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  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
  • Biosystems of New England, Inc. vs. Rhodes, Byron et al Enforcement of Restrictive Covenant document preview
						
                                

Preview

/ ly COMMONWEALTH OF MASSACHUSETTS MIDDLESEX, ss. SUPERIOR COURT CIVIL ACTION No. 17-3092 BIOSYSTEMS OF NEW ENGLAND, INC. vs. BYRON RHODES DECISION AND ORDER ON PLAINTIFE’S MOTION FOR PRELIMINARY INJUNCTION In its motion seeking a preliminary injunction, the plaintiff, Biosystems of New England, Inc., asks this court to enforce certain non-competition covenants contained in an employment agreement between the plaintiff and its former employee, the defendant. Byron Rhodes. For the reasons discussed below, the plaintiff's request for a preliminary injunction is ALLOWED, in part. FACTUAL BACKGROUND The plaintiff is an independent distributor of spinal implants and related products, sold throughout New England and upstate New York. In June 2014, the defendant was employed by the plaintiff as a sales associate. In connection with this employment, the defendant entered into a Sales Employee Agreement (the “2014 SEA”), which included certain “Post-Employment Restrictions.” Those restrictions included not being employed or affiliated in any way with any “CONFLICTING ORGANIZATION,” which was defined in the agreement as “any person. . . or entity . . . that engages in, or is about to become engaged in, the development, design, production, manufacture, promotion, marketing, sale, support, or service of a COMPETITIVE PRODUCT.” “COMPETITIVE PRODUCT],]” in turn, was defined as any products andservices, manufactured, sold, or serviced “that are the same or similar, perform any of the same or similar functions” as any of the plaintiff's products, devices, or services. According to the agreement the restrictions were applicable for two years, “within a One-Hundred (100) mile radius of [the defendant's] territory[,]” which included eight hospitals, all located in Connecticut. In or about September 2016, the defendant was promoted to the position of Sales Representative. The promotion included an increase in salary. At this time the plaintiff and defendant negotiated a new SEA (the “2016 SEA”). This agreement contained the same “Post- Employment Restrictions” as the 2014 SEA, including that the defendant refrain from any employment or affiliation with any company in competition with the plaintiff, selling or servicing a competitive product. Here again, the agreement prohibited post-employment competition for a period of two years, “within a One-Hundred (100) mile radius of [the defendant’s] territory.” In the 2016 SEA, however, the “territory” was defined as eleven surgeons. Five hospitals are also listed with the surgeon’s names. On October 4, 2017, the defendant notified his sales manager that he was resigning from his position with the plaintiff. Ata meeting with the sales manager the following day, the defendant stated that he was going to work for JD Spine, LLC/Globus Medical, Inc. (“JD Spine”), a company that competes with the plaintiff in Connecticut and western Massachusetts, selling competitive products. The plaintiff alleges that, in the period leading up to his departure from the plaintiff, the defendant diverted business to his new employer, and disparaged the plaintiff, thereby encouraging a sales associate to leave the plaintiff and join JD Spine. The defendant denies these allegations. NTHE PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION AND THE DEFENDANT’S OBJECTION THERETO Here, the plaintiff seeks an order preliminarily enjoining the defendant from working for JD Spine or any other competitor of the plaintiff, in connection with any competitive product “within a 100-mile radius of his Biosystems’ territory of New Haven, New London, Bridgeport and Derby, Connecticut for a period of 24 months. .. .” The plaintiff also asks that the defendant be preliminarily enjoined from soliciting any person to terminate that person’s employment with the plaintiff or to breach that person’s employment agreement with the plaintiff, for a period of two years. In support of its requests, the plaintiff argues that the non-competition covenants in the 2016 SEA are valid and enforceable. The plaintiff also argues that enforcing the terms of the 2016 SEA is necessary to protect plaintiff's legitimate business interests, and that the restrictions are reasonable in both duration and scope. Finally, the plaintiff argues that in the absence of injunctive relief, it will suffer irreparable harm, including the loss of customer good will. In a supplemental motion filed October 31, 2017, the plaintiff advised the court that consistent with its reading of the 2016 SEA, it was prepared to limit the geographic scope of the restrictive covenant to the State of Connecticut. The stated reason for this concession was that the State of Connecticut is the primary geographic territory assigned to the defendant’s sales manager while working for the plaintiff. In opposition to the plaintiff's motion for a preliminary injunction, the defendant argues that the restrictive covenants contained in the 2016 SEA are overbroad as to the geographic scope, and also the length of the restrictions. The defendant contends that he is not in violation of the restrictive covenants and the plaintiff cannot demonstrate irreparable injury if injunctive relief is denied.DISCUSSION A. The Legal Standard To prevail on its request for a preliminary injunction, the plaintiff must show a strong likelihood of success on the merits of its claims, that it will suffer irreparable harm without the requested injunctive relief, and that its harm, without the injunction, outweighs any harm to the defendant from being enjoined. G7E Prods. Corp. v. Stewart, 414 Mass. 721, 722-723 (1993); see Planned Parenthood League of Mass., Inc. vy. Operation Rescue, 406 Mass. 701, 710 (1990). The standards to be applied in determining whether to enforce restrictive covenants in employment agreements are well established here in Massachusetts. ! Employee covenants not to compete generally are enforceable only to the extent that they are necessary to protect the legitimate business interests of the employer. Novelty Bias Binding Co. v. Shevrin, [342 Mass. 714, 716 (1961)]. Such legitimate business interests might include trade secrets, other confidential information, or, particularly relevant here, the good will the employer has acquired through dealings with his customers. See A// Stainless, Inc. v. Colby, [364 Mass. 773, 779-780 (1974)]. Protection of the employer from ordinary competition, however, is not a legitimate business interest, and a covenant not to compete designed solely for that purpose will not be enforced. Richmond Bros. Inc. v. Westinghouse Bdcst. Co. Inc., 357 Mass. 106, 111 (1970). Marine Contractors Co., Inc. v. Hurley, 365 Mass. 280, 287-288 (1974). A non-competition covenant must also be reasonable in geographic and temporal scope. See, e.g., All Stainless, 364 Mass. at 779-780. Of course, every case in which a previous employer of a defendant seeks to enforce restrictive covenants will turn on the application of these standards to the facts presented by the particular case. B. Application of the Legal Standard to Plaintiffs Request for Relief In essence, the plaintiff seeks to prevent the defendant from any competitive activity in the State of Connecticut, for a period of two years. The question for this court is whether those ' The parties agree that plaintiff's motion should be decided according to Massachusetts law. 4restrictions are necessary to protect the plaintiff's “legitimate business interests.” “Legitimate business interests include protection of trade secrets, confidential information, and good will.” Boulanger vy. Dunkin’ Donuts Inc., 442 Mass. 635, 641 (2004); New England Canteen Serv., Inc. y. Ashley, 372 Mass. 671, 674 (1977); Marine Contractors Co., Inc., 365 Mass. at 287. The plaintiff seeks to protect, first, its customer good will, arguing that it has already suffered a loss of good will because, before leaving his position at the plaintiff, the defendant attempted to obtain business for his future employer. See Castricone v. Mical, 74 Mass. App. Ct. 591, 598 (2009) (defining good will as generally “‘mean[ing] the advantage that accrues to a business on account of its name, location and reputation, which tends to enable it to retain the patronage of its old customers’” (citation omitted)). The plaintiff has provided emails indicating that the defendant had scheduled surgeries in October 2016 but that he withheld that schedule from the plaintiff, purportedly in an attempt to “steer business to” JD Spine. The defendant, however, has provided an affidavit from himself and from the doctor with whom those surgeries were scheduled, explaining that the surgeon, without any input from the defendant, had already planned to use a product that JD Spine distributed. Moreover, the defendant describes a July 2016 recall of one of the products the defendant sold for the plaintiff, which supports the inference that any loss of good will that the plaintiff experienced arose from that recall. At this stage of the case, then, the plaintiff has not demonstrated a likelihood of success on the merits of its allegation that the defendant has harmed, or will harm, its good will, or that it will suffer irreparable harm to its good will without the requested injunction.The plaintiff also seeks to protect its confidential information.? Again, the plaintiff's evidence as to its likelihood of success with respect to the defendant’s actual use of its confidential information to benefit JD Spine is lacking. By virtue of the positions the defendant held with the plaintiff, however, he did acquire information that he will inevitably use if allowed go forward employed by the plaintiff's competitor, without restriction. In other words, “working for a competitor of the [plaintiff] makes it likely that the information the [defendant] possesses will be used, yet it might be impossible to detect or prove.” Boulanger, 442 Mass. at 643 n.12: see, e.g., Lombard Med. Techs. v. Johannessen, 729 F. Supp. 2d 432, 442 (D. Mass. 2010) (finding it difficult to believe employees did not pick up any confidential or proprietary information when employees were intimately familiar with weaknesses in leading product and had extensive contacts with medical centers involved in clinical trials); Marcam Corp. v. Orchard, 885 F. Supp. 294, 297 (D. Mass. 1995) (finding that former employee with knowledge of marketing strategies and plans for future development would “inevitably, even if inadvertently, be influenced by the knowledge he possesses” and employee could not simply set aside information stored in his memory). Here, the defendant had access to detailed sales information and sales and marketing strategies, and the plaintiff provided the defendant with extensive training and education. See ? The Supreme Judicial Court has “set out six factors of relevant factual inquiry to determine whether ‘information sought to be protected is, in fact and in law, confidential.” Warner-Lambert Co. v. Execuquest Corp., 427 Mass. 46, 49 (1998), quoting Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972). “These factors are (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and its competitors; (5) the amount of effort or money expended by the employer in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.” Id. at 49 n.5, citing Jet Spray Cooler, Inc., 361 Mass. at 840. For purposes of this decision, and where the defendant has not argued otherwise, the court presumes that the information that the plaintiff seeks to protect is, in fact and in law, confidential.Eastern Marble Prods. Corp. v. Roman Marble, Inc., 372 Mass. 835, 842 (1977) (“[A]lthough an employee may carry away and use general skill or knowledge acquired during the course of his employment, he may be enjoined from using or disclosing confidential information so acquired.”); see, e.g., SimpliVity Corp. v. Moran, 2016 WL 5122671, at * 12 (Mass. Super. 2016) (holding that plaintiff's former employee “is not restricted from working and using the sales skills he has developed in employment that is not in direct competition with [plaintiff]”). Therefore, even in the absence of specific evidence showing that the defendant actually used confidential information acquired from the plaintiff to benefit JD Spine, the plaintiff has “carried its burden of establishing a significant risk of irreparable harm absent preliminary injunctive relief.” Aspect Software, Inc. v. Barnett, 787 F. Supp. 2d 118, 131 (D. Mass. 2011). “Although a business may protect its legitimate business interests, a covenant not to compete must be no more restrictive than necessary.” Boulanger, 442 Mass. at 643. “A covenant too broad in any respect will be enforced ‘only to the extent that is reasonable and to the extent that it is severable for the purposes of enforcement.”” Blackwell v. E.M. Helides, Jr. Inc., 368 Mass. 225, 229 (1975) (citation omitted). Under the circumstances of this case, the court believes it is appropriate to tailor the injunctive relief to the specific interests of the parties, with particular attention to the balancing of harms. See Al/ Stainless, Inc., 364 Mass. at 777 (holding that length of limitation period was not unreasonable, but geographical area covered was too broad): Kroeger v. Stop & Shop Cos., Inc., 13 Mass. App. Ct. 310, 317-318 (1982) (affirming trial court’s decision to reduce temporal restriction from lifelong to one year and geographic restriction from anywhere east of Mississippi to only areas in which former employer actually operated); 4.R.S. Servs. v. Morse, 2013 WL 2152181, at *11 (Mass. Super. 2013)(finding that two-year non-solicitation provision was unreasonable and overbroad and reducing it to one year and imposing a geographic limitation). First, while the two-year restriction is not patently unreasonable, the court believes it is longer than necessary to protect defendant’s business interests, especially where the balancing of the harms in the plaintiffs favor is a close question, and where the defendant had worked at the plaintiff for just over one year. See All Stainless, Inc., 364 Mass. at 779 (holding that “enforcement of a restrictive covenant of this type requires a weighing of all the circumstances” and that “a brief term of employment might appropriately be a factor in determining whether to enforce a restrictive covenant in whole or in part”). Compare Blackwell, 368 Mass. at 229 (holding that three-year restrictive covenant was not “too extensive in time” where former real estate sales person’s “intention was to work the same area for a competitor which he had previously covered as a part of the [former real estate agency's] operation”). Furthermore, as the plaintiff seems willing to concede, the 100-mile radius contained in the 2016 SEA seems overbroad. It is more reasonable to limit the restriction on the defendant to the eleven surgeons and the five hospitals referred to as the defendant’s “territory” in the 2016 SEA. See, e.g., Blackwell, 368 Mass. at 229 (concluding that restrictive covenant’s geographical area was not “too broad” where it “closely coincided with the area in which good will had been developed by [defendant employer] in the careful operation of its business, which it was entitled to protect”); Kroeger, 13 Mass. App. Ct. at 317-318.ORDER Accordingly, for a period of one year (12 months) from the date of this order, the defendant is enjoined as follows: 1. The defendant may not contact, or cause anyone else to contact, directly or indirectly, any of the eleven surgeons referred to as the defendant’s “territory” in the 2016 SEA, for the purpose of marketing or selling any “COMPETITIVE PRODUCT,” as those terms are defined in the 2016 SEA. 2. The defendant may have no involvement, direct or indirect, in the sales or marketing of any “COMPETITIVE PRODUCT,” as that term is defined in the 2016 SEA, to anyone at the five hospitals referred to with the eleven surgeons in the 2016 SEA. 3. The defendant shall be prohibited from soliciting or causing the solicitation of any person to terminate his or her employment with the plaintiff. No further preliminary injunctive relief is ordered at this time. Lawrence D. Pierce Justice of the Superior Court DATE: November 3, 2017