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Kahanovitz v. Electro-Biology, Inc.

Superior Court of New Jersey, Appellate Division

July 30, 2013

NEIL KAHANOVITZ, M.D., Plaintiff-Respondent,
ELECTRO-BIOLOGY, INC., and EBI, LLC, Defendants-Appellants, and BIOMET, INC., Defendant.


Argued April 30, 2013.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-8-09.

E. Evans Wohlforth, Jr., argued the cause for appellant (Gibbons P.C., attorneys; Mr. Wohlforth and Jonathan D. Klein, on the briefs).

G. Martin Meyers argued the cause for respondent.

Before Judges Alvarez, Waugh and St. John.


Defendants Electro-Biology, Inc. and EBI, LLC (collectively EBI)[1] appeal a jury's award of $2, 687, 500 in damages to plaintiff Neil Kahanovitz, M.D. EBI also appeals the denial of its motion for judgment notwithstanding the verdict (JNOV) or a new trial. We affirm.

Kahanovitz previously appealed a grant of summary judgment to EBI and prevailed. See Kahanovitz v. Electro-Biology, Inc., No. A-3635-09 (App. Div. Jan. 27, 2011) (slip op. at 25). We affirmed the dismissal of plaintiff's other claims and remanded for a "fuller exploration of the facts through discovery" on plaintiff's breach of contract claim. Id . at 23-25. Thereafter, both parties moved for summary judgment unsuccessfully, and the proceedings concluded with the trial and verdict now in dispute.

We glean the following facts from the trial record and submissions of the parties. Kahanovitz and EBI entered into a series of agreements, starting in 1992, including a "Consulting Agreement" in January 1998, and an "Amendment of Consulting Agreement" in November 1998. In 2004 the parties entered into a contract, now in dispute, titled "Assignment and Second Amendment of Consulting Agreement" (2004 Agreement) incorporating the prior agreements from 1998. EBI executives James Pastena, then CEO, and Dan Page, a former Senior Vice President of Research, negotiated the 2004 Agreement which Page then signed on behalf of EBI. Marcial Perez, then Senior Vice President of Sales Marketing and Business Development, advised Pastena on the matter. John Blumers, EBI's Vice President and Division General Counsel, drafted the 2004 Agreement.

While these agreements were in effect, Kahanovitz served as an advisor to EBI's CEO. However, Pastena left his position at EBI in 2005, at which time EBI's leadership changed hands. Thereafter, around 2006 or 2007, EBI's new management sold the company to a venture capital firm.

During the trial, portions of Page's deposition were read aloud to the jury by both parties' counsel. Pastena and Perez testified on Kahanovitz's behalf while Blumers testified for EBI. Both Pastena and Perez had filed suit against EBI after their discharges from employment in 2005 and 2006 respectively, but their claims were amicably settled. Page's employment with EBI also ended before November 30, 2008.

At trial, EBI contended that Section 4 of the 2004 Agreement, which states that "This Agreement shall terminate on November 30, 2008 unless sooner terminated, " fixed the termination date.

The disputed provision of the 2004 Agreement Section 3(a)(v) states:

Notwithstanding the above during the Term of this Agreement and for so long as Kahanovitz is performing Services within the Agreement Field EBI shall guarantee Kahanovitz a minimum annual royalty payment equal to two hundred and fifty thousand dollars ($25000000) per fiscal year Said minimum royalty shall be paid in four equal quarterly installments Minimum quarterly payments will be reconciled with actual royalties earned at the end of each fiscal year
[(Emphasis added)]

The issue is whether the annual $250000 payment was due even after the November 30 2008 date referenced in the 2004 Agreement so long as Kahanovitz continued to practice as an orthopedic surgeon

Section 2 entitled "Duties and Responsibilities" replaced Section 3 of the earlier Consulting Agreement with "2 Duties and Responsibilities of Kahanovitz" It delineates the following obligations:

During the term of this Agreement Kahanovitz shall from time to time at the request of EBI make himself available to provide consulting services in connection with EBI's spinal products Services shall include but not be limited to the following:
• Provide advice and guidance with respect to the development and expansion of EBI's spine product line and related instrumentation;
• Evaluate new products and related instrumentation;
• Provide advice and guidance on research projects publications and clinical studies;
• Participate in EBI's quarterly New Product Steering Committee Meetings;
• Participate in EBI's Spine Core Panel;
• Consult with Senior Management on trends in spine surgery and reimbursement; and
• Publish and present at various meetings conferences trade shows and journals
The parties understand and agree that in performing these services Kahanovitz may be required to travel an average of three to four days each calendar month The parties shall schedule travel so that it will not unreasonably interfere with Kahanovitz's medical practice
For purposes of this Agreement all services offered pursuant to this Section 3 shall constitute the "Agreement Field" Kahanovitz shall devote a reasonable amount of his business time attention and best efforts in carrying out his obligations under this Agreement
Kahanovitz shall keep detailed records of all services provided pursuant to this Section 3 and submit thereof to EBI at least quarterly
[(Emphasis added)]

Section 13 a non-competition clause from the January 1998 agreement stated the following:

As part of the consideration for EBI's retaining Kahanovitz and in order to further protect EBI's Confidential Information Kahanovitz shall not during the term of this Agreement and for a period of six (6) months immediately following the termination of this Agreement, directly or indirectly, on his own behalf or on behalf of any person, corporation, partnership or other entity other than EBI, whether as an agent, employee, consultant or in any other capacity, engage in the design, development, within the Agreement Field. The restriction contained herein shall apply throughout the United States, Western Europe and Japan.

The January 1998 Agreement also contained a "zipper clause": "This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and shall be deemed to ...

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