O'Hara v. Globus Med., Inc.

• Decision Date: 12 August 2015
• Docket Number: No. 2014 CW 1436R.,2014 CW 1436R.
• Citation: 181 So.3d 69
• Parties: Patrick O'HARA and Wallace Schaefer v. GLOBUS MEDICAL, INC., and Vortex Spine, LLC.
• Court: Court of Appeal of Louisiana — District of US

181 So.3d 69

Patrick O'HARA and Wallace Schaefer
v.
GLOBUS MEDICAL, INC., and Vortex Spine, LLC.

No. 2014 CW 1436R.

Court of Appeal of Louisiana, First Circuit.

Aug. 12, 2015.
Rehearing Denied Sept. 23, 2015.

181 So.3d 71

Kyle Schonekas, Patrick S. McGoey, Andrea V. Timpa, New Orleans, LA, for Relators Patrick O'Hara and Wallace Schaefer.

Greg Murphy, Baton Rouge, LA, Sarah E. Bouchard, Brandon J. Brigham, Philadelphia, PA, for Respondent Globus Medical, Inc.

Before PETTIGREW, WELCH, HIGGINBOTHAM, THERIOT and CHUTZ, JJ.

WELCH, J.

This writ application comes before us on remand from the Louisiana Supreme Court for briefing, argument and full opinion. The issue raised by the application is whether the trial court erred in denying the plaintiffs' motion for partial summary judgment and in determining that Pennsylvania law, rather than Louisiana law, governed the plaintiffs' No Competition, Non–Disclosure Agreements ("NCND agreements"). For reasons that follow, we reverse the judgment of the trial court, grant the plaintiffs' motion for partial summary judgment, and remand this matter for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

The plaintiffs, Patrick O'Hara and Wallace Schaefer, filed a petition for declaratory judgment against the defendants, Globus Medical, Inc. ("Globus"), a Delaware corporation that has its principal place of business in Pennsylvania, and Vortex Spine, LLC ("Vortex"), a Louisiana limited liability company. In the petition, the plaintiffs sought to have certain restrictive covenants declared unenforceable pursuant to La. R.S. 23:921.

According to the plaintiffs' petition, they have made their living for several years in the field of medical equipment sales and related services in Louisiana. The plaintiffs alleged that they acted as sales representatives for Vortex (a distributor for Globus), which manufactures, distributes, and sells products and services for spinal surgery, but that they have never been employed by Globus.

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An exclusive distributor agreement ("EDA") governed the relationship between Globus, Vortex, and Vortex's principal, James Long; the plaintiffs are not parties to the EDA. The EDA was in effect from January 1, 2010, through April 18, 2014. The EDA describes the "Exclusive Distributor" status of Vortex as follows:

Company hereby grants to Distributor the exclusive right to sell in the Region described on Exhibit A attached hereto and made a part hereof, all Company products sold and distributed, including all surgical implants, instruments and associated accessories, and provision of services related thereto ... and Distributor hereby accepts such grant, all subject to the conditions, limitations and provisions set forth in this Agreement. Initially, the Region shall consist of seven (7) Territories as described in Exhibit A.¹

The EDA contains a section addressing confidentiality/no competition, which provides, in part, that "neither Distributor [Vortex] nor any of its employees, agents, representatives, nor Principals ... shall, directly or indirectly, become ... a proprietor, stockholder, director, officer, employee, agent, representative or member of any entity in the continental United States which is engaged in the medical products business." The EDA further provides that "the parties have expressly agreed that this Agreement, the parties' performance hereunder[,] and the relationship between them shall be governed by, construed[,] and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to the principles thereof regarding conflicts of laws."

Mr. Schaefer executed an "Exclusive Distributor Representative No Competition and Non–Disclosure Agreement" with Vortex on July 25, 2011 ("Schaefer NCND Agreement"), although the form agreement was supplied by Globus to Vortex pursuant to the EDA. Mr. Schaefer signed the agreement under the signatory line for "agent," and Mr. Long signed under the signatory line for "Company."² This agreement contained the following "Acknowledgements":

A. The Company is engaged in the sale of products and services for spine surgery ("Products"), including the exclusive sale and distribution of products ("Globus Products") for Globus Medical, Inc. "Globus") within a defined geographical territory ("Globus Territory").

B. Agent performs sales and distribution services for and on behalf of the Company, either as a direct employee or through an independent service contract, including services in connection with the sales and distribution of Globus Products.

C. For purposes of the NCND Agreement, Agent's performance of services and receipt of compensation from the Company will be defined as the Agency Agreement (the "Agency Agreement") between the Agent and the Company, whether or not a written agreement exists between the Agent and the Company

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governing said services and compensation.

D. For purposes of the NCND Agreement, the Agency Agreement Term ("Agency Agreement Term") shall be defined as the time period during which the Agent performs said sales and distribution services on behalf of the Company.

E. For purposes of this NCND Agreement, the NCND Territory ("NCND Territory") shall be defined as the geographic area assigned to the Agent within the most recent 12 months of the Agency Agreement Term. In the event that the Agent has been assigned certain accounts and not a geographic area, the NCND territory shall be defined as the geographic area within a 10–mile radius of each assigned account. In the event the Agent has not been assigned specific accounts or a specific geographic region, the NCND Territory shall be defined as the Globus Territory.

* * *

G. For purposes of the NCND Agreement, Medical Personnel ("Medical Personnel") shall be defined as orthopedic surgeons, neurosurgeons, physicians, nurses[,] and other medical personnel involved in the implantation and other handling and usage of the Products.

H. For purposes of this NCND Agreement, Hospitals ("Hospitals") shall be defined as hospitals, surgery centers, medical centers[,] and other health care facilities that purchase Products and the location at which Medical Personnel perform services related to the implantation and other implantation and other handling and usage of the Products.

I. Agent will have access to confidential, proprietary[,] and trade secret information ("Confidential Information") belonging to the Company and/or to Globus....

J. Agent will receive information and be trained in the highly technical, competitive[,] and specialized business of spine surgery and spinal implants and instrumentation.

The Schaefer NCND Agreement also contained a "No Competition & No Solicitation Covenant" providing as follows:

1.1 Competitive Activity. For purposes of this NCND Agreement, Competitive Activity ("Competitive Activity") shall be defined as participation in, performance of services for, employment by, ownership of any interest in, or assistance, promotion[,] or organization of, any person, partnership, corporation, firm, limited liability company, association[,] or other business entity that manufactures, sells, markets[,] or distributes products or services used in spine surgery ("Competing Company")....

1.2 No Competition Period. For purposes of this NCND Agreement, the No Competition Period ("No Competition Period") shall be defined as the time period encompassing both the Agency Agreement Term and the 12–month period immediately after the termination of the Agency Agreement.

1.3 No Competition or Solicitation Covenant. Agent agrees not to engage in any Competitive Activity with any Hospitals or Medical Personnel during the No Competition Period in the NCND Territory. Furthermore, during the No Competition Period, Agent agrees not to directly or indirectly, either for the Agent's benefit or the benefit of another entity, solicit, call on, interfere with, or attempt to divert, entice away, sell to[,] or market to any customer, Hospital[,] or Medical Personnel in the NCND Territory.

1.4 No Solicitation of Company's Agents or Employees. During the No

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Competition Period, Agent agrees not to directly or indirectly, either for the Agent's benefit or the benefit of another entity, employ or offer to employ in any capacity; contact or recommend for employment with a Competitive Company; contact or recommend for the purposes of entering into a contractual relationship with a Competitive Company; solicit, call on, interfere with, or attempt to divert, or entice away; any individuals who were agents, independent contractors, representatives[,] or employees of the Company or of Globus on the date that the Agency Agreement was terminated or for the 12–month period immediately preceding the termination of the Agency Agreement.

The Schaefer NCND Agreement also provided that "Company has agreed to assign its rights and benefits under this NCND Agreement to Globus, if Globus so requests" and "[i]f such assignment occurs, Company and Agent Acknowledge that Globus shall enjoy all of the rights and benefits of the Company under this NCND Agreement." Lastly, the Schaefer NCND Agreement provided that "[i]n order to maintain uniformity in the interpretation...