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St. Jude Medical S.C. v. Saxon

United States District Court, Eighth Circuit

December 10, 2013

ST. JUDE MEDICAL S.C., INC. a Minnesota Corporation, Plaintiff,
v.
JAMES SAXON and BOSTON SCIENTIFIC CORPORATION, a Delaware Corporation, Defendant.

Laurel J. Pugh, Edward F. Fox, Christopher J. Haugen, and Jonathan C. Marquet, BASSFORD REMELE, PA, 33 South 6th Street, Suite 3800, Minneapolis, MN 55402, for plaintiff.

Jeannette M. Bazis and John W. Ursu, GREENE ESPEL PLLP, 222 South 9th Street, Suite 2200, Minneapolis, MN 55402, for defendant James Saxon.

Erin M. Verneris and Robert L. Schnell, Jr., FAEGRE BAKER DANIELS LLP, 90 South 7th Street, Suite 2200, Minneapolis, MN 55402, for defendants James Saxon and Boston Scientific Corporation.

MEMORANDUM OPINION AND ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION AND EXPEDITED DISCOVERY

JOHN R. TUNHEIM, District Judge.

This case involves a dispute over a sales representative's covenant not to compete with his former employer. Defendant James Saxon sold cardiac rhythm management ("CRM") devices for plaintiff St. Jude Medical, S.C., Inc. ("St. Jude"), but left St. Jude to work for defendant Boston Scientific Corporation ("Boston Scientific"). St. Jude now alleges that Saxon has violated the terms of his covenant not to compete by helping Boston Scientific to sell CRM devices to his former St. Jude customers. St. Jude moves for a preliminary injunction against both Saxon and Boston Scientific and for expedited discovery. The Court will order a preliminary injunction enjoining Saxon from violating the terms of his covenant not to compete with St. Jude. The Court will not order expedited discovery, but will refer the parties to the Magistrate Judge for an early settlement conference.

BACKGROUND

I. PARTIES AND CRM DEVICES

St. Jude is a Minnesota corporation that develops and manufactures medical devices, including CRM devices and "other devices used to diagnose and treat cardiovascular disease and other disorders." (Notice of Removal, Ex. 1 ("Compl.") ¶ 3, Aug. 26, 2013, Docket No. 1.) CRM devices include pacemakers and implantable cardioverter defibrillators ("ICDs"). ( Id. ¶ 10.) St. Jude markets and sells CRM devices through an organization of sales representatives who "market, sell and support [St. Jude]'s products in domestic markets throughout the United States and internationally." ( Id. )

St. Jude alleges that it "expends significant resources on the training and continuing education of its sales personnel to keep them current on the features, capabilities and best uses of its products." ( Id. ) This is because "[e]xperienced and knowledgeable sales personnel are critical in the highly competitive medical device industry because physicians frequently rely on them to describe and explain the features and capabilities of the device and also to provide reliable clinical data and instructions concerning the use of the device." ( Id. ¶ 11.) Additionally, St. Jude alleges that physicians depend on the sales personnel to "train and assist them with the use of the device" and they "often have these personnel observe procedures.... As a result, the physicians' confidence and reliance on the competence and expertise of the sales personnel is a significant, often determinative, factor in a physician's decision to purchase and use [St. Jude] products." ( Id. ¶ 12.)

II. SAXON'S EMPLOYMENT WITH ST. JUDE

Saxon joined St. Jude as a sales representative in June 2009. He was responsible for sales in a territory in and around Montgomery, Alabama. ( Id. ¶ 18.) St. Jude alleges that "[t]hroughout his tenure with [St. Jude], Saxon was highly successful. He increased sales, enhanced customer loyalty, and established valuable relationships with physicians and purchasing personnel." ( Id. ¶ 19.) When he became an employee of St. Jude, Saxon signed an Employment Agreement that included an initial term of three years, after which the terms of the Employment Agreement continued on an "at will" basis. The Employment Agreement also included a non-compete clause:

Non-Competition. During Employee's employment and for a period of one (1) year after the date of termination of employment with [St. Jude] for any reason, Employee will not directly or indirectly engage as a consultant, independent contractor, proprietor, stockholder, partner, co-venturer, officer, director, employee, or in any other capacity with any business which designs, manufactures or sells products which compete with products, now or later during Employee's employment, that are designed, manufactured or sold by [St. Jude] or any of its affiliates in the territory assigned to Employee during the last year of Employee's employment.... For a period of one (1) year after the date of termination of employment with [St. Jude] for any reason, Employee will not directly or indirectly sell, demonstrate, promote, solicit or support the sale of, support or supervise the implantation or other use of, or otherwise have any involvement with the sale or use of any product which competes with any products which Employee sold or solicited the sale of during Employee's employment, to or with any customer upon whom Employee called during the last year of Employee's employment. For a period of one (1) year after the date of termination of employment with [St. Jude] for any reason, Employee will not directly or indirectly influence or attempt to influence such customers to direct their business involving products sold by Employee to any competitor of [St. Jude].

(Compl. ¶ 21, Ex. A ¶ 8.) Saxon worked for St. Jude for the full three years of his Employment Agreement terms, but terminated his employment with St. Jude and began working for Boston Scientific on or about May 6, 2013. (Compl. ¶ 20.)

III. VIOLATION OF THE NON-COMPETE CLAUSE

St. Jude alleges in its verified complaint that in the months following Saxon's departure from St. Jude he violated the non-compete clause of his Employment Agreement on several occasions. These allegations are based on the account of Amy Manley, a St. Jude sales representative who worked with Saxon until he resigned. ( Id. ¶ 24.)

First, St. Jude alleges that on June 18, 2013, Manley saw Saxon inside a cardiology office whose physicians practice at one of the hospitals to which Saxon formerly sold CRM devices. ( Id. ¶ 26.) Manley stated that she saw Saxon speaking with a nurse there. ( Id.; Aff. of Amy Manley ¶ 5, Sept. 13, 2013, Docket No. 17.) She stated that later that day she "learned that Saxon had been asking the nurse questions and offering to help her with pacing and ICD issues that morning. He had also been offering to help with Boston Scientific coding and reimbursement issues, including such issues for pacemakers and ICDs." (Compl. ¶ 27; Manley Aff. ¶ 6.)

Next, St. Jude alleges that a week later, an email from a Senior Manager for Field Reimbursement at Boston Scientific was sent to members of the cardiology office's staff, carbon-copying Saxon, which discussed and followed-up on Saxon's June 18 meeting at the office. (Compl. ¶ 28.) The email stated "I have attached the presentations we discussed..." and included a powerpoint presentation entitled "2013 CRM Physician Device Monitoring Codes ALABAMA" and another document entitled "CRM Physician Payment Rate Summary." ( Id.; Manley Aff. ¶ 7.)

Two days later, St. Jude notified Boston Scientific in writing of these alleged violations of Saxon's Employment Agreement and demanded that the violations cease immediately. (Compl. ¶ 29, Ex. B.)

On July 3, 2013, Manley learned that Saxon had again contacted the nurse at the cardiology office to set up a "lead study" with the office. ( Id. ¶ 30; Manley Aff. ¶ 8.) According to St. Jude, "lead studies exclusively concern and examine CRM issues." (Compl. ¶ 30.) St. Jude alleges that later in the day, Manley was in the nurse's office and overheard both sides of a cell phone conversation between the nurse and Saxon, in which she heard Saxon attempt to set up an appointment for one of his Boston Scientific CRM sales colleagues to train the nurse on one of Boston Scientific's CRM products. ( Id. ¶ 31.) The following week Manley learned that Saxon had directly compared Boston Scientific's lead study to St. Jude's similar study to staff at the cardiology office and that he had visited a purchasing director at a different office with a Boston Scientific sales partner and proposed an addition to the officer's purchasing agreement which included CRM devices. ( Id. ¶¶ 32-33.)

At this point, St. Jude again notified Boston Scientific in writing that it believed Saxon was violating his Employment Agreement. ( Id. ¶ 34.) Boston Scientific responded, denying any violations because Saxon's activities did not involve selling CRM devices. ( Id. ¶ 35.)

St. Jude further alleges that Manley learned that Saxon, his manager, and a Boston Scientific executive had taken an electrophysiologist (who practiced at one of the hospitals Saxon worked with while he was at St. Jude) to dinner on July 24, 2013, and discussed CRM products during dinner. ( Id. ¶ 39; Manley Aff. ¶ 12.) Two days later, two surgical procedures on Manley's schedule - an ICD and a biventricular ICD - with a cardiologist who regularly practices at the same hospital as the electrophysiologist with whom Saxon had been to dinner were cancelled and switched to Boston Scientific. (Compl. ¶ 40; Manley Aff. ¶ 13.) Manley stated that she learned that "Saxon had repeatedly called and demanded to meet with the physician in the physician's office on July 24 or 25, " that he and his manager and a Boston Scientific executive had met in the physician's office for about an hour, and that after the meeting the physician directed that the two CRM cases scheduled for July 26 be switched from St. Jude to Boston Scientific. (Compl. ¶ 41; Manley Aff. ¶ 13.)

IV. SAXON AND BOSTON SCIENTIFIC'S VERSION OF EVENTS

Saxon and Boston Scientific do not materially dispute these allegations. Rather, they claim that on each of the occasions alleged by St. Jude, Saxon was not selling CRM devices, but was assisting the doctors or staff with interventional cardiology ("IC") devices, which St. Jude does not ...


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