Globus Med. v. Jamison

REPORT AND RECOMMENDATION

LAWRENCE R. LEONARD, UNITED STATES MAGISTRATE JUDGE.

This action arises out of a prior relationship between Globus Medical, Inc. (“Globus”) and a group of eleven sales representatives working on behalf of Sky Surgical, Inc. (“Sky Surgical”) to sell Globus's spinal products in several regions throughout Virginia. As the result of an Exclusive Distributor Agreement and accompanying amendments (“EDA”) between Sky Surgical and Globus, Sky Surgical was the exclusive distributor for Globus products in several regions of the state of Virginia. Each of the eleven sales representatives executed a non-compete, nondisclosure, non-solicitation agreement (“NCNDA”) with Globus, and generally agreed to not compete for a term of one year following any termination of relationship between Globus and Sky Surgical. Globus and Sky Surgical renewed the EDA several times throughout the years, but after failed attempts to renew the agreement in the last year, the EDA expired on June 29, 2022. Each of the eleven sales representatives now works for JBC Spine, who distributes spinal products for SeaSpine, Inc. (“SeaSpine”)-a direct competitor of Globus. Globus generally contends that the sales representatives' actions involving JBC Spine/SeaSpine, both before and after the termination of the relationship between Sky Surgical and Globus, violated and continues to violate their NCNDAs. Globus filed this action alleging breach of contract, unjust enrichment, and tortious

interference with contractual relationship as a result of the sales representatives' actions and seeks a preliminary injunction to enforce the sales representatives' compliance with their NCNDAs. Presently before the Court is Globus's Amended Motion for Preliminary Injunction, ECF No. 63.

L PROCEDURAL HISTORY

A. Motion for a Preliminary Injunction

Globus initiated this action by filing a Complaint seeking injunctive relief and monetary damages on July 7, 2022, against Defendants Shane Jamison, Mike Ruane, Mike Jones, Jake Schools, Scott Van Gilder, Sarah Gregory, and Nick Walker (collectively, “the Tidewater Defendants”).^[1] ECF No. 1 at 2. On July 29, 2022, United States District Judge Smith entered the parties' agreed order for entry of a preliminary injunction hearing and briefing schedule. ECF No. 27. Therein, the parties agreed to certain deadlines for discovery and agreed that all discovery must be completed by September 30, 2022. Id. at 2. The parties also agreed to schedule a three-day hearing on the motion for a preliminary injunction. Id. at 3. On August 4, 2022, the Court scheduled a hearing on Globus's motion for a preliminary injunction for December 7, 2022.

On August 11, 2022, Globus filed an Amended Complaint for injunctive relief and monetary damages, which added three defendants to the case-Curt McLeod, Terry McLeod, and Scott Brooks (collectively, “the Richmond Defendants”). ECF No. 35. Globus subsequently requested, and the Court granted, permission to amend its motion for a preliminary injunction to include allegations against the Richmond Defendants. ECF Nos. 55, 59. Accordingly, the lawsuit

involves Globus's allegations against both the Tidewater Defendants and the Richmond Defendants (collectively, “Defendants”).

Globus then filed the instant Amended Motion for a Preliminary Injunction and accompanying memorandum in support on November 16, 2022. ECF No. 63-64.^[2] Accompanying its Amended Motion for a Preliminary Injunction, Globus filed a Motion to File Certain Portions of Plaintiff s Amended Motion for Preliminary Injunction under Seal (“the motion to seal”), ECF No. 66. Additionally, on December 2, 2022-five days before the scheduled hearing on the motion for a preliminary injunction-Globus filed a Motion for Sanctions based upon Spoliation (“the spoliation motion”). ECF Nos. 76, 77. The Court then issued an Order removing the hearing on Plaintiffs Amended Motion for Preliminary Injunction from the docket, citing the December 5 due date for Defendants' responses to the Amended Motion for Preliminary Injunction, and Plaintiffs “extremely broad” motion to seal. ECF No. 78. The Court instead set a status hearing to be held on December 7, 2022. Before the status hearing, on December 5, 2022, Defendants filed their opposition to Plaintiffs Amended Motion for a Preliminary Injunction. ECF No. 81. Additionally, Defendants filed a Motion in Limine to Exclude Certain Evidence from the Evidentiary Hearing and Post-Hearing Submissions Regarding Plaintiffs Motion for a Preliminary Injunction (“the motion in limine”). ECF No. 82.

B. Referral to the Undersigned

Judge Smith held a status hearing on December 7, 2022, regarding the pending motions before the Court. ECF No. 84. Following the hearing, Judge Smith entered an Order referring the outstanding pretrial motions to the undersigned-including the motion to seal, the spoliation motion, and the motion in limine-and instructed that those motions be resolved prior to a hearing

on Plaintiff s Amended Motion for Preliminary Injunction. ECF No. 85 at 1-2. Judge Smith then referred the Amended Motion for Preliminary Injunction, ECF No. 63, to the undersigned to conduct hearings and submit proposed findings of fact and recommendations for disposition pursuant to 28 U.S.C. 636(b)(1)(B), Federal Rule of Civil Procedure 72(b)(1), and Standing Order of Assignment of Certain Matters to United States Magistrate Judges, Part IV.B (E.D. Va., Norfolk and Newport News Divisions, Apr. 2, 2002).^[3] ECF No. 85 at 2-3.

C. Resolution of the Outstanding Pretrial Motions

With respect to the motion to seal, after additional briefing, the Court issued an order on January 12, 2023, granting the motion to seal as modified by the additional briefing. ECF No. 99. With respect to the motion for spoliation and motion in limine, the Court held a hearing on those motions on January 30, 2023, and took the motions under advisement. ECF No. 100. Following the hearing, on February 10, 2023, the Court issued written orders denying the motion for spoliation, ECF No. 76, and denying the motion in limine, ECF No. 82. ECF Nos. 102-03. The Court then scheduled a four-day evidentiary hearing on Plaintiffs Amended Motion for Preliminary Injunction to begin April 24, 2023. ECF No. 63.

D. The Evidentiary Hearing

On the first day of the evidentiary hearing, counsel for Globus and Defendants gave opening statements regarding the Amended Motion for a Preliminary Injunction. See ECF No. 136. The Court heard testimony from Justin Hyde, Vice President of Sales for Globus. Id. On the second day of the hearing, Globus informed the Court that it was proceeding with its preliminary injunction claim against only the Richmond Defendants-Curt McLeod, Terry McLeod, and Scott Brooks. See ECF No. 137. The Court then heard testimony from Curt McLeod.

Id. On the third day of the hearing, the Court heard testimony from Terry McLeod, as well as Kurt Reighard, who was formerly affiliated with Globus, and is the President of JBC Spine, which sells SeaSpine products. See ECF Nos. 138-39. Additionally, the Court heard more testimony Justin Hyde, who Plaintiff recalled as a witness, and video deposition testimony by designation from Nicole McGee, a scheduler at Memorial Regional Hospital in Richmond. Id. Finally, on the last day of the hearing, the Court heard more testimony from Justin Hyde, who Plaintiff again recalled, as well as from Scott Brooks. See ECF No. 140. The parties presented their closing arguments, and the Court ordered the parties to submit proposed findings of fact and conclusions of law, and to submit separate position papers regarding the potential implications of the Federal Trade Commission's proposed rule barring non-compete agreements on the public interest factor of the standard for a preliminary injunction. Id.

E. Post-Hearing Submissions

On May 15, 2023, Globus submitted its proposed findings of fact and conclusions of law, ECF No. 133 (“Globus PFF”), as did the Richmond Defendants, ECF No. 132 (“Defendants PFF”). In Globus's proposed findings of fact and conclusions of law, Globus conceded its tortious interference and unjust enrichment claims need not be considered for the purposes of the preliminary injunction motion. ECF No. 133 at 26, n. 12. On the same day, the parties submitted their position papers on the Federal Trade Commission's proposed rule banning non-compete agreements. ECF No. 134 (Globus's Position Paper); ECF No. 135 (The Richmond Defendants' Position Paper).

II. FINDINGS OF FACT

Despite the parties' submissions of voluminous proposed factual findings and the extensive evidence presented at the evidentiary hearing, the Court limits its findings to only those facts

necessary to resolve the Amended Preliminary Injunction Motion. Accordingly, the Court makes the following findings of fact, based on the evidence and testimony proffered by the parties:

The Relationships Between Globus, Sky, and the Richmond Defendants

1. Globus manufactures spinal implants and hardware. Globus PFF ¶ 1; Defendants PFF ¶ 1.

2. Globus uses third-party distributors, who hire or contract with sales representatives to distribute, promote, market, and sell its products. Globus PFF ¶ 1.

3. For approximately fifteen years, Sky Surgical was the exclusive third-party distributor in several areas in Virginia. Globus PFF ¶ 2; Defendants PFF ¶ 2. Jay Jamison was the principal of Sky Surgical. Defendants PFF ¶ 2.

4. The Richmond Defendants, Curt McLeod, Terry McLeod, and Scott Brooks, worked as sales representatives for Sky Surgical. Globus PFF ¶ 2; Defendants PFF ¶ 3.

5. An EDA governed the relationship between Globus and Sky, and the EDA was renewed yearly to continue...