Stryker Corporation et al v. Prickett et al

Filing 209

OPINION ; signed by Chief Judge Robert J. Jonker (Chief Judge Robert J. Jonker, ymc)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

STRYKER CORPORATION et al.,
Plaintiffs,
File No. 1:14-CV-1000
v.
HON. ROBERT J. JONKER
WILLIAM PRICKETT et al.,
Defendants.
/
OPINION
Plaintiffs Stryker Corporation and Stryker Sales Corporation (collectively, “Stryker”) brought
this action against a former employee, William Prickett, and Prickett’s business, Physician’s Choice
Medical Repair, Inc. (“PCMR”). Before the Court is Stryker’s motion for default judgment. (ECF
No. 199.) For the reasons stated herein, the motion will be granted in part.
I.
Prickett was employed by Stryker as a field service technician, servicing Stryker patienthandling equipment, including: medical-treatment tables, stretchers, cots, hospital beds and
emergency-rescue equipment. As part of his employment, he signed an agreement not to solicit
business from Stryker customers or to work for a Stryker competitor for twelve months following
the termination of his employment. He resigned from Stryker on June 30, 2014. Stryker brought this
action in September 2014, alleging that Prickett had breached the terms of his employee agreement
by providing services to Stryker customers, using Stryker’s confidential pricing and customer
information, and using special tools and parts that Prickett improperly retained after the end of his

employment. Stryker also alleged that Defendants were improperly using the Stryker name and mark
by representing themselves as “Stryker Certified,” and that Prickett had attempted to obtain
additional Stryker parts through several Stryker employees.
On October 22, 2014, the Court entered a preliminary injunction prohibiting Defendants from
using Stryker’s name and from competing with Stryker by providing services to its customers. (ECF
No. 24.) In August 2016, the Court found Defendants in contempt for violating a discovery order and
the terms of the injunction. Defendants failed to produce invoices for work that Defendants
performed from July 2014 to December 2015, despite an order to produce these documents. (R&R
19-25, ECF No. 152, adopted by the Court in ECF No. 172.) Defendants claimed that no such
invoices existed, but Stryker obtained copies of the invoices from third parties. The invoices
demonstrated that Defendants had provided services to Stryker customers in violation of the
injunction. (Id. at 17, 19.) As a sanction for Defendants’ conduct, the Court required Defendants to
pay the gross revenue1 reflected in the invoices from after the date of the injunction ($112,217.05),
and to pay Stryker’s attorney’s fees and costs associated with the motion for contempt and the thirdparty discovery relating to the invoices ($36,126.84). (Id. at 27; Order Regarding Stryker’s Pet. for
Attorney’s Fees & Objs. to Def.’s Statement of Costs, ECF No. 187.)

1

The Court’s sanction intended to disgorge Defendants’ profits from the invoices, rather than their
gross revenue, but Defendants did not meet their burden of proving the costs that should be deducted from
this revenue. (12/15/2016 Mem. Op. 11, ECF No. 186.) Accordingly, gross revenue became the practical
result. Congress has employed a similar damages mechanism in situations where the defense is uniquely well
situated to provide the necessary cost data, and where equitable considerations readily support a gross
revenue remedy if the defense cannot or will not shoulder the burden of proving the costs. See, e.g., 17
U.S.C. § 504(b) (when a copyright owner is entitled to recover damages as a result of infringement, the
owner “is required to present proof only of the infringer’s gross revenue, and the infringer is required to
prove his or her deductible expenses . . .”).

2

II.
In the motion before the Court, Stryker seeks entry of a default judgment against Defendants
for their failure to comply with the Court’s orders. See Fed. R. Civ. P. 16(f)(1)(C) (permitting the
Court to issue “any just orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party
or its attorney . . . fails to obey a scheduling or other order”); see also Fed. R. Civ. P. 37(b)(2)(A)(vi)
(permitting the Court to enter default judgment as a sanction). Stryker has offered evidence that, even
after the Court found Defendants in contempt for violating the preliminary injunction, they have
continued to violate the injunction by servicing Stryker customers. For instance, in December 2016,
a Stryker employee observed Prickett at a hospital that is one of Stryker’s customers. Prickett was
wearing a PCMR jacket and pushing a hospital bed out to the docking area, presumably in order to
repair the bed off-site. (Poulk Decl., ECF No. 200-2.) Defendants do not dispute this evidence, or
the natural inference arising from it. In addition to entry of a default judgment, Stryker seeks an
award of its attorneys’ fees for bringing its motion, and a permanent injunction prohibiting
Defendants from: (a) using the Stryker mark and name; and (b) engaging in competitive conduct for
one year from the date of entry of the default judgment.
A. Money Judgment
A district court has the inherent power to sanction a party when that party exhibits bad faith.
Chambers v. NASCO, Inc., 501 U.S. 32, 43-50 (1991). “A primary aspect of that discretion is the
ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Id. at 44-45.
Typically, before entering a default judgment due to a party’s failure to obey court orders, the Court
must consider the four factors set forth in Regional Refuse Systems, Inc. v. Inland Reclamation Co.,
842 F.2d 150 (6th Cir. 1988), namely: (1) whether the party’s failure to obey is due to wilfulness,
3

bad faith, or fault; (2) whether the adversary was prejudiced by the party’s failure to obey;
(3) whether the party was warned that failure to obey could lead to default judgment; and (4) whether
less dramatic sanctions were imposed or considered before default judgment was ordered. See id.
at 155. In this case, however, Defendants do not object to entry of a default judgment for money
damages. Moreover, there is a “‘clear record of delay or contumacious conduct’” by Defendants. See
Pelz v. Moretti, 292 F. App’x 475, 479 (6th Cir. 2008) (quoting Freeland v. Amigo, 103 F.3d 1271,
1277 (6th Cir. 1997)). Defendants have already been found in contempt for violating multiple Court
orders, including the preliminary injunction, and it appears that the Court’s previous sanctions have
had no impact. Therefore, a default judgment against Defendants in the amount of the Court’s order
for contempt sanctions (ECF No. 187), plus Plaintiffs’ reasonable attorney’s fees for bringing the
motion for default judgment, is appropriate.
B. Permanent Injunction
Defendants object to Stryker’s motion only to the extent that it seeks a permanent injunction
prohibiting Defendants from engaging in competitive conduct for an additional year. Defendants
assert that the non-compete and non-solicitation provisions in the employee agreement expired on
June 30, 2015, and that Stryker should not be permitted to extend this term, particularly in light of
the fact that Stryker has already been awarded damages for Defendants’ competitive conduct.
Defendants contend that Stryker is essentially asking the Court to impose a four-year term (from
2014 to 2018), which goes well beyond the one-year term agreed upon by parties in the employee
agreement.
Generally, in order to obtain a permanent injunction, a party must demonstrate: “(1) that it
has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are
4

inadequate to compensate for that injury; (3) that, considering the balance of hardships between the
plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not
be disserved by a permanent injunction.” eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391
(2006). “The decision to grant or deny permanent injunctive relief is an act of equitable discretion
by the district court[.]” Id. The Court is satisfied that the considerations support a permanent
injunction that prohibits Defendants from using Stryker’s name and reputation in pursuit of their own
business, but that the considerations do not support any further direct prohibition on good faith
business competition.
1. Extended Non-Compete
Prickett resigned from Stryker in 2014. His agreement prevented him from competing with
Stryker for one year after the end of his employment. After that, both parties were free to compete
on a level playing field. Prickett breached his non-compete obligations to be sure. But it is now
almost three years after the end of his employment with Stryker. After a period of time, a prohibition
on competition by a former employee no longer protects the employer’s “reasonable competitive
business interests,” and becomes an unreasonable restraint on trade. See St. Clair Med., P.C. v.
Borgiel, 715 N.W.2d 914, 919 (Mich. Ct. App. 2006). “To be reasonable in relation to an employer’s
competitive business interest, a restrictive covenant must protect against the employee’s gaining
some unfair advantage in competition with the employer, but must not prohibit the employee from
using general knowledge or skill.” Id. Among other things, a restrictive covenant can protect against
the loss of customers, protect the employer’s investment in specialized training of the employee, and
protect the employer’s confidential information. See id.

5

In this case, any unfair advantage that Prickett enjoyed in the marketplace as a result of his
former employment with Stryker has surely dissipated. He allegedly used his knowledge of Stryker’s
pricing to negotiate new contracts with Stryker’s customers, but that knowledge is now stale. He also
took advantage of customer relationships that he had developed in the course of working for Stryker,
but by now Stryker has had an opportunity to repair those relationships and to make clear to its
customers that Prickett is no longer associated with Stryker. Moreover, after a year, both parties
anticipated open competition for the relationship. This is not a case where the former employee
maintains an unfair advantage because he possesses valuable trade secrets or important confidential
information of the employer. Cf. Overholt Crop Ins. Serv. Co. v. Travis, 941 F.2d 1361, 1371 (8th
Cir. 1991) (permitting a permanent injunction in addition to liquidated damages where the
defendants’ possession of confidential customer information posed a threat of future loss of
business). Nor does this appear to be a case where the former employee has such specialized skills
or unique relationships with customers that he can divert significant business from his employer in
the future. Indeed, Defendants’ business is somewhat dependent upon access to a supply of parts that
“cannot be readily obtained[.]” (See Compl. ¶ 52, ECF No. 1.) This is also not a case of a former
salesperson with ability to move large books of business instantaneously to a new employer. Stryker
has had both the means and the opportunity to recover whatever competitive footing it may have lost
due to Prickett’s departure and Defendants’ subsequent conduct.
It is true that the Michigan Court of Appeals has held that, “in appropriate circumstances, the
term of a noncompetition agreement may be extended beyond its stated expiration date.” Thermatool
Corp. v. Borzym, 575 N.W.2d 334, 338 (Mich. Ct. App. 1998).

6

Specific performance of an agreement may be an appropriate remedy where
enforcement of the promise is necessary to avoid injustice. In cases where a party has
flouted the terms of a noncompetition agreement, the court should be able to fashion
appropriate equitable relief despite the fact that the parties did not expressly provide
for such relief in their agreement. Furthermore, as courts allowing extensions of the
terms of noncompetition agreements have found, it may not be possible to determine
monetary damages with any degree of certainty. Where this is the case, the breaching
party should not be rewarded because the agreement has already expired.
Id. (citation omitted). It is also true that the parties to this non-compete expressly provided that the
term of competition would be extended for each day of breach. (Employee Agreement § 8.1, ECF
No. 1-1, PageID.30.) But neither the terms of the parties’ agreement, nor the language of Thermatool
trump the overarching considerations of equity that must guide the Court’s decision in any particular
case.
The Court is also mindful that Stryker will be receiving a damage award for at least some of
Defendants’ competitive activity. The Court’s contempt sanction requires Defendants to pay Stryker
the gross revenue reflected in certain invoices dated from October 2014 to December 2015. This
sanction was primarily focused on vindicating the Court’s orders, but it does function as a
disgorgement remedy in much the same way as if Stryker received a judgment in its favor on its
breach-of-contract claim. At a minimum, this weighs in favor of Defendants when considering the
balance of hardships. To the extent that Stryker is concerned about any loss of goodwill associated
with Defendants’ use of the Stryker name, the permanent injunction will address this concern by
prohibiting Defendants from unfairly using the Stryker name in connection with their products or
services.
In short, Stryker has not demonstrated that extending the non-compete restriction for more
time beyond its natural expiration would meaningfully protect its reasonable business interests, or

7

that its remedies at law are inadequate to protect those interests. And considering the likely hardship
to Defendants resulting from an extension of the non-compete, as well as the public interest against
extended restraints on competitive conduct by former employees, the Court is not persuaded that
equity favors a permanent injunction which extends the non-compete for another year.
2. Use of Stryker’s Name
Stryker also seeks to continue in a permanent injunction the existing restrictions of the
preliminary injunction on Defendants’ use of Stryker’s name. Defendants do not oppose continued
restrictions like this. The Court will, however, modify the existing restrictions to prevent them from
serving as the functional equivalent of a ban on competition.
CONCLUSION
The Court will enter a default judgment in favor of Plaintiffs and against Defendants for the
monetary sanctions that Defendants do not contest, plus Plaintiffs’ reasonable attorney’s fees for
bringing the motion for default judgment. The Court will also include in the judgment a permanent
injunction preventing unfair use of Stryker’s name. The Court will not further extend the restriction
of good faith competition.
An order and judgment will enter in accordance with this Opinion.

Dated:

May 24, 2017

/s/ Robert J. Jonker
ROBERT J. JONKER
CHIEF UNITED STATES DISTRICT JUDGE

8