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SS White Burs, Inc. v. Guidance Endodontics, LLC

United States District Court, D. New Mexico

February 27, 2019

SS WHITE BURS, INC. Plaintiff,
v.
GUIDANCE ENDODONTICS, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION AND GRANTING DEFENDANT'S CROSS-MOTION TO COMPEL ARBITRATION AND DISMISS CASE

         THIS MATTER comes before the Court upon:

         • Plaintiff's Motion for Preliminary Injunction, filed August 10, 2018 (Doc. 16); and

         • Defendant's Cross-Motion to Compel Arbitration and Dismiss (Doc. 19).

         Having reviewed the parties' pleadings and the applicable law, the Court denies Plaintiff's motion for injunctive relief and grants Defendant's cross-motion to compel arbitration and to dismiss case.

         BACKGROUND

         SS White Burs, Inc. (“SS White”) brings this action seeking injunctive and other relief as a result of the anticipatory breach of an agreement dated April 27, 2018 between defendant Guidance Endodontics, LLC (“Guidance”) and SS White (“2018 Handwritten Agreement”).[1] SS White seeks to enforce its written contract with Guidance under the 2018 Handwritten Agreement and to obtain a preliminary and permanent injunction requiring Guidance to immediately perform under that agreement by transferring all rights and interests in “V-Taper Patents” to SS White. Shortly after Plaintiff filed this federal action, Defendant filed a demand for arbitration with the American Arbitration Association (“AAA”), alleging that SS White breached the parties' prior agreements.

         In short, Plaintiff filed this lawsuit to put an end to the arbitration proceedings initiated by Defendant, while Defendant seeks to compel arbitration and dismiss this case.[2]

         This Court has jurisdiction under 28 U.S.C. §1332(a). The First Amended Complaint (“Complaint” hereinafter) states that Plaintiff is an Illinois corporation with its principal place of business in New Jersey and is co-owned and operated by Tom Gallop. Defendant is a New Mexico limited liability company with its principal place of business located in Albuquerque. Charles Goodis is a citizen of New Mexico and the sole member of Guidance. The Complaint also states that Dr. Goodis conducts his business though Guidance and Edge Endo, LLC (“Edge Endo”) and uses these entities interchangeably; and that Guidance is an alter-ego of Edge Endo and vice versa. Compl., ¶¶2-6.

         I. Facts[3]

         A. License Agreement and January 2016 Amendment

         SS White is a manufacturer of medical devices used by dental professionals for cavity preparations, root canals and the addition of crowns and bridges. Dr. Goodis is an endodontist and inventor who was awarded a patent on an innovative design of a variable tapered endodontic file (“V-Taper Patents”) that is used in root canal procedures.

         On March 26, 2015, SS White and Guidance entered into a License Agreement (“License Agreement”) under which Guidance gave SS White a license to manufacture and sell endodontic files covered by intellectual property owned by Guidance in exchange for making certain royalty payments to Guidance. The agreement contained an arbitration clause stating:

Any disputes by and between the parties arising under this Agreement, other than claims for injunctive relief described in Section 15.1, shall be resolved by arbitration.[4]

         Doc. 5-1, §15.2. The agreement also contained a provision regarding modifications:

This Agreement may be modified only by a written instrument that specifically refers to this Agreement and is signed by an authorized official of each Party.

         Doc. 5-1, §20.6.

         On January 31, 2016, the parties amended the License Agreement (“2016 Amendment”) to change the amounts of the yearly minimum royalty payments required to keep the license exclusive, but otherwise left all terms of the License Agreement in effect, including the mandatory arbitration provision:

[a]ll other terms and conditions of the [Licensing Agreement] remain unchanged” [and that the] Amendment incorporates all the rights and obligations contained in the [Licensing Agreement], including the provisions with respect to confidentiality.

         Doc. 5-2 at 2.

         B. 2018 Handwritten Agreement

         Following the 2016 Amendment, Plaintiff claims that disputes arose regarding the royalty payments allegedly owed by SS White to Guidance. According to Defendant, without any explanation or justification, Plaintiff simply abruptly stopped paying the required royalties after March 2017.

         The parties subsequently had discussions regarding this failure to pay accrued royalties. Plaintiff mentions one such attempt at a resolution, with Guidance making an offer of compromise to SS White, agreeing to waive the allegedly overdue royalty payments in return for providing Edge Endo (another company Dr. Goodis founded, owned, and operated) with certain SS White products worth approximately $350, 000.00 per year over the course of five years. This negotiation attempt proved unsuccessful.

         Another discussion that is very pertinent to this lawsuit took place in April 2018, at a conference of the American Association of Endodontists. Dr. Goodis offered, on behalf of Guardian, to sell ownership of certain V-Taper patents outright to SS White in return for: (1) SS White paying the accrued royalties for 2016 and 2017; and (2) yearly payments of $175, 000.00 from 2018 through 2022. Mr. Gallop accepted the offer and counteroffer on SS White's behalf. Defendant describes the conversation about this agreement as brief and rushed but the parties were able to memorialize this agreement on a single-page, hand-written document which the Court transcribes here only for demonstrative and practical purposes:

SS White pays Accrued royalties per ...

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