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Vitale v. Mimedx Group Inc.

United States District Court, D. South Carolina, Columbia Division

August 6, 2019

JON MICHAEL VITALE, Plaintiff,
v.
MIMEDX GROUP, INC.; PARKER H. PETIT; and WILLIAM C. TAYLOR, Defendants.

          ORDER

          R. Bryan Harwell Chief United States District Judge.

         This action is before the Court on Defendant MiMedx Group, Inc's (“MiMedx”) motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). ECF No. 21. MiMedx's motion to dismiss seeks dismissal of Plaintiff Jon Michael Vitale's (“Vitale”) complaint in its entirety as to MiMedx for failure to state a claim. Id. For the reasons stated below, the Court will deny MiMedx's motion to dismiss.[1]

         Factual and Procedural Background

         This action arises from Vitale's termination from employment with MiMedx. See generally ECF No. 1-1 at 3-15 (“Compl.”). Vitale is a resident of Richland County, South Carolina. Id. ¶ 1. MiMedx is a company registered in Florida and headquartered in Marietta, Georgia. Id. ¶ 2. MiMedx is in the business of selling “amniotic tissue and tissue grafts” also know as “‘substitute skin'” throughout the United States, including South Carolina. Id. Parker H. Petit (“Petit”), who is or was the Chief Executive Officer and Chairman of the Board of MiMedx, and William C. Taylor (“Taylor”), who is or was the President, Chief Operating Officer, and a Member of the Board of MiMedx, are both residents of Georgia. Id. ¶¶ 3-4.

         On January 27, 2014, MiMedx hired Vitale as an account executive. Id. ¶ 9. In that position, Vitale was responsible for placing, billing, and selling MiMedx products to healthcare providers, including Dorn Veterans Affairs Hospital (“Dorn”) in Columbia, South Carolina. Id. ¶¶ 10, 20-21. Vitale was successful in his sales role with MiMedx prior to his termination, consistently meeting or exceeding expectations, and had only one disciplinary incident during that time, which is unrelated to the events at issue here. Id. ¶¶ 13-17. Vitale was paid through a combination of base pay and commissions. Id. ¶ 11.

         The allegations at the root of this case concern channel stuffing. “Channel stuffing, put simply, occurs when MiMedx sends a larger quantity of product than purchased to a purchaser to create the appearance of higher level sales to investors.” Id. ¶ 18 Vitale alleges MiMedx is currently under investigation for, and subject to lawsuits based upon, channel stuffing. Id. Vitale further avers MiMedx is subject to a lawsuit by employees retaliated against for reporting channel stuffing. Id. ¶ 19 .

         One place where Vitale alleges MiMedx channel stuffed is Dorn. Id. ¶ 22. In about May, 2016, Dorn's new Assistant Chief of Prosthetics informed Vitale Dorn could no longer hold MiMedx products on consignment (the allegedly “channel stuffed” items) without a consignment agreement; at the time, Dorn was holding approximately $400, 000 worth of said product. Id. ¶¶ 23-26.

         Vitale sought MiMedx's guidance regarding what to do with the product. Id. ¶ 27. MiMedx initially said it did not care, but then told Vitale he could not ship the product back to MiMedx until further notice. Id. ¶ 28. Vitale claims MiMedx did not want him to return the product to MiMedx because it would have counted against MiMedx's quarterly earnings. Id. ¶ 29. Vitale further alleges the Dorn Assistant Chief of Prosthetic's stance that Dorn could no longer hold MiMedx items on consignment would have affected other MiMedx accounts, such that if MiMedx had not channel stuffed, it would have had to disclose to investors it had missed its upper end sales guidance for the quarter. Id. Vitale avers MiMedx first told him to “‘hide'” the product at Dorn; Vitale refused. Id. ¶ 30. MiMedx next directed Vitale to store the product at his home, which was inappropriate because as a medical-grade product, it should be stored in a controlled environment. Id. ¶¶ 30-31. In November, 2016, MiMedx directed Vitale to ship the product back to it, and told Vitale he could use MiMedx's FedEx account for the shipping; shipping by FedEx was MiMedx's preference, but not a requirement Id. ¶¶ 32-33, 36. During the course of his employment with MiMedx, Vitale had frequently used UPS, which was more convenient to his home, to ship items to MiMedx, had never had any issues with delivery, and was never told not to use UPS. Id. ¶¶ 34-35.

         Vitale states he shipped the product to MiMedx via UPS on November 30, 2016. Id. ¶¶ 37. MiMedx claimed it had not received the shipment, and asked Vitale to file a loss of shipment claim against the delivery insurance. Id. ¶ 40. Vitale claims MiMedx's request to file a loss of shipment claim was in lieu of MiMedx properly reporting the returned product as a lost sale. Id.

         Vitale investigated the status of the delivery, and determined it had been delivered to MiMedx and signed for by a MiMedx employee on December 2, 2016. Id. ¶¶ 38, 42. Vitale then asked MiMedx about the package's status via email, telephone, and text message, and received responses including that MiMedx did not receive packages on the loading dock, which it had done throughout Vitale's tenure, and that the employee who had signed for the package did not work for MiMedx, despite the employee signing for both earlier and later sent packages. Id. ¶¶ 42-45. On December 13, 2016, while emailing regarding the purportedly lost package and the directive to file a loss of shipment claim, Vitale received a call from a higher-up employee at MiMedx, who informed him MiMedx's Executive Vice President of Compliance “‘said if you send one more f***ing email you will be fired.'” Following MiMedx's directions, on December 15, 2016, Vitale filed a lost product claim with UPS for product valued at approximately $352, 000. Id. ¶ 47. On the claim form, Vitale indicated “‘I am the shipper & I believe Mi[M]edx is attempting insurance fraud.'” Id.[2]

         On December 20, 2016, MiMedx's Vice President of Sales called Vitale and asked him about whether he was employed by, promoted the products of, or received compensation from, a competitor while working for MiMedx, or if he knew of other MiMedx employees who promoted competitor's products. Id. ¶¶ 48(a)-(c). Vitale truthfully said no to these questions as to himself, and stated he would not discuss other employees. Id. Vitale was also asked if he knew of a company which provides medical-grade gauze and tape to low-income patients; Vitale did not fully answer the question because he feared MiMedx was creating pretext to fire him after he raised concerns about insurance and investor fraud. Id. ¶ 48(d). Vitale was not disciplined or counseled following the phone call. Id. ¶ 49.

         On December 29, 2016, Vitale met with an attorney concerning his worry that MiMedx was building pretext to fire him. Id. ¶ 50. MiMedx had tracking software on Vitale's phone, and could track his location. Id. ¶ 51. While Vitale met with the attorney, MiMedx wiped relevant information from Vitale's phone and computer. Id. ¶ 52.

         Hours after Vitale met with the attorney, MiMedx's Vice President of Sales called Vitale to tell him he was fired. Id. ¶ 53. Vitale requested a reason for his termination; ultimately, the Vice President of Sales told Vitale he was being fired for sending the product to MiMedx via UPS rather than FedEx and for lying during their earlier phone call. Id. ¶ 54. Vitale stated he had not competed with MiMedx. Id. The Vice President of Sales then informed Vitale that because he was being terminated on December 29, 2016 (one day before the last work day of the month), he would not receive his November and December commissions. Id. ¶ 55. Vitale avers he lost more than $20, 000 in commissions. Id. ¶ 56.

         Vitale claims the day after his termination, in a MiMedx press release regarding MiMedx employees sued for competing with MiMedx, Petit and Taylor made defamatory statements about Vitale. Id. ¶¶ 62-63; ECF No. 21-3 at 2-4[3]. Specifically, Taylor said MiMedx “‘took employment actions with various other employees based on the degree of transgression and the openness and willingness of these employees to cooperate in [MiMedx's] investigation.'” ECF No. 21-3 at 2. Petit stated:

‘[W]e have taken disciplinary action against a small number of other individuals in our sales organization who were also found to be associated with this or other similar improper acts. . . . [W]hen an employee violates the duty of loyalty and contractual obligations by selling competitive products or other products, employment actions must be taken. . . . we are always disappointed when individuals decide to follow self-serving financial motives rather than adhere to high standards of conduct and compliance that we foster and instill at [MiMedx].'

ECF No. 20-1 at 2.[4]

         Vitale alleges in May, 2018, Petit made a statement published in the Atlanta Journal- Constitution in which he indicated a South Carolina MiMedx representative who had bribed Veterans Affairs's officials had been terminated by MiMedx some one and a half years prior . Compl . ¶ 6 4 . T h e article at issue concerns workers at Veterans Affairs's facilities in Greenville and Columbia, South Carolina accepting gifts in return for pushing the use of MiMedx products and thereby purportedly committing - and being indicted for - conspiring to defraud the United States government, participating in federal acts in which they had a financial interest, and accepting bribes. ECF No. 21-3 at 5-14. The article states: “[Petit] says the allegations in the indictment handed down in South Carolina this week involved the dealings of just one sales representative who MiMedx fired a year and a half ago.” ECF No. 21-3 at 6. The article later says: “Petit declined to name the sales rep who worked with the South Carolina workers[;]” Petit is quoted as saying: “‘[i]n this particular case, we terminated an employee, a sales employee, responsible for that particular facility about a year and a half ago.'” Id. at 9. Vitale states he never bribed Veterans Affairs's officials, but is the only South Carolina MiMedx representative who was terminated during the relevant period. Compl. ¶ 64.

         On January 21, 2019, Vitale filed suit against MiMedx, Petit, and Taylor in the Court of Common Pleas for Richland County, South Carolina. Compl. Vitale's complaint brought claims for: (1) wrongful discharge in violation of public policy against MiMedx; (2) defamation against all Defendants; and (3) unjust enrichment against MiMedx. Id. On February 19, 2019, Defendants removed to this Court. ECF No. 1.

         On April 8, 2019, MiMedx filed a motion to dismiss Vitale's complaint in its entirety as to MiMedx pursuant to Fed.R.Civ.P. 12(b)(6). ECF No. 21. Vitale responded, ECF No. 24, and MiMedx replied, ECF No. 31. ...


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