Case No.

2:10-CV-615
United States District Court, S.D. Ohio, Eastern Division

William F. Shea, LLC v. Bonutti Research, Inc.

Decided Apr 25, 2011

Case No. 2:10-CV-615.

April 25, 2011

OPINION AND ORDER

NORAH KING, Magistrate Judge

This matter is before the Court for consideration of the Motion to Compel Discovery Responses filed on behalf
of Defendant Bonutti Research, Inc., Doc. No. 42 (filed under seal). For the reasons that follow, the motion is
granted.

I.
Plaintiffs William F. Shea, LLC ["Shea LLC"] and Avon Equity Holdings, LLC, commenced this action against
Defendant Bonutti Research, Inc. ["BRI"], Dr. Peter Bonutti, and four other entities, 1 seeking royalty fees that
BRI purportedly owes to Shea LLC under a Consultant Agreement. Plaintiffs assert claims of breach of
contract, breach of fiduciary duty and unjust enrichment. This action was originally filed in the Court of
Common Pleas for Franklin County, Ohio, and was removed to this Court on the basis of diversity jurisdiction.
2 *2 28 U.S.C. §§ 1332, 1441.

1 Specifically, Unity Ultrasonic Fixation, LLC; Bonutti 2003 Trust; Joint Active Systems, Inc.; and Marctec, LLC. These

Defendants have been dismissed by order of the Court. Opinion and Order, Doc. No. 46.

Peter Bonutti, M.D., is an orthopedic surgeon and inventor. Answer and Counterclaims, Doc. No. 9, at 8. He
formed BRI to assist in the development, manufacture and distribution of his various technologies and
inventions. Complaint, Doc. No. 3, at ¶ 12. According to Dr. Bonutti, BRI has "a substantial and highly
valuable portfolio of patents and other intellectual property." Answer and Counterclaims, at 9.

In 2003, BRI entered into a Consultant Agreement [the "Agreement"] with Shea LLC, pursuant to which Shea
LLC agreed to act as BRI's business advisor. Specifically, Shea LLC allegedly undertook to assist BRI in
finding and developing opportunities in which to license its technology to manufacturers of orthopedic devices
and to assist in the growth of BRI's intellectual property, ideas, technologies and business concepts. Complaint,
at ¶ 13. In accordance with the Agreement, BRI agreed to pay Shea LLC a retainer fee of $30,000, a monthly
payment of $15,000, and up to twenty-five percent of each deal brokered. Id. at ¶ 16. During the course of the
parties' contractual relationship, BRI allegedly paid Shea LLC "more than $11.7 million." Answer and
Counterclaims, at 9.

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 William F. Shea, LLC v. Bonutti Research, Inc. Case No. 2:10-CV-615 (S.D. Ohio Apr. 25, 2011)

Shea LLC claims that Dr. Bonutti and BRI owe additional fees under the Agreement. Plaintiffs also ask that the
allegedly wrongfully terminated interest of Avon Equity Holdings, LLC, in one of the Bonutti entities restored
or compensated. Complaint, at ¶¶ 18, 23, 24. Defendant BRI asserts counterclaims for breach of fiduciary duty,
aiding and abetting breach of fiduciary duty, breach of contract and breach of an implied covenant of good faith
3 and fair dealing.2 Answer and Counterclaims. *3
2 Counterclaims for breach of fiduciary duty and for aiding and abetting breach of fiduciary duty were dismissed.

Opinion and Order, Doc. No. 67.

The issue presently before the Court concerns the responses of Shea LLC to certain discovery requests made by
BRI. According to Defendant BRI, Shea LLC has failed to identify "the extent to which plaintiffs were
improperly competing with BRI and [has] failed to disclose conflicts of interest as mandated by the . . .
Agreement." Motion to Compel, Doc. No. 42, at 4. Plaintiff Shea LLC argues that its responses to the discovery
requests are adequate and that, in any event, the requests are not relevant to any issue in this case.

II.
Rule 37 of the Federal Rules of Civil Procedure permits a motion for an order compelling discovery if a party
fails to respond to discovery requests, provided that the motion to compel includes a certification that the
movant has, in good faith, conferred or attempted to confer with the party failing to respond to the requests.
The Court is satisfied that this prerequisite to a motion to compel has been met in this case.

Determining the proper scope of discovery falls within the broad discretion of the trial court. Lewis v. ACB
Business Services, Inc., 135 F.3d 389, 402 (6th Cir. 1998). "Although a plaintiff should not be denied access to
information necessary to establish [his] claim, neither may a plaintiff be permitted `to go fishing and a trial
court retains discretion to determine that a discovery request is too broad and oppressive.'" Surles v. Greyhound
Lines, Inc., 474 F.3d 288, 305 (6th Cir. 2007), quoting Marshall v. Westinghouse Elec. Corp., 576 F.2d 588, 592
(5th Cir. 1978).

Rule 26(b) provides that "parties may obtain discovery regarding any matter, not privileged, that is relevant to
4 the claim or defense of any party. . . ." Fed.R.Civ.P. 26(b)(1). *4 "A discovery request is generally
unobjectionable `if the information sought appears reasonably calculated to lead to the discovery of admissible
evidence.'" Marshall v. Bramer, 828 F.2d 355, 358 (6th Cir. 1987) (quoting Fed.R.Civ.P. 26(b)(1)). Relevance
for discovery purposes is extremely broad. Miller v. Fed. Express Corp., 186 F.R.D. 376, 383 (W.D. Tenn.
1999). "The scope of examination permitted under Rule 26(b) is broader than that permitted at trial. The test is
whether the line of interrogation is reasonably calculated to lead to the discovery of admissible evidence."
Mellon v. Cooper-Jarrett, Inc., 424 F.2d 499, 500-01 (6th Cir. 1970).

With this standard in mind, the Court proceeds to consider whether Defendant BRI is entitled to the discovery
sought by it.

III.
In order to resolve the merits of the discovery dispute at issue, the Court first considers the nature of the
counterclaim asserted by BRI against Shea LLC. The Court also sets forth the categories of discovery that are
the subject of the present motion.

BRI's Counterclaims against Shea

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BRI terminated the Agreement on October 26, 2007. Answer and Counterclaims, at 14, ¶ 27. According to
BRI, the termination was a result of Shea's desire to "advanc[e] his own competing interests and those of his
other clients." Id. at 14, ¶ 26. Despite termination of the Agreement, "BRI continued to pay Shea LLC project
transaction fees on certain projects." However, in 2009, BRI discontinued these payments, on the grounds that
"Shea and Shea LLC had committed material breaches of their . . . contractual obligations to BRI." Id. at 15, ¶
5 31. In particular, BRI alleges that Shea and Shea LLC "failed to apprise BRI of conflicts of interest, *5
improperly competed against BRI, and failed to protect BRI's confidential information and business matters."
Id. at 15, ¶ 32.

BRI also alleges that Shea worked with the entity "SpineCore" (formed by Thomas and Joseph Errico) "on
technology that directly competed with BRI, specifically, spinal disc replacement technology." Id. at 16, ¶ 34.
BRI contends that, through Shea, it was "pursuing a deal to license its own disc replacement technology to
several medical device companies." Id. at 16, ¶ 35. BRI alleges that Shea was "simultaneously negotiating a
separate deal with one or more of these same medical device companies on behalf of the Erricos and
SpineCore. . . ." Id. at 16, ¶ 36. SpineCore ultimately entered into an agreement with Stryker, which deals in
medical devices, relating to disc replacements. Id. BRI contends that Shea never informed BRI of this deal and
never disclosed that Shea had assisted SpineCore in procuring patents in furtherance of the deal. Id. at 16, ¶¶
36-37.

BRI also alleges that Shea failed to disclose its relationship with K2M, another entity formed by the Erricos. Id.
at 16, ¶ 38. According to BRI, K2M is "in the business of developing technology to assist in the treatment of
spinal disorders, which involves products, technology, and business concepts that directly compete with BRI's
activities." Id. at 17, ¶ 38. BRI further contends that, at Shea's urging, it hired attorney John Andres, who was
affiliated with K2M. Id. at 16, ¶¶ 39-41. BRI apparently "gave Andres unfettered access to highly sensitive
proprietary and privileged information concerning BRI's intellectual property, ideas, techniques, and business
concepts and litigation strategies, apparently at the same time that K2M was developing its own competing
technology." Id. at 17, ¶ 42.

6 BRI alleges that Shea, through its affiliate Hawk, is "a partner in Stout Medical, a *6 company that directly
competes with BRI in the field of minimally invasive medical devices." Id. at 18, ¶ 44. According to BRI,
"Shea and Hawk represented Stout in a deal under which Stout licensed its competing spine technology to
Alphatec, a publicly owned orthopedic device company." Id. Again, BRI claims that Shea failed to disclose this
relationship to BRI. Id.

BRI asserts counterclaims of breach of contract (Count III) and of breach of the covenant of good faith and fair
dealing (Count IV). With respect to the claim for breach of contract, BRI alleges that "Shea LLC was obligated
to inform Bonutti and BRI of conflicts of interest" but failed to do so. Answer and Counterclaims, at 20, ¶ 63.
BRI further alleges that Shea LLC "failed to protect and otherwise misused BRI's confidential and proprietary
intellectual property, including patents and trademarks, ideas, techniques, and business concepts and
strategies." Id. at 20, ¶ 66. BRI alleges that Shea LLC failed to perform its duties under the Agreement in a
professional manner "by failing to procure non-disclosure agreements before disclosing confidential BRI
intellectual property, ideas, techniques, and business concepts and strategies, and failing to inform BRI of direct
conflicts of interest." Id. at 21, ¶ 68. BRI also alleges that Shea acted in breach of its duty not to compete with
BRI "through its dealings with one or more third parties. . . ." Id. at 21, ¶ 70.

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 William F. Shea, LLC v. Bonutti Research, Inc. Case No. 2:10-CV-615 (S.D. Ohio Apr. 25, 2011)

BRI takes the position that the discovery sought from Shea LLC is relevant to the counterclaims or is
reasonably calculated to lead to the discovery of admissible evidence. The Court now considers the discovery
requests at issue.

Discovery Requests at issue

At issue in this case are BRI's Interrogatories 11-20 and Document Requests 24-49, which were served on
7 September 9, 2010. Responses were made on October 12, 2010. *7

1. Interrogatories
Interrogatory No. 11 states:

State whether you have provided consulting or other professional services to any person or entity in the
medical and/or health care industry other than BRI since 2000. Unless your answer is no, identify each
such person or entity and the dates and nature of the services provided.

Interrogatory No. 12 states:

State whether William Shea, individually or through any entity in which he has an ownership interest
(other than Shea LLC), provided consulting or other professional services to any person or entity in the
medical and/or healthcare industry other than BRI since 2000. Unless your answer is no, identify each
such person or entity and the dates and nature of the services provided.

Interrogatory No. 13 states:

State whether you have ever had any ownership or other financial interest in any entity in the medical
and/or healthcare industry. Unless your answer is no, identify each such entity and the dates and nature
of your ownership or financial interest.

Interrogatory No. 14 states:

State whether William Shea, individually or through any entity in which he has an ownership interest
(other than Shea LLC), has ever had any ownership or other financial interest in any entity in the
medical and/or healthcare industry. Unless you answer is no, identify each such entity and the dates and
nature of your ownership or financial interest.

Interrogatory No. 15 states:

Identify all meetings in which you participated with or on behalf of SpineCore, Inc., Joseph P. Errico, or
Thomas Errico since 2000 and include the subject matter of each meeting.

Interrogatory No. 16 states:

Identify all meetings in which William Shea, individually or through any entity in which he has an
ownership interest (other than Shea LLC), participated with or on behalf of SpineCore, Inc., Joseph P.
8 Errico, or Thomas Errico since 2000, and *8 include the subject matter of each meeting.

Interrogatory No. 17 states:

Identify all meetings in which you participated with or on behalf of K2M, Inc. or K2Medical, Inc. since
2000 and include the subject matter of each meeting.

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 William F. Shea, LLC v. Bonutti Research, Inc. Case No. 2:10-CV-615 (S.D. Ohio Apr. 25, 2011)

Interrogatory No. 18 states:

Identify all meetings in which William Shea, individually or through any entity in which he has an
ownership interest (other than Shea LLC), participated with or on behalf of K2M, Inc. or K2Medical,
Inc. since 2000 and include the subject matter of each meeting.

Interrogatory No. 19 states:

Identify all meetings in which you participated with or on behalf of Stout Medical Group since 2000
and include the subject matter of each meeting.

Interrogatory No. 20 states:

Identify all meetings in which William Shea, individually or through any entity in which he has an
ownership interest (other than Shea LLC), participated with or on behalf of Stout Medical since 2000
and include the subject matter of each meeting.

Exhibit A, attached to Motion to Compel.

In response, Shea LLC objected that each interrogatory is "overbroad and is not reasonably calculated to lead to
the discovery of admissible evidence, because Shea LLC's other business relationships are irrelevant to the
parties' claims and defenses. . . ." Id. Shea LLC specifically argued that, under "§ 2 of the . . . Agreement, BRI
expressly `acknowledged that Consultant has multiple clients and does not intend to work exclusively for BRI
or any member of the Bonutti Group.'" Id. Shea LLC also characterized the interrogatories as "unduly
burdensome" and contends that they "seek [] sensitive and confidential business information of trade secrets of
9 Shea LLC or information of third parties that Shea LLC is obligated to maintain *9 as confidential;" that the
interrogatories "seek [] information related to Shea LLC's clients, business associates, or other non-parties that
amounts to harassing, oppressing, or embarrassing Shea LLC, its clients, its business associates, or other non-
parties;" and that, in propounding the interrogatories, BRI is merely engaged in an "impermissible fishing
expedition. . . ." Id.

2. Document Requests
BRI seeks all documents reflecting communications between Shea LLC and K2M or K2 Medical (Request No.
24) and between William Shea, individually or through any entity in which he has an ownership interest, and
K2M or K2 Medical (Request No. 25); all documents reflecting or relating to Shea LLC's and William Shea's
"ownership of, or affiliation or relationship with, K2M or K2 Medical" (Request Nos. 26 and 27); all
documents reflecting communications between Shea LLC and Warburg Pincus related to BRI, Dr. Peter
Bonutti, SpineCore, Inc., and/or Thomas or Joseph Errico (Request No. 28) and between William Shea,
individually or through any entity in which he has an ownership interest, and Warburg Pincus related to BRI,
Dr. Bonutti, SpineCore, Inc. and/or Thomas or Joseph Errico (Request No. 29); all documents reflecting
communications between Shea LLC and "Kyphon related to BRI, Dr. Peter Bonutti, SpineCore, Inc. and/or
Thomas or Joseph Errico" (Request No. 30) and between William Shea, individually or through any entity in
which he has an ownership interest, and Kyphon and related to BRI, Dr. Bonutti, SpineCore, Inc. and/or
Thomas or Joseph Errico (Request No. 31); all documents reflecting or relating to agreements between Shea
LLC and William Shea, individually or through any entity in which he has an ownership interest, and
SpineCore, Inc., since 2000 (Requests Nos. 32 and 33); all documents reflecting or relating to agreements
10 between Shea LLC and William Shea, individually or through any entity in which he *10 has an ownership
interest, and Thomas Errico since 2000 (Requests Nos. 34 and 35); all documents reflecting or relating to

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 William F. Shea, LLC v. Bonutti Research, Inc. Case No. 2:10-CV-615 (S.D. Ohio Apr. 25, 2011)

agreements between Shea LLC and William Shea, individually or through any entity in which he has an
ownership interest, and K2M, Inc. or K2 Medical, Inc. (Requests Nos. 36 and 37); all documents reflecting or
relating to agreements between Shea LLC and William Shea, individually or through any entity in which he has
an ownership interest, and Joseph Errico since 2000 (Requests Nos. 38 and 39); all documents reflecting or
relating to agreements between Shea LLC and William Shea, individually or through any entity in which he has
an ownership interest, and John Andres since 2000 (Requests Nos. 40 and 41); all documents reflecting or
relating to agreements between Shea LLC and William Shea, individually or through any entity in which he has
an ownership interest, and Alphatec Spine, Inc. since 2000 (Requests Nos. 42 and 43); all documents reflecting
or relating to agreements between Shea LLC and William Shea, individually or through any entity in which he
has an ownership interest, and Stout Medical Group since 2000 (Requests Nos. 44 and 45); all documents
reflecting or relating to agreements between Shea LLC and William Shea, individually or through any entity in
which he has an ownership interest, and "any person or entity in the medical and/or health care industry, other
than those identified in request nos. 31-44, since 2000" (Requests Nos. 46 and 47); and all documents reflecting
or relating to communications between Shea LLC and William Shea, individually or through any entity in
which he has an ownership interest, and U.S. Surgical related to BRI, Dr. Bonutti, SpineCore, Inc. and/or
Thomas or Joseph Errico (Requests Nos. 48 and 49).

Shea LLC produced documents responsive to these requests to the extent that BRI sought non-privileged
11 documents dealing with communications with third parties relating to BRI, Dr. *11 Bonutti, or the Agreement.
Memorandum contra, Doc. No. 45, at 4 n. 2. Otherwise, however, Plaintiffs objected to each of the requests on
the basis that they are "duplicative, overbroad, unduly burdensome, not reasonably calculated to lead to the
discovery of admissible evidence, and intended for the purpose of harassment, embarrassment or oppression,."
characterizing the requests as an "attempt to engage in an impermissible fishing expedition and seeking
disclosure of privileged and confidential material." Exhibit A attached to Motion to Compel.

With this background in mind, the Court considers BRI's arguments in support of its motion.

IV.
BRI argues that the discovery sought is relevant to the issues raised in its counterclaims because Shea LLC and
William Shea allegedly failed to disclose certain relationships and agreements they had with competitors of
BRI. In support of this argument, BRI points to Shea LLC's alleged failure to inform BRI that it had an
agreement with Stout Medical regarding "minimally invasive hip applications," "expandable support devices,"
and an "expandable implant and deployment tool for spinal application." Motion to Compel, at 7. According to
BRI, Shea LLC was "purportedly acting as BRI's business manager to procure deals for BRI in each of these
areas." Id. BRI learned of Shea's relationship with Stout Medical through a third party subpoena. According to
BRI, further discovery is necessary to determine the extent to which Shea LLC "failed to disclose highly
pertinent relationships with [other] medical and health care persons and entities." Id. at 7-8.

12 As BRI points out, in November 2007, Shea LLC provided it with a "Designated Contact *12 List" consisting
of entities that Shea LLC contacted on behalf of BRI. According to BRI, Shea had not previously informed BRI
of its contact with the entities identified on the list. BRI points out that twenty-six of those entities also appear
on a list of "Prospective Partners" sent by Shea to Stout Medical two months earlier. See Exhibits H and I,
attached to Motion to Compel. BRI argues that it does not know the extent of Shea's alleged "improper
competition" and "conflicts of interest" and that, since Shea never informed BRI of its alleged improper
competition, "BRI cannot be aware of each party with whom Shea had a conflict of interest and regarding what
products." Motion to Compel, at 13. Thus, BRI argues, the challenged discovery requests are relevant or are at
least reasonably calculated to lead to the discovery of admissible evidence.

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 William F. Shea, LLC v. Bonutti Research, Inc. Case No. 2:10-CV-615 (S.D. Ohio Apr. 25, 2011)

Shea LLC does not view the discovery as relevant and points to certain portions of the Agreement in support of
this theory. Specifically, Shea LLC points to Section 2 and to Section 10 of the Agreement, which provide in
pertinent part as follows:

2. Services. During the term of the engagement hereunder, Consultant shall provide BRI with such
consulting and advisory services that are consistent with the needs of each Project as mutually agreed
upon by the parties (the "Services"). . . . BRI acknowledges that Consultant has multiple clients and
does not intend to work exclusively for BRI or any member of the Bonutti Group.

***

10. Exclusivity and Potential Conflicts.

a. Exclusivity. Nothing herein contained shall preclude any member of the Bonutti Group from retaining
other advisors, consultants and representatives regarding a Project or other transactions and projects.
The engagement hereunder shall be on a non-exclusive basis. . . .

b. Conflicts.

i. Prior to execution of a New Project Form for a new Project, Consultant shall provide written notice to
BRI if Consultant or any Consultant Affiliate represents another client with respect to a product which
competes with any product covered by the new Project; provided that, Consultant actually knows that
13 the product of its other client and the products of the new Project will compete with each other. *13
Upon such disclosure, BRI may either (A) elect to not proceed with the new Project with Consultant or
(B) proceed with the new Project with Consultant, which shall act as a waiver of its right to remove that
Project from this Agreement pursuant to this Section 10.

ii. At any time subsequent to the execution of a New Project Form, if Consultant has actual knowledge
that it or a Consultant Affiliate represents another client with respect to a product that competes with a
product from a Project (the "Effected Project"), then Consultant shall promptly provide written notice to
BRI of such fact (the "Conflict Notice"). . . .

Agreement, Doc. No. 34 (filed under seal).

According to Shea LLC, § 10(b) of the Consultant Agreement, which addresses conflicts, is inapplicable in this
case because "to Shea LLC's knowledge, the parties never added any new Projects or executed any New Project
Form. . . . All of the projects at issue in this case are Initial or Current Projects," and identified in Exhibits A
and B to the Agreement. Memorandum contra, at 8-9. Thus, Shea LLC argues, it was not obligated to disclose
relationships with other clients to BRI. Shea LLC also observes that § 2 of the Agreement specifically provides
that the relationship with BRI was not exclusive, i.e., that Shea LLC had other clients. Shea LLC also takes
issue with BRI's reliance on documents obtained from Stout Medical to support the Motion to Compel.
According to Shea LLC, the technologies of Stout Medical and BRI are "completely different" and have
"different applications."3 Id. at 15-16. Shea LLC argues that, because the technologies are purportedly different,
BRI is not entitled to discovery relevant to those technologies. These arguments, however, necessarily
implicate a merits-based determination. The Court is not in a position to make such a determination at this
juncture and it would be inappropriate to do so. Thus, the Court therefore rejects these arguments.
3 In particular, Shea LLC contends that Stout Medical's "expandable spinal support device" is distinguishable from BRI's

"expandable cannula." Memorandum contra, at 15-16.

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 William F. Shea, LLC v. Bonutti Research, Inc. Case No. 2:10-CV-615 (S.D. Ohio Apr. 25, 2011)

14 Shea also argues that the discovery sought is overbroad because BRI has not identified *14 what products or
technologies of other clients compete with BRI's products or technologies. In response, BRI contends that such
an attempt to narrow the discovery sought is "impossible because the information necessary . . . resides only
with plaintiffs." Motion to Compel, Doc. No. 42, at 9.

Finally, Shea argues that the requests for discovery should at least be limited to the time period during which
the Agreement was in effect, i.e., March 1, 2002 to November 25, 2007.4
4 As noted supra, BRI seeks documents reflecting or relating to relationships between Shea and competitors of BRIsince

2000.

In the Court's view, the discovery sought by BRI is relevant or, at a minimum, is reasonably calculated to lead
to the discovery of admissible evidence on BRI's breach of contract counterclaim. Although the Agreement
makes clear that the relationship between BRI and Shea was not exclusive, the Agreement also required
disclosure of conflicts both prior to the execution of a New Project form and after the execution of such form.
Agreement, at § 10(b). Thus, Shea LLC's argument that its "obligation to provide notice of a potential conflict
arises only when the parties add a new Project to the . . . Agreement by executing a New Project form" is
incorrect. See Memorandum contra, at 8. The Court finds that the discovery sought by BRI is relevant to
whether or not Shea LLC properly disclosed conflicts in accordance with the parties' Agreement. Furthermore,
the Court agrees with BRI that any information as to potential or actual conflicts rests solely with Shea LLC. In
this regard, the Court rejects Shea LLC's position that BRI should be required to identify particular competing
products or technologies. It is simply impossible to know what products or technologies might be competing if
15 BRI was unaware of the particular endeavors for which Shea LLC was providing consulting services. *15

In sum, Shea LLC must respond to BRI's discovery requests. The Court will, however, limit the time period for
such responses to the dates during which the Agreement was in effect.

V.
WHEREUPON, the Motion to Compel Discovery Responses, Doc. No. 42 (filed under seal) is GRANTED.
Plaintiffs are ORDERED to provide responses to BRI's Interrogatories 11-20 and Document Requests 24-49
within thirty (30) days of the date of this Opinion and Order.