SUSAN RICHARD NELSON, District Judge.
Plaintiff Boston Scientific Corporation ("Boston Scientific") has sued its former employee, Marcus Kean, and Kean's new employer, St. Jude Medical S.C., Inc. ("St. Jude"), for breach of contract to enforce a non-competition agreement. Boston Scientific also asserts a claim against St. Jude for tortious interference with contractual relations. Before the Court is Boston Scientific's Motion for a Temporary Restraining Order. Because the Defendants have received notice and the Motion has been fully briefed, the Court will treat it as a Motion for a Preliminary Injunction pursuant to Fed. R. Civ. P. 65(a). Oral arguments were heard on March 2, 2011. For the reasons set forth below, the Court grants the Motion in part.
Defendant Marcus Kean worked as a Cardiac Rhythm Management ("CRM") sales representative for Guidant Sales Corporation ("Guidant"), a wholly-owned subsidiary of Plaintiff Boston Scientific, from February 1, 1999 through January 26, 2011. As a condition of his employment, he signed a non-compete agreement. Pursuant to a corporate reorganization, Boston Scientific was assigned Guidant's rights under the contract between Guidant and Kean. (Declaration of Bruce DeMaro ("DeMaro Decl.") ¶ 12.) In 2008, Kean entered into a new employment agreement with Boston Scientific, and also signed a new non-compete agreement. The 2008 non-compete agreement superseded the prior agreement and is the operative agreement in the present dispute.
The non-compete agreement between Kean and Boston Scientific provides:
(Non-Compete Agreement, Ex. B § 3 to Amended Declaration of Eileen Hunter ("Hunter Decl.") (emphasis added).)
The agreement applies only to "Competitive Products," which are defined as another company's products which "perform[] similar functions or [are] used for the same general purposes as a [Boston Scientific] Product." (
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The non-compete agreement restricts Kean from performing any of the restricted activities involving competitive products with respect to "[Boston Scientific] Accounts," which are defined to include:
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While working for Boston Scientific, Kean sold CRM devices, including pacemakers, implantable defibrillators, and cardiac resynchronization therapy defibrillators. Such CRM devices provide therapy and are used to treat various heart rhythm disorders. (DeMaro Decl. ¶¶ 2-4.) The technology involved in CRM devices is complex, and the market for them is very competitive; thus, sales representatives must have significant technical and clinical knowledge. (
In addition to CRM devices, certain medical device companies also manufacture a different device known as an insertable loop recorder ("ILR"). While a CRM device provides therapy and treatment, an ILR, which is also implanted into a patient's chest, provides electronic diagnostic information. (DeMaro Decl. ¶ 5.) It monitors and records the electronic activity of the patient's heart and is most commonly used with patients suffering from undiagnosed fainting spells. (
Marcus Kean verbally resigned from Boston Scientific on January 26, 2011, to accept a position as a sales representative for Defendant St. Jude. (
Legal Counsel for St. Jude responded to Boston Scientific's letter, stating that while Mr. Kean was aware of his post-employment obligations under the non-compete agreement, the agreement was limited to accounts for competing products that he serviced "on more than three occasions for such products during the year prior to separation from [St. Jude]." (Letter of 2/15/11 from A. Gordon to D. Gerhan, Ex. D to Hunter Decl.) In response to Plaintiff's motion, Defendants also assert this position, arguing that the non-compete agreement is inapplicable to many of the contested Boston Scientific accounts because of a medical device industry standard which purportedly acknowledges the application of a non-compete agreement only to those customers on whom a device sales person has called upon more than three times in their last year of employment. (Defs.' Mem. in Opp'n at 5-6.) Of the 74 doctors, nurses and administrators, and 14 hospitals identified in Boston Scientific's correspondence, St. Jude challenged the application of Kean's non-compete agreement to approximately 28 providers and hospitals, arguing that he did not service these accounts four or more times during his final year of employment with Boston Scientific. (Letter of 2/15/11 from A. Gordon to D. Gerhan, Ex. D to Hunter Decl.)
After having filed the instant motion and after Defendants filed their response, the parties attempted to mediate this dispute. While they did not ultimately resolve the dispute, they did reach agreement as to the list of providers, hospitals, facilities and employees from which and with whom Defendant Kean is prohibited from making contact with regard to competitive products. The Court, therefore, will not address this "more than three contacts"/ "four or more contacts" argument, or the application of the non-compete to particular providers and facilities, as these issues are no longer part of the dispute.
Shortly before submitting his resignation to Boston Scientific, Kean communicated with two Boston Scientific employees, Lauren Kinney and Rosie Hannan. On January 25, 2011, Kean phoned Ms. Kinney, telling her that he had decided to join St. Jude. (Declaration of Lauren Kinney ("Kinney Decl.") ¶ 3.) When asked what he would be doing for St. Jude, Kean stated that he intended to call on the same accounts that he called on for Boston Scientific. (
Between January 28, 2011, the date on which Kean formally resigned from Boston Scientific, and February 18, 2011, the date on which the instant motion was filed, Boston Scientific sales representatives and employees observed Kean contacting certain Boston Scientific accounts, which they considered restricted under the terms of Kean's non-compete agreement. The contacts in question occurred on January 28, February 16 and February 18, 2011.
On January 28, 2011 a "change-out" procedure involving a Boston Scientific CRM was scheduled for 8:00 a.m. at the Menorah Medical Center in Overland Park, Kansas. (Declaration of Kimberly Dreher ("Dreher Decl.") ¶ 5; Declaration of Kathleen Manning ("Manning Decl.") ¶ 5.) A change-out procedure occurs when a physician removes a CRM device and replaces it with another. (
After they arrived at the hospital, catheterization lab staff advised Dreher and Manning that the procedure was delayed because another procedure was taking longer than anticipated. (Dreher Decl. ¶ 7; Manning Decl. ¶ 7.) Later that morning, catheterization lab staff suggested that Dreher and Manning go to lunch and offered to phone them 30 minutes before the start of the procedure. (
After Dreher and Manning received this news and were standing in a hospital hallway, they observed Mr. Kean walking out of the operating room, accompanied by the electrophysiologist, Dr. Polin. (Dreher Decl. ¶ 11.) Kean was dressed in hospital scrubs, which would typically only be worn when he was participating in a procedure. (
Mr. Kean provides a slightly different version of the events on January 28, 2011. He explains that because of a close, personal relationship with Dr. Cohen, he telephoned him on January 26, 2011, to relay the news of his move to St. Jude. (Kean Decl. ¶ 20.) He informed Dr. Cohen that he remained subject to a Boston Scientific non-compete agreement and could not sell or support the sale of St. Jude products. (
Kean contends that he attended the patient's procedure not on behalf of St. Jude, but in his personal capacity, due to his longstanding relationship with patient and the patient's family. Another St. Jude CRM sales representative attended the procedure. (
The next incident involving a possible violation of the non-compete occurred on February 16, 2011. On that day, Boston Scientific employee Kathleen Manning was calling on a device nurse at the Menorah Medical Center location of Midwest Cardiology Associates, when Mr. Kean entered the office to speak to the nurse. (Manning Decl. ¶ 16.) According to Ms. Manning, after Kean and the nurse exchanged greetings, Kean left. Ms. Manning considers Midwest Cardiology Associates to be a Boston Scientific Customer (
Kean contends that he did not actually speak with the device nurse, who was on the telephone at the time he stopped by. (Kean Decl. ¶ 16.) Instead, he exchanged pleasantries with Ms. Manning before leaving because the person responsible for scheduling meetings with Drs. Sharf, Levi and Nager was not there. (
On February 18, 2011, the date on which the instant motion was filed, Kean appeared at Shawnee Mission Medical Center, a facility that Boston Scientific had identified as a prohibited facility under the terms of Kean's non-compete agreement. (
Manning and Dreher proceeded to the catheterization lab at the same time as St. Jude sales representative Tony Anno. (Dreher Decl. ¶ 25; Manning Decl. ¶ 27.) Due to the confusion of having both Boston Scientific and St. Jude staff present, the catheterization lab nurse phoned the cardiologist, Dr. Kiritkumar Masrani. After calling him, the catheterization lab nurse informed Dreher and Manning that Dr. Masrani planned to use a St. Jude device for both of the scheduled defibrillator implant procedures that day. (Dreher Decl. ¶ 28; Manning Decl. ¶ 30.) Mr. Kean had called on Dr. Masrani in the past year and Dreher considered him to be a Boston Scientific customer. (Dreher Decl. ¶ 30.)
Mr. Kean contends that he was present at Shawnee Mission Medical Center on February 18, 2011 in order to obtain training from Mr. Anno on the use of a St. Jude device programmer. (Kean Decl. ¶ 33.) He maintains that they met in the hospital cafeteria for the training session and that he passed both Manning and Dreher as he was leaving the training session. (
Boston Scientific has filed the instant action alleging that Kean is violating his non-compete agreement, and now seeks to enjoin Kean from selling or supporting the sale or implantation of any competitive products, including not only CRM devices but ILRs as well.
This Court must consider four factors to determine whether preliminary injunctive relief is warranted: (1) the movant's likelihood of success on the merits; (2) the threat of irreparable harm to the movant in the absence of relief; (3) the balance between that harm and the harm injunctive relief would cause to the other litigants; and (4) the public interest.
In order to obtain a preliminary injunction, Boston Scientific must show that it has a "fair chance of prevailing" on its claims.
The parties do not dispute that Minnesota law governs this action. Under Minnesota law, employment non-compete agreements are generally disfavored.
Defendants argue that the non-compete agreement is unenforceable, because it was not supported by independent consideration. (Defs.' Mem. in Opp'n at 14.) They contend that Kean signed a new Boston Scientific employment agreement on October 28, 2008 (Employment Agreement, Ex. A at 7 to Hunter Decl.), but did not execute the separate non-compete agreement until November 28, 2008. (Non-Compete Agreement, Ex. B at 6 to Hunter Decl.) Under Minnesota law, where a restrictive covenant is not ancillary to the initial employment contract, it must be supported by independent consideration to be enforceable.
To determine if a non-compete agreement is reasonable, the Court considers: (1) whether the restraint is necessary for the protection of the business or goodwill of the employer; (2) whether the restraint is greater than necessary to adequately protect the employer's legitimate interests; (3) how long the restriction lasts; and (4) the geographic scope of the restriction.
Courts have repeatedly recognized that non-compete agreements in the medical device industry serve employers' important and legitimate interests in long-term customer relationships and preserving goodwill.
As in
As to whether the non-compete applies to the sale of ILRs at St. Jude, Boston Scientific cites to this Court's decision in
Turning to the question of Plaintiff's likelihood of success in proving a breach of the non-compete agreement, Boston Scientific asserts that Kean violated the agreement by selling, supporting or supervising the implantation of competitive CRM devices with respect to his restricted accounts on at least three occasions: January 28, February 16 and February 18, 2011.
While Mr. Kean avers that he was simply present to support a long-time patient and his family, the facts demonstrate his active participation in the removal of the device. Kean turned off the Boston Scientific device prior to its removal because Dreher and Manning were "nowhere to be found," and, conveniently, Kean still had a Boston Scientific programmer in his possession. (Kean Decl. ¶ 23.) After the procedure, he sought out the patient's wife to offer support. (
While Kean argues that as of January 28, 2011, he had not received formal notice that Boston Scientific considered the Menorah Medical Center, Drs. Polin and Cohen to be prohibited accounts, his own knowledge and experience with those customers should have informed his actions. Moreover, it is hardly surprising that Boston Scientific had not provided formal notice to him on January 28, 2011, because it was on that very date that Kean officially resigned from Boston Scientific. (DeMaro Decl. ¶ 14.) In sum, the Court finds that with respect to the January 28, 2011 incident, Boston Scientific has demonstrated a likelihood of success in establishing that Kean breached the terms of his non-compete agreement.
As to the February 16, 2011 incident in which Mr. Kean appeared at the Menorah Medical Center office of Midwest Cardiology Associates, the Court finds that Plaintiff has not demonstrated a likelihood of success in establishing that Kean breached the terms of his non-compete agreement. In this instance, Kean stopped by to schedule an appointment with three doctors, although he was not able to do so because the staff member responsible for scheduling was not present. (Kean Decl. ¶ 16.) While Menorah Medical Center was on the list of prohibited accounts, and while certain physicians in the Midwest Cardiology Associates practice group were also on the list, the doctors identified by Mr. Kean — Drs. Scharf, Levi and Nager — were not on the list of prohibited accounts. (See Letter of 2/3/11 from D. Gerhan to M. Kean, Ex. C to Hunter Decl.) Thus, the record before the Court does not support an inference that Mr. Kean intended to violate the terms of his non-compete agreement with respect to this incident. Moreover, it appears from the declarations provided by both Mr. Kean and Ms. Manning that any interactions that Mr. Kean may have had with the Midwest Cardiology device nurse on February 16 were minimal. (Kean Decl. ¶ 16; Manning Decl. ¶¶ 16-19.)
As to the last incident, occurring on February 18, 2011, the Court finds that Plaintiff has submitted enough evidence to demonstrate a likelihood of success in establishing a breach of the non-compete agreement. On that date, Mr. Kean was at Shawnee Mission Medical Center, a prohibited account, when a scheduled Boston Scientific change-out procedure was switched to a St. Jude device. Prior to this occasion, the physician involved in the procedure, Dr. Masrani, had used Boston Scientific devices for 100% of his procedures. While Kean claims that he was merely at Shawnee Mission Medical Center in order to receive training from his St. Jude colleague, Tony Anno (Kean Decl. ¶ 33), upon seeing Ms. Dreher, he said words to the effect of `Your cases have been cancelled and switched to St. Jude.' (Dreher Decl. ¶ 22.)
For the first time, on February 18, 2011, Dr. Masrani switched from using a Boston Scientific device to a St. Jude device, with no advance notice to Boston Scientific's employees Manning and Dreher, and Mr. Kean happened to be on-site, casually informing Ms. Dreher that her accounts had been switched to St. Jude. The non-compete agreement prohibits soliciting or supporting the sale of, "or otherwise hav[ing] any involvement whatsoever with the sale, manufacturing, research and development, marketing or other business aspect of any [competitive product.]" (Non-Compete Agreement, Ex. B § 3 to Hunter Decl.) (emphasis added). Again, the non-compete applies whether the employee acts "directly or indirectly." (
"The basis of injunctive relief in the federal courts has always been irreparable harm and the inadequacy of legal remedies."
"Minnesota courts have consistently held that `[i]rreparable harm may be inferred from breach of a valid non-compete agreement if the former employee obtained a personal hold on the good will of the former employer.'"
As this Court has recognized, "[b]ecause customer relationships were developed over significant time periods with substantial investment of [Boston Scientific] training sessions and clinical support, its interest is substantial."
In addition to showing a likelihood of success on the merits and irreparable harm, Boston Scientific must also establish that the balance of harms and public interest favor granting preliminary injunctive relief.
The possibility of harm to Kean if preliminary injunctive relief is granted is minimal compared to the irreparable harm Boston Scientific faces if he has indeed violated his non-compete agreement. Kean may still sell CRM devices to doctors and hospitals that are outside his restricted accounts. Although not selling CRMs to his old clients may result in a less successful year in sales, the restriction is for a one-year period, and Mr. Kean's first year of scheduled compensation at St. Jude is not in any way dependent on sales or a transfer of any accounts from Boston Scientific to St. Jude. (Kean Decl. ¶ 6.) As this Court found in
Moreover, Minnesota courts have repeatedly found that "the public interest favors the enforcement of valid business agreements and the protection of legitimate business interests in an industry propelled by vigorous but fair competition."
The Court finds that each of the factors discussed above weighs in favor of granting Boston Scientific's Motion and enjoining Kean from continuing to engage in conduct likely prohibited by his non-compete agreement.
Based on the foregoing, and all the files, records, and proceedings herein,
1. Boston Scientific's Motion for a Temporary Restraining Order (Doc. No. 2) is
2. Defendant Marcus Kean is
1. Cushing Memorial Hospital
2. Heartland Regional Medical Center
3. Overland Park Regional Medical Center
4. Liberty Hospital
5. Phillip Moore, Cardiac Cardiovascular Director Liberty Hospital
6. Joel Winger, Cardiac Cath Lab Manager Liberty Hospital
7. Menorah Medical Center
8. Olathe Medical Center
9. Alan McPherson, Administrator Olathe Medical Center
10. Shawnee Mission Medical Center
11. St. John's Hospital
12. Kansas City VA Medical Center
13. Centerpoint Medical Center
14. Heart Health PA
15. Cardiology Services
16. Midwest Cardiology Associates
17. Liberty Cardiovascular Specialists
18. Heartland Cardiovascular Consultants
19. Overland Park Cardiovascular Inc.
20. Sunflower Medical Group
21. Kiritkumar Masrani MD — Heart Health PA
22. David Robbins MD — Heart Health PA
23. Jenae Carlson NP — Heart Health PA
24. Shelley [unknown] (Pacemaker Tech at Heart Health PA) — Heart Health PA
25. All Advanced Registered Nurse Practitioners — Heart Health PA
26. Rangarao Tummala MD — Cardiology Services
27. Ravi Yarlagadda MD — Cardiology Services
28. Rick Brown MD — Cardiology Services
29. Jim Markum MD — Cardiology Services
30. Roger Freidman MD — Cardiology Services
31. Nursing Administrators — Cardiology Services
32. Nikki Chapman RN — Cardiology Services
33. Mary Zeller RN — Cardiology Services
34. Linda Kerster, ARNP — Cardiology Services
35. Gloria Hiller RN — Cardiology Services
36. Carol Powell, Administrator — Cardiology Services
37. Glenn Polin MD — Midwest Cardiology Associates
38. Peter Park MD — Midwest Cardiology Associates
39. Chandrasekhar Vasamreddy MD — Midwest Cardiology Associates
40. Sandy Sosa RN — Midwest Cardiology Associates
41. April Zawoski RN — Midwest Cardiology Associates
42. Carrie Ureker RN — Midwest Cardiology Associates
43. Sarah Jensen — Midwest Cardiology Associates
44. Josea [unknown] (Pacemaker Tech) — Midwest Cardiology Associates
45. Paul Kramer MD — Liberty Cardiovascular Specialists
46. Venkat Pasnoori MD — Liberty Cardiovascular Specialists
47. Demetrio Maragos MD — Liberty Cardiovascular Specialists
48. Kimberly Jackson RN — Liberty Cardiovascular Specialists
49. Paulette Scherrer, Administrator — Liberty Cardiovascular Specialists
50. Mohan Hindupur MD — Heartland Cardiovascular Consultants
51. Ricardo Ramos MD — Heartland Cardiovascular Consultants
52. Francisco Lammoglia MD — Heartland Cardiovascular Consultants
53. Robert Grant, DO — Heartland Cardiovascular Consultants
54. Judy Edwards — Heartland Cardiovascular Consultants
55. Julian Nunez MD — Cardiovascular Inc.
56. George Pierson MD — Cardiovascular Inc.
57. Michael Sweeney MD — Cardiovascular Inc.
58. Lawrence Cohen MD
3. "GSC Account" and "Competitive Product" shall have the meanings as provided in Kean's Agreement Regarding Non-Disclosure of Confidential Information, Non-Competition and Ownership of Intellectual Property, which is attached as Exhibit B to the Complaint in this action;
4. Defendant St. Jude Medical S.C., Inc. is enjoined from interfering with the contractual relationship between Boston Scientific and Marcus Kean;
5. The restrictions contained within Paragraph 2 of this Order shall apply regardless of whether Defendant Kean acts directly or indirectly or whether Defendant Kean acts personally or as an employee, agent or otherwise for another;
6. This Order is binding upon Defendants, as well as their affiliates, successors, assigns, agents, servants, employees, representatives, and any persons in active concert or participation with them.
7. Boston Scientific is