A recent trade secrets case in the U.S. District Court for the Central District of Illinois may make individuals think twice before they attempt to recruit a proxy to get around a noncompete clause. (Orthofix Inc. v. Melissa Gordon (2016 WL 1170896))
Medical device company Orthofix Inc. sued former sales representative Melissa G. for violating the non-solicitation, unfair competition, and nondisclosure provisions of her employment contract; appropriating trade secrets in violation of the Illinois Trade Secrets Act (ITSA); and tortious interference with its business relations.
Orthofix sells “bone growth stimulators,” which purportedly promote the healing of broken bones, to physicians. Melissa worked for Orthofix from 2007 until March 2013. Melissa’s sales territory was central Illinois, later expanding to Chicago, and her job involved keeping detailed notes on physician clients. Upon hire, she signed an agreement promising not to do business with Orthofix customers or compete with the company for one year following separation, nor disclose its trade secrets or confidential information.
The circumstances surrounding Melissa’s separation from the company are disputed by the parties, but in 2013 she was either terminated or quit as a result of changes Orthofix made to her sales territory. Melissa then joined Orthofix’s competitor DonJoy Orthopedics, where she worked in the same geographic region, but for the first year sold products that she claimed were non-competitive with Orthofix’s.
Melissa soon recruited former Orthofix colleague Kelly B. to work for DonJoy. At DonJoy, Kelly began selling bone growth stimulators in Melissa’s old sales territory. After Melissa’s contractual noncompete period with Orthofix expired, she took over Kelly’s job and resumed selling the stimulators to her former customers in central Illinois. Orthofix contends that Melissa was using Kelly as a “cat’s paw” to allow DonJoy access to Melissa’s former doctor clients during the period that she was contractually barred from doing business with them. As evidence, Orthofix pointed to the fact that Melissa resumed a direct sales role after her year was up, and admitted to having accompanied Kelly to meet with her former clients on several occasions.
Melissa moved for summary judgment on the grounds that the restrictive employment covenants were unenforceable, and the physician information she acquired while at Orthofix were not trade secrets within the meaning of ITSA.
The court agreed with Orthofix that its client relationships with physicians could be sufficient to justify a restrictive covenant, and denied Melissa summary judgment on that point. It also rejected Melissa’s argument that the physician information was not confidential information within the meaning of the confidentiality clause, and that it did not fall under the protections of ITSA. Judge Sara Darrow concluded that the compiled data was of sufficient economic value to Orthofix and that a jury could find Orthofix made reasonable efforts to keep it secret.
As far as Orthofix’s tortious interference claim, the judge ruled the company had presented adequate evidence that Melissa solicited Kelly to be her proxy to sell bone growth stimulators to her former Orthofix clients as a way of circumventing her noncompete agreement.
“Kelly was hired for just one year to serve Melissa’s former clients in central Illinois, despite her lack of sales experience, then replaced by Melissa when the year was up,” Darrow wrote. “A reasonable jury could conclude that this constituted “purposeful interference” with Orthofix’s business expectancies.”
Our Chicago non-compete agreement, employment law and business dispute attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.
Lubin Austermuehle a firm of Chicago business dispute lawyers handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Tinley Park, Downers Grove, Oak Brook and Chicago have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.
Lubin Austermuehle a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Our firm has also handled many shareholder and LLC disputes between owners of closely held corporations, and LLCs.
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