Court Enforces One Year Employment Agreement Restrictive Covenant
In the business law and commercial litigation case of Synthes USA Sales, LLC vs. Harrison, PICS Case No. 14-0880 (C.P. Chester, May 19, 2014), the Honorable Mark L. Tunnel, in a lengthy 40 page opinion, found that the non-solicitation agreement was reasonable and enforceable, plaintiff was likely to succeed on its claims of breach of contract and tortuous interference, plaintiff had suffered and would continue to suffer irreparable harm if a preliminary injunction were not issued, and that injunctive relief was in the public interest. Court Enforces One Year Employment Agreement Restrictive Covenant.
Synthes, based in Chester County, Pa., designed, manufactured and sold various devices for use in orthopedic surgery. When Harrison joined Synthes as an associate sales consultant, he signed an agreement that prohibited him from soliciting Synthes’ customers and prospective customers and from competing with Synthes in the same territory for one year after termination of his employment. When he was promoted to sales consultant, he signed a new agreement as a condition of the promotion that contained a non-solicitation covenant (NSC). He was assigned to a territory in California.
Five years later, he resigned from Synthes and immediately following his resignation, began employment with defendant Globus Medical Inc., a direct competitor of Synthes. He immediately contacted, solicited, provided services to, and made Globus sales to the top Synthes customers in his territory and continued to do so.
Synthes sought an injunction restricting Harrison’s activities for one year from the date of the most recent hearing to ensure that it got the “benefit of its bargain” or at the very least for 12 months form the last breach of the agreement.
The court held that the NSC was incident to Harrison’s employment relationship with Synthes. It then found that the NSC was reasonable as to time and geographic scope since it prohibited soliciting of Synthes’ customers or prospects for one year and within a specifically defined territory.
Noting that Pennsylvania courts recognize that an employer’s trade secrets, customer goodwill, and specialized training and skills acquired from the employer are all legitimate interests protected through a general restrictive covenant, the court found that Synthes had invested significant sums and effort in providing extensive training to all sales consultants, including Harrison. Synthes supplied Harrison with its annual business plans, including special pricing with certain hospitals and “pipeline” information regarding product development- proprietary and confidential information that it would not want a competitor to know. Harrison had developed relationships with his clients and goodwill as a result of Synthes’ efforts and investment in him. Thus, the court concluded that Synthes had legitimate business interest to protect that Harrison’s continued employment with Globus put at risk.
Additionally, the court held that Synthes was likely to succeed on its claims against Harrison for breach of contract and Globus for its tortuous interference with the NSC, noting that Harrison admitted that he began contacting and soliciting Synthes’ customers on the first day of his job at Globus, and that Globus was aware of the NSC.
The court also found that Synthes would suffer immediate and irreparable harm if an injunction was not issued since such harm was likely to result from Harrison’s carrying with him Synthes’ goodwill, customer relationships, and confidential information. Synthes would be unable to put a monetary value on the resource investment and competitive advantage lost as a result of Harrison’s conduct.
Finally, the court found that injunctive relief was proper because the balance of hardships weighed heavily in favor of Synthes and an injunction was reasonably suited to abate the offending conduct and was in the public interest as it would discourage unfair competition and the misappropriation and wrongful use of confidential information.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 37 PLW 544 (June 10, 2014)
Filed Under: Business Law; Business/Commercial Litigation: Restrictive Covenant Enforcement; Non-Solicitation Agreements Enforcement
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