United States District Court, M.D. Florida, Jacksonville Division
FINDINGS OF FACT AND CONCLUSIONS OF LAW
TIMOTHY J. CORRIGAN UNITED STATES DISTRICT JUDGE
February 7, 2013, Plaintiff Hollister Incorporated filed this
case against Defendants Zassi Holdings, Inc. and Peter von
Dyck, asserting a claim against Zassi for breach of the
warranty of good and marketable title contained in an Asset
Purchase Agreement (“APA”) entered into by
Hollister and Zassi (Count I), and a claim against Zassi and
von Dyck for fraudulent inducement (Count II). (Doc. 1).
Hollister alleged that during negotiations in connection with
the APA, Defendants failed to disclose the material fact that
Zassi had released future patent claims against ConvaTec,
Inc. in a settlement agreement that Zassi had entered into
with ConvaTec (“ConvaTec Agreement”).
August 6, 2013, the Court bifurcated the liability issues
from damages for trial purposes. (Doc. 26). Liability was
tried to a jury on February 4-7, 2014 before the Honorable
Paul A. Magnuson. (Docs. 57, 60, 64, 72). On February 10,
2014, the jury rendered a verdict for Hollister on liability
on both counts, finding, among other things, that Zassi and
von Dyck had defrauded Hollister by failing to disclose in
the sale negotiations that they had released certain patent
claims against ConvaTec relating to bowel management systems
(“BMS”). (Doc. 77). After Zassi's attorneys
withdrew, and Zassi failed to retain new counsel, Hollister
filed a Motion for Default Against Zassi (Doc. 147), and a
clerk's default was entered against Zassi on September 4,
2015. (Docs. 149, 150). Von Dyck has continued
to defend the case.
parties waived a jury trial on damages, and the Court
conducted a damages bench trial on December 7-9, 2015. (Docs.
177-79). On March 30, 2016, the Court issued its Findings of
Fact and Conclusions of Law. (Doc. 197). The Court found that
Hollister proved that ConvaTec's Flexi-Seal fecal
management system (“FMS”) products literally
infringed Hollister's U.S. Pat. No. 7, 722, 583
(“‘583 patent”) but that Hollister had
“failed to prove by a preponderance of the evidence the
amount of reasonable royalty damages” that Hollister
would have recovered in its unsuccessful 2010 patent
infringement lawsuit against ConvaTec but for Defendants'
fraudulent concealment of the ConvaTec release. (Doc. 197 at
37). Accordingly, the Court entered a Final Judgment awarding
Hollister no damages. (Doc. 198). The Court denied
Hollister's Post-Trial Motion Pursuant to Fed.R.Civ.P.
52(b) and 59. (Doc. 205).
appealed, and on October 25, 2018, the Eleventh Circuit
reversed this Court's decision and remanded the case for
a new trial on damages consistent with its opinion. (Doc. 221
at 22); Hollister Inc. v. Zassi Holdings, Inc., 752
Fed.Appx. 888, 897 (11th Cir. 2018). The Eleventh Circuit
noted two reversible errors. First, under Florida law, the
Court should have calculated damages as of the time of
Defendants' fraud in 2006, rather than the date of
Hollister's unsuccessful infringement action against
ConvaTec in 2010. Id. at 893-95. In addition, the
Court erred in finding that Hollister failed to prove it was
entitled to any damages. Id. at 895-97.
the Eleventh Circuit's mandate, the Court held a bench
trial on December 17-18, 2019 to determine Hollister's
damages. (Docs. 247, 248). The Court received post-trial
submissions from the parties (Docs. 254, 255) and now makes
its findings of fact and conclusions of law.
law governs the damages award. Under Florida law, the burden
of proving damages rests solely with the plaintiff. Asset
Mgmt. Holdings, LLC v. Assets Recovery Ctr. Invs., LLC,
238 So.3d 908, 912 (Fla. Dist. Ct. App. 2018). At trial,
Hollister relied on a benefit of the bargain theory of
damages under Florida law. (Tr. II at 76:14-21). “Under
a benefit of the bargain theory, damages are measured as
‘the difference between the actual value of the
property and its value had the alleged facts regarding it
been true.'” Hollister, 752 Fed.Appx. at
893 (quoting Kind v. Gittman, 889 So.2d 87, 90 (Fla.
Dist. Ct. App. 2004) (internal quotation marks omitted)).
This measure of damages requires Hollister to prove the
actual value of the property at the time of purchase.
Id. The key time frame for measuring damages is
“the time of the fraudulent representation.”
Totale, Inc. v. Smith, 877 So.2d 813, 815 (Fla.
Dist. Ct. App. 2004). Applying the benefit of the bargain
theory, Hollister's damages are the difference between
what Hollister paid Zassi in 2006-$35 million-and what it
would have paid had Zassi disclosed its release of
infringement claims against ConvaTec. (Pl. Ex. 6).
Eleventh Circuit noted, there is not only one way to prove
damages in this case, nor is there only one correct damages
amount. Under Florida law, “a trial judge is vested
with reasonable discretion in awarding damages.”
E.F.K. Collins Corp. v. S.M.M.G., Inc., 464 So.2d
214, 215 (Fla. Dist. Ct. App. 1985). Generally, a damages
award in a nonjury trial will be sustained on appeal if
supported by a reasonable evidentiary basis. See Pearce
& Pearce, Inc. v. Kroh Bros. Dev. Co., 474 So.2d 369
(Fla. Dist. Ct. App. 1985).
ordering a new damages trial, the Eleventh Circuit explained
that “[t]here may be several ways for Hollister to
establish the value of a reasonable royalty at the time of
the fraud.” Hollister, 752 Fed.Appx. at 897.
Hollister potentially could use the $5.9 million that
ConvaTec paid Zassi for the release in their 2005 settlement
agreement. After all, ConvaTec acquired the license in the
settlement agreement only about a year before the fraudulent
transaction. In the settlement agreement, though, Zassi also
released ConvaTec from claims related to ConvaTec's use
of Zassi's technology for other products. To use this
agreement as a yardstick, Hollister probably would need to
introduce some evidence showing what portion of the
settlement payment represented the amount that ConvaTec paid
to acquire the license for the bowel management system
technology as opposed to the other technology. As an
alternative, Hollister potentially could rely on a report
from its investment banker written at the time of the
transaction that valued the intellectual property Hollister
acquired from Zassi at $8.7 million. To prove its damages in
this way, Hollister would need additional evidence showing
how much the value of the intellectual property portfolio
declined due to ConvaTec's license.
Id. However, the Eleventh Circuit left open the
possibility that Hollister might rely on another method,
provided it was consistent with Florida law. Id.
the Eleventh Circuit opinion and the evidence adduced at
trial, the Court has essentially been presented with three
approaches to measure Hollister's damages. First, there is
the $5.9 million that ConvaTec paid Zassi in 2005 under the
ConvaTec Agreement. Earlier, in 1999, ConvaTec and Zassi had
entered into an agreement under which ConavTec funded
Zassi's development of continent ostomy port
(“COP”) technology. (Pl. Ex. 87 at 10). Under
that agreement, ConvaTec agreed to pay Zassi certain amounts
upon reaching milestones in the development of the COP;
ultimately, ConvaTec paid Zassi $3.3 million in funding
associated with the development of the COP. (Pl. Ex. 87 at
15:13-18). Pellegrino Pionati, ConvaTec's vice president
of global marketing, research and development in 2005,
testified that during the course of ConvaTec and Zassi's
relationship, Zassi performed human clinical trials in South
Korea without informing ConvaTec. The clinical trials resulted
in a significant adverse event that required the companies to
report it to the FDA, resulting in additional-arguably
unnecessary-work. (Pl. Ex. 87 at 12:8-15:12; Tr. II at
this period, Zassi informed ConvaTec that it was developing a
BMS product, and the companies shared information regarding
the BMS market and its opportunities. They had finalized an
agreement regarding development and distribution of
Zassi's BMS product in 2002, but Zassi then told ConvaTec
that it had decided to go a different way. Zassi was first to
the market with its BMS product in 2003, and a year and a
half later, ConvaTec introduced its product, the Flexi-Seal
FMS. Zassi felt that ConvaTec had misused Zassi's trade
secrets in creating the Flexi-Seal. (Tr. II at 95:12-22).
the deterioration of their relationship, ConvaTec and Zassi
underwent mediation to resolve their disputes, which resulted
in the ConvaTec Agreement. ConvaTec paid Zassi $5.9 ...