Mortier v. LivaNova USA, Inc.

Background

Todd J. Mortier co-founded Caisson Interventional, LLC, which was developing a minimally invasive mitral-valve replacement system. LivaNova invested in and later acquired Caisson. Under the acquisition agreements, Caisson’s members sold their ownership interests to LivaNova, and option holders received payments for terminating their options. The agreements provided for additional payments tied to events including regulatory approval and commercial sales.

The complaint alleged that LivaNova stopped pursuing development, regulatory approval, and commercialization of the device, delaying or preventing the events that would trigger additional payments. Mortier asserted breach-of-contract, breach-of-the-covenant-of-good-faith-and-fair-dealing, and alternative unjust-enrichment claims. He brought the action for himself and on behalf of former Caisson members and option holders. The opinion also notes that Mortier agreed to forgo claims on behalf of former Caisson employees seeking retention-payment relief.

LivaNova’s Motion

LivaNova moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). It argued that Mortier was not the real party in interest—a person who, under the applicable law, possesses the right being enforced—because the former members and option holders had not assigned their claims to him. LivaNova alternatively sought an order requiring the people Mortier represented to be substituted as parties.

The court applied the Rule 12(c) standard used for a motion to dismiss for failure to state a claim. It accepted the complaint’s factual allegations as true and drew reasonable inferences in Mortier’s favor. Because the case was based on diversity of citizenship, the court applied Delaware law to the substantive question of who could enforce the contractual rights.

Contractual Authority

The court rejected LivaNova’s argument that an express assignment of claims was required. Federal Rule of Civil Procedure 17 identifies several ways a person may sue as the real party in interest and does not make assignment the exclusive method.

The court held that the plain language of the Unit Purchase Agreement gave Mortier broad authority. The agreement appointed him irrevocably as the members’ attorney-in-fact and agent, authorized him to act on their behalf in litigation or arbitration involving the agreement, permitted him to transact litigation matters and engage counsel, and allowed him to take actions he deemed necessary or appropriate on their behalf. The option-termination agreements gave him the same authority regarding the option holders. The court found no language excluding the ability to start a lawsuit.

The court also relied on related provisions requiring indemnification of Mortier for liabilities and expenses arising from enforcement of the agreements and providing attorney-fee recovery to a prevailing party in an enforcement action. Read together, those provisions showed that the parties contemplated that the Member Representative could enforce the agreements in court.

Real Party in Interest

The court recognized that an agent who holds only a power of attorney to bring suit ordinarily is a nominal party, not a real party in interest. But it found that Mortier’s appointment gave him substantially broader authority and was expressly “coupled with an interest” and irrevocable. In the court’s view, the agreement vested Mortier with an interest in the rights he sought to enforce, making him a real party in interest under Delaware law.

The court considered Delaware cases involving stockholder representatives and found them consistent with allowing a contractual representative to sue in the representative’s own name for other members of the represented group.

Effect on Represented Persons and Disposition

The court held that Rule 17’s purposes were satisfied because the agreements provided that the former members and option holders had authorized Mortier to act for them, ratified his actions, and would be bound by the result. The court concluded that no additional order was necessary. It therefore denied Defendant’s Motion for Judgment on the Pleadings or in the Alternative to Substitute Real Parties in Interest.