Taylor v. Cordis Corp.

• Decision Date: 30 April 1986
• Docket Number: Civ. A. No. J86-0128(L).
• Citation: 634 F. Supp. 1242
• Parties: Daniel J. TAYLOR, Plaintiff, v. CORDIS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

634 F. Supp. 1242

Daniel J. TAYLOR, Plaintiff, v. CORDIS CORPORATION, Defendant.

Civ. A. No. J86-0128(L).

United States District Court, S.D. Mississippi, Jackson Division.

April 30, 1986.

Harry E. Neblett, Jr., Copeland, Cook, Taylor & Bush, Jackson, Miss., for plaintiff.

Neville H. Boschert, Watkins, Ludlam & Stennis, Jackson, Miss., for defendant.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause came before the court on the complaint of plaintiff Daniel J. Taylor for a declaratory judgment, pursuant to 28 U.S.C. §§ 2201 and 2202, that a non-competition agreement in Taylor's contract of employment with defendant Cordis Corporation (Cordis) is void and unenforceable. Cordis counterclaimed for a preliminary injunction to enforce the agreement. Following a hearing on February 28, 1986, this court on March 4, 1986 entered a temporary restraining order enjoining Taylor from soliciting or contacting any customer, client or lead with whom he had contact in Mississippi, less the Gulf Coast area, during his employment by Cordis, for the purpose of sales of products or services in competition with Cordis. In the instant action, Cordis seeks a preliminary injunction incorporating and extending the relief granted in the temporary restraining order, and further seeks to have the court broaden its order to prevent Taylor from contacting, for the sale of any medical product, any customers, clients or leads he acquired while employed by Cordis. Upon a review of the evidence adduced at the bench trial, the court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

Taylor began working as a medical supplies salesman for McNees Medical Supply after his graduation from college in 1969 and he has been in medical supplies sales since that time. Upon leaving McNees in 1974, Taylor worked for Deseret, selling intravenous products, EKG equipment and surgical products, until 1977. From 1977 to 1981, Taylor was a sales manager for Healthco for which he sold medical supplies and prostheses within a fifty-mile radius of Jackson, Mississippi. At no time between 1969 and 1981 did Taylor market or sell heart pacemakers or pacemaker products.

Taylor began his employment with Cordis on February 13, 1981. The Cordis products line which Taylor was authorized to sell included heart pacemakers, pacemaker lead introducers and vascular catheters. Shortly after he started with Cordis, Taylor was sent to Memphis, Tennessee for a technical training course in anatomy, physiology and electrophysiology. He subsequently attended a training course in Cordis products in Miami, Florida. Additionally, he received miscellaneous periodicals and other documents relating to pacemaker technology, which information was regularly updated through company newsletters and information sheets distributed over the course of his employment. Thomas V. Brown, Cordis' vice president of sales and marketing for all of North America, testified at trial that the extent of the training that a new salesman must receive depends upon his prior sales experience and his knowledge of pacemaker technology. Brown stated that the pacemaker sales industry is a highly technical, dynamic and competitive one and that it requires even a superlative salesman some time to "work up to speed" in the field of pacemaker sales. Although Taylor had extensive experience in sales of medical supplies in the Mississippi area and was familiar with the local physicians who regularly implanted pacemakers, he received technical training on pacemakers during his employment with and at the expense of Cordis. It appears that it took him over a year to develop sufficient technical expertise, combined with cultivating the trust and confidence of the implanting physicians, to attract any significant portion of the market. This is evidenced by the fact that in fiscal year 1981-82, Taylor's first full year with the company, he sold 13 pacer units; in fiscal year 1982-83 he sold 84 pacer units; in fiscal year 1983-84 he sold 98 pacer units; and in fiscal year 1984-85 he sold 119 pacer units.

On February 13, 1981, the first day of Taylor's employment with Cordis, he signed as part of his employment contract a document entitled "Employment Agreement with Respect to Proprietory Information and Unfair Competition" (agreement). It was undisputed at trial that signing such agreement was a condition precedent to Taylor's employment with Cordis. Brown testified that such agreements are utilized by all the major competitors in the pacemaker business. Paragraphs 1 and 4 of the agreement read as follows:

1. That during your employment with Cordis and for six months after employment, you will not directly or indirectly own, operate, manage, consult with, control, participate in the management or control of, be employed by, maintain or continue any interests whatsoever in any enterprise that designs, manufactures, distributes, markets or promotes medical devices or their components in competition with Cordis (a "conflicting organization"), in the same geographical area for which you were primarily responsible at the time of termination of your employment, without the written consent of an officer of Cordis.

* * * * * *

4. You agree that during your employment with Cordis and for one year after termination of such employment, you will not solicit or contact any of the customers, clients, or leads with whom you have had contact during your employment by Cordis for the purpose of sales of products or services in competition with Cordis and will not disclose the names of Cordis' customers, clients, and leads or any part thereof, to any person or entity for any reason or purpose whatsoever.

The agreement delineates no specific geographical territory. Cordis representatives testified that the "Mississippi territory" comprised all of Mississippi except six counties: Pearl River, Stone, George, Hancock, Harrison and Jackson along the gulf coast. Although there is some confusion in the record concerning areas of northern Mississippi that were outside of the Mississippi territory, it appears that Taylor understood his territory to cover all of northern Mississippi with the possible exception of some cities and counties in the Mississippi Delta. Defendant's exhibit 28, however, sets forth the names of every physician in the Mississippi territory who bought Cordis products from Taylor and the cities in which those physicians practice with the exception of Dr. Earl Fyke.¹

Taylor testified that he received no customer list at the outset of his employment with Cordis. Indeed, it appears from the record that only two physicians in the Mississippi territory were Cordis customers when Taylor began in February 1981. The evidence showed that, of the physicians who bought Cordis products from Taylor, twenty-five percent were customers of his prior to February 1981 and approximately fifty percent were acquainted with him prior to February 1981.

Much testimony was adduced at trial concerning the nature of the pacemaker sales industry. Sales are normally made directly to the hospital wherein the implant surgery is to be performed, but the decision to purchase a certain type pacemaker is made by a physician. As in most sales contexts, but more particularly so in the pacemaker business, a sale is the product of close contact and mutual confidence between the salesman and the physician. Only when the physician feels that he can trust and rely upon the representations of the salesman concerning the quality of the product does a sale occur. Implanting physicians regularly request the presence of the salesman of the pacemaker at the actual implant surgery. Although the salesman never "scrubs up" or invades the sterile field, he provides the doctor with technical information during surgery. Thus, the trust and reliance so crucial to pacemaker sales is placed as much in the sales representative as in the product. The potential for economic abuse should a salesman begin suggesting that the doctor use another brand of pacemaker was shown during the examination by counsel for Taylor of Thomas V. Brown. Brown testified that when Robert Poole, a Cordis salesman in the Dallas, Texas area, left Cordis to work with a competitor, he took approximately eighty percent of Cordis' business with him. Poole was not bound by a non-competition agreement.

Plaintiff testified that in 1984, 1985 and early 1986, he became increasingly concerned about the quality and marketability of Cordis pacemakers. His concern stemmed from the frequency of recalls of Cordis pacemakers issued by the United States Food and Drug Administration (FDA) and the frequency with which notices were distributed by Cordis to its sales force and physicians with respect to defects in design and performance of its pacemakers. On December 5, 1983, Cordis issued an "Urgent Medical Device Notification" for certain Gamma series pacemakers which were experiencing "early battery depletion" due to "self-discharge." This notice was followed by an "Important Update on Notification Concerning Gamma Series Pacers" issued on April 18, 1984. These notices recommended close supervision of patients with Gamma series implants, especially pacer-dependent patients.² On October 5, 1984, Cordis issued a "Heat-Stressed Pacer Notification" to its sales force, recommending monthly monitoring of patients implanted with heat-stressed pacers. The FDA classified this notice as a recall. On March 1, 1985, Cordis issued another "Urgent Medical Device Notification" for the Gamma series pacemakers, warning again of early battery depletion. This was followed by a similar notification, also classified by the FDA as a recall, on April 19, 1985, relating to certain Lambda and Theta series pacemakers but warning of sudden failures due to the breaking of a wiring board connection in the pacemakers and recommending explanting such pacemakers. On January 9, 1986, Cordis issued an ...