Nuvasive, Inc. v. Patrick Miles

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

NUVASIVE, INC., a Delaware )
Corporation, )
)
Plaintiff, )
)
v. ) C.A. No. 2017-0720-SG
)
PATRICK MILES, an individual, )
and ALPHATEC HOLDINGS, )
INC., a Delaware Corporation, )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: May 22, 2020
Date Decided: August 31, 2020

Aaron P. Sayers, of MCDERMOTT WILL & EMERY LLP, Wilmington, Delaware;
OF COUNSEL: Rachel B. Cowen, Michael J. Sheehan, J. Christian Nemeth, and
Emory D. Moore, Jr., of MCDERMOTT WILL & EMERY LLP, Chicago, Illinois;
Christopher W. Cardwell, of GULLET, SANFORD, ROBINSON & MARTIN,
PLLC, Nashville, Tennessee, Attorneys for Plaintiff NuVasive, Inc.

Philip A. Rovner and Jonathan A. Choa, of POTTER ANDERSON & CORROON
LLP, Wilmington, Delaware; OF COUNSEL: Frank Earley, of MINTZ LEVIN
COHN FERRIS GLOVSKY & POPEO, P.C., New York, New York; Micha Danzig,
Eric J. Eastham, and Paul M. Huston, of MINTZ LEVIN COHN FERRIS GLOVSKY
& POPEO, P.C., San Diego, California, Attorneys for Defendant Alphatec Holdings,
Inc.

GLASSCOCK, Vice Chancellor
 The Plaintiff, NuVasive, Inc. (“NuVasive”) specializes in spinal surgery

support; one of the Defendants, Alphatec Holdings, Inc. (“Alphatec”) is a direct

competitor of NuVasive. The heart of the dispute involves allegations that a

NuVasive fiduciary, Defendant Patrick Miles, developed a scheme while working at

NuVasive to decamp to Alphatec, taking confidential information, employees, and

customers with him. At the time he became an Alphatec employee, Miles had just

resigned as Vice Chairman of NuVasive and as a member of NuVasive’s Board of

Directors; he had recently served as President and COO of NuVasive.

NuVasive brought this Action against Miles and Alphatec, the current

operative pleading is its Second Amended Complaint for Damages (the “SAC”).

NuVasive’s litigation position is complicated by the fact that, although Miles had

agreed to a non-compete agreement, that agreement is void under California law.1

Currently before me is Alphatec’s Motion to Dismiss. Alphatec is charged in

the SAC with unfair competition, tortious interference with contract, tortious

interference with prospective economic advantage, aiding and abetting breach of

fiduciary duty, and deceptive and unfair trade practices under Florida and North

Carolina law; all resulting from the scheme described above. I examine the

allegations regarding each tort in light of the Motion to Dismiss, with mixed results

for the movant. My reasoning is below.

1
NuVasive, Inc. v. Miles, 2019 WL 4010814 (Del. Ch. Aug. 26, 2019).

1
 I. BACKGROUND2

A. The Parties

Plaintiff NuVasive is a Delaware corporation headquartered in San Diego,

California.3 NuVasive is a publicly-traded company and is in the spine surgery

industry.4

Defendant Alphatec is a Delaware corporation headquartered in Carlsbad,

California.5 Alphatec is a competitor of NuVasive.6

Defendant Patrick Miles was employed at NuVasive for seventeen years,

rising to the position of President and Chief Operating Officer, and was later

appointed a member of NuVasive’s Board of Directors and Vice Chairman.7 Miles

later joined Alphatec as its Executive Chairman, and later Chief Executive Officer.8

B. NuVasive Evaluates a Potential Acquisition of Alphatec; Miles’s
Employment Agreement with NuVasive

Miles served as NuVasive’s President and Chief Operating Officer through

September 2016—while Miles was serving in such capacity, NuVasive evaluated an

2
The facts, except where otherwise noted, are drawn from the Plaintiff’s Second Amended
Complaint for Damages, D.I. 234 (the “Second Amended Complaint” or “SAC”), and exhibits or
documents incorporated therein, and are presumed true for the purposes of Alphatec’s Motion to
Dismiss.
3
SAC, ¶ 8.
4
Id.
5
Id. ¶ 11.
6
Id. ¶ 3.
7
Id. ¶ 10.
8
Id. ¶ 52.

2
opportunity to pursue an acquisition of Alphatec.9 Miles was heavily involved in

the potential acquisition process and due to Miles’s long history in the product

development side of NuVasive’s business, Miles’s evaluation and recommendation

regarding Alphatec was given substantial weight by NuVasive.10 Internally within

NuVasive, Miles expressed the opinion that the Alphatec acquisition opportunity

was a “waste of time” and that Alphatec was a “poor acquisition target.” 11 Miles

remarked that an analysis stating that Alphatec had an “[a]ged, undifferentiated

portfolio” was “dead on the mark.”12 Consistent with Miles’s recommendations,

NuVasive decided not pursue an acquisition of Alphatec.13

Around this time, Miles expressed a desire to have more input and control

regarding NuVasive’s strategic direction, and consequent to this desire Miles was

appointed to NuVasive’s Board of Directors in August 2016.14 Shortly after joining

NuVasive’s Board of Directors, Miles disclosed that we was considering accepting

an employment offer from Alphatec.15

Miles leveraged the Alphatec offer to negotiate a new employment agreement

with NuVasive, executed on September 11, 2016, to remain with NuVasive as its

9
Id. ¶¶ 15–16.
10
Id. ¶ 17.
11
Id. ¶¶ 18–19.
12
Id. ¶ 19.
13
Id. ¶ 20.
14
Id. ¶ 21.
15
Id. ¶ 22.

3
Vice Chairman (the “Letter Agreement”).16 Miles made it known that he wanted

reduced day-to-day responsibilities in order to spend more time with his family and

did not want the workload associated with a high-level management position with

NuVasive or Alphatec.17 As NuVasive’s Vice Chairman, Miles would remain

involved with high-level business strategy, product development, and maintaining

key customer and partner relationships, but would largely be relieved of day-to-day

management responsibilities.18 Miles’s new employment agreement included a

compensation package providing (1) a $500,000 annual salary, (2) an equity award

valued in excess of $3.7 million, and (3) continued vesting of earlier equity grants.19

Miles also remained on NuVasive’s Board of Directors.20

The Letter Agreement included certain restrictive covenants applicable to

Miles. Miles agreed that “for a one year period following the termination of [his]

employment for any reason, [Miles] will not provide any services to any business

operating in any line or type of business conducted by NuVasive or its

subsidiaries.”21 Additionally, “for that same one year period,” Miles agreed that he

“will not hire or solicit, directly or indirectly, any former or current employees of

NuVasive, its subsidiaries and/or distributors, or solicit the business of any

16
Id.; SAC, Ex. A (“Letter Agreement”).
17
SAC, ¶ 24.
18
Id. ¶ 23.
19
Id. ¶ 22.
20
Id.
21
Letter Agreement, at 2; SAC, ¶ 26.

4
customers, clients, medical partners (including physicians utilizing NuVasive’s

products and services) of NuVasive, its subsidiaries and/or distributors.”22 The

Letter Agreement is “governed by the laws of the State of Delaware, without regard

for choice of law provisions.”23

After Miles agreed to the Letter Agreement, NuVasive continued to trust

Miles with its most confidential business information including acquisition targets,

product development timelines and launch windows, domestic and international

growth and expansion plans, key customer and surgeon relationships, and

NuVasive’s 5-year strategic plan.24 Miles assured NuVasive of his loyalty to the

company, telling NuVasive’s Board of Directors that he “bleeds purple”—purple

being a core part of NuVasive’s image, branding, and marketing.25

C. Miles’s Investment in Alphatec; Miles Resigns from NuVasive and Joins
Alphatec

On March 22, 2017, Miles executed a securities purchase agreement to

purchase $500,000 of Alphatec stock in a private placement.26 Alphatec’s press

22
Letter Agreement, at 2; SAC, ¶ 26.
23
Letter Agreement, at 3; SAC, ¶ 27. In a previous Memorandum Opinion in this matter I found
the Delaware choice-of-law provision to be unenforceable with regard to the non-solicitation and
non-competition covenants. NuVasive, Inc. v. Miles, 2019 WL 4010814, at *7 (Del. Ch. Aug. 26,
2019).
24
SAC, ¶ 32.
25
Id. ¶ 34.
26
Id. ¶ 36.

5
release announcing the private placement sale reflected that the purpose of the sale

was to enable Alphatec to more effectively compete in the spinal surgery business.27

NuVasive’s Code of Conduct, in place at the time of the private placement

sale provided: “To be sure we are keeping NuVasive’s best interests at heart, we

should not have a significant investment in a customer, supplier or competitor.

Large investments in these organizations could divide our interests and make it

difficult for us to act in the best interests of our Company.”28 Miles’s investment in

Alphatec—which Miles made through an entity called “MOM”—was not disclosed

by Miles or Alphatec.29

During this time, Miles and Alphatec were engaged in discussions for Miles

to become Alphatec’s “leader.”30 Miles did not disclose these discussions to

NuVasive, all the while Miles remained part of ongoing discussions and disclosures

of NuVasive’s most confidential business strategies and other information.31

Around this time and throughout his tenure as Vice President of NuVasive, Miles

disparaged NuVasive and key members of its management to critical NuVasive

customers, medical partners, and employees.32 In June 2017, Miles sold 15,000

27
Id. ¶ 37.
28
Id. ¶ 38.
29
Id. ¶¶ 36, 39.
30
Id. ¶ 40.
31
Id.
32
Id. ¶ 41.

6
shares of NuVasive stock, the proceeds of which exceeded $1 million.33 In

September 2017, Miles contacted a NuVasive customer and respected spinal surgeon

and informed him that Miles was considering an offer to join Alphatec—Miles

sought the surgeon’s advice regarding Alphatec’s offer.34

While still employed at NuVasive, Miles negotiated to secure an additional

equity stake in Alphatec.35 On October 1, 2017, Miles disclosed to NuVasive that

he was resigning effective immediately and that he would assume the position of

Executive Chairman of Alphatec the following day.36

On October 2, 2017, Alphatec announced that Miles had been appointed

Executive Chairman of Alphatec, and that Miles would lead the company.37 As part

of Miles’s agreement to join Alphatec, Miles agreed to purchase an additional 1.3

million Alphatec shares (valued at $2,938,000), was granted 1,000,000 Restricted

Stock Units, and received warrants to purchase up to an additional 1.3 million shares

of Alphatec.38 Alphatec’s press release noted that Miles would be “fully engaged,

focusing primarily on further defining and implementing Alphatec’s strategic

33
Id. ¶ 42.
34
Id. ¶ 43.
35
Id. ¶ 45.
36
Id. ¶ 46.
37
SAC, Ex. B, at 1.
38
SAC, ¶ 45. The Restricted Stock Units had a market value of $3.22 million as of market close
on October 2, 2017. Id.

7
initiatives, expanding and fortifying the Company’s relationships with surgeon

customers, and leading Alphatec’s new technology development.”39

D. Miles Recruits Former NuVasive Executives, NuVasive Employees, and
Medical Advisors

Alphatec’s executive team and Board of Directors is composed of many

former NuVasive employees—four of the six members of Alphatec’s Executive

Team and four of the nine members of Alphatec’s Board of Directors are recent

employees of NuVasive.40 Brian Snider, a former NuVasive employee who became

Alphatec’s Executive Vice President Strategic Marketing and Product Development

in March 2017, had agreed to a Proprietary Information and Inventions Agreement

(the “PIIA”) with NuVasive, pursuant to which Snider owed post-employment

obligations to NuVasive.41

Upon joining Alphatec, Miles began recruiting former NuVasive employees,

including at least thirteen former NuVasive employees who now work at Alphatec.42

Miles also successfully recruited two longtime NuVasive clinical advisors and

design surgeons to modify their longstanding business relationships with NuVasive

39
SAC, Ex. B, at 1.
40
SAC, ¶ 50.
41
Id. ¶¶ 52–53. Pursuant to the PIIA, until March 24, 2018, Snider owed NuVasive a duty not to
“induce or influence, or seek to induce or influence, any person who is employed or engaged by
[NuVasive] (as an agent, employee, independent contractor, or in any other capacity), or any
successor thereto, with the purpose of obtaining such person as an employee or independent
contractor for a business competitive with [NuVasive], or causing such person to terminate his or
her employment agency or relationship with [NuVasive], or any successor thereto.” Id. ¶ 53.
42
Id. ¶ 54.

8
and assume similar roles with Alphatec.43 One of these advisors, Dr. Luiz Pimenta,

had a Second Amended and Restated Clinical Advisor Agreement with NuVasive

(the “Pimenta Agreement”).44 The Pimenta Agreement provides that during the term

of the agreement, Dr. Pimenta is prohibited from: “(a) performing any service for

any third-party which may utilize any of the information obtained from NuVasive .

. . and (b) working with any other party with respect to similar products or similar

systems for which [Pimenta] receives (or stands to receive) royalties under [the

Pimenta Agreement].”45

E. Distributors and Distributor Representatives

Immediately following Alphatec’s hiring of Miles, Alphatec contacted

NuVasive’s distributors in an attempt to induce such distributors to assume similar

distributor or sales roles for Alphatec.46 Alphatec told these distributors that

NuVasive intended to terminate their contracts or convert them into direct

employees.47 This effort resulted in the loss of a NuVasive distributor and a number

of distributor representatives.48

43
Id. ¶ 55.
44
Id. ¶¶ 55–56; see SAC, Ex. D.
45
SAC, Ex. D, § 2.A.
46
SAC, ¶ 58.
47
Id. The SAC pleads on information and belief that Alphatec offered distributors “bounty
commissions” for terminating their relationship with NuVasive and “converting NuVasive’s
business.” Id.
48
Id. ¶ 59.

9
 1. Absolute Medical

Absolute Medical, LLC (“Absolute Medical”) became a Florida-based

exclusive distributor of NuVasive’s products on February 14, 2013.49 Absolute

Medical and NuVasive entered into the January 1, 2017 Exclusive Sales

Representative Agreement (the “Absolute Agreement”) as amended by the July 1,

2017, Territory Transition Agreement (the “Transition Agreement”).50 The

Absolute Agreement appoints Absolute Medical as NuVasive’s “exclusive sales

representative” in the “Territory” for the “Term” (until January 1, 2022).51 The

“Territory” is composed of eight counties and one hospital in the State of Florida.52

In accordance with the Absolute Agreement, Absolute Medical hired a staff of sales

representatives (the “Representative Affiliates”) to assist in promoting NuVasive’s

products in its sales territory.53

In connection with its position as an exclusive distributor for NuVasive,

Absolute Medical received training and had access to and knowledge of NuVasive’s

trade secrets and other proprietary information.54 The Absolute Agreement contains

49
Id. ¶ 60.
50
See SAC, Ex. E; SAC, Ex. F.
51
SAC, Ex. E, § 1.01.
52
SAC, Ex. F, Annex II. The counties are: Flagler, Volusia, Lake, Seminole, Osceola, Orange,
Highlands, and Brevard. Id. Three hospitals are excluded from Brevard County (Wuesthoff
Medical Center Melbourne, Holmes Regional Medical Center, and Palm Bay Hospital), and the
single hospital is in Polk County (Heart of Florida Regional Medical Center). Id.
53
SAC, ¶ 61; see SAC, Ex. E, § 5.03.
54
SAC, ¶ 62.

10
non-compete and non-solicit obligations that require Absolute Medical and its

Representative Affiliates not to compete for the same customers they solicited on

NuVasive’s behalf for one year after the Term (until January 1, 2023).55 The

Absolute Agreement also contains other obligations of Absolute Medical, including

the obligation to advise NuVasive of any changes in Absolute Medical’s “status,

organization, personnel, and similar matters,” a non-disclosure obligation, an

agreement to indemnify NuVasive in certain circumstances, and a further assurances

obligation.56

On November 27, 2017, Absolute Medical’s president and sole member Greg

Soufleris notified NuVasive of Absolute Medical’s intent to “resign[]” from its

“partnership” with NuVasive.57 On November 30, 2017, Soufleris formed Absolute

Medical Systems, LLC (“AMS”), a Florida limited liability company headquartered

at the same address as Absolute Medical.58 On December 1, 2017, AMS executed a

contract with Alphatec to be its exclusive distributor of spinal products—NuVasive

alleges on information and belief that Alphatec encouraged Soufleris to terminate

the Absolute Agreement with the understanding that Alphatec would sign an

exclusive contract with a separate, newly formed, Absolute entity (AMS).59

55
Id. ¶ 63; SAC, Ex. E, §§ 5.09(c), (e).
56
SAC, ¶ 66; SAC, Ex. E, §§ 5.04, 8.01, 10.01, 12.04.
57
SAC, ¶ 67; SAC, Ex. G, at 1.
58
SAC, ¶ 69.
59
Id. ¶ 70; SAC, Ex. H.

11
 On December 5, 2017, Absolute Medical’s counsel emailed NuVasive’s

counsel stating that three Representative Affiliates—Dave Hawley, Ryan Miller, and

Brandon Gottstein—resigned from Absolute Medical.60 Shortly thereafter, Hawley

and Miller began selling Alphatec products as sales representatives for AMS, and

Hawley, Miller, and Gottstein all became direct employees of Alphatec as sales

representatives.61 With Alphatec’s encouragement, AMS and Hawley, Miller, and

Gottstein now promote and/or sell Alphatec products to the same customers to whom

they previously promoted and sold NuVasive products.62

On December 12, 2017, Hawley corresponded with a former NuVasive

employee who now works for Alphatec about custom medical instruments.63 The

former NuVasive employee was subject to a temporary restraining order at the time

which prohibited her from possessing NuVasive’s materials.64 Nonetheless, the

email from Hawley provided Alphatec with precise descriptions of the medical

instruments and promised to send the custom instruments NuVasive previously

made to Alphatec so Alphatec could copy them.65 Additionally, Soufleris has

60
SAC, ¶ 71.
61
Id. ¶ 72.
62
Id. ¶ 73.
63
Id. ¶ 74.
64
Id. ¶ 75.
65
Id. ¶ 74.

12
solicited business from at least two of Absolute Medical’s NuVasive customers on

Alphatec’s behalf.66

To induce Absolute Medical to begin selling its products through the AMS

entity, Alphatec promised to pay a greater sales commission to Absolute Medical

than it received under the Absolute Agreement.67 NuVasive alleges on information

and belief that Alphatec is paying Absolute Medical and its Representative Affiliates

an additional “bounty commission” for any NuVasive business it converts.68

Alphatec’s solicitation of Absolute Medical allegedly induced Hawley and Miller to

solicit customers they solicited or serviced in connection with Absolute Medical’s

agreement with NuVasive.69 Furthermore, NuVasive alleges on information and

belief that Alphatec is indemnifying Absolute Medical, Soufleris, Hawley, and

Miller for actions brought by NuVasive.70

2. inoSpine

inoSpine, LLC (“inoSpine”) is a North Carolina limited liability company and

was a North Carolina-based exclusive distributor for NuVasive.71 inoSpine received

66
Id. ¶ 76.
67
Id. ¶ 77.
68
Id.
69
Id. ¶ 78.
70
Id.
71
Id. ¶ 79; SAC, Ex. J, at 1.

13
NuVasive’s training and had access to and knowledge of NuVasive’s trade secrets

and other proprietary information.72

Around February 1, 2014, Michael Jones became an Independent Contractor

of inoSpine and executed an Independent Contractor Agreement with inoSpine (the

“Independent Contractor Agreement”).73 Jones’s duties under the Independent

Contractor Agreement included, “without limitation, promoting and selling products

offered by [inoSpine], including sales support functions, providing services to

healthcare providers to whom such products are sold, and such other duties as may

be assigned by [inoSpine] from time-to-time.”74

The Independent Contractor Agreement provides that during the term of the

agreement and for one year following Jones’s last day of employment, Jones “will

not compete with [inoSpine] in [Jones’s] Territory” by “[s]elling and/or promoting

any products that are competitive with any products sold and/or promoted by

[inoSpine] on the last day of [Jones’s] employment and which [Jones] sold and/or

promoted while employed by [inoSpine].”75 Jones’s Territory under the Independent

Contractor Agreement consists of ten counties in North Carolina: Mecklenburg,

72
SAC, ¶ 80.
73
Id. ¶ 81; SAC, Ex. J.
74
SAC, ¶ 81.
75
Id. ¶ 82; SAC, Ex. J., § 8(A)(1).

14
Catawba, Haywood, Iredell, Cabarrus, Rowan, Gaston, Rutherford, Caldwell, and

Burke.76

The Independent Contractor Agreement also imposes certain non-solicitation

obligations on Jones.77 Jones agreed “not compete with [inoSpine] by, in a

competitive capacity”:

Soliciting or accepting business competitive to [inoSpine] from, or
providing competing products and/or services to, any person or entity,
from whom or which [Jones] accepted business on behalf of [inoSpine]
or to whom or which [Jones] provided products and/or services on
behalf of [inoSpine] during the one-year period preceding the last day
of [Jones’s] employment[.]78

The Independent Contractor Agreement also provides that Jones will “not compete

with [inoSpine] by, in a competitive capacity”:

Soliciting or accepting competing business from or providing
competing products and/or services to, any person or entity from whom
or which [Jones] personally solicited business on behalf of [inoSpine]
during the three (3) month period immediately preceding the last day
of [Jones’s] employment.79

NuVasive is agreed to be a third party beneficiary of the Independent Contractor

Agreement, “with full contractual and other rights to directly enforce” certain

76
SAC, ¶ 83, SAC Ex. J, Schedule A.
77
SAC, ¶ 84.
78
Id.; SAC, Ex. J, § 9(A)(1).
79
SAC, ¶ 84; SAC, Ex. J, § 9(A)(2).

15
provisions of the Independent Contractor Agreement, including the non-competition

and non-solicitation provisions excerpted above.80

Around February 17, 2017, Kenneth Kormanis became an employee of

inoSpine as a Spine Specialist and executed an Employment Agreement with

inoSpine (the “Employment Agreement”).81 The Employment Agreement provides

that during the term of the agreement and for a period of two years following

Kormanis’s last day of employment, Kormanis “will not compete with [inoSpine] in

[Kormanis’s] Territory” by “[s]elling and/or promoting any products that are

competitive with any products sold and/or promoted by [inoSpine] on the last day of

[Kormanis’s] employment and which [Kormanis] sold and/or promoted while

employed by [inoSpine].”82 Kormanis’s Territory under the Independent Contractor

Agreement consists of four counties in North Carolina: Guilford, Forsyth, Stokes,

and Rockingham.83

The Employment Agreement also imposes certain non-solicitation obligations

on Kormanis.84 Jones agreed “not compete with [inoSpine] within [Kormanis’s]

Territory, by, in a competitive capacity”:

Soliciting or accepting business competitive to [inoSpine] from, or
providing competing products and/or services to, any person or entity,

80
SAC, ¶ 85; SAC, Ex. J, § 10.
81
SAC, ¶ 86; SAC, Ex. K.
82
SAC, ¶ 88; SAC, Ex. K, § 8(A)(1).
83
SAC, ¶ 89; SAC, Ex. K, Schedule A.
84
SAC, ¶ 90.

16
 from whom or which [Kormanis] accepted business on behalf of
[inoSpine] or to whom or which [Kormanis] provided products and/or
services on behalf of [inoSpine] during the one-year period preceding
the last day of [Kormanis’s] employment[.]85

The Employment Agreement also provides that Kormanis will “not compete with

[inoSpine] within [Kormanis’s] Territory, by, in a competitive capacity”:

Soliciting or accepting competing business from or providing
competing products and/or services to, any person or entity from whom
or which [Kormanis] personally solicited business on behalf of
[inoSpine] during the three (3) month period immediately preceding the
last day of [Kormanis’s] employment.86

NuVasive is agreed to be a third party beneficiary of the Employment Agreement,

“with full contractual and other rights to directly enforce” certain provisions of the

Employment Agreement, including the non-competition and non-solicitation

provisions excerpted above.87

Around March 5, 2018 Jones and Kormanis terminated their respective

independent contractor and employment relationships with inoSpine.88 Alphatec

solicited Jones and Kormanis to terminated their respective agreements with

inoSpine and begin distributing Alphatec products.89 Alphatec promised to pay

Jones and Kormanis a greater sales commission than they received under their

85
Id.; SAC, Ex. K, § 9(A)(1).
86
SAC, ¶ 90; SAC, Ex. K, § 9(A)(2).
87
SAC, ¶ 91; SAC, Ex. K, § 10.
88
SAC, ¶ 92.
89
Id. ¶ 93.

17
respective agreements with inoSpine.90 NuVasive has alleged upon information and

belief that Alphatec is paying Jones and Kormanis an additional “bounty

commission” for “any NuVasive business they convert.”91 Alphatec also agreed to

indemnify Jones and Kormanis with respect to any claims related to their contractual

obligations to inoSpine and NuVasive.92

Jones and Kormanis are now affiliated with Alphatec and are promoting

and/or selling Alphatec’s competitive products within their former respective

inoSpine territories.93 Jones “converted at least one lateral surgery performed by

one of his former inoSpine surgeon-customers to Alphatec.”94

F. The Second Amended Complaint and Procedural History

The original complaint in this Action was filed on October 10, 2017, the SAC

was filed on November 4, 2019. The SAC names two Defendants—Miles and

Alphatec—and pleads a total of ten counts.95 Six counts are pled against Alphatec:

Counts IV, V, VI, VIII, IX, and X.96

Count IV claims unfair competition and alleges that Alphatec engaged in

unfair competition by “unlawfully st[ealing] NuVasive’s employees, distributors,

90
Id. ¶ 94.
91
Id.
92
Id. ¶ 95.
93
Id.
94
Id. ¶ 96.
95
Id. ¶¶ 98–165.
96
Id.

18
customers, medical partners, technology and business strategies in an effort to

unfairly compete against NuVasive.”97

Count V claims tortious interference with contractual relations and alleges

that Alphatec (along with Miles) “willfully interfered with NuVasive’s contractual

relationships by soliciting NuVasive’s medical partners and distributors to terminate

their relationships with NuVasive and accept engagement with Alphatec.”98

Count VI claims tortious interference with prospective economic advantage

and alleges that Miles “breached his non-competition and non-solicitation covenants

by soliciting [NuVasive’s employees, customers, distributors, and medical partners]

to terminate their relationships with NuVasive and join Alphatec,” and alleges that

Alphatec’s conduct is “malicious, intentional, without legal justification, and is done

with the intent to injure NuVasive.”99

Count VIII claims that Alphatec aided and abetted Miles’s alleged breaches

of fiduciary duty.100

Count IX claims deceptive and unfair trade practices under Florida law, and

alleges that Alphatec unfairly competed with NuVasive and engaged in unfair and/or

97
Id. ¶ 121.
98
Id. ¶ 128.
99
Id. ¶¶ 134–35.
100
Id. ¶ 148.

19
deceptive acts and practices in its activities concerning Absolute Medical, AMS,

Soufleris, and Absolute Medical’s employees and sales representatives.101

Count X claims unfair and deceptive trade practices under North Carolina law,

and alleges that Alphatec solicited and induced Jones and Kormanis to breach

obligations to inoSpine by selling Alphatec’s products, with knowledge of Jones and

Kormanis’s contractual obligations to inoSpine and NuVasive.102

Alphatec moved to dismiss the Counts IV, V, VI, VIII, IX, and X of the SAC

on November 19, 2019.103 I heard Oral Argument on May 22, 2020, and considered

the matter submitted for decision on that date.

II. ANALYSIS

Alphatec has moved to dismiss Counts IV, V, VI, VIII, IX, and X of the SAC

under Chancery Court Rule 12(b)(6).104 The standard for dismissal under Rule

12(b)(6) is well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are well-pleaded if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and (iv) dismissal is inappropriate
unless the plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of proof.105

101
Id. ¶ 154.
102
Id. ¶ 161.
103
Def. Alphatec Holdings, Inc.’s Mot. to Dismiss Pl.’s Second Am. Compl., D.I. 245.
104
Ch. Ct. R. 12(b)(6).
105
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (footnotes and internal quotation
marks omitted).

20
I need not, however, “accept conclusory allegations unsupported by specific facts or

. . . draw unreasonable inferences in favor of the non-moving party.”106

A. The SAC Pleads Facts Sufficient to Put Alphatec on Notice of the Claims
Asserted Against It

As an initial matter, Alphatec contends that all Counts asserted against it by

NuVasive should be dismissed because Alphatec Holdings, Inc.—the entity referred

to herein throughout as Alphatec—is “lump[ed] together” with its wholly owned

subsidiary Alphatec Spine, Inc. (“Alphatec Spine”) at the outset of the SAC and all

allegations and claims are asserted against the agglomerated entities. Alphatec Spine

was formerly a Defendant in this Action, but NuVasive opted to remove Alphatec

Spine as a Defendant when it filed the SAC.107 In Alphatec’s contention, because

the SAC does not provide notice of the individual role it played in the conduct

alleged, apart from the role played by Alphatec Spine, there are no well-pled

allegations against Alphatec.

Claims against a defendant may be dismissed where that defendant is lumped

together with other defendants such that there are no well-pled facts to suggest any

wrongdoing by that defendant.108 This Court has found such is the case where the

lumping together occurs and the complaint is “largely silent” as to the role of the

106
Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011).
107
Compare SAC with Pl. NuVasive Inc.’s First Am. Compl. for Damages, D.I. 105.
108
Howland v. Kumar, 2019 WL 2479738, at *5 (Del. Ch. June 13, 2019).

21
defendant in the events at issue.109 But that is not the situation here. Instead,

Alphatec and Alphatec Spine are lumped together because NuVasive pleads that

both entities participated in all the pertinent conduct alleged.

Alphatec may be correct that it is a holding company with “no actual

operations,” and that consequently NuVasive cannot ultimately show that Alphatec

engaged in any of the conduct described in the SAC.110 But the pleading stage is not

where NuVasive must show the sufficiency of its claims in that regard. To survive

Alphatec’s Motion, NuVasive need only show that it is reasonably conceivable that

Alphatec engaged in the tortious conduct alleged.111 As to those claims in the SAC

that meet this reasonable conceivability standard, Alphatec may further test the

sufficiency of NuVasive’s pleadings via motion once a record has been created,

should it find it appropriate to do so. But the SAC’s allegations against Alphatec are

sufficiently pled as to put Alphatec on notice of the claims asserted against it, and

the SAC does not fail to state a claim simply because it pleads all allegations against

both Alphatec and Alphatec Spine.112

109
Shandler v. DLJ Merch. Banking, Inc., 2010 WL 2929654, at *12 (Del. Ch. July 26, 2010).
110
Opening Br. in Support of Alphatec Holdings’ Mot. to Dismiss Pl.’s Second Am. Compl., D.I.
251 (“Alphatec’s Opening Br.”), at 12.
111
In re Hansen Med., Inc. S’holders Litig., 2018 WL 3025525, at *5 (Del. Ch. June 18, 2018)
(stating that the pleading standards under Rule 12(b)(6) “are minimal, and the operative test is one
of reasonable conceivability, which asks whether there is a possibility of recovery.” (internal
citations and quotation marks omitted)).
112
See Dolan v. Altice USA, Inc., 2019 WL 2711280, at *6 (Del. Ch. June 27, 2019) (“Delaware
follows a simple notice pleading standard.” (quoting O’Reilly v. Transworld Healthcare, Inc., 745
A.2d 902, 912 (Del. Ch. 1999)).

22
 B. Alphatec Has Not Waived Certain Arguments

In 2018, Alphatec and Alphatec Spine moved to dismiss NuVasive’s first

amended complaint (the “FAC”) in its entirety. 113 NuVasive filed the SAC in

response. NuVasive points out that Alphatec and Alphatec Spine’s opening brief in

support of their Motion to Dismiss the FAC did not raise some of the grounds for

dismissing certain claims that Alphatec has now raised in this Motion to Dismiss the

SAC. As a result, argues NuVasive, those grounds for dismissal should be deemed

waived. I find this argument without merit. This is not a situation where Alphatec

answered the FAC, eschewing a motion to dismiss, but now seeks to dismiss the

same claims in the SAC. Instead, Alphatec and Alphatec Spine moved to dismiss

the FAC in its entirety. Presumably, the grounds for dismissal had merit; because

NuVasive amended its pleading. These fact do not, to my mind, indicate any intent

to waive the defenses that Alphatec now asserts to the SAC; and implying a waiver

under these circumstances would be perverse to the administration of justice and the

Court’s interest in deciding cases efficiently. I find no waiver.

C. California Law Applies to Counts IV, V, and VI

Alphatec has moved to dismiss all six Counts pled against it in the SAC. Two

of those Counts—Counts IX and X—are explicitly brought under the laws of Florida

113
Defs. Alphatec Spine, Inc. and Alphatec Holdings, Inc.’s Opening Br. in Support of their Mot.
to Dismiss, or in the Alternative, to Stay this Action, D.I. 117.

23
and North Carolina, respectively.114 There is no dispute that the claim in Count

VIII—aiding and abetting Miles’s breach of fiduciary duties owed to a Delaware

entity—arises under Delaware law. As to Counts IV, V, and VI, Alphatec contends

that California law should apply.115 NuVasive does not argue that California law

does not apply, and its briefing on Counts IV, V, and VI cites exclusively California

law.116 Though NuVasive does not explicitly agree that California law applies to

Counts IV, V, and VI, it appears to acquiesce to such a conclusion, and has waived

the opportunity to argue that another state’s law should apply to these claims.117

Given this situation, I decline to engage in a choice-of-law analysis, sua sponte.118

Therefore, given NuVasive’s acquiescence and waiver (and given that, in any event,

114
SAC, ¶¶ 150–65.
115
Alphatec’s Opening Br., at 18 (“Even though NuVasive bring its claims in Delaware, California
law—not Delaware law—should apply.”).
116
Pl. NuVasive, Inc.’s Answering Br. in Opp’n to Def. Alphatec Holdings, Inc.’s Mot. to Dismiss
Pl.’s Second Am. Compl, D.I. 259 (“NuVasive’s Answ. Br.”), at 10 (“Even if California law
applies to these Counts, as [Alphatec] contends, [Alphatec’s] argument that NuVasive has failed
to plead allegations such that there is no reasonably conceivable basis for recovery is wrong.”).
117
Emerald Partners v. Berlin, 2003 WL 21003437, at *43 (Del. Ch. Apr. 28, 2003), aff’d, 840
A.2d 641 (Del. 2003) (“It is settled Delaware law that a party waives an argument by not including
it in its brief.”); Lechliter v. Delaware Dep’t of Nat. Res. Div. of Parks & Recreation, 2015 WL
7720277, at *3 (Del. Ch. Nov. 30, 2015). NuVasive’s position on whether California law should
apply rises past mere indifference, as NuVasive forcefully argues that Count IV states a claim
under Cal. Bus. & Prof Code § 17200 et seq. notwithstanding that the SAC does not cite the statute.
118
See e.g. Richards v. Copes-Vulcan, Inc., 213 A.3d 1196, 1197 (Del. 2019) (noting that “[t]he
parties agree that Ohio law applies to this case,” and making no conflict-of-laws inquiry).

24
California has the most significant relationship with these tort claims)119 I apply

California law to Counts IV, V, and VI.120

D. Count IV

Count IV alleges unfair competition. NuVasive’s briefing asserts that this is

a claim under California Business & Professional Code § 17200 et seq.—known as

California’s Unfair Competition Law (“UCL”)—not a claim for the common law

tort of unfair competition.121 Alphatec contends that under Delaware’s notice

119
“Delaware courts look to the Restatement (Second) of Conflict of Laws for guidance in conflict
of law disputes.” Those Certain Underwriters at Lloyd’s, London v. Nat’l Installment Ins. Servs.,
Inc., 2007 WL 4554453, at *16 (Del. Ch. Dec. 21, 2007), aff’d, 962 A.2d 916 (TABLE). Were I to
undertake a choice-of-law analysis and find that a conflict exists between Delaware and California
law, I would then employ the “most significant relationship test” to determine which state’s law
applies to the Counts IV, V, and VI. State Farm Mut. Auto. Ins. Co. v. Patterson, 7 A.3d 454, 457
(Del. 2010); see Restatement (Second) of Conflicts of Laws § 145(1) (1971). I have already
determined in a previous decision in this matter that California has the strongest contacts with
Miles’s employment agreement. NuVasive, Inc. v. Miles, 2018 WL 4677607, at *5 (Del. Ch. Sept.
28, 2018); see NuVasive, Inc. v. Miles, 2019 WL 4010814, at *3 (Del. Ch. Aug. 26, 2019) (“As I
explained in my September 28, 2018 Memorandum Opinion, California has the strongest contacts
to the Agreement and absent the choice of law provision, California law would apply.”). Though
that decision dealt with choice-of-law for contractual (rather than tort) claims, the Restatement
(Second) of Conflict of Laws provides that a conflict-of-laws analysis for both contract and tort
disputes should look towards the same principles of § 6 in determining which state has the most
significant relationship to the transaction or occurrence, as applicable. Restatement (Second) of
Conflicts of Laws §§ 145(1), 188(1) (1971). Though the contacts here are not identical to those
analyzed in my previous decision, California likewise has the strongest contacts the claims asserted
in Counts IV, V, and VI. See id. § 6. The alleged injuries occurred in California, and to the extent
any conduct causing the alleged injuries occurred outside of California, it is not alleged to have
occurred in Delaware. Alphatec’s hiring of Miles occurred in California. Furthermore, Delaware
has no strong policy interest in the application of Delaware law to Counts IV, V, and VI.
120
I note that under Delaware law a court must determine whether an actual—rather than a
“false”—conflict exists before employing a choice-of-law analysis. Laugelle v. Bell Helicopter
Textron, Inc., 2013 WL 5460164, at *2 (Del. Super. Oct. 1, 2013). I comment on the most
significant relationship in n.119 not as part of a comprehensive choice-of-law analysis, but merely
to demonstrate that applying California law would not be inequitable given NuVasive’s
acquiescence.
121
NuVasive’s Answ. Br., at 10–13.

25
pleading standard, the claim as pled is insufficient to put Alphatec on notice of a

UCL claim.122 I disagree based on the facts pled. NuVasive’s allegation of torts

arising out of California—to which Alphatec itself asserts California law applies—

including an allegation of “unfair competition” puts Alphatec on notice that it is

being charged with a violation of California’s UCL.

In order to state a claim under the UCL, “a plaintiff must show either an (1)

‘unlawful, unfair, or fraudulent business act or practice,’ or (2) ‘unfair, deceptive,

untrue or misleading advertising.’”123 As written, the UCL establishes three varieties

of unfair competition: unlawful, unfair, and fraudulent—a plaintiff need show only

one in order to state a claim under the UCL.124

“Unlawful,” in the context of the UCL, has a “straightforward and broad

interpretation”:

The UCL covers a wide range of conduct. It embraces anything that
can properly be called a business practice and that at the same time is
forbidden by law. . . . Section 17200 borrows violations from other
laws by making them independently actionable as unfair competitive
practices.125

122
Alphatec Holdings’ Reply Br. in Support of its Rule 12(b)(6) Mot. to Dismiss Pl’s Second Am.
Compl., D.I. 262 (“Alphatec’s Reply Br.”), at 7.
123
Lippitt v. Raymond James Fin. Servs., 340 F.3d 1033, 1043 (9th Cir. 2003) (quoting Cal. Bus.
& Prof Code § 17200).
124
Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 973 P.2d 527, 540 (Cal. 1999).
125
CRST Van Expedited, Inc. v. Werner Enters., Inc., 479 F.3d 1099, 1107 (9th Cir. 2007) (quoting
Cel-Tech, 973 P.2d at 560).

26
“A claim under the UCL unlawful prong may be premised upon the unlawful actions

that constitute tortious interference with contractual relations.”126 Because I

conclude, infra, Section II.E., that NuVasive has stated such a claim in Count V,

NuVasive has stated a claim for an unlawful act under the UCL.127

However, as Alphatec points out, the SAC seeks no remedy permitted by the

UCL. “While the scope of conduct covered by the UCL is broad, its remedies are

limited . . . . A UCL action is equitable in nature; damages cannot be recovered.”128

A prevailing plaintiff is “generally limited to injunctive relief and restitution,” and

“may not receive damages.”129 Alphatec argues that NuVasive’s UCL claim must

be dismissed because the SAC “seeks only compensatory damages (in the form of

lost profits) from Alphatec.”130 NuVasive seeks no injunctive relief from

Alphatec.131

Although the SAC, in addition to requesting NuVasive’s damages for

unlawful competition, also seeks “disgorge[ment of] all compensation paid to Miles,

including but not limited to his salary and the fair value market of his equity awards,”

126
Blizzard Entm’t Inc. v. Ceiling Fan Software LLC, 28 F. Supp. 3d 1006, 1017 (C.D. Cal. 2013)
(citing CRST, 479 F.3d at 1107).
127
See e.g. AmeriPOD, LLC v. DavisREED Constr. Inc., 2017 WL 2959351, at *7 (S.D. Cal. July
11, 2017); Salon Supply Store, LLC v. Creative Nail Design, Inc., 2015 WL 11438492, at *9 (S.D.
Cal. June 19, 2015).
128
Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 943 (Cal. 2003).
129
Cel-Tech, 973 P.2d at 560 (emphasis added).
130
Alphatec’s Reply Br., at 13.
131
See generally SAC.

27
this remedy does not seek relief available under the UCL from Alphatec.132

NuVasive does not seek disgorgement from Alphatec, and even if it did,

disgorgement is incongruous with and broader than the restitution remedy

permissible under the UCL.133 Since NuVasive seeks no remedy cognizable under

the UCL, Count IV is dismissed.

E. Count V

Count V alleges tortious interference with contractual relations. The elements

of this tort under California law are “(1) a valid contract between plaintiff and a third

party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts

designed to induce a breach or disruption of the contractual relationship; (4) actual

breach or disruption of the contractual relationship; and (5) resulting damage.”134

NuVasive alleges that Alphatec tortuously interfered with NuVasive’s contractual

132
SAC, ¶¶ 123–24 (emphasis added).
133
In Kraus v. Trinity Management. Services Inc., 999 P.2d 718 (Cal. 2000), the California
Supreme Court “defined an order for restitution as one compelling a UCL defendant to return
money obtained through an unfair business practice to those persons in interest from whom the
property was taken, that is, to persons who had an ownership interest in the property or those
claiming through that person.” Korea Supply, 63 P.3d at 944 (quoting Kraus, 999 P.2d at 725)
(internal quotation marks omitted). Disgorgement, which NuVasive seeks, is a “broader remedy
than restitution” which “may include a restitutionary element, but is not so limited.” Id. (citing
Kraus, 999 P.2d at 725). Kraus continued:
[An order that a defendant disgorge money obtained through an unfair business
practice] may compel a defendant to surrender all money obtained through an unfair
business practice even though not all is to be restored to the persons from whom it
was obtained or those claiming under those persons. It has also been used to refer
to surrender of all profits earned as a result of an unfair business practice regardless
of whether those profits represent money taken directly from persons who were
victims of the unfair practice. Kraus, 999 P.2d at 725.
134
Pac. Gas & Elec. Co. v. Bear Stearns & Co., 791 P.2d 587, 589–90 (Cal. 1990).

28
relationships with its medical partners and independent distributors “by soliciting

NuVasive’s medical partners and distributors to terminate their relationships with

NuVasive and accept engagements with Alphatec.”135

Alphatec raises but a single argument why Count V should be dismissed. It

argues that the third element of the tort cannot conceivably be satisfied because the

alleged inducement—higher commissions and indemnification from claims by

NuVasive—is contained within the terms of the distributors’ agreements with

Alphatec Spine, to which Alphatec is not a party.136 Per Alphatec, because it is not

a party to these agreements, it could not have induced a breach of the distributors’

existing agreements with NuVasive.

But this is a non-sequitur. Alphatec need not itself be a party to the new

contractual relationships in order for the SAC to state a claim for tortious

interference with contractual relations by Alphatec. NuVasive need only show that

“interference [was] certain or substantially certain to occur as a result of [Alphatec’s]

action.”137 It is reasonably conceivable that Alphatec caused its wholly-owned

subsidiary to enter into the contracts with NuVasive’s medical partners and

independent distributors, and that interference with NuVasive’s contractual

135
SAC, ¶¶ 126–28.
136
See e.g. SAC, Ex. H.
137
Jenni Rivera Enters., LLC v. Latin World Entm’t Holdings, Inc., 249 Cal. Rptr. 3d 122, 141
(Cal. Ct. App. 2019) (quoting Korea Supply, 63 P.3d at 951).

29
relationships with these individuals and entities was consequently substantially

certain to occur. If a developed record demonstrates otherwise, summary judgment

will be available, but at this pleading stage, Alphatec’s Motion to Dismiss Count V

is denied.

F. Count VI

Count VI alleges tortious interference with prospective economic advantage.

The elements of the tort are: “(1) an economic relationship between the plaintiff and

some third party, with the probability of future economic benefit to the plaintiff; (2)

the defendant’s knowledge of the relationship; (3) intentional acts on the part of the

defendant designed to disrupt the relationship; (4) actual disruption of the

relationship; and (5) economic harm to the plaintiff proximately caused by the acts

of the defendant.”138

Tortious interference with prospective economic advantage is “distinct” from

tortious interference with contractual relations, and the California Supreme Court

has stated that “courts should . . . firmly distinguish the two kinds of business

contexts, bringing a greater solicitude to those relationships that have ripened into

agreements, while recognizing that relationships short of that subsist in a zone where

the rewards and risks of competition are dominant.”139 However, some plaintiffs

138
Korea Supply, 63 P.3d at 950 (quoting Westside Ctr. Assocs. v. Safeway Stores 23, Inc., 49 Cal.
Rptr. 2d 793, 802 (Cal. Ct. App. 1996)).
139
Della Penna v. Toyota Motor Sales, U.S.A., Inc., 902 P.2d 740, 751 (Cal. 1995).

30
may be able to state causes of action for both torts and “the existence of a contract

does not mean that a plaintiff’s claim must be brought exclusively as one for

interference with contract.”140

The distinction between the two torts is that the tort of interference with

prospective economic advantage has an independent wrongfulness requirement.141

That is, “[t]o establish a claim for interference with prospective economic advantage

. . . a plaintiff must plead that the defendant engaged in an independently wrongful

act.”142 This must be so, else wholesome competitive practices would be made

tortious. The interference must be wrongful “by some measure beyond the fact of

the interference itself.”143 Further, as the California Supreme Court has explained:

“The tort of intentional interference with prospective economic advantage is not

intended to punish individuals or commercial entities for their choice of commercial

relationships or their pursuit of commercial objectives, unless their interference

amounts to independently actionable conduct.”144 “[A]n act is independently

140
Korea Supply, 63 P.3d at 952–53.
141
Id. at 953 (Cal. 2003). The California Supreme Court has explained that this difference
emanates from the fact that while interfering with an existing contract is “‘wrongful in and of itself,
intentionally interfering with a plaintiff’s prospective economic advantage is not.” Id. (internal
citations omitted).
142
Id.
143
Della Penna, 902 P.2d at 751.
144
Korea Supply, 63 P.3d at 953.

31
wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory,

regulatory, common law, or other determinable legal standard.”145

NuVasive contends that Alphatec’s alleged aiding and abetting of Miles’s

breaches of fiduciary duty constitutes independent wrongfulness sufficient to state a

claim for tortious interference with prospective economic advantage. But, as

discussed, infra, Section II.G., NuVasive’s aiding and abetting claim does not

withstand Alphatec’s Motion to Dismiss. Consequently, because the only

independent wrongfulness alleged by NuVasive is the aiding and abetting claim,

NuVasive has failed to plead independent wrongfulness and its claim for tortious

interference with prospective economic advantage is dismissed.

G. Count VIII146

Count VIII alleges that Alphatec aided and abetted Miles’s alleged breaches

of fiduciary duty. This claim has four elements “(i) the existence of a fiduciary

relationship, (ii) a breach of the fiduciary’s duty, (iii) knowing participation in the

breach by the non-fiduciary defendants, and (iv) damages proximately caused by the

145
Id. at 954.
146
As noted, supra, the parties do not dispute that Delaware law applies to the aiding and abetting
claim. Were I required to opine on the question, I would find that Delaware applies. Shandler v.
DLJ Merch. Banking, Inc., 2010 WL 2929654, at *19 (Del. Ch. July 26, 2010) (“When the claim
against a third-party is that it was knowingly complicitous in a breach of fiduciary duty against a
Delaware entity, Delaware’s interest is paramount.”); Hamilton Partners, L.P. v. Englard, 11 A.3d
1180, 1211–12 (Del. Ch. 2010).

32
breach.”147 While Alphatec does not concede that Miles in fact breached his

fiduciary duties to NuVasive, there is no doubt that the SAC alleges behavior on

Miles’s part clearly incompatible with the duty of a fiduciary to his entity. I note

that Miles has not moved to dismiss the fiduciary duty claims asserted against him,

and has instead answered the SAC.148 Alphatec, however, argues that NuVasive has

failed to plead facts from which I may reasonably infer that Alphatec knowingly

participated in Miles’s alleged breach of duty. I agree.

One is generally not responsible for the torts of another. The element of

knowing participation requires that “the third party act with the knowledge that the

conduct advocated or assisted constitutes” a breach of duty.149 This requires that the

plaintiff plead that the alleged aider and abettor’s participation in the breach was

substantial, and that the third party acted with scienter, i.e. knowingly, intentionally

or with reckless indifference.150 In order to establish scienter, the plaintiff must

demonstrate that the alleged aider and abettor had “actual or constructive knowledge

that their conduct was legally improper.”151 While a claim of knowing participation

need not be pled with particularity, the plaintiff must plead factual allegations “from

147
In re Rural Metro Corp., 88 A.3d 54, 80 (Del. Ch. 2014), aff’d sub nom. RBC Capital Mkts.,
LLC v. Jervis, 129 A.3d 816 (Del. 2015) (citing Malpiede v. Townson, 780 A.2d 1075, 1096 (Del.
2001)).
148
Def. Patrick Miles’ Answ. to Pl. NuVasive, Inc.’s Second Am. Compl., D.I. 244.
149
Mesirov v. Enbridge Energy Co., Inc., 2018 WL 4182204, at *13 (Del. Ch. Aug. 29, 2018)
(quoting Malpiede, 780 A.2d at 1097).
150
RBC, 129 A.3d at 862.
151
Id. (quoting Wood v. Baum, 953 A.2d 136, 141 (Del. 2008)).

33
which knowing participation can be reasonably inferred.”152 “The scienter pleading

requirement is among the most difficult in our law to satisfy.”153 That must be the

case because, again, generally one is not responsible for the torts of others. For a

third party to be found liable as an aider and abettor requires an independent tort on

the aider and abettor’s part, which in turn requires the pleading of guilty

participation; that is, scienter.

NuVasive has alleged a scheme whereby Alphatec communicated with Miles

for over a year while Miles owed fiduciary duties to NuVasive. NuVasive also

alleges that Miles purchased $500,000 in Alphatec stock in a private placement

while he was employed by NuVasive.

As an initial matter, the claims involving Miles’s alleged investment in

Alphatec do not state a claim for aiding and abetting breach of fiduciary duty.

Though NuVasive alleges such an investment was a breach of NuVasive’s Code of

Conduct, and that Miles did not disclose such investment to NuVasive, there is no

allegation that Alphatec knew of such policy, and pleading a breach of an internal

policy is not equivalent to pleading a breach of a common law fiduciary duty. Nor

is the fact that Miles made the investment through a third party entity (called

“MOM”) sufficient to plead knowing participation on the part of Alphatec. The

152
Skye Mineral Inv’rs, LLC v. DXS Capital (U.S.) Ltd., 2020 WL 881544, at *29 (Del. Ch. Feb.
24, 2020).
153
Mesirov, 2018 WL 4182204, at *13 (citing RBC, 129 A.3d at 866).

34
SAC avers that Miles used this entity to conceal his investment from NuVasive, and

its theory, as I understand it, is that Alphatec was “in” on this plot by Miles. But

giving NuVasive the benefit of the doubt that Alphatec knew Miles controlled

“MOM,” at most NuVasive pleads that Alphatec facilitated Miles’s investment by

permitting him to make the investment. NuVasive fails to plead that Alphatec knew

of, or played any role in, Miles’s alleged concealment of the investment.154

NuVasive cites no case, nor could it, that stands for an outright prohibition on a

company counting as its investors a fiduciary of a competitor, nor a requirement that

such company alert its competitor in such an instance.155 Moreover, that Miles used

an entity to make an investment is unremarkable, and it is not reasonably conceivable

that this allegation alone gives rise to a reasonable inference of Alphatec’s scienter.

NuVasive also alleges that Miles and Alphatec engaged in a scheme to “steal

NuVasive’s employees, distributors, customers, medical partners, technology and

154
NuVasive pleads that Alphatec aided Miles’s concealment by “not disclosing that Miles was
the beneficial owner of the shares,” but fails to identify a duty requiring Alphatec to do so. See In
re Oracle Corp. Derivative Litig., 2020 WL 3410745, at *12 (Del. Ch. June 22, 2020).
155
NuVasive also attempts to paint Alphatec’s press release of the private placement sale as an
acknowledgement that the private placement’s purpose was to enable Alphatec to compete with
NuVasive. The pertinent part of the statement reads: “We believe the additional capital will allow
us to execute on our plans to expand our surgeon customer base, drive growth through the launch
of our new products . . . as well as support the transformation of our distribution channel.” SAC,
¶ 37. Insofar as one can ascertain the purpose of the private placement sale from the press release,
it appears to simply state that the funds will be used to grow and support Alphatec’s business. To
the extent Alphatec and NuVasive are competitors one can infer that necessarily Alphatec’s growth
could negatively impact NuVasive. But the same could be said for every other company in the
industry. Consequently, the connection between a broad statement of the intended use of the funds
and any harm to NuVasive is too attenuated to give rise to a reasonably conceivable inference of
Alphatec’s scienter that Miles was acting to aid Alphatec’s at NuVasive’s expense.

35
business strategies.”156 But NuVasive’s allegations of such a scheme do not state a

claim upon which relief may be granted. In understanding this analysis it is helpful

to acknowledge that Alphatec is not alleged to have aided and abetted a breach of

Miles’s employment agreement, because I have found that the contractual

restrictions on Miles’s competition and solicitation were unenforceable under

California law.157

NuVasive avers that “[i]mmediately after submitting his resignation, Miles

and Alphatec began raiding NuVasive’s executives, sales force, and other

employees, to obtain their relationships, know-how, and proprietary information.”158

But while this activity might support, for instance, a claim of aiding and abetting

breach of a non-compete (if a viable non-compete existed here), such allegation

cannot support a claim for aiding and abetting breach of fiduciary duty because that

duty ended when Miles left NuVasive, and a breach of duty claim predicated on acts

after Miles’s resignation must necessarily fail.159 For the same reason, NuVasive’s

allegations that Miles and Alphatec have “already begin [sic]”—as of the time of the

filing of the SAC—to use NuVasive’s confidential information does not state a

156
SAC, ¶ 1.
157
NuVasive, Inc. v. Miles, 2019 WL 4010814 (Del. Ch. Aug. 26, 2019).
158
SAC, ¶ 7.
159
See Gen. Video Corp. v. Kertesz, 2008 WL 5247120, at *18 (Del. Ch. Dec. 17, 2008) (holding
that any claims for breach of fiduciary duty “predicated on acts” occurring after the resignation of
the defendant as a director and/or officer of certain entities “must fail”).

36
claim, because nowhere does NuVasive allege that Alphatec used such information

while Miles owed fiduciary duties to NuVasive.160

NuVasive also makes miscellaneous allegations regarding Miles’s non-

disclosure of his relationship with Alphatec.161 But, like the deficiencies with the

investment-related allegations, NuVasive has failed to plead any involvement by

Alphatec in Miles’s non-disclosure of the parties’ relationship, nor an independent

duty of Alphatec to disclose such information.162

Next, NuVasive argues that Miles breached a fiduciary duty aided by Alphatec

when Miles held clandestine conversations with Alphatec—while Miles was a

NuVasive fiduciary—where NuVasive’s confidential information was disclosed.

Such an allegation, if properly pled, could withstand a motion to dismiss.163 But a

review of the SAC reveals that is simply not what is pled, and the necessary pleading

of scienter is absent. The content of only one alleged conversation between Miles

and Alphatec, via email, is recounted in the SAC. NuVasive avers that “[i]n

December 2016, Miles e-mailed Stephen Hochschuler, a key surgeon within the

160
SAC, ¶ 119.
161
Id. ¶¶ 118 (“Miles’ scheme to gain access to NuVasive’s most confidential and proprietary
business information by actively misleading NuVasive as to his relationship and personal
investment with Alphatec constitutes unfair competition.”), 147 (“While employed by NuVasive,
Miles breached [his fiduciary duties to NuVasive] by: . . . (d) actively misleading NuVasive as to
his loyalty to the Company, assuring the Board that he “bleeds purple”; and (e) failing to disclose
his continued contacts with Alphatec.”).
162
See In re Oracle Corp. Derivative Litig., 2020 WL 3410745, at *12 (Del. Ch. June 22, 2020).
163
E.g. Beard Research, Inc. v. Kates, 8 A.3d 573, 603–05 (Del. Ch. 2010), aff’d sub nom. ASDI,
Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010)).

37
spinal surgery field, and a substantial Alphatec shareowner, praising the appointment

of former NuVasive employee Terry Rich as Alphatec’s CEO.”164 Miles assured

Hochshuler that “you will like him as he is a harda[**].”165 Regardless of the

propriety of this email, it is not actionable; it is not reasonably conceivable that

Miles’s personal opinion of the durability of Mr. Rich’s fundament was NuVasive’s

confidential information, or that disclosing that opinion breached a fiduciary duty.

Otherwise, the SAC is silent as to any information Miles may have shared with

Alphatec, while still owing fiduciary duties to NuVasive.

Additionally, NuVasive pleads that while Miles worked for NuVasive, he was

“engaged in surreptitious discussions to become Alphatec’s ‘leader.’”166 But the

allegation that Miles negotiated for employment with Alphatec while at NuVasive—

which is a safe bet considering Miles announced his intent to join Alphatec

contemporaneously with his resignation from NuVasive—does not constitute an

allegation of Alphatec’s support for, or even contemporaneous knowledge of,

Miles’s conversion of NuVasive’s confidential information. NuVasive pleads that

Miles concealed his discussions with Alphatec from NuVasive and “made no effort

to recuse himself from ongoing discussions and disclosures of NuVasive’s most

164
SAC, ¶ 35.
165
Id. I note that the spelling of the surgeon’s last name is inconsistent in the SAC.
166
Id. ¶ 40.

38
confidential business strategies and other information.”167 This is a part of the

pleading alleging the Miles himself breached a fiduciary duty. But in order to

support an aiding and abetting claim, the pled facts would need to support an

inference that Alphatec not only intended to lure Miles away from NuVasive, but

also that it materially supported or encouraged the purloining of NuVasive

confidential information while Miles owed fiduciary duties. 168 No such pleading is

made in the SAC. Miles’s alleged failure to make disclosure and to not recuse

himself from confidential discussions, once he had decided to join Alphatec, does

not give rise to a reasonable inference that Alphatec acted with the requisite scienter

in aiding such a breach. There is no well-pled allegation that in negotiating for

Miles’s employment, Alphatec had “actual or constructive knowledge that [its]

conduct was legally improper.”169

All that remains is an unsupported allegation that Miles “consult[ed] with

Alphatec board members and shareowners about Alphatec-related business.”170

While the gravamen of the aiding and abetting allegations allege transmission of

NuVasive’s confidential information, this allegation centers only on Alphatec’s

167
Id.
168
Agspring Holdco, LLC v. NGP X US Holdings, L.P., 2020 WL 4355555, at *21 (Del. Ch. July
30, 2020) (“[S]ubstantial assistance means that the secondary actor must have provided assistance
or participation in aid of the primary actor’s allegedly unlawful acts.” (quoting Oracle, 2020 WL
3410745, at *11) (internal quotation marks omitted)).
169
RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816, 862 (Del. 2015) (quoting Wood v. Baum, 953
A.2d 136, 141 (Del. 2008)).
170
SAC, ¶ 147.

39
business. Moreover, such an allegation, without more “does not adequately allege

in a non-conclusory fashion that [Alphatec] knowingly participated in a breach of

fiduciary duty.”171 It does not plead scienter on Alphatec’s part.

Therefore, NuVasive has failed to state a claim for aiding and abetting breach

of fiduciary duty and Count VIII must be dismissed.

H. Count IX

Count IX alleges deceptive and unfair trade practices under the Florida

Deceptive and Unfair Trade Practices Act (“FDUTPA”).172 A FDUTPA claim has

three elements: (1) a deceptive act or unfair practice, (2) causation, and (3) actual

damages.173 A deceptive act is one that is “likely to mislead consumers”—NuVasive

does not allege that Alphatec engaged in any such conduct.174 On the other hand, an

unfair practice is one that “offends established public policy and one that is immoral,

unethical, oppressive, unscrupulous or substantially injurious to consumers, (or

competitors or other businessmen).”175 The parties dispute whether Alphatec’s

171
In re Gen. Motors (Hughes) S’holder Litig., 2005 WL 1089021, at *23 (Del. Ch. May 4, 2005),
aff’d, 897 A.2d 162 (Del. 2006).
172
Fla. Stat. § 501.201 et seq.
173
Bookworld Trade, Inc. v. Daughters of St. Paul, Inc., 532 F. Supp. 2d 1350, 1364 (M.D. Fla.
2007) (citing Rollins, Inc. v. Butland, 951 So. 2d 860, 869 (Fla. Dist. Ct. App. 2006)).
174
Davis v. Powertel, Inc., 776 So. 2d 971, 974 (Fla. Dist. Ct. App. 2000) (internal quotation marks
omitted).
175
Nature’s Prod., Inc. v. Natrol, Inc., 990 F. Supp. 2d 1307, 1322 (S.D. Fla. 2013) (quoting
Hanson Hams, Inc. v. HBH Franchise Co., LLC, 2003 WL 22768687, at *2 (S.D. Fla. Nov. 7,
2003)) (internal quotation marks omitted).

40
alleged actions constitute an unfair practice. Whether conduct constitutes an unfair

trade practice is a question of fact.176

NuVasive’s allegations under the FDUTPA concern Absolute Medical (a

Florida-based business). NuVasive alleges that Alphatec knew that Absolute

Medical had a five-year contract to serve as NuVasive’s distributor in certain

counties and hospitals in the State of Florida, and that such contract prohibited

Absolute Medical from distributing products from any of NuVasive’s

competitors.177 NuVasive alleges that Alphatec encouraged Absolute Medical’s

principal, Mr. Soufleris, to form AMS with the understanding that AMS would sign

an exclusive contract with Alphatec.178 The inference intended is that creation of

AMS would allow Absolute Medical to conceal its breach, or avoid the

consequences thereof. NuVasive alleges that Absolute Medical breached its

contracts with NuVasive and that Alphatec induced and encouraged such breach.179

The SAC also alleges that Alphatec induced Absolute Medical’s employees and

sales representatives to breach their restrictive covenants.180 NuVasive alleges that

Alphatec is indemnifying Absolute Medical, Soufleris, Hawley, and Miller for

actions brought by NuVasive.181

176
Siever v. BWGaskets, Inc., 669 F. Supp. 2d 1286, 1293 (M.D. Fla. 2009).
177
SAC, ¶¶ 60, 77.
178
Id. ¶¶ 69–70.
179
Id. ¶ 154.
180
Id.
181
Id. ¶ 78.

41
 Alphatec contends that the actions alleged do not constitute an unfair practice,

citing, in effect, the definition of an unfair practice.182 But given the Plaintiff-

friendly inferences I must draw at this pleading stage, and given that whether a

course of action is an unfair trade practice is a question of fact, it is, at a minimum,

reasonably conceivable that Alphatec acted in a manner that “offends established

public policy and one that is immoral, unethical, oppressive, unscrupulous or

substantially injurious to consumers, (or competitors or other businessmen).”183

The “FDUTPA offers two types of remedies: equitable relief in the form of

declaratory or injunctive relief pursuant to Fla. Stat. 501.211(1) or ‘actual damages’

pursuant to Fla. Stat. 501.211(2).”184 “The measure of actual damages is the

difference in the market value of the product or service in the condition in which it

was delivered and its market value in the condition in which it should have been

delivered according to the contract of the parties.”185 Actual damages do not include

182
Alphatec does argue in its reply brief that “[o]ffers of indemnity . . . are not considered unlawful
inference in the context of business competition,” citing a California case. Alphatec’s Reply Br.,
at 22 (citing PMC, Inc. v. Saban Entm’t, Inc., 52 Cal. Rptr. 2d 877 (Cal. Ct. App. 1996)). The
extent to which a California case would be applicable to resolving a claim under Florida law is
unclear, but regardless, “[n]ormally, this court does not entertain arguments raised for the first time
in a reply brief,” and I do not consider that argument here. Pryor v. IAC/InterActiveCorp, 2012
WL 2046827, at *6 n.71 (Del. Ch. June 7, 2012).
183
Nature’s Prod., Inc. v. Natrol, Inc., 990 F. Supp. 2d 1307, 1322 (S.D. Fla. 2013) (quoting
Hanson Hams, Inc. v. HBH Franchise Co., LLC, 2003 WL 22768687, at *2 (S.D. Fla. Nov. 7,
2003)) (internal quotation marks omitted).
184
Eclipse Med., Inc. v. Am. Hydro-Surgical Instruments, Inc., 262 F. Supp. 2d 1334, 1356 (S.D.
Fla. 1999), aff’d sub nom. Eclipse Med., Inc. v. Am. Hydro-Surgical, 235 F.3d 1344 (11th Cir.
2000).
185
Rollins, Inc. v. Butland, 951 So. 2d 860, 869 (Fla. Dist. Ct. App. 2006) (quoting Rollins, Inc. v.
Heller, 454 So. 2d 580, 585 (Fla. Dist. Ct. App. 1984)).

42
consequential damages for purposes of the FDUTPA.186 Alphatec argues that

NuVasive seeks only lost profits, which are the “quintessential example of

consequential damages.”187

NuVasive denies that it merely seeks lost profits, and also disagrees that lost

profits are categorically unrecoverable actual damages. The SAC states that

“Alphatec’s violations of the FDUTPA have aggrieved NuVasive and caused it to

suffer damages and has incurred (and will continue to incur) considerable costs and

attorneys’ fees.”188 The SAC does not limit the damages sought to lost profits.

Having generally pled damages recoverable under the FDUTPA, NuVasive has

stated a claim under Rule 12(b)(6). But the damages that NuVasive may ultimately

obtain remain, of course, limited by the bounds set by Florida law.

I. Count X

Count X alleges unfair and deceptive trade practices under the North Carolina

Unfair and Deceptive Trade Practices Act (“NCUDTPA”).189 To prevail on a

NCUDTPA claim, the plaintiff must show: (1) the defendant committed an unfair or

deceptive act or practice, (2) the action in question was in or affecting commerce,

186
Id.
187
Hardwick Props., Inc. v. Newbern, 711 So. 2d 35, 40 (Fla. Dist. Ct. App. 1998) (citing Nyquist
v. Randall, 819 F.2d 1014, 1017 (11th Cir. 1987)).
188
SAC, ¶ 156.
189
N.C. Gen. Stat. § 75–1 et seq.

43
and (3) the act proximately caused injury to the plaintiff.190 A practice is unfair

“when it offends established public policy as well as when the practice is immoral,

unethical, oppressive, unscrupulous, or substantially injurious to consumers . . . . [or]

amounts to an inequitable assertion of . . . power or position.”191 “To prove

deception, while ‘it is not necessary . . . to show fraud, bad faith, deliberate or

knowing acts of deception, or actual deception, [a] plaintiff must, nevertheless, show

that the acts complained of possessed the tendency or capacity to mislead, or created

the likelihood of deception.’”192

NuVasive’s NCUDTPA claim alleges that Alphatec solicited and induced

former inoSpine contractor/employees Jones and Kormanis to breach their

obligations to inoSpine by selling Alphatec products and that Alphatec agreed to

indemnify Jones and Kormanis for any lawsuits brought by NuVasive.193

Actions for unfair or deceptive trade practices are distinct from actions for

breach of contract, and “mere breach of contract, even if intentional, is not

sufficiently unfair or deceptive to sustain such an action under [the NCUDTPA].”194

190
Capital Res., LLC v. Chelda, Inc., 735 S.E.2d 203, 212 (N.C. Ct. App. 2012) (citing Kewaunee
Scientific Corp. v. Pegram, 503 S.E.2d 417, 420 (N.C. Ct. App. 1998)).
191
Id. (quoting McInerney v. Pinehurst Area Realty, Inc., 590 S.E.2d 313, 316–17 (N.C. Ct. App.
2004)).
192
Id. (quoting Overstreet v. Brookland, Inc., 279 S.E.2d 1, 7 (N.C. Ct. App. 1981)).
193
SAC, ¶ 161. NuVasive alleges that it is a third party beneficiary of Jones and Kormanis’s
agreements with inoSpine, an allegation that is supported by those agreements, which are exhibits
to the SAC. SAC, Ex. J, § 10; SAC, Ex. K, § 10.
194
Branch Banking & Tr. Co. v. Thompson, 418 S.E.2d 694, 700 (N.C. Ct. App. 1992).

44
Where the alleged unlawful act is breach of contract, “[t]o recover for unfair and

deceptive trade practices, a party must show substantial aggravating circumstances

attending the breach of contract.”195

NuVasive asserts in briefing that “[Alphatec] used Miles’[s] confidential

information to target and induce Messrs. Jones and Kormanis to breach their

contracts with NuVasive and begin selling [Alphatec’s] products” while “agree[ing]

to indemnify them for any actions NuVasive brought against them for such

breaches.”196 The SAC does not actually plead that Alphatec used confidential

information to recruit Jones and Kormanis, what the confidential information was

(other than Jones and Kormanis’s identities) or how Alphatec allegedly used such

information.197

But in addition to use of confidential information for solicitation of Messrs.

Jones and Kormanis, NuVasive also alleges that Alphatec interfered with their non-

competition agreements (of which NuVasive was a third party beneficiary).

NuVasive cites Sandhills Home Care, L.L.C. v. Companion Home Care—

Unimed, Inc.,198 in contending that courts have found similar acts violate the

NCUDTPA. Sandhills held that the contention that the NCUDTPA did “not extend

195
Bob Timberlake Collection, Inc. v. Edwards, 626 S.E.2d 315, 323 (N.C. Ct. App. 2006) (citing
Branch Banking, 418 S.E.2d at 700).
196
NuVasive’s Answ. Br., at 20–21 (citing SAC, ¶¶ 79–97).
197
See SAC, ¶¶ 79–97, 158–165.
198
2016 WL 4164460 (N.C. Super. Ct. Aug. 1, 2016).

45
to claims arising out of an employer interfering with its competitors non-competition

agreements has been squarely rejected by [North Carolina’s] appellate courts.”199

The court denied a motion to dismiss a NCUDTPA claim because the plaintiff had

“adequately alleged that [the plaintiff’s competitor] tortiously interfered with

Plaintiff’s customer relationships and with its former employees’ restrictive

covenants.”200 Notably, Sandhill’s holding was based on a well-pled tortious

interference claim, not a breach of contract claim, and consequently there is no

mention of the required showing of substantial aggravating circumstances that must

attend to a breach of contract in order to state a claim under the NCUDTPA.201

In United Laboratories, Inc. v. Kuykendall,202 the North Carolina Supreme

Court “specifically held that tortious interference with a restrictive covenant by a

competitor stated a claim for unfair and deceptive trade practices under [the

NCUDTPA].”203 In Section II.E., supra, I denied Alphatec’s Motion to Dismiss the

tortious interference claim (Count V) under California law. It remains to be seen

upon the development of a record whether Alphatec’s actions vis-á-vis Jones and

Kormanis are sufficient to amount to tortious interference.204 But at this pleading

199
Id. at *16.
200
Id.
201
Id.
202
370 S.E.2d 375 (N.C. 1988).
203
Roane-Barker v. Se. Hosp. Supply Corp., 392 S.E.2d 663, 670 (N.C. Ct. App. 1990) (citing
United Laboratories, 370 S.E.2d at 389).
204
Id. at 663 (“Because defendant’s acts did amount to tortious interference with contract, as in
Kuykendall, the court did not err in finding an unfair or deceptive trade practice . . . .”).

46
stage, the SAC states a claim for a violation of the NCUDTPA, and, consequently,

Alphatec’s Motion to Dismiss Count X is denied.

III. CONCLUSION

Alphatec’s Motion to Dismiss is GRANTED IN PART and DENIED IN

PART. The parties should submit a form of order consistent with this Memorandum

Opinion.

47