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DePuy Synthes Sales, Inc. v. Williams

United States District Court, D. Idaho

November 2, 2017

DEPUY SYNTHES SALES, INC., Plaintiff,
v.
RICHARD WILLIAMS, Defendant,

          MEMORANDUM DECISION AND ORDER RE: PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION (DKT. 3)

          HONORABLE RONALD E. BUSH, U.S. MAGISTRATE JUDGE.

         Pending is Plaintiff's Motion for Preliminary Injunction (Dkt. 3). Having carefully considered the record, heard oral argument, and otherwise being fully advised, the undersigned enters the following Memorandum Decision and Order:[1]

         SUMMARY OF DECISION

         Plaintiff's Motion for Preliminary Injunction is DENIED for failure to make a clear showing of likely success on the merits and for failure to make a clear showing of likely irreparable harm absent preliminary injunctive relief.

         BACKGROUND

         Plaintiff DePuy Synthes Sales, Inc. (“DePuy”) seeks a preliminary injunction barring Defendant Richard Williams (“Williams”) from taking actions that DePuy contends violate a non-competition agreement he signed when he began employment with DePuy. Williams is now working for Steelhead Surgical, Inc. (“Steelhead”), a competitor of DePuy.

         Through its Mitek Sports Medicine division, [2] DePuy designs, manufactures, and sells medical devices and instruments for the diagnosis and treatment of soft tissue joint injuries and conditions in the market for arthroscopic and sports medicine devices, instruments, and tools. Decl. of Stephen Stranzl ¶ 3 (Dkt. 3-6) (“Stranzl Decl.”). These products are used, as may be appropriate, in orthopedic surgeries involving the shoulder, elbow, hand, wrist, hip, knee, and ankle. Id. ¶ 4. Orthopedic surgeons use them to diagnose and treat various joint injuries or conditions such as ACL reconstruction and meniscus and rotator cuff repair. Id. The customers involved in buying such devices are primarily orthopedic surgeons, the medical centers where they perform procedures, and employees involved with purchasing medical devices. Id.

         DePuy hired Williams as an associate sales consultant in June 2015. Id. ¶ 7. In that role, according to DePuy, Williams “covered surgical cases in his territory, participated in sales strategy for his territory, and served as one of the faces of DePuy Synthes products for the customers in his territory.” Id. Prior to starting with DePuy, and as a condition of his employment, Williams signed an Employee Secrecy, Intellectual Property, Non-Competition and Non-Solicitation Agreement (the “Employee Secrecy Agreement”). Id. In broad terms, the Employee Secrecy Agreement purports to prohibit Williams from competing with DePuy for 18 months after the termination of his employment with DePuy. See generally Employee Secrecy Agreement (Dkt. 1-1). The parties dispute the enforceability and scope of the Employee Secrecy Agreement.

         As a DePuy sales representative, Williams worked in the Boise area. Stranzl Decl. ¶ 9 (Dkt. 3-6). He worked primarily with 10 DePuy customer accounts, which are the same customer accounts DePuy now seeks to enjoin Williams from contacting on Steelhead's behalf.[3] His responsibilities included attending surgeries and providing DePuy medical devices when asked. Decl. of Richard “Jake” Williams ¶ 21 (Dkt.15-1) (“Williams Decl.”). Williams likens his role to that of a golf caddy, handing equipment to the professional upon request. Id. Most of Williams's work involved knee surgeries, but he also had connections to some shoulder surgeries and he observed some hand surgeries. Id. ¶¶ 20, 23.

         The parties dispute the circumstances of Williams's departure from DePuy. Williams claims he was shown the door after being led to believe by his supervisor, Bob Davis, and the regional manager, Stephen Stranzl, that his job was in jeopardy. Id. ¶¶ 26, 27, 29. Davis and Stranzl both claim that Williams's job at DePuy was not in jeopardy and that nobody at DePuy suggested to Williams that it was. Supplemental Decl. of Stephen Stranzl ¶¶ 15-17 (Dkt. 21-1) (“Stranzl Supplemental Decl.”); Decl. of Robert “Bob” Davis ¶¶ 14-16 (Dkt. 21-2) (“Davis Decl.”). Regardless, on August 28, 2017 Williams submitted his notice of resignation, effective September 11, 2017. Stranzl Decl. ¶ 18 (Dkt. 3-6). On September 11, 2017, Williams began working at Steelhead. Williams Decl. ¶ 31 (Dkt. 15-1).

         Steelhead distributes sports medicine devices manufactured by Arthrex. DePuy considers both Steelhead and Arthrex competitors. Stranzl Decl. ¶ 18 (Dkt. 3-6). Orthopedic surgeons in the Boise area commonly use products from both DePuy and Steelhead/Arthrex, sometimes even during the same surgery. Williams Decl. ¶¶ 33, 38-39.

         DePuy concluded that Williams intended to represent Steelhead in the same customer accounts he serviced for DePuy. DePuy's counsel sent Williams a letter demanding he comply with the Employee Secrecy Agreement. Decl. of Christopher M. Lindstrom ¶ 2 (Dkt. 3-2); see also (Dks. 3-3). When Williams began representing Steelhead to DePuy customers, DePuy's counsel sent a cease and desist letter. Decl. of Christopher M. Lindstrom ¶ 4 (Dkt. 3-2); see also (Dkt. 3-5). Subsequently, DePuy filed this lawsuit and now moves for a preliminary injunction. Subject matter jurisdiction exists under 28 U.S.C. § 1334, as the diversity and amount-in-controversy requirements are satisfied.

         DISCUSSION

         A. Legal Standards

         Preliminary injunctions are governed by Federal Rule of Civil Procedure 65. “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). A party seeking a preliminary injunction must establish that (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) an injunction is in the public interest. Id. at 20. The court may apply a sliding scale test, under which “the elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another.” Id. However, the party seeking a preliminary injunction must carry its burden of persuasion by a “clear showing” of the four required elements. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam); Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (a “preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion”) (quoting Mazurek, 520 U.S. at 972).

         B. A Preliminary Injunction Is Not Warranted.

         1. DePuy Has Not Clearly Shown A Likelihood of Success on the Merits.

         To succeed on its motion for preliminary injunction, DePuy must demonstrate it is likely to succeed on the merits of its claims. DePuy alleges Williams is liable for breaching the Employee Secrecy Agreement. To evaluate whether DePuy is likely to succeed on this claim, the Court must first determine what law governs the Employee Secrecy Agreement.

         a. New Jersey Law Applies to the Employee Secrecy Agreement.

         A federal district court sitting in diversity must apply the forum state's choice of law rules to determine the controlling substantive law. Fields v. Legacy Health Sys., 413 F.3d 943, 950 (9th Cir. 2005). Idaho, the forum state, applies the Restatement (Second) of Conflict of Laws, including section 187 thereof. Carroll v. MBNA America ...


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