Freedom Med. Inc. v. Whitman

343 F.Supp.3d 509

FREEDOM MEDICAL INC., Plaintiff,

v.Gerry L. WHITMAN, et al., Defendants.

CIVIL ACTION NO. 18-4155

United States District Court, E.D. Pennsylvania.

Signed October 29, 2018

Edward T. Kang, Gregory H. Mathews, Kandis L. Kovalsky, Kang Haggerty & Fetbroyt LLC, Philadelphia, PA, for Plaintiff.

Greggory J. Savage, Liesel B. Stevens, Ray Quinney & Nebeker, Salt Lake City, UT, Matthew V. Delduca, Pepper Hamilton LLP, Princeton, NJ, Katherine B. Puccio, Pepper Hamilton LLP, Judson A. Aaron, Conrad O'Brien, PC, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION

WENDY BEETLESTONE, DISTRICT JUDGE

A long-simmering commercial dispute between two players in the medical equipment sales business has boiled over into the controversy presently before the Court. Plaintiff, Freedom Medical Inc., is a Pennsylvania-based medical equipment sales company; Defendants are: Med One Equipment Services ("Med One"), a medical sales company; a family of corporations linked to Med One ("Corporate Affiliates"); and three individual ("Individual Defendants"), all of whom recently left the employ of Plaintiff to take new roles with Med One. The dispute arises out of allegations that the Individual Defendants misappropriated Freedom Medical's confidential and proprietary information to solicit customers for Med One; and, that Med One facilitated the misappropriation by poaching Freedom Medical's employees. On September 26, 2018, Freedom Medical filed both a Complaint and a Motion for a Temporary Restraining (TRO) and Preliminary Injunction. On October 4, 2018, the Court granted in part and denied in part the TRO. Specifically, the Court enjoined the Individual Defendants from divulging or using Freedom Medical's trade secrets, and ordered the Defendants to return any confidential or proprietary information to Freedom Medical.

Presently before the Court is Freedom Medical's Motion for Preliminary Injunction. Based upon the parties' submissions and testimony elicited at a hearing held on October 23 and 25, 2018, Plaintiff's motion will be granted in part and denied in part.

I. Background

A. Freedom Medical

Freedom Medical is in the business of renting and selling medical equipment to hospitals, nursing homes and other healthcare providers. Particularly important to Freedom Medical's business is the relationships it has with healthcare providers that are members of Group Purchasing Organizations ("GPO"), entities that aggregate purchasing volume among member-healthcare-providers and leverage that volume to negotiate discounts with manufacturers, distributors and other vendors. Freedom Medical is a "preferred provider" of medical equipment for three of the four largest GPOs in the nation. As a preferred provider, Freedom Medical may submit bids in response to a GPO's request for proposals; if the bids are accepted, then Freedom Medical signs an Agreement with the GPO, guaranteeing that Freedom Medical will provide goods and services to GPO members under the terms set forth in the Agreement. Such GPO Agreements contain pricing and servicing information.

To maintain an advantage in the competitive healthcare industry, Freedom Medical has developed certain information related to its business, which it contends is both confidential and proprietary, including, inter alia , pricing information, business plans and customer lists.¹ Freedom Medical takes several affirmative steps to safeguard this confidential information. First, Freedom Medical requires all employees to acknowledge and agree to comply with an Acceptable Use Policy that restricts the use of digitally stored confidential information. Second, Freedom Medical requires all employees with access to confidential information to sign restrictive covenants at the inception of their employment. The restrictive covenants prohibit unauthorized use or disclosure of confidential information. Furthermore, the restrictive covenants contain a global non-compete clause that prohibit employees from working for any competitor for a one-year period following the end of employment with Freedom Medical.²

B. Defendants

Plaintiff brings suit against two sets of Defendants. The first group of Defendants consists of Med One, a Utah-based seller of medical equipment, and various corporate entities tied to Med One.³ Like Freedom Medical, Med One is in the business of selling and renting medical equipment to hospitals and other healthcare providers. Although not a preferred provider for GPOs, Med One nevertheless sells and rents medical equipment to healthcare providers that are members of GPOs.⁴

The second group of Defendants consists of three former employees of Freedom Medical who left to take roles at Med One, namely Gerry Whitman, Joshua Oderlin, and Jason Cavanaugh ("Individual Defendants"). All three Individual Defendants worked as regional branch managers at Freedom Medical before leaving to join Med One: Whitman served as regional branch manager of the Atlanta Branch Office; Oderlin served as regional branch manager of the San Diego Branch Office; and Cavanaugh served as regional branch manager of the San Francisco Branch Office. As regional branch managers, Individual Defendants had access to Freedom Medical's confidential information, including customer lists, pricing schedules, and Freedom Medical's business plans.

Defendant Cavanaugh was the first to leave Freedom Medical, resigning on February 12, 2018. On April 3, 2018, Defendant Whitman left, and, finally, on July 6, 2018, Defendant Oderlin resigned. All three were hired to be sales representatives for Med One. Both Defendant Cavanaugh and Defendant Oderlin remained in their respective territories. Defendant Whitman, however, moved territories, switching to the Florida Panhandle.

As of October 24, 2018, Defendant Cavanaugh was no longer employed at Med One. Defendant Oderlin, while still employed, was on unpaid leave pending an investigation related to this case. Defendant Whitman remains employed at Med One.

C. Procedural History

On September 26, 2018, Freedom Medical filed suit against Defendants, bringing the following claims: (1) Violation of the Defend Trade Secret Act (DTSA), 18 U.S.C. § 1836, against all Defendants; (2) Misappropriation of Trade Secrets and Confidential Information in violation of the Pennsylvania Uniform Trade Secrets Act (PUTSA), 12 Pa. C.S.A. § 5301, against all Defendants; (3) Breach of Contract against Defendants Cavanaugh, Whitman, and Oderlin; (4) Tortious Interference with Contractual Relations against Med One; and (5) Breach of Fiduciary Duty against Defendants Cavanaugh, Whitman, and Oderlin. Plaintiff petitioned for various forms of injunctive relief, including asking the Court to:

• Enjoin, temporarily, preliminarily and permanently thereafter, Cavanaugh, Whitman and Oderlin from directly or indirectly using, disclosing or retaining any confidential, proprietary or trade secret information of Freedom Medical;

• Enjoin, temporarily, preliminarily and permanently thereafter Cavanaugh, Whitman and Oderlin from soliciting, doing business with, selling to, renting to or servicing any current or prospective client, customer or account, who has been solicited or serviced by Freedom Medical or any affiliate of Freedom Medical within one (1) year prior to the termination of their employment;

• Enjoin, temporarily, preliminarily and permanently thereafter for a one (1) year period following a final order of this Court Cavanaugh, Whitman and Oderlin from working for any of the Med One Defendants, or any of their affiliated entities or any other person whether as an employee, consultant, owner, agent, or in any other capacity or manner whatsoever, for their own account or for the benefit of any person, that is engaged in any business or any service that, directly or indirectly, is in competition with, similar to or the same as the business of Freedom Medical;

• Enjoin, temporarily, preliminarily and permanently thereafter Cavanaugh, Whitman and Oderlin from soliciting any employee of Freedom Medical to leave his or her employment with Freedom Medical;• Enjoining the Med One Defendants and each of their affiliated entities from continuing to employ Cavanaugh, Whitman and Oderlin in violation of the restrictive covenants contained in their employment agreements;

• Order Cavanaugh, Whitman and Oderlin to return to Freedom Medical all Freedom Medical confidential, proprietary or trade secret information and produce for inspection and analysis all their personal computers, smart phones, thumb drives and any other digital media storage devices;

• Order Cavanaugh, Whitman and Oderlin to provide Freedom Medical with a full, detailed and complete accounting of all communications each of them has had with current or prospective customers of Freedom Medical or any employee of Freedom Medical since the end of their employment with Freedom Medical;

• Order Cavanaugh, Whitman and Oderlin to provide a detailed accounting of all revenues attributable directly or indirectly to the activities of Cavanaugh, Whitman and Oderlin since they became employed by Med One.

On October 4, 2018, following a hearing, the Court granted in part and denied in part Freedom Medical's TRO. Specifically, the Court enjoined the Individual Defendants "from divulging to Defendant Med One or any other person, company, or entity or using for any purpose any trade secrets, proprietary information, or confidential information belonging to Plaintiff," and further ordered the Individual Defendants to "immediately return to Plaintiff any ...confidential or proprietary information of Plaintiff that is in their possession or control, in whatever form that information exists, including, but not limited to any physical or electronic documents and copies thereof, with the exception of documents and information pertaining to Defendants Whitman, Oderlin and Cavanaugh's personal compensation."⁵

The Court held hearings on Freedom Medical's motion on October 23 and October 25, 2018. At...