JAMES S. GWIN, District Judge.
In this action, Plaintiff Invacare Corporation ("Invacare") moves for a preliminary injunction against its former employee, Defendant Michael Nordquist, and Nordquist's current employer, Defendant Ki Mobility.
Plaintiff Invacare now seeks an injunction requiring Defendants to comply with the two-year non-competition agreement that Defendant Nordquist signed during his Invacare employment.
For the following reasons, the Court GRANTS IN PART and DENIES IN PART Plaintiff's motion for a preliminary injunction.
Our economy ultimately depends on property rights, enforceable contracts, and free market competition. But when employers seek to limit competition by requiring their employees to agree to restrictive employment covenants, those foundational principals come into tension. That tension is on full display here.
Plaintiff Invacare and Defendant Ki Mobility both design, produce, and sell a wide variety of specialty wheelchairs and assistive seating devices. Both companies have the same three major customers—NuMotion, the Veterans Affairs Hospitals, and National Seating & Mobility (NSM). Those three customers account for between seventy and eighty percent of the market.
Each of these three major customers establish product formulary lists. Sales from companies on those formulary lists give purchasing agents higher commissions, and inclusion on the formulary lists is extremely important.
Defendant Michael Nordquist worked for Plaintiff Invacare for approximately thirteen years, from 2004 until September 2017.
On March 1, 2004, Defendant Nordquist and Plaintiff Invacare entered into a non-disclosure, non-competition, non-recruitment, and non-interference with customer relationships agreement.
At Invacare, Nordquist worked in product development roles. Most recently, Nordquist worked as a director of product management.
With his Invacare final position, Nordquist did not interact with customers in his day-to-day responsibilities.
As an Invacare director of product management, Nordquist participated in high level weekly and monthly meetings to discuss Invacare confidential information.
Additionally, Nordquist helped to develop Invacare's three-year strategic plan.
Because of his involvement in developing and implementing this three-year plan, Nordquist learned Invacare's general pricing strategy, product roadmap, and commercial initiatives (e.g. which parts of the market Invacare intends to emphasize) until 2020.
In October 2017, Ki Mobility hired Nordquist as a regional sales manager.
In his Ki Mobility employment, Nordquist meets with customers during two opportunities, when he travels with salespeople and at Ki Mobility trade show booths.
On January 9, 2018, Plaintiff Invacare sued Defendants Nordquist and Ki Mobility. Invacare alleges that Nordquist has breached his non-competition agreement and has misappropriated Invacare trade secrets. Invacare also alleges that Defendant Ki Mobility unlawfully induced Nordquist to breach his non-competition agreement.
On April 6, 2018, Invacare moved for a preliminary injunction against Defendants. Invacare seeks an injunction to enforce its restrictive covenants against Defendants Nordquist and Ki Mobility. On May 3, 2018, the Court conducted a hearing on this motion.
In deciding whether to grant injunctive relief under Federal Rule of Civil Procedure 65, the Court considers four factors: (1) the movant's likelihood of success on the merits; (2) whether the movant will suffer irreparable harm without the injunction; (3) whether granting the injunction will cause substantial harm to others; and (4) the injunction's impact on the public interest.
The Court finds that Plaintiff Invacare has shown a likelihood of success on the merits of its breach of contract claim. The Court also finds that Invacare has shown a threat of irreparable harm. While the harm to others and public interest factors have little bearing on this case, the Court finds that the first two factors weigh in favor of granting the injunction. Therefore, for the reasons explained below, the Court will GRANT IN PART Invacare's motion for a preliminary injunction.
Invacare brings breach of contract, misappropriation of trade secrets, and tortious interference with contract claims. Invacare premises its preliminary injunction motion and evidence primarily on its breach of contract claim. The Court finds that Invacare's likelihood of success on this claim supports injunctive relief.
Based on the evidence presented thus far, Invacare will likely be able to prove that a valid contract exists between itself and Defendant Nordquist, and that Nordquist broke the restrictive covenants in that contract.
At this early stage, the evidence suggests that Ki Mobility directly competes with Plaintiff Invacare. Nordquist signed an agreement to work for Ki Mobility while still employed by Invacare and began working for Ki Mobility only days after he resigned from Invacare. These actions plainly violate the competitive employment restrictions in the agreement Nordquist signed.
However, under Ohio law,
The primary merits question then, is not whether Nordquist breached the agreement's terms, but whether the restrictive covenants' terms were reasonable. At this early stage, Plaintiff has shown that the restrictive covenants' terms were reasonable in some, but not all, respects.
Ohio courts disfavor restrictive covenants.
When determining the reasonableness of a restrictive employment covenant, Ohio courts consider:
The agreement Nordquist signed prohibits him from working for or assisting any "Competitor" in the United States for two years after his Invacare employment ends.
In turn, "Competitive Product" is defined as:
Essentially, this agreement stops Nordquist from working in the United States seating and mobility industry in any capacity for two years after his Invacare employment ends. Further, the agreement prohibits Nordquist from any "contact" with Invacare's customers for two years.
This agreement appears somewhat overbroad in protecting Invacare's legitimate interest in protecting its confidential information and preventing unfair competition. The agreement apparently prohibits all competition by Nordquist. Indeed, the agreement's terms would seemingly prohibit Nordquist from engaging in totally non-competitive employment for another company in the wheelchair industry, such as being a maintenance worker or a janitor. As other courts have recognized, a "total ban on any employment in any position with any competitor is not a ban on unfair competition, but a total ban on competition itself, producing a disproportionate benefit to the employer to the employee's detriment."
In sum, the preliminary evidence suggests that while some of the agreement's terms are valid, others are overly broad. Therefore, the Court will enforce some, but not all, of the restrictive covenants.
Under Ohio law, restrictive employment covenants are not "all or nothing." Instead, Ohio law "permits courts to determine, on the basis of all available evidence, what restrictions would be reasonable between the parties."
Nordquist was intimately involved in the development, pricing, sale, and marketing of a subset of Invacare's product lines.
Invacare keeps all of this information confidential in several ways. These include marking sensitive documents "confidential," limiting distribution of confidential documents to only those employees that attend certain meetings, and requiring its major customers to sign nondisclosure agreements regarding Invacare's pricing.
Further, as a result of his thirteen years of Invacare employment, Nordquist developed significant customer relationships.
Against this backdrop, the Court finds that Invacare has a legitimate interest in maintaining its pricing and operations information's confidentiality. Invacare also has a legitimate interest in ensuring that Ki Mobility, or any other competitor, cannot use Invacare's confidential information to gain an unfair competitive advantage. Finally, Invacare has a legitimate interest in ensuring that Nordquist does not leverage his Invacare customer relationships to cause a loss of customer goodwill towards Invacare.
Because of these legitimate interests, at this early stage, Invacare's temporal restrictions seem reasonable. Invacare presented evidence that Nordquist worked on Invacare's three-year product plan, and Invacare's restrictive covenant only limits Nordquist's employment for two years. A two-year restriction on positions that could take advantage of Invacare's confidential product development information therefore seems reasonable.
Regarding the contract's geographic restrictions, Invacare shows evidence that Nordquist was involved with its three major customers—NuMotion, NSM, and the Veterans Affairs Hospitals. Each relationship was national in scope. A nationwide geographic restriction is supported.
Therefore, the Court finds that Invacare is likely to succeed in proving that a Court-fashioned restrictive covenant is necessary to the extent that it prevents Nordquist from utilizing the confidential information he learned from his Invacare employment and prevents him from leveraging his Invacare customer relationships.
"A plaintiff's harm from the denial of a preliminary injunction is irreparable if it is not fully compensable by monetary damages."
Invacare argues that it will suffer irreparable harm because the potential damage from Nordquist disclosing Invacare's confidential information or unfairly utilizing his customer relationships would be impossible to quantify.
As an initial matter, the Court notes that Invacare has not presented any evidence of actual harm. Invacare offers evidence that Nordquist has interacted with customers during his Ki Mobility employment, but Invacare has provided no evidence that it lost any business or customer goodwill as a result of Nordquist's Ki Mobility employment.
Invacare argues that, in spite of the lack of actual harm evidence, it will suffer irreparable harm because of the inevitable disclosure doctrine.
The inevitable disclosure doctrine holds that a threat of irreparable harm "can be shown by facts establishing that an employee with detailed and comprehensive knowledge of an employer's trade secrets and confidential information has begun employment with a competitor of the former employer in a position that is substantially similar to the position held during the former employment."
Defendants do not contest that Nordquist possesses knowledge of Invacare's confidential information and trade secrets,
As both an Invacare product manager and as a Ki Mobility sales manager, Nordquist's ultimate goal is to maximize the sales of his employer's products. In both roles, he accomplishes this goal by interacting with customers at trade shows and in other venues, and by ensuring that his employer's product better fits a customer's needs than the competitor's product.
Nordquist's roles with Ki Mobility and Invacare differ in their stages in the lifecycle of a sale. As an Invacare product management director, Nordquist worked from the beginning of a sale, developing and pricing the product. He necessarily interacted with customers, especially in regards to getting the product on a customer's formulary.
Although these roles' day-to-day activities may differ, all of the information Nordquist gained in Invacare product management would be useful to him in selling Ki Mobility products. This is so for two reasons. First, the products Nordquist sells at Ki Mobility directly compete with Invacare products that he developed.
Therefore, Nordquist's Invacare and Ki Mobility roles appear substantially similar, and so the inevitable disclosure doctrine likely applies. The inevitable disclosure doctrine therefore establishes a threat of irreparable harm.
Additionally, Invacare introduced substantial evidence that Nordquist has already taken advantage of his Invacare-developed customer relationships in his Ki Mobility employment. Nordquist demonstrated Ki Mobility's products to customers at a major industry trade show.
If Nordquist discloses any Invacare confidential information or unfairly takes advantage of his Invacare customer relationships, the full extent of the damage to Invacare would be difficult, if not impossible, to calculate. Ohio courts have recognized that injunctive relief is appropriate when the disclosure of confidential or trade secret information might lead to difficult-to-measure damages.
For those reasons, Invacare has established that it may suffer irreparable harm without an injunction.
Neither of these factors tilts the scales in favor of either party.
There is little risk of substantial harm to any non-party as a result of any injunction or lack thereof. There may be some minimal harm to Ki Mobility's customers from removing Nordquist's substantial experience from the marketplace. But this harm is speculative and neither party has presented any evidence of how it might manifest.
Additionally, public interest considerations are essentially balanced between the parties. On one hand, Nordquist possesses Invacare confidential information, and the public interest is served by preventing unfair competition and by upholding valid contracts between employers and employees. On the other, as discussed previously, our economy is based upon business competition. Broad restrictive employment covenants can stifle competition.
Regardless, neither of these considerations is so hefty in this case as to play anything more than the most minor role in the Court's analysis.
Because of Invacare's likelihood of success on the merits and the threat of irreparable harm, the Court finds that a preliminary injunction is necessary. Nordquist had access to a significant amount of Invacare confidential information that would provide an unfair Ki Mobility advantage. Additionally, Nordquist's Ki Mobility employment allows him to take unfair advantage of customer relationships that Nordquist developed and cultivated at Invacare.
The terms of the injunction are as follows:
The Court sets the bond in this case at $25,000. This order will become effective upon Plaintiff Invacare's posting of such bond with the Clerk of Courts.
For those reasons, the Court
IT IS SO ORDERED
