Audiology Distribution, LLC v. Simmons

Decision Date27 May 2014
Docket NumberCase No. 8:12-cv-02427-JDW-AEP
PartiesAUDIOLOGY DISTRIBUTION, LLC, Plaintiff, v. DONNA M. SIMMONS et al., Defendants.
CourtU.S. District Court — Middle District of Florida
ORDER

BEFORE THE COURT are Defendant Donna Simmons' Second Amended Motion for Partial Summary Judgment (Dkt. 61) and Defendant Danelle Gallegos' Second Amended Motion for Partial Summary Judgment (Dkt. 62). Plaintiff responded in opposition to each motion (Dkts. 66, 67), and Simmons replied in support of her motion for partial summary judgment (Dkt. 76). Upon consideration, the motions (Dkts. 61,62) are GRANTED in part and DENIED in part. The motions are granted to the extent that HearUSA's internal policies and procedures do not create enforceable contractual obligations, and Simmons's motion is granted to the extent that Section 7(a)(i)(B) of the Employment Agreement is unreasonable in duration and is modified to be effective for six months after Simmons terminated her employment with Audiology. In all other respects, the motions are denied.

I. INTRODUCTION
A. Hear USA Acquires Doctor's Hearing Center.

Defendant Donna Simmons was the long-time owner and sole shareholder of an audiologyand hearing aid business known as Doctor's Hearing Center, Inc., where Danelle Gallegos1 worked as her assistant (Dkt. 47 ¶¶ 12, 20; Dkt. 55 ¶¶ 7, 10). On June 30, 2006, HearUSA, Inc. entered into an Asset Purchase Agreement to acquire the assets of Doctor's Hearing Center, including all "confidential or proprietary information" and "patient . . . files and records" (Dkt. 61-4; Dkt. 47 ¶¶ 15, 16; Dkt. 55 ¶ 7). On the same day, Simmons executed an Employment Agreement (Dkt. 61-7) and a Non Compete and Confidentiality Agreement (Dkt. 61-8).

Under the Employment Agreement, Simmons became HearUSA's Regional Manager for Southwest Florida for an "employment period" of three years, beginning June 30, 2006 (Dkt. 61 -7). Section 7 of the Employment Agreement addressed confidential information and customer lists:

7. Confidentiality; Return of Property.

(a) Employee acknowledges that Employee's work for the Company is expected to bring Employee into close contact with various confidential business data of the Company, its contracting parties, affiliates and customers not readily available to the public. Accordingly, Employee:

(i) convenants and agrees that (A) during the Employment Period, except pursuant to appropriate safeguards on confidentiality and only in connection with the business of the Company and (B) after the Employment Period, on any basis for any reason. Employee shall not use or disclose to anyone except authorized personnel of the Company or the Company's Affiliates (as defined below), whether or not for Employee's benefit or otherwise, any confidential matters (collectively, "Confidential Matters") concerning the Company or its suppliers, consultants, agents, other contracting parties or customers, whether such customers are deemed former, current or potential customers (collectively, the "Clients"), including without limitation all confidential technical information of the Company, secrets, trade secrets, proprietary software, copyrights, Client lists, lists of employees, . . . and other confidential business affairs, learned by the Employee, whether before or after the date hereof, concerning the Company, its Clients or a third party, including without limitation any [affiliates of the Company]; and
(ii) covenants and agrees that (A) all confidential memoranda, notes, lists (including, without limitation, mailing and Clientlists), records and other confidential documents, whether in written, electronic or other form (and all copies thereof) made or compiled by Employee or made available to him concerning the Company, its Clients and any Affiliates whether before or after the date hereof are the sole property of the Company, and (B) if such documents are in the possession or control of Employee, Employee shall deliver them, without retaining any copies thereof, to the Company promptly at the time of Employee's termination of employment or at any other time upon request by the Company.

(Dkt. 61-7 ¶ 7, at 5) (emphasis added).2

The Non Compete and Confidentiality Agreement (Dkt. 61-8) prohibited Simmons from competing with HearUSA within a specific geographic area, soliciting HearUSA customers, or hiring HearUSA staff for three years from her hire date (id. ¶ 1, at 2-3). The Agreement also required Simmons to agree "that for a period of THREE (3) years from the date hereof," she would not "directly or indirectly use or divulge . . . trade secrets or confidential proprietary information," including "customer data" (id. ¶ 2, at 3).

When it acquired Doctor's Hearing Center, HearUSA hired Gallegos as an administrative assistant to Simmons (Dkt. 62-1 at 7:23-24). On July 16, 2007, Gallegos executed the Agreement to Protect Business Information and Not to Improperly Compete (the "2007 Gallegos Agreement") (Dkt. 47-3), which contained confidentiality (id. ¶ 2), trade secret (id. ¶ 3), and non-compete (id. ¶ 4) provisions.3 Contemporaneously with the 2007 Gallegos Agreement, Gallegos also signed variousdocuments addressing HearUSA's internal policies and procedures.4

B. Audiology Acquires HearUSA.

HearUSA filed a voluntary petition for Chapter 11 bankruptcy on March 16, 2011.5 Plaintiff Audiology Distribution acquired substantially all of HearUS A's assets in the bankruptcy proceeding on September 9, 2011 (Dkt. 61 at 5; Dkt 66 at 6; Dkt. 61-6 ¶ 5).

On the same day, Audiology sent Simmons a letter titled "Employment Offer" (Dkt. 61-9). In the letter, Audiology "offer[ed]" Simmons "employment as a[n] Audiologist" (id ). The letter also stated that Simmons's "hire date [would] be [her] original hire date with HearUSA" (id). Appended to the letter was a Covenant Not-To-Compete. Simmons never signed the letter and did not acceptAudiology's offer of employment. Instead, she left her position at HearUSA (by then acquired by Audiology) on September 28, 2011, and started her own hearing aid business, Physicians Hearing Specialists, Inc.6

Gallegos received a similar letter from Audiology (the "2011 Gallegos Letter") offering her the position of Office Manager (Dkt. 62-3), which Gallegos signed and accepted.7 Sent with the 2011 Gallegos Letter was a set of documents including the Siemens Policies Acknowledgment, which Gallegos signed, certifying that she read and understood various Siemens8 policies, including theBusiness Conduct Guidelines, Code of Conduct, Electronic Communication Policy, and the Employee Patent & Secrecy Agreement (Dkt. 62-1 at 48; Dkt. 3915). Gallegos retained the position of Office Manager with Audiology until she was terminated on October 17, 2011 (Dkt. 62-1 at 23:3-11). After the termination, she immediately began working with Simmons at Physicians Hearing Specialists (id. at 23:1-4).

C. Simmons and Gallegos Copy Patient Information Sheets While Working for HearUSA and Audiology.

Simmons and Gallegos admit that they copied patient information sheets and charts at Audiology's Osprey, Florida office and took the copies with them after leaving Audiology (Dkt. 61-1 at 117:25-120:6, 121:16-19; Dkt. 62-1 at 24:19-25). The patient information sheets were provided to Paige Ligon, Simmons's accountant, who created a master client list from the files (Dkt. 61-1 at 164:5-10; Dkt. 62-1 at 29:3-9). The client list and the information obtained from the patient information sheets were used to send direct mail soliciting Audiology's clients (Dkt. 61-1 at 125:22-126:5), and to call "[a] few" clients to inform them of Simmons' move (Dkt. 61-1 at 111:25-l 12:6; Dkt. 62-1 at 29:11-20). Since starting Physicians Hearing Specialists, Simmons has seen over one hundred former patients of Audiology's who were on the list compiled by Ligon (Dkt. 61-1 at 167:20-23).

D. Simmons Sells Products to Audiology Customers.

While working for Audiology and before leaving to start Physicians Hearing Specialists, Simmons sold three hearing aids to Audiology clients at Audiology's office "through sources other than" Audiology. Simmons purchased the hearing aids wholesale and then retained the revenue without processing the purchase through Audiology (Dkt. 61 at 6 n.3; Dkt. 61-1 at 71:14-73:22, 81:20-82:6).

It is therefore undisputed that Simmons and Gallegos copied client information sheets whileworking at Audiology, gave that information to Ligon to compile a master client list, used the list to solicit Audiology clients through mail and over the phone, and sold hearing aids to Audiology customers in Audiology's office and retained the income without informing Audiology.

E. The Complaint

Audiology's operative complaint alleges six causes of action against Simmons, Gallegos, Ligon, and Physicians Hearing Specialists (Dkt. 47). Count I is a claim for breach of contract against Simmons for allegedly breaching the confidentiality provisions of her Employment Agreement and for breaching "the agreements and policies attached as Composite Exhibit 2" (Dkt. 47 ¶¶ 43, 44). Count II alleges that Defendants misappropriated trade secrets in violation of the Florida Uniform Trade Secrets Act, § 688.001 et seq., Florida Statutes, by taking patient contact and medical history information from Audiology for use in converting clients to Simmons's new business (Dkt. 47 ¶¶ 47-52). Count III is a claim for misappropriation of corporate opportunities against Simmons and Gallegos based on their outside sales of hearing aids and related services to patients while at Audiology (id. ¶¶ 55-58). Count IV alleges that Simmons and Gallegos breached their fiduciary duties owed to Audiology (id. ¶¶ 63-65). Count V is a claim for tortious interference with advantageous business relationships brought against all four Defendants (id. ¶¶ 68-72). And Count VI is a claim for breach of contract against Gallegos for allegedly breaching the confidentiality and non-compete provisions of the 2007 Gallegos...

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