Medtronic, Inc. v. Advanced Bionics Corp.

• Decision Date: 26 June 2001
• Docket Number: No. C0-00-1461, No. C8-00-1563.
• Citation: 630 N.W.2d 438
• Parties: MEDTRONIC, INC., Respondent, v. ADVANCED BIONICS CORPORATION, et al., Appellants.
• Court: Minnesota Court of Appeals

630 N.W.2d 438

MEDTRONIC, INC., Respondent, v. ADVANCED BIONICS CORPORATION, et al., Appellants.

Nos. C0-00-1461, C8-00-1563.

Court of Appeals of Minnesota.

June 26, 2001.

William Z. Pentelovitch, Richard G. Wilson, Wayne S. Moskowitz, Maslon Edelman Borman & Brand, LLP, Minneapolis (for respondent).

Michael A. Lindsay, Mitchell Granberg, Dorsey & Whitney, LLP, Minneapolis, and Michael J. Weber, Feldman, Gale & Weber, P.A., Miami Center, Miami, FL (for appellants).

Considered and decided by WILLIS, Presiding Judge, ANDERSON and FOLEY, Judges.

OPINION

DANIEL F. FOLEY, Judge¹

This case arises out of a noncompete agreement between appellant Mark Stultz and respondent Medtronic, Inc., his former employer. Stultz's new employer, appellant Advanced Bionics Corporation, and Stultz brought a complaint in California Superior Court challenging the agreement, and Medtronic brought a complaint in Minnesota district court seeking enforcement. This is a consolidated appeal from several orders for temporary injunctions. Advanced Bionics and Stultz challenge the injunction order and the exercise of jurisdiction by Minnesota. Because we agree with the district court's determination that Minnesota law applies to this dispute and that Minnesota has jurisdiction to issue temporary injunctive relief to enforce the limited noncompete agreement, we affirm.

FACTS

Medtronic is a Minnesota-headquartered medical technology corporation, which currently markets an implantable neurostimulator device designed to relieve chronic pain caused by neurological diseases. Advanced Bionics, a California-headquartered corporation, manufactures implantable neurostimulation devices to treat deafness and expects to have a pain neurostimulator, similar to Medtronic's device, on the market within two years. Both corporations conduct business nationwide.

In 1995, Mark Stultz began working for Medtronic in the management and marketing of spinal-cord stimulation products. Stultz was eventually promoted to product manager of the neurostimulation—pain division. When he began his employment with Medtronic, Stultz signed an employment contract containing a noncompete clause, which states, in part, that

for two (2) years after termination of employment he/she will not directly or indirectly render services (including services in research) to any person or entity in connection with the design, development, manufacture, marketing, or sale of a Competitive Product that is sold or intended for use or sale in any geographic area in which Medtronic actively markets a Medtronic Product or intends to actively market a Medtronic Product of the same general type or function * * *.

The agreement also included a choice-of-laws provision, which stated:

The validity, enforceability, construction and interpretation of this Agreement shall be governed by the laws of the state in which the Employee was last employed by Medtronic.

On June 5, 2000, Stultz signed an offer of employment with Advanced Bionics. Two days later, Stultz resigned from his employment with Medtronic, and Advanced Bionics filed a motion for declaratory and injunctive relief in California Superior Court. The complaint stated: "Stultz is the Director of SCS Business Development at Advanced Bionics, and works at [its] facilities in Sylmar, California." In fact, Stultz had not yet moved to California.

On June 8, Advanced Bionics filed an ex parte application in California for a temporary restraining order (TRO) to prevent Medtronic from "taking any action, other than in this court, to enforce its non-competition agreement with Mr. Stultz." In support of the motion, Stultz filed a declaration stating his intent to work and live in California. It was allegedly signed on June 7.² A hearing was scheduled for the next day.

On June 9, Medtronic removed the California action to federal court based on diversity. On the same day, Medtronic filed a motion in Hennepin County District Court for a TRO to prevent Advanced Bionics from taking action to interfere with the jurisdiction of the Minnesota court and from employing Stultz. The TRO was granted.

Advanced Bionics filed an amended complaint in California stating that Stultz was a Minnesota resident who intended to relocate to California. Because Stultz and Medtronic both resided in Minnesota, complete diversity was lacking. On June 16, the California federal court remanded the case to California Superior Court for lack of subject matter jurisdiction. The court found that Medtronic knew Stultz was a Minnesota resident and had violated its obligation to "reasonably investigate the facts before filing a notice of removal," but deleted a reference to "bad faith" removal that Advanced Bionics had included in the proposed order.

The California Superior Court denied Medtronic's motion to stay or dismiss pending a decision on the merits in Minnesota finding that the "interests of substantial justice will not be served by staying or dismissing this action." The California court retained jurisdiction over the case and held that Medtronic's assertion that Stultz's employment with Advanced Bionics and the use of the experience and the knowledge he gained at Medtronic would violate the noncompete agreement was "insufficient as a matter of [California] law."

On August 3, the Hennepin County District Court issued a temporary injunction prohibiting Advanced Bionics from interfering with the noncompete agreement between Stultz and Medtronic and barring Stultz from "providing service or assistance" to Advanced Bionics in connection with any spinal-cord stimulation device. The court analyzed the case under the factors set forth in Dahlberg Bros. v. Ford Motor Co., 272 Minn. 264, 274-75, 137 N.W.2d 314, 321-22 (1965). But the August 3 temporary injunction, unlike the June 9 TRO, did not include language restraining Advanced Bionics from pursuing the litigation pending in California.

On August 8, Advanced Bionics obtained an ex parte TRO in California enjoining Medtronic from participating in or taking any action in any court other than the California Superior Court to enforce the noncompete agreement against Stultz or to otherwise restrain Stultz from working for Advanced Bionics in California. This order prohibited Medtronic from taking any action in the Minnesota case. Medtronic sent a letter to the Minnesota court, informing it of the August 8 California TRO and asking for "guidance" as to how to proceed in view of the restrictions laid down by the California court.

On August 16, the Minnesota court amended its August 3 order nunc pro tunc, enjoining Advanced Bionics from seeking relief from any other court that would "restrict Medtronic from prosecuting its claims." The order noted that the June 9 TRO issued in Minnesota had contained this prohibition and the "failure to incorporate such language in [the August 3 temporary injunction] was a clerical error." The court further ordered Advanced Bionics to move to vacate or rescind the August 8 California TRO. In its findings of fact, the court noted that the California court had based its decision to grant relief at least in part on the fact that the California case was filed two days before the Minnesota action. But the district court found that Advanced Bionics had not made the "first-filed" argument in Minnesota. The court held that California does not have a "materially greater interest" in this case and that Minnesota law should apply.

On August 21, Advanced Bionics moved ex parte in California Superior Court to sanction Medtronic for writing the August 11 letter to the Minnesota court and for a permanent injunction against Medtronic. Advanced Bionics orally informed the California court of the Minnesota court's directive that Advanced Bionics seek to vacate the August 8 TRO. The California court denied the motions in totality.

On August 22, Advanced Bionics appealed to this court from the August 3 and 16 temporary injunction. Advanced Bionics also moved the district court for a stay of the nunc pro tunc order prohibiting Advanced Bionics from seeking relief from any other court or in any way seeking to limit the right of Medtronic to prosecute its claims.

On August 22, the district court in Minnesota held a pretrial conference. The court expressed its displeasure with Advanced Bionics's counsel, who failed to inform the court until that day that Medtronic's counsel had been enjoined by the California court from appearing. The court indicated that although Medtronic had written a letter advising of the August 9 ex parte TRO, the August 16 amendment nunc pro tunc was not in response to that letter, but rather on the court's own initiative. On August 25, the district court in Minnesota heard arguments from Advanced Bionics on the motion for a stay pending appeal. The court denied a stay pending this appeal and further amended the August 3 temporary injunction to preclude Advanced Bionics from seeking any "permanent" relief in California. Advanced Bionics then filed a second appeal, and we consolidated the appeals.³ On September 12, the California court amended the August 8 TRO to permit Medtronic to participate in this appeal.⁴

ISSUES

1. Did the district court err in failing to defer any ruling on a temporary injunction motion because related litigation was filed first in California?

2. Based on the doctrine of unclean hands, did the district court err in granting equitable relief to a party that "improperly" sought removal of related litigation in California?

3. Did the district court err in issuing the temporary injunction?

ANALYSIS

As a preliminary matter we address Advanced Bionics's concerns regarding the Minnesota district court's nunc pro tunc orders of August 16 and 25. Advanced Bionics argues that the orders are improper sua sponte amendments. But we find the nunc pro tunc orders proper under Minn.R.Civ.P. 60.01.

Minn.R.Civ.P. 60.01 allows clerical errors "arising from oversight or...