Nuvasive, Inc. v. Patrick Miles

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

NUVASIVE, INC., )
a Delaware Corporation, )
)
Plaintiff, )
)
v. ) C.A. No. 2017-0720-SG
)
PATRICK MILES, an individual )
ALPHATEC HOLDINGS, INC., )
a Delaware Corporation. )
)
Defendants. )
)

MEMORANDUM OPINION

Date Submitted: April 16, 2024
Date Decided: August 16, 2024

Ethan H. Townsend, Aaron P. Sayers, MCDERMOTT WILL & EMERY LLP,
Wilmington, Delaware; OF COUNSEL: Rachel B. Cowen, MCDERMOTT WILL &
EMERY LLP, Chicago, Illinois; Morris J. Fodeman, WILSON SONSINI
GOODRICH & ROSATI, New York, New York; Jeffery S. Hood, PROCOPIO,
CORY, HARGREAVES & SAVITCH LLP, San Diego, CA; Attorneys for Plaintiff.

Philip A. Rovner, POTTER ANDERSON & CORROON LLP, Wilmington,
Delaware; OF COUNSEL: Nimalka Wickramasekera, WINSTON & STRAWN
LLP, Los Angeles, California, Brian J. Nisbet, Elizabeth S. Deshaies, WINSTON &
STRAWN LLP, Chicago, Illinois, John C. Sanders, Jr., WINSTON & STRAWN
LLP, Dallas, Texas; Attorneys for Defendants.

GLASSCOCK, Vice Chancellor
This matter involves a suit by a medical-device company, NuVasive, Inc.

(“NuVasive” or the “Company”) against a former executive and director, Patrick

Miles, and Defendant Alphatec Holdings, Inc. (“Holdings”), the parent of Miles’

current employer. The complaint alleges legal causes of action against Holdings.1

It also maintains a single cause of action against Miles,2 for breach of fiduciary duty.

The case against Miles and Holdings was tried. I have determined that the

most efficient way to approach the matter is to resolve the breach of duty claim

against Miles, then let the parties inform me what issues remain. During his time at

NuVasive, Miles made an investment in Holdings, which intended to compete with

NuVasive. Plaintiff has clarified that it does not allege that the investment itself was

a breach of duty. It argues, however, that in failing to disclose the investment to his

employer, Miles breached a duty of loyalty owed to NuVasive. That is the only

breach of duty claim before me, therefore. 3 That limited issue is the subject of this

brief memorandum opinion.

I find under the circumstances here, as disclosed at trial, that the failure to

disclose did not amount to bad faith or otherwise demonstrate a breach of the duty

of loyalty.

1
Plaintiff has sued Holding’s subsidiary, Alphatec Spine, Inc. on similar grounds in California.
2
A second cause of action against Miles for tortious interference with contract has been dropped
by the Plaintiff. Pre-Trial Stipulation and [Proposed] Order ¶¶ 1–2, Dkt. No. 484.
3
Id.; Tr. of 4-16-2024 Post-Trial Oral Arg. 12:11–21:21, Dkt. No. 522. (“Post Trial Oral Arg.”).

1
I. BACKGROUND 4

A. Factual Background

1. The Parties

NuVasive is a medical device company incorporated in Delaware, with its

principal place of business in San Diego, California.5 NuVasive develops

technologies to treat spinal disease. 6

Holdings is a holding company incorporated in Delaware that owns the stock of

its subsidiaries.7 Holdings via its subsidiaries is a direct competitor of NuVasive, as

they also develop technologies to treat spinal disease.8

Miles is the current President and Chief Executive Officer of non-party Alphatec

Spine, Inc. (“Spine”), one of Holdings’ subsidiaries. 9 Miles is also the President and

Chairman of Holdings.10 Miles formerly held an executive position and was a

member of the Board of Directors of NuVasive.11

4
This Letter Opinion only contains facts necessary to my analysis. Citations to the parties’ joint
trial exhibits are referred to by the numbers provided by the parties and cited as “JX __”. See
Parties’ Joint Ex. List, Dkt. No. 484. Citations to the parties’ stipulated pre-trial order are cited as
“PTO ¶ __”. Pre-Trial Stipulation and [Proposed] Order, Dkt. No. 484. References to the trial
transcripts are cited as “Tr. __:__”. 10-2-2023 Trial Tr.—Volume I, Dkt. No. 496; 10-3-2023 Trial
Tr.—Volume II, Dkt. No. 497; 10-4-2023 Trial Tr.—Volume III, Dkt. No. 498; 10-5-2023 Trial
Tr.—Volume IV, Dkt. No. 499; 10-6-2023 Trial Tr.—Volume V, Dkt. No. 500.
5
PTO ¶ 6.
6
Tr. (Malone) 16:20–30:10.
7
PTO ¶ 7.
8
JX441–JX444.
9
PTO ¶ 8.
10
Id.
11
JX42.

2
2. Miles’ Responsibilities at NuVasive and Involvement with
Holdings & Spine

Before joining Holdings and Spine, Miles worked for NuVasive for

approximately 17 years.12 Miles was crucially involved with NuVasive’s product

development and commercial strategy while employed at the Company.13

Eventually, Miles began serving as NuVasive’s President and Chief Operating

Officer in 2016. 14

During his employment at NuVasive, in January 2016, the Company

considered an opportunity to acquire Spine, which was on the verge of bankruptcy. 15

At the direction of Greg Lucier, NuVasive’s Chief Executive Officer, NuVasive’s

executives, including Miles, reviewed, commented, and participated in a meeting

with Spine and its financial team regarding a potential purchase of Spine.16 Miles

advised against NuVasive pursuing an acquisition of Spine.17 Despite Miles’

position that acquiring Spine was not advantageous to NuVasive, Miles stated, in a

text message to a former NuVasive sales executive, Terry Rich, “Tell your buddy

to put $’s behind [Spine] so we can run at that.” 18 Ultimately, in February 2016,

12
PTO ¶ 9.
13
Tr. (Miles) 111:24–112:9.
14
JX420.
15
JX11.
16
JX6–JX12; JX395; JX482.
17
JX11; JX12.
18
JX3 at 16.

3
NuVasive’s management unanimously agreed that Spine would not be a good

acquisition.19

The next month in March 2016, Miles was approached by a third-party

investor group that was interested in his involvement to invest in and potentially run

Spine, if Holdings accepted the group’s investment proposal.20 Miles was courted

by the third-party investor group for several months with the idea that Miles would

eventually serve as Spine’s CEO.21 Holdings did not accept the third-party investor

group’s proposal, however, and Miles did not pursue the opportunity further. 22

In the meantime, on August 1, 2016, NuVasive appointed Miles to its Board

of Directors and sent Miles to a leadership program. 23 The leadership program was

a CEO “charm school,” in which Miles was expected to learn skills to make a

successful CEO. 24 Miles completed the leadership program, but NuVasive was not

satisfied with Miles’ performance. 25 Eventually, as relations became tense between

Miles and NuVasive’s leadership, particularly with Lucier, and with no signs of

upward movement within the Company, Miles tendered his resignation on

September 7, 2016 to pursue an opportunity as Spine’s CEO.26 At the time, Craig

19
Tr. (Miles) 415:10–433:24; JX7–JX12; JX1153.
20
Tr. (Miles) 434:7–459:13; Tr. (Hunsaker) 869:4–873:6.
21
Tr. (Miles) 434:7–459:13; JX16.
22
Tr. (Hunsaker) 872:9–873:6.
23
Tr. (Miles) 461:14–464:20.
24
Id.
25
Id.
26
Id. at 466:10–467:9; JX40.

4
Hunsaker, a longtime friend of Miles and former NuVasive employee, was joining

Spine, making the opportunity attractive to Miles.27

In response to Miles’ intention to resign, NuVasive offered Miles a lucrative

executive compensation package to remain at the Company, which Miles accepted.28

The offer letter (the “Offer Letter”) from NuVasive stated that that Miles would

“have an ongoing fiduciary duty to NuVasive” that precluded him from “knowingly

engag[ing] in any activity that compromises the interests of NuVasive.”29

3. NuVasive’s Code of Ethical Business Conduct

NuVasive has a Code of Ethical Business Conduct (the “Code”). 30 The Code

has a “Conflicts of Interest” section which details “Financial Investments in Other

Companies.”31 This section states that “[t]o be sure we are keeping NuVasive’s best

interests at heart, we should not have a significant investment in a customer, supplier

or competitor.”32 It further states that “an investment in one of these companies is

significant if it gives you some decision-making power.”33

27
JX710.
28
Tr. (Miles) 467:16–469:6; JX48; JX513.
29
JX47.
30
JX1093.
31
Id. at 3278.
32
Id. (emphasis added).
33
Id. (emphasis added).

5
4. Miles’ Investment in Holdings

In early 2017, Holdings sought more capital through a private placement (or

“PIPE” offering) in which the company raised approximately $18.9 million by

selling (i) 1,809,628 shares of common stock, (ii) 15,245 shares of preferred stock

(convertible into 7,622,372 shares of common stock), and (iii) warrants to buy up to

9,432,000 more shares of common stock. 34 During this time, Rich, who was now

serving as Holdings’ CEO, contacted Miles to discuss a potential investment in

Holdings.35 Holdings created presentation materials for potential investors, which

described Holdings’ business plan and indicated that it expected to compete with

NuVasive by offering similar products.36 In addition, an original version of the

materials depicted a picture of Rich standing over a dead cheetah, NuVasive’s

mascot. 37 The materials made it obvious that Holdings expected to directly compete

with NuVasive in the market. Miles has maintained that he did not review these

materials.38

On March 22, 2017, Miles (through his entity MOM, LLC) made a $500,000

investment in Holdings stock.39 Miles (through MOM, LLC) received 56,501 shares

34
PTO ¶ 10.
35
Tr. (Miles) 166:17–167:10.
36
JX73 at 15, 29.
37
JX69 at 39; Tr. (Malone) 30:22–31:5. The photo was only removed after Holdings’ independent
investment banker suggested it was inappropriate. JX70.
38
Tr. (Miles) 168:23–174:6, 470:15.
39
PTO ¶ 11.

6
of common stock, 386.99 shares of preferred stock, and 250,000 warrants for his

investment.40 At trial, Miles stated he made the investment because he felt guilty

that he turned his back on his friends at Spine by reneging on Spine’s offer of

employment, and accepting NuVasive’s counteroffer.41 Miles did not disclose his

investment in Holdings to NuVasive. The reasoning behind his lack of disclosure

was due to the appearance of the investment and to avoid further conflict with

NuVasive’s management. 42 For his investment, however, Miles received no

operational control or input; the investment was purely passive. 43 Five months after

his investment in Holdings, Miles resigned from NuVasive on October 1, 2017, to

become Executive Chairman at Holdings and Spine. 44

B. Procedural History

NuVasive brought an action against Miles on October 10, 2017 45 and filed an

Amended Complaint on June 28, 2018, adding Holdings and Spine as named

Defendants. 46 Miles filed a Motion for Partial Summary Judgment on March 6,

2018 asserting that California law should govern his employment agreement 47 and I

40
Id. ¶ 12.
41
Tr. (Miles) 472:12–23.
42
Id. at 478:18–479:14.
43
Id. at 470:22–471:22, 473:13–475:18, 476:13–477:15.
44
PTO ¶ 13; Tr. (Miles) 495:5–500:20, 503:10–505:17; JX543; see JX858.
45
Verified Compl. For Breach of Fiduciary Duty, Dkt. No. 1.
46
Pl. NuVasive, Inc. First Am. Compl. for Damages, Dkt. No. 105 (“Am. Compl.”).
47
Def.’s Mot. for Partial Summ. J., Dkt. No. 36.

7
denied that Motion on September 28, 2018. 48 On February 6, 2019, Miles filed a

Renewed Motion for Summary Judgment. 49 I granted that Motion in part in a Bench

Ruling on June 7, 201950 and a Memorandum Opinion on August 26, 2019.51 On

November 19, 2019, Holdings filed a Motion to Dismiss 52 and I granted and denied

that Motion in part in a Memorandum Opinion on August 31, 2020.53 I held trial in

this matter on October 2, 2023 through October 6, 2023. 54 I heard post-trial oral

argument on April 16, 2024, and took the matter under advisement that same day.55

This Memorandum Opinion addresses solely the pending claim for Breach of

Fiduciary Duty of Loyalty against Defendant.

II. ANALYSIS

The question before me is whether failure on the part of a fiduciary to disclose

a passive investment in a company that intends to compete with the entity to which

he owes duties, under the circumstances here, is a breach of the fiduciary duty of

loyalty. NuVasive seeks relief in the form of disgorgement of all salary, equity

awards, investment gains, and other compensation received by Miles, post-

48
NuVasive, Inc. v. Miles, 2018 WL 4677607 (Del. Ch. Sept. 28, 2018).
49
Def. Patrick Miles' Renewed Mot. for Partial Summ. J., Dkt. No. 179.
50
Judicial Action Form, Dkt. No. 201.
51
Nuvasive, Inc. v. Miles, 2019 WL 4010814, (Del. Ch. Aug. 26, 2019).
52
Def. Alphatec Hldgs., Inc.'s Mot. to Dismiss Pl.'s Second Am. Compl., Dkt. No. 245.
53
NuVasive, Inc. v. Miles, 2020 WL 5106554 (Del. Ch. Aug. 31, 2020).
54
Trial before Vice Chancellor Sam Glasscock beginning 10.2.23 and concluding on 10.6.23, Dkt
No. 495.
55
Post Trial Oral Arg. before Vice Chancellor Sam Glasscock dated 4.16.24, Dkt. No. 521 (“Post
Trial Oral Arg.”).

8
investment.56 NuVasive has the burden of demonstrating by the preponderance of

the evidence that Miles breached his duty of loyalty. 57

A. Miles Failure to Disclose a Passive Investment in Holdings Does Not
Constitute a Breach of Fiduciary Duty of Loyalty Under These Facts

Directors and officers of Delaware corporations owe a fiduciary duty of

utmost loyalty.58 In that vein, it is noteworthy what the Plaintiff is not alleging here.

It is not alleging that the mere passive investment by Miles in Holdings is itself a

breach of the duty of loyalty. NuVasive has a policy on when investments by

fiduciaries are prohibited, as discussed below; NuVasive does not allege that Miles

investment violates that policy. Importantly, a material investment in a competitor

could lead a fiduciary to act in his own self-interest arising from the investment,

contrary to the interests of his employer; such actions would amount to a classic

breach of the duty of loyalty. No such actions are alleged here.

A plaintiff can plead a claim for breach of the duty of loyalty by alleging facts

demonstrating that the fiduciary failed to pursue the best interests of the corporation

and its stockholders and therefore failed to act in good faith.59 The duty of loyalty

mandates that the best interest of the corporation and its shareholders takes

56
Second Am. Compl. Prayer for Relief ¶¶ A–D, Dkt. No. 234. Because of my decision here, I
need not address the remedy. I note that the requested relief seems poorly aligned with the breach
alleged, however.
57
Martin v. Med-Dev Corp., 2015 WL 6472597, at *10 (Del. Ch. Oct. 27, 2015).
58
Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006).
59
In re Orchard Enters., Inc. S'holder Litig., 88 A.3d 1, 33 (Del. Ch. 2014) (citing In re Walt Disney
Co. Deriv. Litig., 906 A.2d 27, 53 (Del. 2006)).

9
precedence over any interest possessed by a director, officer, or controlling

shareholder and not shared by the stockholders generally. 60 Thus, a failure to act in

good faith may be shown, for instance, where the fiduciary acts intentionally with a

purpose other than that of advancing the best interests of the corporation.61

NuVasive asserts that Miles breached his duty of loyalty when he failed to

disclose his $500,000 investment through Holdings’ PIPE, since Holdings intended

to compete with NuVasive.62 It contends that Miles hid his investment in Holdings

from NuVasive, thereby violating his fiduciary duty to NuVasive. 63 Miles asserts

that pursuant to NuVasive’s Code his investment was permissible, because he

obtained no control or decision-making authority with the competing entity in

exchange for his investment.64 Miles further contends that he did not “hide” his

investment from NuVasive since he was not under an obligation to disclose the

investment.65 At issue is not best practices for corporate executives or directors, but

whether the failure to disclose, itself, was sufficiently opposed to the interests of

NuVasive so as to constitute bad faith. Under the facts established at trial, I find

that Miles did not act in bad faith.

60
Id. (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993), decision modified
on reargument, 636 A.2d 956 (Del. 1994)).
61
Id. (citing Disney, 906 A.2d at 67); accord Stone, 911 A.2d at 369.
62
Plaintiff NuVasive, Inc.'s Opening Post-Trial Br. 60–63, Dkt. No. 516 (“Pl.’s PT OB”).
63
Pl.’s PT OB 61.
64
Defendants' Post-Trial Br. 17–21, Dkt. No. 514 (“Defs.’ PT OB”).
65
Defs.’ PT OB 22.

10
It was clarified at post-trial oral argument that the breach of fiduciary duty claim

was limited to failure to disclose a passive investment.66 I do not find that the failure

to disclose the investment is a breach of a fiduciary duty of loyalty. I note that

Holdings’ investor materials made it clear that it intended to compete with

NuVasive. That fact alone, coupled with a passive investment, does not demonstrate

bad faith. This is because there is no evidence that, in his capacity as a NuVasive

officer or director, Miles failed to advance the best interests of NuVasive and its

stockholders. Additionally, the trial record does not show that Miles took any action

on which any implied conflict of interest could bear. Finally, the investment was

purely passive; Miles held no decision-making role at Holdings, and thus could not

have used a position resulting from his investment to cause Holdings to compete

against NuVasive. The investment did not give Miles operational input or control

over Holdings.

The agency issue of a fiduciary holding an interest in a competitor is manifest. If

Miles had been presented with an opportunity to cause NuVasive to take an action

that would have resulted in a benefit to Holdings and Miles, presumably entire

fairness review would obtain.67 Likewise, if Miles had been given an opportunity

66
Post Trial Oral Arg. 12:11–21:21. NuVasive initially asserted that the act of investing in a
competitor business was a breach of a fiduciary duty of loyalty. See Pl.’s PT OB 60–61.
67
See In re BGC P’rs, Inc. Deriv. Litig., 2019 WL 4745121, at *1 (Del. Ch. Sept. 30, 2019)
(denying motion to dismiss and applying entire fairness where conflicted director who held a larger
economic interest in a target company than the acquirer company and was alleged to have
influenced the acquirer to overpay for its acquisition of the target company).

11
by NuVasive to indulge a hidden conflict, which opportunity he would not have been

given had he disclosed that conflict, a finding of breach of duty might obtain.68

Again, nothing of the kind is present in the record here. There was simply no

transaction, or contemplated transaction, in which Miles experienced a conflict of

interest. 69

Three factual scenarios require further comment. Miles testified as to the reason

he invested in Holdings.70 Miles stated he made the investment because he felt guilty

for not supporting his friend and former colleague, Hunsaker, at Spine, who was

joining Spine with the intent to turn around its trajectory and profitability. 71 Miles’

guilt stemmed from reneging on Spine’s offer that he join the company as its CEO,

and accepting NuVasive’s counteroffer to remain at NuVasive.72 In particular, Miles

expressed that he holds “people and friends in high esteem,”73 and Miles felt a

personal obligation to “help [his] buddy,” and did not make an investment as a

68
See Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1134, 1153 (Del. Ch. 1994), aff'd, 663 A.2d
1156 (Del. 1995) (holding a financial interest in a target company is material when the “interested
director fails to disclose his interest in the transaction to the board and a reasonable board member
would have regarded the existence of the material interest as a significant fact in the evaluation of
the proposed transaction.”) (emphasis omitted).
69
See id; See also in re Oracle Corp. Deriv. Litig., 2023 WL 3408772 (Del. Ch. May 12, 2023)
(holding a breach of fiduciary duty did not exist where the conflicted director disclosed a financial
interest in a target company and withdrew from a presentation wherein the company considered
the acquisition of the target company).
70
Tr. (Miles) 472:12–23.
71
Id.; Id. at 174:11–14.
72
Id. at 472:12–23.
73
Id.

12
vehicle to creating wealth.74 I find this testimony convincing, and not consistent

with bad faith.

Second, Miles testified that he did not disclose the investment in Holdings

because he wanted to avoid conflict with NuVasive’s management. Specifically,

Miles had a tense relationship with NuVasive’s CEO, Lucier. In particular, the pair

were in conflict over their differing backgrounds; Miles had spent sixteen years in

the spine industry compared to Lucier who had no experience in the spine or surgical

industry, 75 leading to conflicting views between them. For instance, Miles believed

that Lucier was more invested in the transactional nature of NuVasive instead of

focusing on the culture of the Company.76 The dislike of each man for the other was

well-known at the Company, and is amply demonstrated in the record.77

Consequently, Miles had no desire to engage personally with Lucier by informing

him of the investment.78 Again, I find this testimony persuasive. The failure to

disclose in these circumstances, to my mind, falls short of bad faith.

Finally, Plaintiff points to Miles’ recommendation against NuVasive acquiring

Holdings, before his investment in Holdings, as evidence that the subsequent

investment and failure to disclose must have been in bad faith. The facts are as

74
Id.
75
Id. at 397:14–398:19.
76
Id. at 489:8–16.
77
E.g., id. at 431:19–432:6.
78
Id. at 478:18–479:14.

13
follows: (1) NuVasive was approached with an opportunity to acquire Spine in

January 2016;79 (2) Lucier directed NuVasive’s executive officers, including Miles,

to evaluate the proposal; 80 (3) the executives and NuVasive’s financial team met to

discuss the potential proposal; 81 (4) Miles advised against acquiring Spine; 82 and (5)

NuVasive’s management unanimously agreed to decline to acquire Spine, in

February 2016. 83 At this point in time, Miles had not yet invested in Holdings; that

investment occurred in March 2017. I accept Miles’ testimony, as set out above,

that he invested out of a sense of obligation to a friend, and not to seize an

opportunity from NuVasive. Holdings as constituted in January 2016 was not a

successful concern. 84 I find Miles’ recommendation against the acquisition by

NuVasive was made in good faith, and not indicative that his subsequent investment

was bad faith.

NuVasive relies on Metro Storage International v. Harron,85 to support its

assertion that Miles committed an actionable violation of a fiduciary duty by not

disclosing his investment. 86 I do not find NuVasive’s reliance on Metro Storage

International persuasive. In Metro Storage International, an officer of an LLC

79
JX11.
80
JX6–JX12; JX395; JX482.
81
JX6–JX12; JX395; JX482.
82
JX11; JX12.
83
Tr. (Miles) 415:10–433:24; JX7–JX12; JX1153.
84
See JX1163; Tr. (Miles) 424:14–426:21; JX9.
85
275 A.3d 810 (Del. Ch. 2022).
86
Pl.’s PT OB 60.

14
entered an employment agreement that provided that the officer would have six

months to conclude any existing engagements before committing his time to the

LLC. 87 The officer, however, continued to work for his previous client by providing

the same services he gave to the LLC and disclosing the LLC’s confidential

information.88 Throughout his employment with the LLC, the officer kept his work

with his previous client a secret.89 Ultimately, once the LLC became defunct the

officer left, taking the LLC’s confidential information. 90 The Court held in part that

the officer’s failure to disclose his concurrent engagements constituted a breach of

his fiduciary duty of loyalty since the knowledge of the engagements were

something the LLC “would wish to have” and an obligation of full disclosure was

implicit as the officer agreed to cease other engagements outside the LLC. 91

Metro Storage International relied on Hollinger International v. Black92 and

Triton Construction Company v. Eastern Shore Electrical Services for its

determination.93 In Hollinger International, the board chairman agreed to oversee

the process for developing a value-maximizing transaction for the corporation, such

as selling the corporation or its assets.94 However, the chairman diverted to himself

87
Metro Storage Int’l, 275 A.3d at 823.
88
Id.
89
Id.
90
Id.
91
Id. at 851 (quoting Restatement (Third) of Agency § 8.11 cmt. b).
92
844 A.2d 1022 (Del. Ch. 2004).
93
2009 WL 1387115 (Del. Ch. May 18, 2009).
94
Hollinger Int’l, 844 A.2d at 1029.

15
a valuable opportunity presented to the corporation for the possible sale of its

newspaper asset to a potential buyer.95 The chairman did not disclose the letters sent

to the chairman by the buyer seeking to purchase the corporation’s newspaper

asset.96 The Court held in part that the chairman’s failure to disclose his dealings

with the buyer, when “full disclosure was obviously expected,” was a violation of

his fiduciary duty of loyalty.97 In Triton Construction Company, an employee of an

electrical contracting company failed to disclose his simultaneous employment with

a competitor of the electrical contracting company.98 The Court held in part that the

employee was not a key employee, director, or officer, and thus, did not owe

fiduciary duties to the company solely by virtue of his position.99 But he did owe

certain duties, including the duty to disclose, because he was an agent of the

company and had confidential information, which creates a relationship that is

analogous in most respects to that of a fiduciary relationship. 100

The circumstances present here differ from the facts presented in Metro Storage

International, Hollinger International, and Triton Construction Company. First,

NuVasive has not shown that Miles dedicated time or resources toward Holdings

during the time when he continued to work for the Plaintiff. While the officer of the

95
Id.
96
Id. at 1061.
97
Id.
98
Triton Const. Co., 2009 WL 1387115, at *1.
99
Id. at **9–11.
100
Id. at *11.

16
LLC in Metro Storage International dedicated time and resources to his previous

client and the chairman in Hollinger International dedicated time and resources to

diverting a corporate opportunity to himself, Miles held only held a passive

investment in which he possessed no operational control or input.101

Second, NuVasive points to the Offer Letter, by which it retained Miles when he

considered taking a position with Holdings, as imposing a duty to disclose similar to

the employment agreement found actionable in Metro Storage International. 102 In

particular, the Offer Letter stated: Miles would “have an ongoing fiduciary duty to

NuVasive” that precluded him from “knowingly engag[ing] in any activity that

compromises the interests of NuVasive.” 103 The Offer Letter does not provide a

divergent contractual standard of duty, however; it merely restates the common law

fiduciary duty.

Third, the employment agreement in Metro Storage International and the

diversion of a corporate opportunity in Hollinger International clearly indicate the

need for full disclosure, 104 but Miles’ investment in Holdings is not a circumstance

101
Tr. (Miles) 470:22–471:22, 473:13–475:18, 476:13–477:15.
102
Pl.’s PT OB 62. In addition, NuVasive has not pled a breach of contract claim in this
proceeding. See PTO ¶¶ 1–2.
103
JX45.
104
See Metro Storage Int’l, 275 A.3d at 851; Hollinger Int’l, 844 A.2d at 1061. Plaintiff relies on
a statement in Metro Storage International, which cites the Restatement (Third) of Agency § 8.11
cmt. b, that an agent breaches a duty by not giving his principal information that he knows the
principal would wish to know. Pl.’s PT OB 60–63. Plaintiff points to the testimony of Miles that
he did not want Lucier to be aware that he was investing in Holdings as invoking this principle.

17
where full disclosure was “obviously expected” 105 to prevent a breach of the duty of

loyalty, since there was no transaction or circumstance in which Miles experienced

a conflict of interest. 106

Turning to NuVasive’s Code, I find the Code created a standard under which

Miles was obliged to eschew certain investments. However, the Code 107 limits these

to “significant” investments. Per the Code, an investment is significant where the

investor receives “decision-making power.” Thus, under a reasonable reading of the

Code, it is implicit that there is no obligation to eschew, or disclose, an investment

where the investor does not receive decision-making authority. The Code itself, of

course, does not eliminate an obligation to act in good faith where common-law

fiduciary duty so requires,108 but it is evidence here of lack of bad faith inhering in

Miles actions.

NuVasive makes a final argument that relies on the importance of the investment

Miles made to the success of Holdings; an argument I find unpersuasive. NuVasive

Pl.’s PT OB 15–16; Tr. (Miles) 176:14–19. Lucier, however, was not Miles’ principal, but was
another fiduciary of NuVasive. NuVasive was the principal; under the authority cited, for the duty
to disclose to arise, the agent must know the principal would have an interest in disclosure.
NuVasive would surely have an interest in knowing of a conflicted investment where the fiduciary
was faced with acting or considering a transaction where that conflict could come to bear. The
trial record did not reflect such a scenario, however.
105
Hollinger Int’l, 844 A.2d at 1061.
106
See Technicolor, Inc., 663 A.2d at 1153. See also in re Oracle Corp. Deriv. Litig., 2023 WL
3408772.
107
JX1093.
108
Plaintiff makes this point in its reply brief. See Plaintiff NuVasive, Inc.'s Post-Trial Reply Br.
2, Dkt. No. 519 (“Pl.’s PT RB”).

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asserts that Miles’ investment, although only a small fraction of the funds that

Holdings raised, was nonetheless significant to its operations, allowing it to compete

with NuVasive.109 But this is not an argument relating to the failure to disclose as a

breach of duty—if anything, it is an argument that the investment itself was a breach

of the duty of loyalty, a claim the Plaintiff has foregone. In any event, it was not

demonstrated by the evidence that Miles’ investment was critical or a substantial aid

to Holdings’ ability to compete with NuVasive.

III. CONCLUSION

Failure by a fiduciary to disclose even a passive interest in a competitor is

problematic, no doubt. If conflicted transactions follow, entire fairness may obtain.

Failure to disclose such an investment is not per se a breach of the duty of loyalty,

where no conflicted transaction or decision by the fiduciary, or other reason the

entity would have an interest in disclosure, is present. For the foregoing reasons, I

find that the Plaintiff has not demonstrated that Miles’ failure to disclose his

investment in Holdings breached his fiduciary duty of loyalty to NuVasive. The

parties are directed to submit a form of order consistent with this Memorandum

Opinion.

109
Pl.’s PT RB 4.

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