20.
following year, in August 2008, GEOMC and CTI entered into
another agreement entitled “Distributor Appointment in
Korea” (“2008 Distributor Appointment”).
L.R. 56(a)(1) ¶ 8; 2008 Distributor Appointment, Oh Dec.
Ex. B, ECF No. 171-2. Relying on the language of the more
detailed 2007 Agreement, the 2008 Distributor Appointment
succinctly provides as follows: “Pursuant to the
Territory Exclusive License Agreement of the Pain Management
Device made October 17, 2007 between Competitive
Technologies, Inc. (CTT) and GEOMC, both parties agree that
CTT delegates GEOMC to designate the exclusive distributor
for the Korea under the same conditions set forth in the
2008 Distributor Appointment does not specify any particular
entity or entities that GEOMC must appoint as the
“exclusive distributor” in Korea, nor does it
separately address the division of royalty payments or
reports. Id. Following this agreement, GEOMC
appointed itself as the exclusive distributor for the devices
in Korea. L.R. 56(a)(1) ¶ 8. Since that time, CTI claims
that GEOMC has not specified the exact number of devices sold
in Korea, nor has GEOMC made any payments to CTI in
connection with sales of devices in Korea. L.R. 56(a)(2) p.
January 2010, the parties agreed to amend the payment
mechanism that was outlined in the 2007 Agreement. L.R.
56(a)(1) ¶¶ 9-10. GEOMC and CTI executed a
Memorandum of Understanding (“2010 MOU”)
providing that “GEOMC will receive $9, 000 for the sale
of each unit” instead of dividing the proceeds by fifty
per cent. 2010 MOU, Oh Dec. Ex. C, ECF No. 171-3.
The 2010 MOU was signed by John B. Nano, CTI's President
and Chief Executive Officer (“CEO”) at the time,
and Young H. Lim, GEOMC's President and CEO at the time.
April 2011, the parties again adjusted the agreed-upon price
that CTI would pay GEOMC for each device sold, increasing the
per-unit payment amount from $9, 000 to $10, 000. L.R.
56(a)(1) ¶ 11. This increase was not memorialized in a
written agreement, but both parties acknowledge that GEOMC
and CTI agreed to increase the payment price to $10, 000 per
unit in April 2011. L.R. 56(a)(2) ¶ 11.
the 2007 Agreement and subsequent amendments, GEOMC shipped a
total of 691 Devices to CTI between 2008 and
2013. L.R. 56(a)(1) ¶ 13. The parties agree
as to the number of units shipped during this period;
however, they disagree as to how much money has been paid
between the parties for these devices, and whether the amount
paid satisfies the parties' obligations under the
Financial Troubles and Block Payments
to GEOMC, CTI began experiencing “cash flow”
problems at some point during the course of the parties'
relationship. Id. at ¶¶ 19-20; Oh Dec.
¶ 12, ECF No. 171. In order to help accommodate
CTI's situation, GEOMC claims that it allowed CTI to make
certain block payments. Id. GEOMC does not specify
the timing or amount of such payments.
the other hand, disputes GEOMC's characterization of
CTI's financial trouble. L.R. 56(a)(2) ¶¶
19-20. According to CTI, GEOMC was experiencing financial
trouble, not CTI, and in order to accommodate GEOMC's
needs, CTI made block payments to GEOMC between 2008 and 2012
that overrepresented the amounts owed under the contract.
Id. at p. 20. According to a document sent from Mr.
Johnson to Mr. O'Connell in 2013 regarding the status of
the accounting for GEOMC devices, CTI paid GEOMC an advance
of $147, 000 for design work in August 2008, $100, 000 in
September 2009, and another $100, 000 in 2010. Id.;
Johnson E-mail, Weil Dec. Ex. W, ECF No.
172-13. GEOMC disputes the specific amounts
alleged by CTI in connection with those block payments, and
GEOMC also disputes their characterization as
“overpayments.” Pl. Repl. Br. at 4-6, ECF No.
parties do not dispute that, since January 1, 2012, CTI has
sold 61 devices under the 2007 Agreement as
amended. L.R. 56(a)(1) ¶ 55. The parties also
do not dispute that CTI has not made any payments to GEOMC in
connection with any sales of devices since December 31, 2011.
Id. at ¶ 56.
2012, approximately five months after CTI ceased making
payments under the 2007 Agreement, the parties entered into a
“Security Agreement” agreement regarding the
devices (“2012 Security Agreement”). 2012 Sec.
Agreement, Oh Dec. Ex. E, ECF No. 171-5. The terms of this
agreement granted GEOMC a security interest in the following
identified “collateral”: “273 Calmare
devices located in the Company's warehouse located
at… Stratford, CT” as well as “120 devices
located in the Company's warehouse located at…
Charlotte, NC[.]” Id. at ¶ 2.
agreement specifies several “events of default”
that would trigger this security interest, including the
“failure of the Company to pay any of the amounts due
under the Obligations as and when due and payable.”
Id. at ¶ 8(a). If an event of default occurs
under the agreement, GEOMC may “declare the unpaid
balance of any Obligations to be immediately due and
payable” or it may require CTI to “assemble the
Collateral and make it available to Supplier[.]”
Id. at ¶ 9.
2012 Security Agreement also specifies that CTI is required
to maintain insurance on the specified collateral.
Id. at ¶ 6 (“The Company will insure the
Collateral against all insurable casualties and risks. The
Company will pay all premiums due or to become due for such
insurance.”). GEOMC insists that CTI never maintained
such insurance, see L.R. 56(a)(1) ¶ 32, while
CTI contests that it did provide the requisite insurance.
See L.R. 56(a)(2) at p. 22; Insurance Policy Renewal
and Invoice, Mir Dec. Exs. A-B, ECF Nos. 176-1, 176-2.
D. Johnson, CTI's acting CEO at the time, signed the 2012
Security Agreement and Ms. Lim, who was still serving as
GEOMC's President and CEO, signed on behalf of GEOMC.
2012 Sec. Agreement, Oh Dec. Ex. E, ECF No. 171-5. The text
of the agreement includes explicit assurances that the
agreement is binding on both corporate entities and that the
signatories have the requisite authority to sign on behalf of
each company: “This Agreement… ha[s] been
properly executed on behalf of the Company and, upon
execution by the Supplier, this Agreement and the related
documents and the transactions contemplated by it, will be
the valid and binding obligation of the Company, fully
enforceable against the Company in accordance with their
respective terms….” Id. at ¶ 4(d).
Following the execution of the agreement, GEOMC's
security interest in the specified devices was documented in
a UCC-1 Financing Statement that CTI, acting through its CEO
Johnie Johnson, filed with the State of Connecticut. UCC-1
Statement, Oh Dec. Ex. G, ECF No. 171-7.
to GEOMC, an event of default has occurred under the 2012
Security Agreement because, since December 31, 2011, CTI has
failed to pay the required $10, 000 price per device, as
required under the adjusted 2007 Agreement. L.R. 56(a)(1)
¶¶ 30, 57-58. Based on CTI's alleged failure to
make the required payments, GEOMC demanded the return of all
devices identified as collateral under the 2012 Security
Agreement. Id. CTI has refused to return the devices
to GEOMC. Id.
does not contest any of the written terms of the 2012
Security Agreement. Rather, CTI argues that it is not
required to return the devices because the 2012 Security
Agreement is wholly invalid and is not binding on CTI. L.R.
56(a)(2) pp. 20-21. CTI specifically claims that Johnie
Johnson, the acting CEO of CTI at the time of the 2012
Security Agreement, breached his fiduciary duties by entering
into the 2012 Security Agreement without full Board approval;
thus, CTI is not required to comply with the terms of the
Revocation of Security Agreement
explains that Johnie Johnson became “interim-CEO of
CTI” in September 2010. L.R. 56(a)(2) ¶ 14, p. 20.
CTI states that he assumed this role “without full
board approval, ” although they do not assert that full
board approval was required in order for Mr. Johnson to
validly hold this title. Id. Mr. Johnson's term
as CEO lasted for about two years, until November 1, 2012
when he was formally replaced by Carl
O'Connell. L.R. 56(a)(1) ¶ 14. Mr. O'Connell
resigned from the CEO position in September 2013, and Conrad
Murray replaced him as CEO at the end of that month.
Id. at ¶ 15.
Johnson's capacity as CEO and CFO for CTI from 2010-2012,
he took the lead in negotiating the 2012 Security Agreement
and other business dealings with GEOMC on behalf of CTI. L.R.
56(a)(1) ¶ 18. CTI's Bylaws grant such authority to
Mr. Johnson in his capacity as CEO, stating in relevant part
that “[e]ach of the CEO, the CFO and the COO shall have
the power on behalf of the Corporation to execute and deliver
all contracts, instruments, conveyances or documents and to
affix the corporate seal thereto.” Am Bylaws, Weil Dec.
Ex. T, ECF No. 172-10. During his term as CEO, Mr. Johnson also
made several filings with the Securities and Exchange
Commission (“SEC”) which he signed on behalf of
CTI. L.R. 56(a)(1) ¶ 17; Mir Dep. at 220:8-13, Weil Dec.
Ex. AI, ECF No. 172-25.
O'Connell, Mr. Johnson's immediate successor as CEO
of CTI, knew about the 2012 Security Agreement when he took
on the role of CEO, and he wrote to Mr. Johnson about the
details of the various agreements between CTI and GEOMC. L.R.
56(a)(1) ¶ 42; July 2013 Emails, Weil Dec. Ex. U, ECF
No. 172-11. Mr. O'Connell discussed the agreement with
CTI's Board of Directors as well. Mir. Dep. at 204:11-22,
Weil Dec. Ex. AI, ECF No. 172-25.
February 10, 2014, after Mr. Mir had replaced Mr.
O'Connell as CEO of CTI, the Board of Directors
determined by unanimous written consent that Mr. Johnson
“may have acted contrary to the best interest of the
Company and its stockholders in connection with certain
contracts, agreements, initiatives or other actions Johnson
entered into.” L.R. 56(a)(1) ¶ 48, Written Board
Consent in Lieu of Meeting, Weil Dec. Ex. X, ECF No. 172-14.
CTI's Board of Directors declared that several contracts
entered into by Mr. Johnson, including the 2012 Security
Agreement, were retroactively “rendered unauthorized,
rejected, and void. Id. CTI then issued a Form 8-K
in March 2014 stating that “Johnson did not have the
authority to act on behalf of the Company in connection to
the Actions” and “authoriz[ing] certain officers
to take all measures appropriate and necessary to nullify the
Actions.” L.R. 56(a)(1) ¶ 49; March 2014 8-K, Weil
Dec. Ex. Y, ECF No. 172-15. Relying on this written consent
and subsequent filing, CTI now insists that it is not bound
by the terms of the 2012 Security Agreement.
Devices Delivered and Amounts Paid
claims that CTI has maintained in its possession all of the
collateral identified in the 2012 Security Agreement: 273
devices in Stratford, Connecticut and 120 devices in
Charlotte, North Carolina. L.R. 56(a)(1) ¶ 58. CTI
acknowledges that, as of January 3, 2017, it possesses a
total of 399 devices at its warehouse in Stratford,
Connecticut. Id. at ¶ 53. Between 2008 and
2016, CTI admits that it has “sold, leased, or
otherwise disposed of” a total of 267 devices.
Id. at ¶ 54. CTI sold 61 of those devices after
December 31, 2011, but CTI has not made any payments to GEOMC
in connection with those post-2011 sales. Id. at
parties disagree as to specific amounts paid and amounts owed
under the 2007 Agreement and subsequent amendments. GEOMC
claims that CTI currently owes GEOMC $4, 673, 406 for the
devices. Id. at ¶ 60. To support this claim,
GEOMC relies on a spreadsheet it prepared listing all devices
provided to CTI between September 2008 and June 2013, as well
as related costs. GEOMC Accounting, Oh Dec. Ex. J, ECF No.
171-10. GEOMC also refers to CTI's publicly
filed Form 10-Q, Amendment No. 1 for the quarterly period
through September 2016, which lists the figure $4, 182, 380
next to the phrase “Accounts Payable, GEOMC.”
Id. at ¶ 62. That same figure is listed under
“Accounts Payable, GEOMC” in CTI's 10-Q dated
March 2013. Id. at ¶ 63.
insists that this figure does not reflect the amount owed to
GEOMC for the devices. L.R. 56(a)(2) ¶62-63. Instead,
CTI claims that it does not owe GEOMC anything under either
the 2007 Agreement, that agreement's subsequent
amendments, or the 2012 Security Agreement.
STANDARD OF REVIEW
judgment is appropriate if 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). The movant bears the
initial burden of demonstrating the absence of a genuine
dispute of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the movant has carried that
initial burden, “the opposing party must come forward
with specific evidence demonstrating the existence of a
genuine dispute of material fact.” Brown v. Eli
Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011). If no
reasonable jury could find in favor of the opposing party
because “the evidence to support its case is so slight,
there is no genuine issue of material fact and a grant of
summary judgment is proper.” Gallo v. Prudential
Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1224
(2d Cir. 1994).
dispute 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). An issue of fact is material if it
“might affect the outcome of the suit under the
governing law . . . .” Id. Disputes concerning
immaterial facts do not prevent summary judgment. See
id.; Howard v. Gleason Corp., 901 F.2d 1154,
1159 (2d Cir. 1990) (“[S]ummary judgment cannot be
avoided by immaterial factual disputes.”).
ruling on a motion for summary judgment, the Court must
construe the evidence in the light most favorable to the
nonmoving party and draw all inferences in its favor.
Dalberth v. Xerox Corp., 766 F.3d 172, 182 (2d Cir.