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OBP Corporation v. Welch Allyn, Inc. (Lawyers Weekly No. 12-156-16)

COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT CIVIL ACTION NO. 2016-01496-BLS1 OBP CORPORATION d/b/a OBP MEDICAL vs. WELCH ALLYN, INC. MEMORANDUM OF DECISION AND ORDER ON WELCH ALLYN, INC.’S MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Defendant, Welch Allyn, Inc., allegedly misappropriated confidential business information belonging to plaintiff OBP Corporation. The confidential business information was a list of OBP’s customer names, along with confidential sales information. Welch Allyn obtained the confidential information from Owens & Minor, Inc., OBP’s primary distributor. Welch Allyn allegedly used the confidential business information to craft a marketing plan intended to steal OBP’s customers and to eliminate OBP as a competitor in the market for a selfilluminating, disposable vaginal speculum. Welch Allyn now moves to dismiss OBP’s First Amended Complaint (Amended Complaint) pursuant to Mass. Civ. P. 12(b)(6). For the reasons that follow, the motion is DENIED. BACKGROUND The following comes from the allegations, taken as true, in OBP’s Amended Complaint. OBP sells a variety of medical examination instruments to hospitals and physician offices, including a self-illuminating disposable vaginal speculum. It generates its customers through direct marketing and sales efforts, and sells its products by entering into pricing agreements directly with individual customers and with group purchasing organizations (GPOs) acting on behalf of hospital systems and/or physician’s offices. The individual customer agreements identify OBP’s customers and the prices OBP negotiated directly with them. Similarly, the GPO agreements identify the prices OBP negotiated with the GPOs and include provisions indicating that the terms of the agreement are confidential. Since June 2011, OBP has used Owens & Minor to fulfill orders from OBP’s customers. In connection with this service, Owens & Minor stocks its distribution centers with OBP products. Owens & Minor orders products directly from OBP at an agreed upon unit price based on demand from OBP’s customers. When Owens & Minor fulfills customer orders, it charges customers according to the terms set forth in OBP’s pricing agreements with the customers. OBP reimburses Owens & Minor through “rebates” for any difference between that price and the fixed price Owens & Minor pays to OBP. As part of this process, OBP provides copies of the relevant pricing agreements to Owens & Minor. In return for its fulfillment services, OBP pays Owens & Minor an administrative fee. Owens & Minor operates pursuant to a Code of Honor, made publicly available on its website, in which it states that the customer and sales information of suppliers like OBP will not be disclosed to third parties and will only be used for purposes of effectuating the parties’ business relationship. The Code of Honor specifically provides that: [a]ll Company records and information related to the Company, its customers, suppliers and teammates is […]

Welch v. Barach, et al. (Lawyers Weekly No. 11-097-13)

NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us 12‑P‑1308 Appeals Court JOHN F. WELCH, JR.[1] vs. DANIEL J. BARACH & others.[2] No. 12‑P‑1308. Suffolk. March 7, 2013. ‑ August 8, 2013. Present: Berry, Sikora, & Milkey, JJ. Uniform Securities Act. Consumer Protection Act, Unfair or deceptive act. Words, “Material fact.” Civil action commenced in the Superior Court Department on May 1, 2009. The case was heard by Christine M. Roach, J., on motions for summary judgment. Jeffrey S. Robbins for the plaintiff. Kevin J. O’Connor for the defendants. SIKORA, J. This appeal arises from a Superior Court action for private civil relief authorized by the Uniform Securities Act codified in Massachusetts as G. L. c. 110A, §§ 101-417 (securities act). In relevant part, the securities act enables the purchaser of a security to sue its offeror or seller for restitutional damages, reasonable attorney’s fees, and costs, if that offeror or seller has omitted a “material fact” from the information communicated to the purchaser in the explanation or inducement of the purchase. G. L. c. 110A, § 410(a)(2). The plaintiff, John F. Welch, Jr., appeals from summary judgment entered against his claims of liability for omission of a material fact and for relief under (1) the securities act and (2) the consumer protection act, G. L. c. 93A, § 9. Welch contends that defendant Daniel J. Barach, a hedge fund operator, omitted a material fact from a memorandum describing the fund and his qualifications as its manager: Barach’s involvement in litigation several years before Welch’s investment in the fund. Welch maintains that the omission affected his decision in 2003 to invest. During the period of early 2007 through 2008, the fund declined and then liquidated. Welch lost most of his investment of $ 7 million. For the following reasons, we affirm the judgment. Background. The following facts emerge from the summary judgment record as undisputed. 1. Parties. In 1997, Barach organized the hedge fund under the name of MLT Capital, L.P. (MLT Capital). He created MLT Management, LLC, as the sole general partner of MLT Capital, and MLT Advisors Corp. as its investment advisor. It is undisputed that Barach alone (1) controlled, managed, and directed all of MLT Capital’s activities; (2) made all investment decisions; and (3) solicited investors. He pooled investments for the purpose of trading in domestic and foreign securities. Barach built the […]