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Yeatts v. Zimmer Biomet Holdings, Inc.

United States District Court, N.D. Indiana, South Bend Division

January 18, 2019



          Michael G. Gotsch, Sr. United States Magistrate Judge

         This case arises from circumstances that put Plaintiff Alejandro Yeatts at the center of an investigation and criminal charges against his employer, Defendant, Zimmer Biomet Holdings, Inc.[1] (“Biomet”) for violations of the Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. § 78dd-1, et seq. Biomet is a global company that designs, manufactures, and sells a variety of medical devices. The criminal charges resulted in part from Biomet's business relationship with Prosintese, a Biomet distributor in Brazil owned by Sergio Galindo, that engaged in the practice of unlawfully bribing doctors. Biomet resolved the FCPA charges against it by entering two Deferred Prosecution Agreements (“DPAs”) with the Department of Justice, Criminal Division, Fraud Section (“DOJ”) in 2012 and 2017.

         In compliance with the 2012 DPA, Biomet instituted a Restricted Parties List (“RPL”) that included the names of individuals and entities with which the company and its affiliates must not do business to avoid violating the FCPA. A cover e-mail accompanying the RPL, which was sent to company employees and Biomet's business partners, explained that the named entities posed risks to Biomet's efforts to comply with anti-corruption and anti-bribery laws, including the FCPA. Yeatts was included on the RPL with a notation stating that he had been “[s]uspended in connection with [a] corruption-related investigation involving Biomet Brazil.” [DE 67-21 at 4]. Almost a year after Biomet published the RPL, Yeatts's employment was terminated and the parties entered a Settlement Agreement.

         In October 2016, Yeatts initiated this lawsuit raising a defamation claim against Biomet for the statements made about him in the RPL and accompanying e-mail.[2] Yeatts has now filed a motion for partial summary judgment seeking resolution of certain elements his defamation claim but acknowledging that genuine disputes of material fact exist as to the falsity of Biomet's statements and the necessary elements of malice and damages. Biomet has filed its own motion for summary judgment arguing that no genuine disputes of material fact exist and that Yeatts failed to establish all the elements necessary to succeed on his defamation claim thus entitling Biomet to judgment as a matter of law. Both motions became ripe on October 23, 2018. This Court held oral argument on December 13, 2018. The undersigned now issues the following opinion and order based upon the consent of the parties and 28 U.S.C. § 636(c).

         I. Relevant Background

         A graduate of the University of Pennsylvania's Wharton School of Finance, Yeatts was employed by Biomet Argentina, SA, a subsidiary of Biomet, from 2005 through September 4, 2015. Initially, he served as Biomet Argentina's Managing Director. In December 2008, Wil Boren, President of Biomet International, Ltd., promoted him to the position of Business Manager for South America. In his new role, Yeatts was the most senior Biomet employee in the region and directly oversaw Biomet's operations in Brazil. Yeatts's responsibilities included implementation of Biomet's compliance policies.

         Until 2008, Biomet International sold medical devices in Brazil under a distribution agreement with Prosintese, Sergio Galindo's company. Prosintese was Biomet's sole distributor of knee replacements, hip replacements, and arthroscopic devices. Biomet terminated Prosintese as its distributor in May 2008 after learning that Galindo had been bribing healthcare providers, conduct prohibited by the FCPA. Yeatts and other Biomet senior leaders were informed of Galindo's illegal bribes. Yeatts understood the gravity of Galindo's misconduct and its potentially damaging effect on Biomet due to his attendance at multiple FCPA training sessions relevant to his compliance duties in the Latin America region.

         Biomet's business in Brazil, however, declined after terminating Prosintese and Galindo because Prosintese continued to own the government registrations for Biomet's products in Brazil and new registrations could not be obtained quickly. Accordingly, Biomet entered into a “Private Instrument for Cancellation of Business Relationship” with Prosintese and Galindo on June 1, 2009 (“the 2009 Agreement”). Through the 2009 Agreement, Biomet and Prosintese deemed their business relationship, which had authorized Prosintese to import, store, promote, distribute, and market Biomet products in Brazil, terminated and cancelled. [DE 67-6 at 4, ¶ 2]. Prosintese and Galindo were also explicitly “prohibited from importing, storing, promoting, distributing or in any way marketing in Brazil the products made by Biomet . . . .” [DE 67-6 at 4, ¶ 3]. However, the 2009 Agreement limited Biomet, Prosintese, and Galindo to interaction related to the use and renewal of Prosintese's product registrations until new registrations could be procured. [DE 67-6 at 7-8, ¶¶ 18-24].

         Among the distributors replacing Prosintese in Brazil was a company named Bio2, which engaged Galindo as a consultant. Accordingly, Biomet President Boren equated Bio2 with Galindo in a PowerPoint presentation shared with Yeatts and others. [DE 67-10 at 3]. Yeatts communicated with Galindo in his capacity as Bio2's consultant about product registrations, but also solicited Galindo's advice related to products, the market, and prices. [DE 67-1 at 9, 76:10-24]. Yeatts's contacts with Galindo included several in-person meetings between 2009 and 2014. [DE 67-1 at 13, 204:14-18]. The agenda for one of those meetings on June 27, 2010, shows that they anticipated discussing the loss of trust and credibility suffered by Biomet as the result of Prosintese's termination and Biomet's resulting departure from the Brazilian market as well as sales, marketing, and pricing. [DE 67-8 at 2]. Yeatts's interactions with Galindo are also detailed in other communications to and from Yeatts between 2009 and 2014 that focused on control of Bio2 and pricing. [DE 67-9; DE 67-12].

         Following an independent investigation by DOJ and its own investigation of FCPA compliance within the company, including Galindo's conduct in Brazil, Biomet entered its first DPA with DOJ on March 26, 2012 (“the 2012 DPA”). [DE 67-16]. The 2012 DPA assessed Biomet $17.28 million in penalties and required Biomet to “engage an independent corporate compliance monitor” (“the Monitor”) to avoid criminal prosecution. [DE 67-16 at 7]. The 2012 DPA defined the Monitor's primary responsibility as assessing and monitoring Biomet's compliance with the DPA “to specifically address and reduce the risk of any recurrence of Biomet's misconduct.” [DE 67-16 at 28]. The DPA also authorized the Monitor to investigate Biomet's compliance program and issue a report recommending improvements to the program. [DE 67-16 at 28-30]. The DPA required Biomet to “adopt all recommendations in the [Monitor's] report.” [DE 67-16 at 30].

         In October 2013, Biomet learned from an anonymous source that Galindo remained inappropriately involved in the operation of Biomet's new Brazilian distributors. In compliance with the 2012 DPA, Biomet informed the Monitor and DOJ about this information, which led to new and separate corruption-related investigations by both Biomet and DOJ. Yeatts was never interviewed as part of the investigations. However, his interactions with Galindo after the 2009 Agreement were considered, especially because of his central role in Biomet's South American operations. In April 2014, Yeatts was suspended from employment because of his interactions with Galindo.

         Upon the Monitor's recommendation, Biomet instituted a Restricted Parties List (“RPL”) on October 24, 2014. [DE 67-3 at 5, 10:5-7; DE 67-18 at 2, ¶ 4]. The Monitor had worked with a Biomet committee to determine which individuals and entities would be included on the RPL. [DE 67-3 at 9-10, 22:22-23:22]. The Monitor would not have approved the RPL without Yeatts's name being included as a restricted party due to concerns about how his conduct did impact, and could have affected, Biomet's compliance obligations. [DE 67-3 at 21, 361:11-14]. Biomet's Chief Compliance Officer, Vice President, and General Counsel, Antje Petersen-Schmalnauer, distributed the RPL by e-mail to Biomet employees and business partners in the relevant region. Petersen-Schmalnauer's cover e-mail stated:

         Biomet Inc. and its worldwide subsidiaries (“Biomet” or the “Company”) are committed to complying with the anti-corruption and anti-bribery laws in all countries in which Biomet operates. In furtherance of that commitment, Biomet has identified several entities that pose significant and unacceptable compliance risks. The Company has placed these entities on a Restricted Parties List. All Biomet employees, agents, third parties and any individual or entity performing services for or on behalf of Biomet, anywhere in the world may not do business with any entity on the Restricted Parties List. [DE 67-21 at 2]. The attached RPL included a listing for “Alejandro Yeatts (Biomet South America Managing Director and Biomet Argentina President), ” which identified the source of his inclusion as “Brazil Investigation” and the description of the issue surrounding Yeatts as “Suspended in connection with corruption-related investigation involving Biomet Brazil.” [DE 67-21 at 4].

         On September 4, 2015, Yeatts was ultimately terminated from Biomet. The terms of Yeatts's departure were defined in a Settlement Agreement. Pursuant to the Settlement Agreement, Biomet paid Yeatts approximately $350, 000 and Yeatts agreed

that he accepts the offer made by [Biomet] and readjusts his claim to the total, single and final amount stated [above] on account of any and all items, and that he waives any other item to which he might be entitled based on the employment relationship held with [Biomet] and/or termination thereof as agreed hereunder. [Yeatts] further states that upon full payment of the offered amount any and all claims or rights which might have been derived from his employment relationship with [Biomet] and/or the termination thereof shall be finally settled. Accordingly, [Yeatts] shall have no claims against [Biomet] and/or any of its related, controlling, controlled or subsidiary entities, associated or continuing companies or entities, or their respective shareholders, directors, manager or officers.

[DE 67-17 at 23-24]. The Settlement Agreement was publicly filed in Argentina on September 4, 2015, and approved by an Argentinian court on September 30, ...

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