United States District Court, D. Nevada
ORDER GRANTING MOTION TO DISMISS (ECF NO.
P. GORDON, UNITED STATES DISTRICT JUDGE
Axis Spine NV, LLC sues defendant Xtant Medical Holdings,
Inc. for breach of contract, breach of the covenant of good
faith and fair dealing, and intentional interference with
prospective economic advantage. According to Axis, the
parties entered into a contractual relationship for Axis to
distribute Xtant's medical devices. Axis alleges Xtant
breached the agreement by failing to pay for Axis's
services. Axis also alleges Xtant interfered with Axis's
relationship with its own sales representatives, who are
independent contractors, by failing to pay Axis under the
moves to dismiss all claims arguing that the statute of
frauds bars Axis's contract-based claims because Axis
relies on an unsigned letter of intent. Xtant argues the
intentional interference claim is barred by the economic loss
doctrine or the gist of the action doctrine, and is
inadequately pleaded because there is no allegation Xtant
intended to interfere with the relationship or to harm Axis.
I grant the motion, with leave to amend.
to the amended complaint, from 2006 to 2015, Axis distributed
medical devices for Xtant's predecessor, X-Spine Systems,
Inc. ECF No. 6 at 2. In August 2015, X-Spine was acquired by
Bacterin International Holdings, Inc. and renamed Xtant.
2015, Xtant representatives contacted Axis about expanding
the relationship between the two companies. Id. at
3. The parties exchanged drafts of a letter of intent (LOI)
from late 2015 through April 2016. Id. On April 9,
2016, Xtant's chief executive officer, Daniel Goldberger,
sent the final draft of the LOI to Axis and requested
confirmation so he could submit it to Xtant's board of
directors for approval. Id. Axis accepted the terms
and continued to distribute Xtant's product. Id.
was for a three-year term and provided that Xtant would pay
Axis $250, 000 at signing, and $75, 000 at each of the first
and second anniversaries. Id. It also provided for
stock options and for Axis to earn commissions to be
calculated and paid monthly. Id. at 3-4.
board conditioned approval of the LOI on Xtant conducting due
diligence on Axis. Id. at 4. While Xtant was
conducting due diligence, it paid the first commission
payment on May 17, 2016. Id. During the summer of
2016, Xtant conducted an inventory count and hired an outside
company to perform a financial audit of Axis. Id.
Through that audit, Xtant gained access to internal Axis
information, including information about Axis's sales
representatives. Id. at 4-5. In October 2016, the
parties reconfirmed their agreement via a final version of
the LOI. Id. at 5.
alleges that in reliance on the parties' agreement, it
restructured its business to better handle Xtant's
business. Id. According to Axis, it performed under
the agreement, but Xtant experienced cash flow problems
resulting in late payments. Id.
March 2017, Xtant hired a new chief executive officer, Carl
O'Connell. Id. O'Connell reaffirmed the
parties' agreement the same month he was hired.
Id. Xtant made a $50, 000 payment on April 1, but
Xtant still owed Axis a substantial balance. Id.
restructuring officer, David Barker, subsequently contacted
Axis about renegotiating the parties' contract.
Id. At a June 21 meeting, Barker told Axis that
Xtant would not agree to the LOI, would not issue the stock
options, and would not pay the commission rates set forth in
the LOI. Id. Since then, Xtant has not paid pursuant
to the LOI's terms. Id. at 6. Axis alleges Xtant
owes nearly $1 million in past due payments. Id.
Axis also alleges that as a result of Xtant failing to pay
what is owed under the LOI, Axis has not been able to fulfill
its obligations to its own sales representatives, who are
independent contractors. Id. Based on these
allegations, Axis asserts claims for breach of contract,
breach of the covenant of good faith and fair dealing, and
tortious interference with prospective economic advantage.
considering a motion to dismiss, "all well-pleaded
allegations of material fact are taken as true and construed
in a light most favorable to the non-moving party."
Wyler Summit P'ship v. Turner Broad. Sys., Inc.,
135 F.3d 658, 661 (9th Cir. 1998). However, I do not
necessarily assume the truth of legal conclusions merely
because they are cast in the form of factual allegations in
the complaint. See Clegg v. Cult Awareness Network,
18 F.3d 752, 754-55 (9th Cir. 1994). A plaintiff must make
sufficient factual allegations to establish a plausible
entitlement to relief. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 556 (2007). Such allegations must amount to
"more than labels and conclusions, [or] a formulaic
recitation of the elements of a cause of action."
Id. at 555.
I may not consider any material beyond the complaint when
ruling on a Rule 12(b)(6) motion to dismiss without
converting it to one for summary judgment. Lee v. City of
Los Angeles,250 F.3d 668, 688 (9th Cir. 2001);
Fed.R.Civ.P. 12(d). However, I may consider a document that
is not attached to the complaint if the document's
"authenticity ... is not contested" ...