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TransWorld Medical Devices, LLC v. Cleveland Clinic Foundation

United States District Court, W.D. North Carolina, Charlotte Division

August 8, 2019

TRANSWORLD MEDICAL DEVICES LLC, Plaintiff,
v.
THE CLEVELAND CLINIC FOUNDATION, Defendant.

          MEMORANDUM AND RECOMMENDATION AND ORDER

          DAVID S. CAYER, UNITED STATES MAGISTRATE JUDGE

         THIS MATTER is before the Court on Defendant's “Motion to Stay or Dismiss Under the Federal Arbitration Act” (document #18) and “Motion to Dismiss Pursuant to Federal Rule … 12(b)(6) …” (document #20), both filed December 21, 2018, Defendant's “Motion to Stay or Dismiss Amended Complaint Under the Federal Arbitration Act” (document #32) and “Motion to Dismiss Amended Complaint Pursuant to Federal Rule … 12(b)(6) …” (document #34), both filed February 8, 2019, and the parties' briefs and exhibits.

         On June 18, 2019, these Motions were referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1).

         On January 11, 2019, Plaintiff filed an Amended Complaint (document #27) as a matter of course. See Fed.R.Civ.P. 15(a)(1)(B). Accordingly, Defendants' Motions that were directed at the original Complaint are moot. See Young v. City of Mount Ranier, 238 F.3d 567, 573 (4th Cir. 2001) (amended pleading renders original pleading of no effect); Turner v. Kight, 192 F.Supp.2d 391, 397 (D. Md. 2002) (denying as moot motion to dismiss original complaint on grounds that amended complaint superseded original complaint).

         Having fully considered the arguments, the record, and the applicable authority, the undersigned respectfully recommends that Defendant's “Motion to Stay or Dismiss Amended Complaint Under the Federal Arbitration Act” (document #32) be granted and that Defendant's “Motion to Dismiss Amended Complaint Pursuant to Federal Rule … 12(b)(6) …” (document #34) be granted in part, as discussed below.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         Plaintiff is a North Carolina limited liability company that was dissolved by the North Carolina Special Superior Court for Complex Business Cases. See Amended Complaint (document #27) at ¶¶ 1, 50. Plaintiff was co-owned by Charles Richardson and Franz Kellar. Elaine Rudisill was appointed Receiver to wind up Plaintiff and liquidate its assets. Id. at ¶ 50. Defendant is a non-profit corporation organized under the laws of the State of Ohio and maintains its principal place of business in Cleveland, Ohio.

         Plaintiff and Defendant are equal shareholders in Cleveland Heart, a Delaware corporation headquartered in Cleveland. Through the Receiver, Plaintiff brings claims on its behalf and derivatively on behalf of Cleveland Heart.

         In 2007, the parties formed Cleveland Heart for the purposes of developing and commercializing artificial heart and blood pump assist technology. The parties executed a Shareholder Agreement which was attached to the original Complaint and to the Amended Complaint.

         On March 6, 2008, the parties and Cleveland Heart entered into a Technology License Agreement of intellectual property rights and technology from the parties to Cleveland Heart. The Technology License Agreement also contains a broad Alternative Dispute Resolution provision requiring good faith negotiation, mediation, and ultimately binding arbitration of “any dispute arising out of or relating to this Agreement, ” with mediation and arbitration to take place in Cleveland under the American Arbitration Association's rules.

         On October 29, 2018, Plaintiff filed its Complaint alleging that Defendant had “stolen and is now attempting to control the use of valuable blood pump technology that should instead be made widely available to heart patients around the world.” Document #1 at 1. Specifically, Plaintiff alleged that Defendant refused to allow licensed technology to be used in research Cleveland Heart had contracted with Duke University.

         Defendant responded with its initial Motions, including seeking to compel arbitration because Plaintiff's claims arose out of or related to the Technology License Agreement.

         In its Amended Complaint, Plaintiff references the Technology License Agreement but recasts the original claims as arising from the Shareholder Agreement.

         Defendant renewed its Motion to Compel Arbitration. Defendant also filed a Rule 12(b)(6) Motion to Dismiss any claims that are not subject to arbitration. Defendant concedes that Plaintiff's claims for aiding and abetting breach of fiduciary ...


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