Bennett v. Medtronic, Inc.

Decision Date27 March 2002
Docket NumberNo. 01-55966.,01-55966.
Citation285 F.3d 801
PartiesRufus L. BENNETT; Keith Valentine; Patrick Miles, Plaintiffs-Appellees, v. MEDTRONIC, INC., a Minnesota corporation; Medtronic Sofamor Danek, Inc., an Indiana corporation, Defendants-Appellants.
CourtU.S. Court of Appeals — Ninth Circuit

William Z. Pentelovitch (argued), Maslon Edelman Borman & Brand, Minneapolis, MN; James C. Martin, Crosby, Heafey, Roach & May, Los Angeles, CA, for the defendants-appellants.

Craig E. Hunsaker, Brobeck, Phleger & Harrison, San Diego, California, for the plaintiffs-appellees.

Appeal from the United States District Court for the Southern District of California, Jeffrey T. Miller, District Judge, Presiding.

Before: SCHROEDER, Chief Judge, CUDAHY,1 and McKEOWN, Circuit Judges.

OPINION

McKEOWN, Circuit Judge.

This case requires us to address the scope of the Anti-Injunction Act, 28 U.S.C. § 2283, in the context of a district court order restraining the parties from seeking to enforce non-compete agreements in state court. The Anti-Injunction Act prohibits a federal court from enjoining state court proceedings except "as expressly authorized by ... Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." Id. Because none of the exceptions are applicable here, we reverse the grant of injunctive relief.

BACKGROUND
I. THE PARTIES

This suit arises from Medtronic, Inc.'s effort to enforce covenants not to compete against former employees. Such covenants are variously referred to as non-compete or non-competition agreements. Medtronic acquired Sofamor Danek, Inc. and created a subsidiary, Medtronic Sofamor Danek, which is based in Memphis, Tennessee (collectively "Medtronic"). One of Medtronic's direct competitors is San Diego-based NuVasive, Inc. Both Medtronic and NuVasive design and manufacture devices relating to spinal surgery.

Three former Medtronic employees, Rufus Bennett, Keith Valentine, and Patrick Miles (collectively "the Employees"), entered into non-compete or confidentiality agreements with Medtronic or its predecessors. Medtronic alleges that the Employees violated these agreements by going to work for NuVasive after quitting their jobs with Medtronic.

The migration of a Medtronic employee to NuVasive spawned earlier litigation in Tennessee. In early 2000, NuVasive and Medtronic settled a suit with a factual and procedural history similar to the present one, and agreed that during an 18-month period between February 2000 and August 2001, they would litigate in Tennessee any of their disputes concerning non-compete agreements.

II. THE PRESENT LITIGATION

On March 13, 2001, Medtronic brought suit against NuVasive in Tennessee state court. Medtronic advanced two causes of action: (1) a claim for declaratory judgment that NuVasive's hiring of the Employees was in violation of their contractual obligations to Medtronic under Tennessee law, and (2) a claim of tortious interference with prospective business advantage based on inducement to breach fiduciary duty. Medtronic sought to enjoin NuVasive from employing the Employees during the pendency of the action and for two years after entry of final judgment. Five weeks later, Medtronic filed a first amended complaint in its Tennessee action, adding the Employees and alleging several new causes of action.2

One month after the Tennessee suit was filed, the Employees brought suit against Medtronic in California Superior Court. In their complaint, the Employees sought: (1) a declaration that the non-compete clauses in their contracts are unlawful under California Business and Professions Code § 16600, et seq., (2) an injunction preventing Medtronic "from taking further steps — in the Tennessee Lawsuit, or otherwise — that would impair [the Employees'] rights as California citizens and employees," and (3) relief under California's unfair competition laws from Medtronic's efforts to enforce the non-compete clauses. Medtronic removed this action to federal court.

On April 18, 2001 the Employees sought a temporary restraining order with respect to the pending proceedings in Tennessee state court. The district court granted the temporary restraining order for a thirty-day period, concluding that the injunction was "in aid of the court's jurisdiction, or necessary to protect or effectuate the court's judgment." The court also stated that the injunction was limited in scope because it would only "preclude Defendants from seeking to enforce Plaintiff's non-compete agreements in any court but" the federal district court in San Diego. Medtronic appeals from this order.

DISCUSSION

We first consider jurisdiction to review this order. Ordinarily, temporary restraining orders, in contrast to preliminary injunctions, are not appealable; however, the fact that an order is simply denominated as a "temporary restraining order" does not end our inquiry. See Geneva Assurance Syndicate, Inc. v. Med. Emergency Serv. Assoc., 964 F.2d 599, 600 (7th Cir.1992) (noting that "the name which the judge gives the order is not determinative."). It is the essence of the order, not its moniker, that determines our jurisdiction.

The Federal Rules of Civil Procedure provide that a temporary restraining order:

shall expire by its terms within such time after entry, not to exceed 10 days, as the court fixes, unless within the time so fixed the order, for good cause shown, is extended for a like period or unless the party against whom the order is directed consents that it may be extended for a longer period.

Fed.R.Civ.P. 65. For purposes of jurisdiction, an order that does not possess the essential features of a temporary restraining order will be treated like a preliminary injunction. See Sampson v. Murray, 415 U.S. 61, 87-88, 94 S.Ct. 937, 39 L.Ed.2d 166 (1974) ("where an adversary hearing has been held, and the court's basis for issuing the order strongly challenged, classification of [a] potentially unlimited order as a temporary restraining order seems particularly unjustified").

It can be safely said that "the court's basis for issuing the order [was] strongly challenged." Here, both parties had an opportunity to file extensive written materials and present oral argument. See San Francisco Real Estate Investors v. Real Estate Inv. Trust, 692 F.2d 814, 816 (1st Cir.1982) (describing these as "considerations that militate in favor of assuming jurisdiction."). The duration of the order also compels us to treat it as a preliminary injunction, considering that the district court granted relief for three times the period contemplated by Rule 65.

Thus, on its face, the district court's order does not comply with the strictures of a temporary order. Admittedly, the order is far from unlimited in temporal scope. Nonetheless, we cannot appropriately characterize the district court's order as a temporary restraining order. We conclude that the order is akin to a preliminary injunction and is therefore reviewable as an interlocutory decision under 28 U.S.C. § 1292.

I. THE ANTI-INJUNCTION ACT

The Anti-injunction Act provides as follows:

A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.

28 U.S.C. § 2283. The Supreme Court has confirmed what is facially apparent; the breadth of the Act's prohibition is broad. Atlantic Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S. 281, 286-87, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970). "Any doubts as to the propriety of a federal injunction against state court proceedings should be resolved in favor of permitting the state courts to proceed in an orderly fashion to finally determine the controversy." Id. at 297, 90 S.Ct. 1739.

The threshold question we address is whether the district court's order constitutes "an injunction to stay[state court] proceedings." Because the issue before us is a legal one, we review the injunction de novo. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir.2001).

Rule 65 permits an extension of a temporary order "for a like period," meaning an additional ten days. Here the initial order was for thirty days and nothing in the record suggests that Medtronic consented to the temporary restraining order's extended duration. In their motion for a temporary restraining order, the Employees asked for an order against Medtronic "filing any paper, participating in any proceeding, posting any bond, or taking any other action in the Tennessee lawsuit, or in any other forum other than this proceeding ..." The effect of the court's order granting the motion is to halt the Tennessee proceedings.

It has been suggested that the Act does not apply because the district court order enjoins Medtronic rather than the Tennessee proceeding itself and because the claims and the parties in the two cases are different. The first argument is belied by the district court's language which "precludes Defendants from seeking to enforce Plaintiffs' non-compete agreements in any court" except the federal district court in San Diego. Ordering the parties not to proceed is tantamount to enjoining the proceedings. "It is settled that the prohibition of Section 2283 cannot be evaded by addressing the order to the parties...." Atlantic Coast, 398 U.S. at 287, 90 S.Ct. 1739 (citations omitted). And, although NuVasive is not a party to the California action, both Medtronic and the Employees are parties to the suits in Tennessee and California. The claims in the two cases are intimately linked, albeit not identical. Regardless, the identicality of claims or parties is not the touchstone of the Act. The Act prohibits federal courts from enjoining state court proceedings, which is exactly what occurred here. Thus, the Act's prohibition is...

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