The Franchise Memorandum

A federal court in Missouri recently denied a medical device manufacturer’s motion for summary judgment on its distributor’s counterclaims for breach of contract and declaratory relief, finding factual disputes remained as to nearly every significant issue. MWG Enters., LLC v. ETS Wound Care, LLC, 2022 WL 503727 (E.D. Mo. Feb. 18, 2022). The parties’ distribution agreement gave MWG the exclusive right to sell ETS’s newly‑created medical device in six states and to the entire federal government. Near the end of the agreement’s first one-year term, ETS terminated the agreement on the basis of several breaches it held to be incurable, including MWG’s failure to use best efforts to sell the device, failure to maintain and deliver proper records, false sales reporting, and sales outside of the contract. MWG sued for breach, and ETS counterclaimed for breach of contract and tortious interference. ETS moved for summary judgment on all of MWG’s claims and two of its own claims, asserting that there was no dispute as to the facts of the alleged breaches.

The court disagreed, questioning ETS’s estimates of MWG’s sales under and outside of the contract. The issue of sales outside the contract was further subject to a dispute over the interpretation of the contractual term “medical facilities.” The sales estimates were also fundamental to ETS’s allegation that MWG failed to use its best efforts—a fact-intensive issue in any event—making summary judgment inappropriate as to that issue as well. Next, the court held that the plain language of the agreement did not require sales information to be shared. Further, the court held that ETS failed to plead that MWG intentionally provided it with false sales information, so that the issue was not properly before the court. Because of the many factual disputes, the court therefore denied summary judgment.