Depuy Orthopaedics, Inc. v. Waxman

• Decision Date: 13 September 2012
• Docket Number: No. 1D12–897.,1D12–897.
• Citation: 95 So.3d 928,34 IER Cases 307
• Parties: DePUY ORTHOPAEDICS, INC., a foreign corporation, Appellant, v. Peter WAXMAN, Scott Londy, and Justin Monteiro, Appellees.
• Court: Florida District Court of Appeals

95 So.3d 928

34 IER Cases 307

DePUY ORTHOPAEDICS, INC., a foreign corporation, Appellant,

v.Peter WAXMAN, Scott Londy, and Justin Monteiro, Appellees.

No. 1D12–897.

District Court of Appeal of Florida, First District.

Aug. 3, 2012.

Rehearing Denied Sept. 13, 2012.

John R. Stiefel, Jr., of Holbrook, Akel, Cold, Stiefel & Ray, P.A., Jacksonville; Deborah Pollack–Milgate and Dwight D. Lueck of Barnes & Thornburg, LLP, pro hac vice, Indianapolis, IN, for Appellant.

Warren D. Zaffuto and Harvey W. Gurland, Jr., of Duane Morris LLP, Miami, James L. Beausoleil, Jr., of Duane Morris LLP, pro hac vice, Philadelphia, PA, for Appellees.

LEWIS, J.

DePuy Orthopaedics, Inc. (“DePuy”), Appellant, timely appeals from the trial court's non-final order denying its motion for temporary injunction seeking to enforce non-compete covenants included in the Employment Agreements of Peter Waxman, Scott Londy, and Justin Monteiro, Appellees. We reverse and remand for entry of a temporary injunction.

I. FACTS AND PROCEDURAL HISTORY

DePuy manufactures and sells orthopedic products, and it promotes the sale of its products through independent distributors. However, the distributors do not re-sell DePuy's products. Instead, the distributors take orders for the products and submit those orders to DePuy. The distributors retain sales representatives to sell DePuy's products. The sale of orthopedic products involves the necessity of developing goodwill via relationships with hospital administrators and surgeons. Surgeons, patients, and hospital administrators associate the use of the products with DePuy, not with its distributors or sales representatives. In order to protect the goodwill developed through these relationships, DePuy requires its distributors to execute non-compete covenants with the distributor's sales representatives; also, DePuy requires that the covenants be assignable to itself. DePuy provides extensive sales training and service programs to its distributors.

DePuy has sold its products in southern Florida since the 1970's. From 1999 to May 1, 2011, Joint Venture, Inc. (“Joint Venture”), was DePuy's distributor for southern Florida. During the time Joint Venture distributed DePuy's products in southern Florida, it employed Waxman as a sales representative and later as a sales manager.

In December 2002, Waxman entered into an Employment Agreement with Joint Venture. In the Employment Agreement, Waxman agreed, upon termination of his employment, not to compete for a period of two years “in Indian River, St. Lucie, Okeechobee, Martin, Palm Beach, Broward, and Dade County, Florida, in the manufacturing, developing, marketing, selling, pricing, or performance of services or goods which are the same or similar to services or goods manufactured, developed, provided, sold, or leased by [Joint Venture].” The Employment Agreement was terminable at will. Further, the Employment Agreement provided in paragraph 34, under the heading “ASSIGNMENT,” as follows: “[Joint Venture's] rights and obligations under this Agreement shall inure to the benefit of and be binding upon [Joint Venture's] assigns and successors. Since this Agreement is personal to Employee, Employee's obligations under this Agreement may not be assigned or transferred to any other.”

In January 2006, Waxman entered into another agreement containing a non-compete covenant with Joint Venture; in return, he was promoted to the position of sales manager. The new non-compete covenant also lasted for a period of two years and covered various counties, including Indian River, St. Lucie, Okeechobee, Martin, Palm Beach, Broward, and Dade County. The new non-compete covenant also provided that all of the terms and conditions in Waxman's Employment Agreement remain in effect. Waxman performed services in most, if not all, of the southern Florida counties identified in the non-compete covenants.

Londy worked for Joint Venture as a sales representative for DePuy's products for many years. In January 2003, Londy also entered into an Employment Agreement that contained a non-compete covenant that was effective for two years upon termination and covered the same counties as Waxman's non-compete covenants. Londy performed services and received compensation for the counties covered by his non-compete covenant. Monteiro also worked for Joint Venture as a sales representative for DePuy's products for many years, and his Employment Agreement, executed in August 2003, contained the same non-compete conditions described above. To the extent that Monteiro was not directly involved in sales in all of the counties covered in his non-compete covenant, he participated in sales meetings regarding all of the counties. Both Londy's and Monteiro's Employment Agreements contained a clause, identical to the clause that was agreed to by Waxman, that permitted assignment of the non-compete covenants. Like Waxman's Employment Agreement, Londy's and Monteiro's Employment Agreements were terminable at will.

In March 2011, DePuy entered into an Amendment Agreement with Joint Venture and Mark DeBiase, Joint Venture's President. In the Amendment Agreement, Joint Venture agreed that effective midnight on April 30, 2011, it would no longer be the distributor for DePuy's products in Miami–Dade, Monroe, Broward, Palm Beach, Okeechobee, Martin, and St. Lucie Counties. The Amendment Agreement also provided that DePuy and its designees retain the sole right to enforce the non-compete covenants that Joint Venture had the right to enforce. Joint Venture assigned its rights in the identified counties, via the Amendment Agreement, in the following manner:

[Joint Venture] and [DeBiase] each hereby disclaims any right, title or interest in any and all intangible assets relating to the Counties, [DePuy's] Products in the Counties or the right to act as a sales representative of [DePuy] in the Counties (“ Intangible Assets ”). Such Intangible Assets include, without limitation, all intellectual property, goodwill, customer lists and the like regarding the Counties. If any rights in such Intangible Assets shall have become vested in [Joint Venture] or [DeBiase], each of them hereby assigns and conveys such rights to [DePuy].

On May 1, 2011, DePuy began distributing its products in these counties through a new distributor. Appellees learned before May 1, 2011, that Joint Venture would no longer be DePuy's distributor. On May 1, 2011, Appellees began working for their new employer. Approximately three weeks after Appellees began working for their new employer, Appellees began calling accounts in their former DePuy territories. Appellees executed an agreement with their new employer that they would be compensated even if they were enjoined from working in their former DePuy territories. Shortly after Appellees began calling the accounts, DePuy experienced a drop in sales with those accounts. DePuy's relationships with its customers were damaged.

After learning that Appellees began calling accounts in their former DePuy territories, Joint Venture and DePuy confirmed the assignment of Joint Venture's rights in an Assignment Document dated May 27, 2011. The Assignment Document provided in pertinent part as follows:

This assignment includes but is not limited to the right to enforce the covenants not to compete executed by the individuals and to pursue damages. The agreements and covenants assigned include but are not limited to the Employment Agreements between Joint Venture and [Appellees], and the Non–Compete Covenant between Joint Venture and Peter Waxman.

In July 2011, DePuy filed a verified complaint, claiming that Appellees violated their non-compete covenants. Also, DePuy filed an emergency motion for temporary injunction. Following an evidentiary hearing on DePuy's motion, the trial court entered an order denying DePuy's motion for injunction, finding that DePuy failed to prove irreparable injury. While the trial court noted that DePuy provided evidence that it had a drop in sales revenue in the counties mentioned in the non-compete covenant provisions, it stated that it was speculative at that point to assume that Appellees caused the drop in sales revenue. DePuy filed a motion for reconsideration, arguing that the trial court erred in finding that there was no irreparable injury because the applicable statute creates a presumption of irreparable injury if there is a violation of an enforceable restrictive covenant. DePuy argued that it was entitled to this presumption because the covenants were reasonable as to time, area, and line of business, and DePuy had proven that it had legitimate business interests in protecting its goodwill with customers. The trial court agreed that it erred and vacated the order.

After the trial court vacated its order, the trial court entered another order denying DePuy's motion for injunction. In its order, the trial court reasoned as follows:

The assignment clause of each defendant's employment contract with Joint Venture[ ], Inc. specifically states that “Since this Agreement is personal to Employee, Employee's obligations under this Agreement may not be assigned or transferred to any other.” In light of this language the assignment of May 27, 2011 by Joint Venture, Inc. to DePuy of the defendants' obligations under the employment contracts is prohibited. This contract language is consistent with Florida law on the subject of assignability of non-compete agreements by a former employer to a subsequent buyer or assignee. Sun Group Enterprises, Inc. v. DeWitte, 890 So.2d 410 (Fla. 5th DCA 2004); Corporate Express Office Products, Inc. v. Phillips, 847 So.2d 406 (Fla.2003); also see Wolf v. James G. Barrie, P.A., 858 So.2d 1083 (Fla. 2d DCA 2003). Under the circumstances plaintiff has no standing to enforce the covenants not to compete. For the reasons stated above and set forth in [Appellees'] memorandum.... [DePuy's] Emergency Motion for Temporary Injunction is denied.

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