DENTSPLY International Inc. et al v. Rene
Filing
21
MEMORANDUM OPINION AND ORDER denying 6 Motion for TRO (Written Opinion). Signed by Judge Donovan W. Frank on 03/06/2013. (rlb)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
DENTSPLY International Inc.
and DENTSPLY IH Inc.,
Civil No. 13-394 (DWF/JJG)
Plaintiffs,
v.
MEMORANDUM
OPINION AND ORDER
Shari Rene,
Defendant.
_______________________________________________________________________
Joseph G. Schmitt, Esq., and Katie M. Connolly, Esq., Nilan Johnson Lewis PA, counsel
for Plaintiffs.
Brian M. Childs, Esq., and V. John Ella, Esq., Jackson Lewis LLP, counsel for
Defendant.
_______________________________________________________________________
INTRODUCTION
This matter is before the Court on a Motion for a Temporary Restraining Order
brought by Plaintiffs DENTSPLY International Inc. (“DENTSPLY”) and DENTSPLY
IH Inc. (“DENTSPLY IH”) (together, “Plaintiffs”). (Doc. No. 6.) For the reasons set
forth below, the Court denies the motion.
BACKGROUND
DENTSPLY develops, manufactures, and sells professional dental products.
(Doc. No. 8, Baldwin Aff. ¶ 2.) In late 2011, DENTSPLY began the process of
integrating the dental implants business of its wholly-owned subsidiary, Tulsa Dental
Products LLC (“Tulsa”), into its wholly-owned subsidiary, DENTSPLY IH, for the
purpose of creating a central dental implants business. (Id. ¶ 3.) DENTSPLY IH does
business as DENTSPLY Implants (also referred to as “DENTSPLY”) in developing,
manufacturing, and selling dental implants and abutments, as well as instruments used in
placing the implants, and related computer software. (Id. ¶¶ 3, 5.) DENTSPLY
manufactures and distributes regenerative materials, which are, in general, bone and
tissue products. (Id. ¶ 5.) DENTSPLY employs sales representatives to market its
products within specified sales territories. (Id. ¶ 6.) As part of the integration of Tulsa’s
dental implants business into DENTSPLY, many of Tulsa’s sales representatives became
sales representatives of DENTSPLY. (Id. ¶ 4.)
In April 2012, Defendant Shari Rene (“Rene”) became an employee of
DENTSPLY as part of the sales force integration. (Id. ¶ 21.) Before that, and since July
2006, Rene was employed by Tulsa. (Id.) Rene resigned her employment with
DENTSPLY on June 29, 2012. (Id.) At the time, she was a District Manager. (Id.)
While working for Tulsa and DENTSPLY, Rene was responsible for marketing dental
implant products to dentists, oral surgeons, periodontists, and laboratories within her
geographic territory. (Id. ¶ 22.) Prior to integration, Rene’s territory included Minnesota,
North Dakota and parts of Wisconsin and Nebraska. (Id.) After Rene became an
employee of DENTSPLY, her territory changed and Renee was assigned to Minneapolis
Southeast/Rochester territory, which includes parts of Minneapolis and St. Paul,
Minnesota, and Eau Claire, Wisconsin. (Id. ¶ 23.) Rene briefly transferred to the
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Minneapolis/Northwest Fargo territory. (Id.) As an employee of both Tulsa and
DENTSPLY, Rene built strong relationships with her customers. (Id. ¶ 32.)
When Rene received her offer for employment from Tulsa in June 2006, her offer
stated: “Attached is your Employment Agreement, which is an integral part of this offer
of employment. To accept this offer of employment, you must also agree to the
conditions in the Employment Agreement” (the “Agreement”). (Doc. No. 9, Connolly
Aff. ¶ 2, Ex. A.) Rene signed and returned an executed copy of the Agreement, along
with an executed offer letter. (Id.) Rene re-affirmed her assent to the Agreement in
February 2009, when she accepted a promotion to Implant Account Executive. (Id. ¶ 2,
Ex. B.) The Agreement states in relevant part:
I [Rene] will not render services, directly or indirectly, to any
CONFLICTING ORGANIZATION or, in the event I am a sales
representative, I will not work for CONFLICTING ORGANIZATION in
geographic areas in which I worked while employed by the Company, for a
period of two (2) years after termination of my employment with the
Company, except that I may accept employment with a CONFLICTING
ORGANIZATION, whose business is diversified and which is, as to that
part of its business in which I accept employment, not a CONFLICTING
ORANIZATION, provided the Company, prior to my accepting such
employment shall receive separate written assurances satisfactory to the
Company from such CONFLICTING ORGANIZATION and from me, that
I will not render services, directly or indirectly, in connection with any
CONFLICTING PRODUCT.
(Connolly Aff. ¶ 2, Ex. A at ¶ 6.) In addition, the Agreement provides the following
relevant definitions:
“CONFLICTING ORGANIZATION” means any person (including myself
as individual serving as a consultant or independent contractor) or
organization which is engaged or about to become engaged in research on
or development, production, marketing or selling of a CONFLICTING
PRODUCT.
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...
“CONFLICTING PRODUCT” means any product, process, machine,
material or service in existence or under development, of any person or
organization other than the Company, which resembles or competes with
any product manufactured, distributed or under development by the
Company incorporating CONFIDENTIAL INFORMATION to which I had
access during my term of employment with the Company, or whose use or
marketability could be enhanced by application to it of CONFIDENTIAL
INFORMATION to which I shall have had access during my employment
by the Company.
...
“CONFIDENTIAL INFORMATION” means information disclosed to me
or known or acquired by me as a result of my employment by the
Company, not generally known in the trade or industry in which the
Company is engaged, about the Company’s products, processes, machines,
materials and services, including research, planning, development,
manufacturing, purchasing, finance, data processing, engineering,
marketing, merchandising, selling and the names of existing or future
customers, clients, and accounts of the Company as well as the needs and
requirements of said customers.
(Connolly Aff. ¶ 2, Ex. A.) In addition, the Agreement provides that, in a case where a
former employee is unable to obtain employment commensurate with her training and
education because of her obligations under the Agreement, DENTSPLY would make
monthly payments to the employee. (Connolly Aff. ¶ 2, Exs. A & B ¶ 7.)
Rene was originally hired with Tulsa as an Endodontic Specialist. (Doc. No. 16,
Rene Decl. ¶ 5.) In February 2009, Rene became an Implant Account Executive. (Id.)
As an Implant Account Executive, Rene sold “Ankylos,” a dental implant product. (Id.)
Rene submits that, in 2011, DENSTPLY acquired a competitor, Astra Tech Dental, and
that the integration of the companies became effective on April 2, 2012. (Id.) Rene
claims the corporate culture changed dramatically for the worse, leading her to resign.
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(Id. ¶¶ 7, 8.) Rene claims that when she left, she had no intention of returning to the
dental implant industry, and that she returned all DENTSPLY property and information.
(Id. ¶ 9.) Rene submits that she did not take any tangible items from DENTSPLY, did
not take or use any customer lists or price lists, did not take the password to the sales
website, has no confidential information in her possession, and that she did not copy or
transfer any information from DENTSPLY when she left. (Id.) Rene explains that she
does store names and telephone numbers on her mobile phone, and that her phone
contacts include friends, family, former colleagues and employees of DENTSPLY, as
well as some doctors who may be customers of DENTSPLY, Nobel Biocare, Bard, or
from other jobs Rene has had. (Id. ¶ 10.) Rene maintains that contact information for
oral surgeons, oral surgery practices, and dentists in her geographic region is available on
the Internet. (Id.)
On January 10, 2013, Rene was hired by Nobel Biocare as a Territory
Representative. (Rene Decl. ¶ 2.) At Nobel Biocare, Rene sells and supports sales
accounts for dental implants, abutments, and related services. (Id. ¶ 2.) 1 Rene’s sales
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In the eight months between the time she resigned from DENTSPLY Implants and
the time she began working for Nobel Biocare, Rene worked for C.R. Bard, Inc. (“C.R.
Bard”). (Rene Decl. ¶ 4.) Rene claims that C.R. Bard does not compete with Nobel
Biocare or DENTSPLY Implants. (Id. ¶ 3.)
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territory includes St. Paul, Minnesota, north to Duluth, Minnesota, and parts of Western
Wisconsin, including Eau Claire. (Id.) 2
Plaintiffs assert that, in her new sales position with Nobel Biocare, Rene has
contacted at least seven of DENTSPLY’s clinical customers, including oral surgeons and
dentists, with whom she worked while employed by DENTSPLY. (Baldwin Aff. ¶ 31.)
Plaintiffs also assert that Nobel Biocare is a direct competitor of DENTSPLY and that
Nobel Biocare sells many of the same products as DENTSPLY, including implants,
related computer software, abutments, and instruments. (Id. ¶ 28.) Rene does not dispute
that DENTSPLY and Nobel Biocare are competitors and notes that virtually all of the
practice groups of oral surgeons in her geographic area maintain some inventory for
DENTSPLY and Nobel Biocare, as well as other competing manufacturers. (Rene Decl.
¶¶ 12-13.) Rene also asserts that most, if not all, of the oral surgeons she called upon
while working for DENTSPLY were also Nobel Biocare customers already. (Id. ¶ 14.)
Rene insists that her approach to making sales does not involve the use of confidential
information and that any information about prices prior to 2013 would not be of value to
a competitor, as most manufacturers update their prices and product lines on an annual
basis. (Id. ¶ 16.)
In their Complaint, Plaintiffs assert the following claims: (1) breach of employee
agreement; (2) misappropriation or threatened misappropriation of confidential
2
Rene asserts that she cannot relocate to a new region, as she is subject to a divorce
decree that does not allow her to move outside a 30-mile radius of her home. (Id. ¶ 22.)
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information; and (3) claim for equitable relief. (Doc. No. 1, Compl.) Plaintiffs also
move for a temporary restraining order, which the Court considers below.
DISCUSSION
The Court considers four primary factors in determining whether a temporary
restraining order should be granted: (1) the threat of irreparable harm to the moving
party; (2) the likelihood of the moving party’s success on the merits; (3) the state of
balance between the alleged irreparable harm and the harm that granting the injunction
would inflict on the other party; and (4) the public interest. Dataphase Sys., Inc. v. C L
Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981). This analysis was designed to determine
whether the Court should intervene to preserve the status quo until it decides the merits of
the case. Id. None of the factors by itself is determinative; rather, in each case, the
factors must be balanced to determine whether they tilt toward or away from granting
injunctive relief. See West Pub. Co. v. Mead Data Cent., Inc., 799 F.2d 1219, 1222 (8th
Cir. 1986). The party requesting the injunctive relief bears the “complete burden” of
proving all of the factors listed above. Gelco Corp. v. Coniston Partners, 811 F.2d 414,
418 (8th Cir. 1987).
A.
Likelihood of Success
This Dataphase factor requires that the movant establish a substantial probability
of success on the merits of its claim. See Dataphase, 640 F.2d at 114. Plaintiffs have
asserted a breach of contract claim against Rene based on the alleged violation of the
Agreement’s terms, and a cause of action based on the alleged misappropriation of
confidential information. With respect to the breach of contract claim, Plaintiffs assert
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that the Agreement is a valid contract supported by adequate consideration and that the
non-compete within the Agreement is both necessary for the protection of the business or
goodwill of DENTSPLY and is not broader than necessary to protect those interests.
Plaintiffs further assert that because Rene was working for Nobel Biocare in the same
geographic territory in which she worked for DENTSPLY, and because she is using
confidential information, Rene has breached the Agreement. With respect to the
misappropriation claim, Plaintiffs assert that, despite notice, Rene has contacted at least
seven of DENTSPLY’s clinical customers since joining Nobel Biocare, and that it
appears that Rene has been using DENTSPLY’s confidential customer information for
the benefit of her new employer.
Rene argues that Plaintiffs have not shown they are likely to succeed on the merits
of their breach of contract claim. Rene’s primary argument is that the non-compete in the
Agreement is not a blanket restrictive agreement, but rather that the terms of the
Agreement provide that Rene, as a former employee, is restricted from only the use of
Plaintiffs’ confidential information in the former employee’s successive employment.
Rene further argues that Plaintiffs cannot establish that Rene has possessed or used
Plaintiffs’ confidential information.
Under Minnesota law, restrictive covenants are to be strictly construed, but will be
enforced to the extent that they protect a legitimate business interest of the employer. See
Prow v. Medtronic, Inc., 770 F.2d 117, 120 (8th Cir. 1985); Medtronic, Inc. v. Gibbons,
527 F. Supp. 1085, 1094 (D. Minn. 1981). The covenant must be reasonable, and to
determine the reasonableness of a non-compete agreement, the Court considers:
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(1) whether the restraint is necessary for the protection of the business or goodwill of the
employer; (2) whether the restraint is greater than necessary to adequately protect the
employer’s legitimate interests; (3) how long the restriction lasts; and (4) the geographic
scope of the restriction. Prow, 770 F.2d at 120. 3
In this case, the Court agrees with Plaintiffs that the Agreement protects Plaintiffs’
legitimate interests and, at least preliminarily, that the non-compete is reasonable in its
geographic scope and length of time. See, e.g., Timm & Assocs., Inc. v. Broad, Civ.
No. 05-2370, 2006 WL 3759753, at *4 (D. Minn. Dec. 21, 2006) (two-year restriction
reasonable); Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d 698, 703 (Minn. Ct.
App. 1989) (upholding a geographic restriction that was limited to area necessary to
protect former employer). Thus, the Court concludes, preliminarily, that the non-compete
provision in the Agreement is reasonable.
This does not end the Court’s inquiry, however, as the Court must determine
whether Plaintiff is likely to succeed in demonstrating that Rene has breached the terms
of the non-compete. By signing the Agreement, Rene agreed not to render services to
any “conflicting organization” in the geographic areas in which she worked while
employed by Plaintiffs for a period of two years. (Connolly Aff. ¶ 2, Ex. A at ¶ 6.) The
Agreement defines a “conflicting organization” as “any . . . organization which is
engaged or about to become engaged in research on or development, production,
3
It appears to the Court that the Agreement is supported by adequate consideration;
Defendants do not contest this point.
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marketing or selling of a CONFLICTING PRODUCT.” (Id.) “Conflicting product” is
defined, in relevant part, as “any product . . . which resembles or competes with any
product manufactured, distributed or under development by the Company incorporating
CONFIDENTIAL INFORMATION” to which Rene had access to during her
employment with Plaintiffs or a product “whose use or marketability could be enhanced
by application to it of CONFIDENTIAL INFORMATION” to which Rene had access.
Finally, “Confidential Information” is defined as:
information disclosed to me or known or acquired by me as a result of my
employment by the Company, not generally known in the trade or industry
in which the Company is engaged, about the Company’s products,
processes, machines, materials and services, including research, planning,
development, manufacturing, purchasing, finance, data processing,
engineering, marketing, merchandising, selling and the names of existing or
future customers, clients, and accounts of the Company as well as the needs
and requirements of said customers.
(Id. (emphasis added).)
The Court agrees, at least at this preliminary stage, with Rene’s reading of the
Agreement—particularly that any restriction placed on Rene related to working for a
competing organization is limited to the sale of a “conflicting product,” which in turn is
connected to the use of “confidential information.” Thus, under the plain terms of the
Agreement, Rene would not violate the terms of the non-compete by working for a
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competitor in the same geographic area unless that work also involved the use of
“confidential information.” 4
Plaintiffs assert that Rene is using DENTSPLY’s confidential information.
Specifically, Plaintiffs assert that “[i]t appears that Ms. Rene has been capitalizing on
[DENTSPLY’s] confidential customer information—which she has a duty to protect—for
the benefit of her new employer.” (Doc. No. 7 at 24.) However, after careful review of
the evidence submitted and the arguments of the parties, the Court finds that Plaintiffs
have not met their burden of establishing that Rene has used any confidential
information in her position with Nobel Biocare. In particular, Plaintiffs have not made a
sufficient showing that Rene used information not generally known in the trade or
industry in making sales with her new employer. Plaintiffs have offered no evidence that
Rene took any documents or other electronic information upon leaving DENTSPLY.
Moreover, while Plaintiffs submit evidence that Rene has contacted DENTSPLY
customers, they have not put forth evidence that Rene used confidential information in
making those contacts. 5 Because the Agreement appears to be narrowly crafted to cover
4
This narrow restriction is consistent with other terms of the Agreement, namely
the provision that, in a case where a former employee is unable to obtain employment
commensurate with her training and education because of her obligations under the
Agreement, DENTSPLY would make monthly payments to the employee. (Connolly
Aff. ¶ 2, Exs. A & B ¶ 7.)
5
At the hearing, Plaintiffs submitted two e-mail messages from Rene to Casey
Baldwin, the Central Regional Manager at DENTSPLY, to support their claim that Rene
had, and used, confidential information while working for Nobel Biocare. The Court has
reviewed both messages, as well as the Supplemental Declaration of Shari L. Rene (Doc.
(Footnote Continued on Next Page)
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only the use of DENTSPLY’s confidential information, the Court determines that
Plaintiffs have not demonstrated a likelihood of success on the merits. Accordingly, the
Court finds that this factor weighs against granting a temporary restraining order. 6
C.
Irreparable Harm
The movant must establish that irreparable harm will result if injunctive relief is
not granted and that such harm will not be compensable by money damages. See
Packard Elevator v. I.C.C., 782 F.2d 112, 115 (8th Cir. 1986). Plaintiffs contend that
Rene’s use of DENTSPLY’s confidential information and goodwill will cause damage to
its customer and prospective customer relationships, and that the harm will be immediate
and irreparable without an injunction. Rene submits that Plaintiffs have failed to make a
showing of irreparable harm because they offer no evidence that Rene took or used any
of Plaintiffs’ confidential information, that Rene has made a single sale to any customer
of Plaintiffs, or that sales by Rene to Plaintiffs’ customers could not be compensable by
money damages.
Here, as discussed above, Plaintiffs have not demonstrated that they are likely to
prevail on the merits of their breach of contract or misappropriation claims. Thus, the
(Footnote Continued From Previous Page)
No. 20), and finds that the messages are not sufficient to demonstrate that Rene used
confidential information.
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For reasons similar to those discussed above, the Court concludes that Plaintiffs
have not met their burden to establish a likelihood of success on the merits of their
misappropriation claim.
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Court also finds that Plaintiffs have not demonstrated that they are threatened with
irreparable harm. This factor weighs against granting a temporary restraining order.
D.
Balance of Harms and Public Interest
The third Dataphase factor to be considered is whether the harm to the movant in
the absence of injunctive relief outweighs the potential harm that granting injunctive
relief may cause to the non-movant. See Dataphase, 640 F.2d at 114. The final
Dataphase factor to be considered by a court is whether injunctive relief is in the public’s
interest. Id. At this early stage, and in light of the Court’s findings above, the Court
concludes that these factors weigh against granting a temporary restraining order.
CONCLUSION
For all of the reasons discussed above, the Court concludes that the balance of
equities does not favor Plaintiffs and justice does not require the Court to intervene to
preserve the status quo until the merits are determined. While the Court denies Plaintiffs’
motion for a temporary restraining order, the Court notes that this was a close call. The
Court understands that many, if not most, non-compete provisions are intended to cover a
situation where a former employee begins working for a direct competitor in the same
geographic area, but the actual language of the non-compete at issue here appears to be
more narrowly drawn, so as to prohibit only the use of confidential information while
working for a competitor. The Court also notes, however, that this Order is not
determinative of future motions, and there is no guarantee that the Court’s current view
of the parameters of the non-compete will stand in future motions, particularly as the
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record and arguments are supplemented and refined. The Court strongly suggests that the
parties make an attempt to resolve this case.
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that Plaintiffs’ Motion
for Temporary Restraining Order (Doc. No. [6]) is DENIED.
Dated: March 6, 2013
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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