Date: 07-08-2022

Case Style:

PRECISION ORTHOPEDICS, INC. vs ZIMMER US, INC., ET AL

Case Number: 2D20-904

Judge: John K. Stargel

Court:

DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT

On Appeal From The Circuit Court for Hillsborough County

Steven Scott Stephens
Judge

Plaintiff's Attorney: Marie Tomassi, Stanley H. Eleff, and Ashlyn R. Banks, of Trenam,
Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A., St. Petersburg;
and Frederick J. Mills, of Morrison & Mills, P.A.,

Defendant's Attorney:

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Description:

Tampa, Florida - Business Law lawyer represented Appellees with disputing a series of written agreements related to the sale of products in specified regions of Florida.

This dispute arises among several parties who entered into a
series of written agreements (including multiple addenda) related to
the sale of products in specified regions of Florida from 2004 to
2018. Zimmer US, Inc., d/b/a Zimmer Biomet (Zimmer) and two of
its distributors, Medtech Southeast, Inc., and Orthopedics, Inc. (the
Distributor Defendants), were defendants in the Original Complaint
and subsequent Amended Complaint filed by Precision Orthopedics,
Inc. The trial court dismissed the Original Complaint without
prejudice and later dismissed the Amended Complaint with
prejudice. Because the trial court looked beyond the four corners of
the Amended Complaint and did not accept as true all well-pleaded
allegations when it granted the motion to dismiss, we must reverse
and remand for further proceedings.
On March 9, 2004, Precision and Zimmer entered into an
agreement (the Representative Agreement) making Precision the
sales representative for Zimmer's medical devices in a territory
comprised of twenty-two counties in Florida. Under its terms, the
Representative Agreement became effective on April 1, 2004, and
expired on December 31, 2013, unless extended at Zimmer's "sole
discretion." The Representative Agreement granted Precision the
3
right to solicit orders for specific Zimmer products, which included
"certain orthopedic implants and devices and other medical
products, services, and supplies." The Representative Agreement
gave Zimmer broad discretion in carrying out its terms, including
the right to determine which products Precision had the right to sell
and in which territory.
Prior to the Representative Agreement, the principal owner of
Precision, George Etheridge, sold his controlling interest in
Precision. Despite this sale, Zimmer wished for Etheridge to remain
in his current position at Precision and to perform the services
required under the Representative Agreement. Thus, on the same
day the Representative Agreement was executed, the parties
separately executed an addendum to the contract (the 2004
Addendum) as a "bargain to keep Etheridge on the job" for five more
years. In return, Zimmer agreed to give up, temporarily, some of its
reserved discretion over Precision's selling capacity as well as to pay
Etheridge $10 million over five years. The 2004 Addendum set out
incentive-based installment payments, which were due and payable
to Etheridge on December 31 of each calendar year starting in 2004
and ending on December 31, 2008—the date on which the 2004
4
Addendum expired pursuant to its terms. At the same time, the
Representative Agreement's term expressly remained unchanged
and was set to continue through December 31, 2013. After the
2004 Addendum, the parties subsequently entered into five
additional addenda to the Representative Agreement over the life of
their relationship.
In June 2015, Zimmer's then-parent company, Zimmer
Holdings, Inc., acquired and merged with one of its largest
competitors, Biomet, Inc., and all of its subsidiaries. Following the
acquisition, Zimmer Holdings, Inc., became Zimmer Biomet
Holdings, Inc.1
Prior to the acquisition, Biomet had agreements with the
Distributor Defendants to sell and distribute Biomet's products in
territories that overlapped with the territories in which Precision
distributed and sold Zimmer products. Following the merger,
Zimmer reiterated to Precision that it intended to keep the status
quo: Precision would continue selling and distributing only so1
Although Zimmer became known as "Zimmer Biomet" after
the merger, for the purposes of this opinion, we refer to both
Zimmer and Zimmer Biomet as Zimmer.
5
called "legacy" Zimmer products, and the Distributor Defendants
would continue selling and distributing legacy Biomet products.
Precision expressed its displeasure with Zimmer's decision but
continued selling legacy Zimmer products in its assigned territory
for the next three and one-half years (until the expiration of the
Representative Agreement, which had been extended to December
31, 2018, by virtue of the parties' 2013 Addendum).
As the Representative Agreement approached its expiration
date, Precision and Zimmer were unable to mutually agree to terms
under which they could continue their relationship. Accordingly,
the companies did not agree to an extension of the Representative
Agreement, and it expired of its own terms on December 31, 2018.
On February 14, 2019, Precision filed its Original Complaint.
Relying on the 2004 Addendum, Precision brought two claims for
breach of contract, alleging that Zimmer had breached the
Representative Agreement and 2004 Addendum by (i) failing to
allow Precision to sell Biomet products in its assigned territory and
(ii) failing to pay Precision for commissions on sales of Biomet
products in Precision's assigned territory made by the Distributor
Defendants. Precision also sought a declaration that it was no
6
longer bound by the noncompete or confidentiality clauses in the
Representative Agreement because Zimmer had allegedly breached
that contract. Additionally, Precision brought claims against the
Distributor Defendants for interfering with its contractual rights
under the Representative Agreement and 2004 Addendum. The
Original Complaint relied solely on the plain language of the
Representative Agreement and 2004 Addendum. Precision argued
that "the 2008 Addendum operated to extend the term of the 2004
Addendum" when it incorporated the 2004 Addendum by reference.
Zimmer and the Distributor Defendants moved to dismiss all claims
against them.
The trial court found that "[n]one of the additional addenda
altered the material provisions of the [Representative] Agreement
and the 2004 Addendum." The trial court noted that "[t]he
recitations specifically say the [2004] Addendum is for the purpose
of securing the continued services of Etheridge" and that "[n]o
permanent structural change to the Parties' relationship is
mentioned" in the 2004 Addendum. While the trial court
recognized the possibility that the parties could have intended to
permanently expand the scope of Precision's exclusivity and
7
constrain Zimmer's discretion when it entered the 2004
Addendum—even "without mentioning it in the recitations"—both of
those occurrences would be "unusual and unexpected." The trial
court accordingly held that the 2004 Addendum was unambiguous,
finding that "in order to conclude the Parties intended to
fundamentally alter the base contract the language would have to
say so clearly."
The trial court also recognized that "different provisions in a
contract can have different effective timespans, depending on the
language used," citing St. Johns Investment Management Co. v.
Albaneze, 22 So. 3d 728 (Fla. 1st DCA 2009). The court found that
"[t]he fatal flaw in Precision's argument is that any subsequent
contract that would 'incorporate by reference' the 2004 Addendum
would incorporate the whole addendum, including its definition of
'Addendum Term.' " The meaning of "Addendum Term" in the 2004
Addendum "could not change when another document incorporated
it by reference. The incorporating document is bound by the terms
of the incorporated document, not the other way around." The trial
court concluded that although "[p]arts of the 2004 Addendum may
still be viable today, . . . each part must be read individually to
8
determine its continuing vitality" and that the Original Complaint
failed to state a claim for breach of contract or tortious interference
because those claims "depend on contractual provisions that are
long expired" pursuant to the terms of the "Addendum Term"
provision in the 2004 Addendum. The trial court also dismissed the
declaratory claim because Precision failed to allege a real and
present controversy. Additionally, the court dismissed the two
counts against the Distributor Defendants because they alleged
"tortious interference with [expired] contracts."
In its Amended Complaint, Precision raised the same counts
as before but provided more detailed information on the
relationship and added a count alleging that Zimmer failed to pay
commissions due from the 2013 Addendum on Zimmer products
sold before December 31, 2018 (an amount Precision estimated to
be between $30,000 and $40,000). Additionally, in its Amended
Complaint, Precision sought to avoid its earlier assertion that the
contract was unambiguous by newly alleging that "notwithstanding
the 'Addendum Term' " in the 2004 Addendum, parol evidence
highlighting the parties' "course of dealing and intent" should be
considered.
9
The trial court again dismissed Precision's claims. The court
found that the new allegations "still do not escape the plain
language of the contract as expressed in the previous order." Thus,
the court reasoned it did not appear that Precision's Amended
Complaint had a pleading problem—it was a "substantive issue of
the interpretation of the contracts" that yielded the result. The trial
court dismissed all counts with prejudice but offered Precision the
opportunity to file a motion seeking leave to amend. Precision
declined to seek leave to amend, and this appeal followed.2
We must determine whether the trial court erred in dismissing
the Amended Complaint with prejudice. In considering a motion to
dismiss, the trial court must confine its review to the four corners of
the complaint, draw all inferences in favor of the pleader, and
accept all well-pleaded allegations as true. City of Gainesville v.
2
We originally lacked jurisdiction over this appeal as the order
on appeal merely granted a motion to dismiss with prejudice
without dismissing the action, which is not an appealable order.
See McManus v. Gamez, 276 So. 3d 1005, 1007 (Fla. 2d DCA 2019).
The court's standard order for this situation was issued, and a final
order was procured pursuant to Florida Rule of Appellate Procedure
9.110(l) related to premature appeals. Thus, this court now has
jurisdiction pursuant to Florida Rule of Appellate Procedure
9.030(b)(1)(A).
10
Dep't of Transp., 778 So. 2d 519, 522 (Fla. 1st DCA 2001); see also
Alevizos v. John D. & Catherine T. MacArthur Found., 764 So. 2d 8,
9 (Fla. 4th DCA 1999) ("[A] court's gaze is limited to the four corners
of the complaint, including the attachments incorporated in it, and
all well pleaded allegations are taken as true."). We review a trial
court's order granting a motion to dismiss de novo. See Swope
Rodante, P.A. v. Harmon, 85 So. 3d 508, 509 (Fla. 2d DCA 2012).
"In the context of a motion to dismiss, the plain language of each
contract must be scrutinized along with the complaint to determine
if sufficient ultimate facts are pleaded to state a claim for relief."
Coleman v. 688 Skate Park, Inc., 40 So. 3d 867, 869 (Fla. 2d DCA
2010). Additionally, this court in Consuegra v. Lloyd's Underwriters
at London, 801 So. 2d 111, 112 (Fla. 2d DCA 2001), reversed the
trial court's conclusion that Lloyd's did not breach its contract with
Mr. Consuegra, noting:
[A] motion to dismiss for failure to state a cause of action
is not a substitute for a motion for summary judgment,
and in ruling on such a motion, the trial court is confined
to a consideration of the allegations found within
the four corners of the complaint. Cyn-co, Inc. v.
Lancto, 677 So. 2d 78, 79 (Fla. 2d DCA 1996). We do not
find that the plain language of the contract in this case
unambiguously established that Lloyd's did not breach
the duty alleged in the complaint.
11
It is undisputed that when the parties executed the
Representative Agreement and the 2004 Addendum, they intended
that those two documents would govern the parties' business
relationship until the end of 2008. The trial court concluded that
the Representative Agreement, as modified by the 2004 Addendum,
was the operative document governing the parties' relationship.
The Representative Agreement as signed in 2004 had a term that
extended through 2013, but the 2004 Addendum was set to expire
on December 31, 2008.
Precision argues that the 2004 Addendum applies because it
was contemplated by subsequent addenda. The trial court,
however, found that the recitations in the 2004 Addendum related
to the purpose of retaining Ethridge and were not meant to
permanently alter the parties' relationship as defined in the
Representative Agreement, specifically noting that "different
provisions in a contract can have different effective timespans,
depending on the language used." See also St. Johns Inv. Mgmt.
Co., 22 So. 3d 728. The trial court also determined extrinsic
evidence was unnecessary to determine the parties' intent because
of the plain language of the document.
12
Precision argues that the divergent interpretations of whether
the addenda constituted a permanent alteration beyond the
purpose of retaining Etheridge demonstrates an ambiguity that
cannot be resolved on a motion to dismiss. Precision further argues
that it is not required to explain why the 2004 Addendum was
extended in order to survive a motion to dismiss. In its Amended
Complaint, Precision expanded its explanation of the contractual
history between the parties describing in depth its position that the
parties continued to operate under the terms of the Representative
Agreement, as modified by all addenda including the 2004
Addendum, even after its purported expiration date.3
We agree with Precision that the Amended Complaint
recounted many examples of conduct that at a minimum created
3 The trial court stated in its order dismissing the Amended
Complaint that
[t]he plaintiff's opposition memorandum . . . and
argument in court make an elegant presentation but still
do not escape the plain language of the contract as
expressed in the previous order. The last two counts fall
with the first four.
It does not appear to be a problem with pleading,
but rather a substantive issue of interpretation of the
contracts, that yields this result.
13
issues that could not properly be resolved on a motion to dismiss.
The trial court was required to limit its review at this stage to the
four corners of the Amended Complaint and accept as true all wellpleaded allegations. Precision's course-of-conduct assertions
contained in the Amended Complaint had to be considered. The
trial court erred when it instead made ultimate findings regarding
the relationship of the parties through their agreements on a
motion to dismiss based solely on the language of the contract. See
Consuegra, 801 So. 2d at 112. The plain language of this contract
did not preclude Precision's claims, and it was error to dismiss the
related claims in the Amended Complaint with prejudice for failure
to state a cause of action.
Finally, we note that the trial court's order did not specifically
address the new count in the Amended Complaint alleging that
Zimmer failed to pay certain commissions owed on the sale of legacy
Zimmer products through 2018 according to the 2013 Addendum.
This allegation is, of course, distinct from the contract claims in
which Precision seeks damages under the 2004 Addendum for the
sale of legacy Biomet products. The dismissal of this count must
also be reversed because, as previously stated, a motion to dismiss
14
cannot go beyond the four corners of the Amended Complaint, and
the allegation that these outstanding commissions are owed must
be accepted as true as "well-pleaded allegations." See City of
Gainesville, 778 So. 2d at 522. The request for declaratory relief
and the counts against the Distributor Defendants must further be
reversed because the allegations therein must be accepted as true
under a motion-to-dismiss analysis. We likewise see nothing in the
plain language of the contracts at issue that would otherwise
require dismissal of these claims.

Outcome: We do not comment on the merit of the trial court's analysis of
the agreements in this case. Rather, we simply hold that such
analysis was improper based on the specific allegations of the
course of conduct between the parties contained in the Amended
Complaint. The granting of the motion to dismiss was improper.

Plaintiff's Experts:

Defendant's Experts:

Comments: