CVS Pharmacy Inc. v. Brown

CVS PHARMACY INC, Plaintiff, v. TIMOTHY M BROWN, Defendant.

CASE NO. C21-306 MJP

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

March 16, 2021

ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

This matter comes before the Court on Plaintiff's Motion for a Temporary Restraining Order. (Dkt. No. 3.) Having reviewed the Motion, Defendant's Opposition (Dkt. No. 12), the Reply (Dkt. No. 13), the declarations and supplemental materials filed by the Parties, and having held oral argument on March 12, 2021, the Court DENIES the Motion.

BACKGROUND

Plaintiff CVS Pharmacy Inc. filed suit against its former employee, Defendant Timothy Brown, alleging that his decision to work for its competitor, Cigna, violates a noncompete agreement and will enable Brown to use CVS's confidential information to its great disadvantage. CVS pursues three causes of action, for: (1) breach of contract; (2) violations of the Defend Trade Secrets Act, 18 U.S.C. § 1836(b)(3)(A); and (3) violations of the Rhode Island Uniform Trade Secrets Act., R.I. Gen. Laws. § 6-41-1, et seq.

CVS filed this case in Rhode Island, the location of its headquarters and place of incorporation. But the U.S. District Court in Rhode Island agreed with Brown—a Washingtonian—that it lacked personal jurisdiction. The court then transferred the case to this District to cure the want of personal jurisdiction. This left unresolved CVS's Motion for a Temporary Restraining Order, through which CVS seeks to enforce a noncompete covenant for 12 months against Brown preventing him from growing or expanding Cigna's Medicare Advantage business, being involved in dual special needs plans (DUALS) programs, or managing Cigna's Medicare Advantage programs in his old CVS territories. (Compl. ¶ 106 and page 33; Pl. Reply at 1 (Dkt. No. 13).) The Court below reviews the relevant record.

In 2017, Defendant Timothy Brown began working at Aetna, which was later acquired by Plaintiff CVS in November 2018. (Complaint ¶¶ 3-4 (Dkt. No. 1).) Brown has a depth of experience in the insurance industry that dates back to 1995. (Declaration of Timothy Brown ¶ 6.) At Aetna, Brown served first as a Medicare General Manager and later as the Chief Medicare Officer for the Northwest and Mountain regions of the United States. (Compl. ¶¶ 4, 27.) Brown was one of 15 "Chief Medicare Officers" at CVS. (Id. ¶ 23.) After giving advance notice, Brown resigned his position at CVS/Aetna on January 22, 2021. (Brown Decl. ¶ 32.) Brown has taken a position as Medicare Advantage Performance Officer at HealthSpring Management of America, LLC, an indirect subsidiary of Cigna, where he will focus on growing and expanding Cigna's Medicare Advantage programs nationally and overseeing DUALS program proposals outside of his prior Aetna territories. (Id. ¶¶ 32, 35-36, 41.)

CVS alleges that Brown's decision to work for Cigna violates a Restrictive Covenant Agreement he signed in April 2019. (Dkt. No. 1-1 (RCA).) The RCA states that Brown was given equity in CVS and access to confidential information in exchange for agreeing to a noncompete covenant. (RCA ¶ 1.) For twelve months after termination, the noncompete covenant prohibits Brown from "directly or indirectly, engag[ing] in Competition or provide Consulting or Audit Services within the Restricted Area." (RCA ¶ 2; id. ¶ 3.) The term "Competition" means: "providing services to a Competitor of the Corporation . . . that (i) are the same or similar in function or purpose to the services [Brown] provided to the Corporation at any time during the last year of [his] employment by the Corporation; or (ii) will likely result in the disclosure of Confidential Information to a Competitor or the use of Confidential Information on behalf of a Competitor." (Id. ¶ 2(a).) The RCA defines Competitor broadly enough to include Cigna, a point Brown does not appear to dispute. The term "Restricted Area" means the entire United States and anywhere in the world where CVS conducts its business. (Id. ¶ 2(e).)

CVS alleges that Brown will unfairly use and reveal confidential information he has about Aetna's Medicare Advantage business. CVS alleges and argues that Brown was privy to confidential information about Aetna's "Medicare Advantage bids, plans for market expansion, contract renewal and non-renewal, healthcare plan structure and benefits, fees, and STARS ratings forecasts and strategy." (Pl. Mot. at 9 (Dkt. No. 3 at 16); see Compl. ¶¶ 25-26.) The U.S. Centers for Medicare and Medicaid Services (CMS) provides the STARS ratings annually, to measure the quality ratings for all Medicare Advantage plans offered nationally. (Compl. ¶¶ 17, 45-47.) "STARS ratings are a critical component of any health plan's overall financial performance in the Medicare Advantage business and its opportunities for successful growth and expansion." (Compl. ¶ 48.) CVS alleges that even though Brown was only in charge of theNorthwest Mountain Market, he received information about national strategies for bids and expansion in 2022, as well as STARS ratings and forecasts. (Compl. ¶¶ 25-26.) CVS alleges that "because Aetna's planning for its Medicare Advantage market expansion and product offerings for the 2022 plan year began between October and December of 2020" "Brown learned Aetna's strategies for formulating and selling its 2022 Medicare Advantage plans." (Compl. ¶¶ 52-53.) CVS alleges that Brown knows where Aetna is "facing financial pressures or has low STARS ratings," and can use this to Cigna's advantage. (Id. ¶ 55.) To buttress these allegations, CVS has submitted a declaration appending slide decks Brown received showing CVS's planning for the 2022 Medicare Advantage bidding on a national level. (See Declaration of Michael Kavouras (Dkt. No. 14).)

CVS's Motion requires some review of the Medicare Advantage bidding process for insurers. In February each year, an insurer provides CMS with an application "contain[ing] preliminary plans for market expansion and plan renewals." (Compl. ¶ 40.) Then "[f]rom February to June, insurers enter the product development phase of the bid cycle." (Id. ¶ 41.) But it is not until June that the insurer must provide its final bid to CMS containing "proposed plan offerings and projected revenue, utilization and projected costs, for each of for the particular markets covered." (Id. ¶ 42.) Notwithstanding this business cycle, CVS maintains that Brown knows too much about Aetna's business plans for 2022 because he was privy to the planning cycle between October and December 2020: "Brown knows the specific regions where Aetna plans to expand, type of the plans Aetna intends to offer in each region, the regions where Aetna plans were strong (and, therefore, where Aetna would likely invest more heavily in marketing and sales), and the regions where Aetna plans were less strong (and, therefore, where Aetna might invest less in marketing)." (Id.)

CVS also alleges that Brown has confidential information regarding Aetna's DUALS business plans, strengths, and weaknesses on a national basis. (Compl. ¶¶ 70-77.) CVS alleges Brown "led" the development and planning for a DUALS program in Nevada that it launched in January 2021. (Id. ¶ 73.) CVS alleges that Brown received confidential information about CVS/Aetna's plans for the DUALS market plans for 2022 through "formal briefing packages related to [DUALS] contracts for the 2022 plan year." (Id. ¶ 75.) As alleged, "Brown now has the blueprint for developing and implementing a successful [DUALS] strategy" to compete with CVS/Aetna. (Id. ¶ 77.)

Brown pushes back against these allegations. First, he states that he did not "retain any confidential documents or information [he] obtained from or through [his] employment with CVS/Aetna." (Brown Decl. ¶ 33.) He states further that he "do[es] not want or need any information [he] obtained from CVS/Aetna in [his] new position at Cigna, which is distinctly different and not similar in any way in function or purpose to the position [he] held at CVS/Aetna." (Id.) He explains that "there are substantial business model differences" between Aetna and Cigna, including that CVS/Aetna uses a fee-for-service model, while Cigna uses a values-based contracting approach. (Id. ¶¶ 37-38.) Second, Brown avers that he did not "attend or participate in any bid information for 2022 at CVS/Aetna and [he has] no information regarding CVS/Aetna's Stars or Duals plans for 2022." (Id. ¶ 31.) And as to DUALS, he states he "had no knowledge of or exposure to what CVS/Aetna was doing nationally, nor what other regions were doing with respect to Duals efforts in various markets within those other regions." (Id. ¶ 30.) He also states that he was involved in the launch of only one DUALS plan and "had no input or involvement in the CVS/Aetna national strategy for Duals." (Id.)

The Parties also dispute whether CVS gave Brown valid, independent consideration in exchange for the noncompete promise in the RCA. CVS points to the cover page of the RCA, which states that Brown was required to accept the noncompete in order to obtain "restricted stock units" (RSUs) valued at nearly $98,000. (Kavouras Decl. ¶ 10 & Dkt. No. 1-1 at 2.). Brown disputes this claim. He asserts that the RSUs were awarded to him in March 2019 as part of his incentive compensation for 2019 based on his 2018 performance. (Brown Decl. ¶ 17.) This is reflected in his 2019 Total Compensation & Benefits Statement Based on Performance Year 2018, which lists the RSUs as "Long Term Incentives" with a value of $98,000. (See Declaration of Shannon McDougald Ex. A (Dkt. No. 30-1).) Brown argues that the month after he received this compensation notification, he was then required to sign the RCA to obtain the RSUs that had already been awarded. (Brown Decl. ¶ 17.)

The Parties also dispute whether the RSUs reflect shares of equity in CVS. Brown points out that the Restricted Stock Unit Agreement governing the RSUs states that: "An RSU does not represent...