Devos Ltd. v. Bradhold et al

Filing 38

DECISION AND ORDER: ORDERED that the individual Defendants are enjoined from using, disclosing or disseminating any of the Plaintiffs confidential and/or proprietary information, as those terms are defined in the restrictive covenants; and it is furt her; ORDERED that the individual Defendants shall immediately return to the Plaintiff any confidential and/or proprietary information currently in their possession; and it is further; ORDERED that the individual Defendants are enjoined from working w ith or for the corporate Defendant PharmaLink, or any other competitor of the Plaintiff; and it is further; ORDERED that the individual Defendants are enjoined from engaging in, assisting, or having any active interest or involvement in any business or entity that is engaged in substantially the same business as the Plaintiff; and it is further; ORDERED that the individual Defendants are enjoined from soliciting, contacting, doing business with, calling upon or communicating with any customer, f ormer customer or prospective customer of the Plaintiff; and it is further; ORDERED that the corporate Defendant PharmaLink is enjoined from employing or otherwise accepting services from the individual Defendants; and it is further; ORDERED that the se restrictions are conditioned upon the Plaintiffs posting of a bond in the amount $250,000.00 to cover the possible costs and damages that may be incurred by the Defendants if there is a determination that this preliminary injunction was impro vidently granted. If the bond is not filed within ten days of the date of this Order, the Defendants are granted leave to return to the Court and make an application to vacate the injunction. This case is respectfully referred to United States Magistrate Judge A. Kathleen Tomlinson for discovery. It is So Ordered by Judge Arthur D. Spatt on 8/11/2017. (Ortiz, Grisel)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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DEVOS LTD. d/b/a GUARANTEED RETURNS,
Plaintiff,
-againstCHAD BRADHOLD, BRIAN MOORE, THOMAS J. LUKACZ,
PHARMALINK, INC. and JOHN DOES 1 to 15,

FILED 
CLERK 

8/11/2017 4:58 pm

U.S. DISTRICT COURT 
EASTERN DISTRICT OF NEW YORK 
LONG ISLAND OFFICE 

Decision & Order
17-cv-3718(ADS)(AKT)

Defendants.
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APPEARANCES:
Meltzer, Lippe, Goldstein & Breitstone, LLP
Attorneys for the Plaintiff
190 Willis Avenue
Mineola, NY 11501
By: Thomas J. McGowan, Esq., Of Counsel
Boynton, Waldron, Doleac, Woodman & Scott, P.A.
Attorneys for the Defendants Chad Bradhold, Brian Moore, and Thomas J. Lukacz
82 Court Street
Portsmouth, NH 03801
By: Philip Pettis, Esq., Of Counsel
Ogletree, Deakins, Nash, Smoak & Stewart, PC
Attorneys for the Defendant PharmaLink, Inc.
10 Madison Avenue, Suite 402
Morristown, NJ 07960
By:
Sharon P. Margello, Esq., Of Counsel
SPATT, District Judge:
On or about March 22, 2017, the Plaintiff Devos Ltd. d/b/a Guaranteed Returns (the
“Plaintiff” or “GRX”) and two of its executives were convicted by a jury in the Eastern District of
Pennsylvania on charges of mail fraud, wire fraud, theft of government property, money laundering
conspiracy, obstruction of justice, and false statements.
Within a month of the conviction, the individual Defendants Chad Bradhold, Brian Moore,
and Thomas J. Lukacz, all of whom worked as sales representatives for GRX, resigned and began
working for a competitor, namely, the corporate Defendant PharmaLink, Inc.
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The Plaintiff now seeks to enforce certain restrictive covenants that the individual
Defendants signed as a condition of their employment with GRX. In particular, the Plaintiff moves
under Fed. R. Civ. P. 65 for a preliminary injunction, seeking, among other relief, an order barring the
Defendants, during the pendency of this litigation, from unfairly competing with GRX and/or
engaging in conduct which allegedly violates the restrictive covenants.
Based on a review of the parties’ submissions, together with the transcript of oral arguments
heard on July 31, 2017, the Court now finds that the Plaintiff’s motion for a preliminary injunction
should be granted.
Initially, the Court notes that this case is substantially similar to another case, involving the
same Plaintiff, which is currently pending before the Court, namely, Devos Ltd. also doing business as
Guaranteed Returns v. Jacob Record, et al., 2:15-cv-06916(ADS)(AYS) (the “Record Case”). In that case, the
Court previously held that restrictive covenants materially indistinguishable from those at issue here
were enforceable against GRX’s former sales representatives, and that, in order to safeguard its
valuable customer relationships and confidential customer information, the company was entitled to
a preliminary injunction barring the defendants from acting in violation of such agreements. See
generally Devos, Ltd. v. Record, 2015 U.S. Dist. LEXIS 172929 (E.D.N.Y. Dec. 24, 2015) (Spatt, J.). In the
Court’s view, the reasoning from that case applies with equal force to the facts of this case.
The only apparent difference between the Record Case and this case – and indeed, the only
new fact raised by the Defendants as favoring a different result – is the procedural posture of the
Plaintiff’s criminal proceeding. Namely, whereas the Record Case was decided at a time when the
allegations of wrongdoing against the Plaintiff were unproven (a circumstance the Court found
insufficient to justify excusing the defendants from their continuing obligations under the restrictive
covenants), the Defendants here argue that the Plaintiff’s subsequent conviction has so altered the
parties’ contractual relationship as to render the restrictive covenants unenforceable.

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However, from a legal standpoint, the conclusion favored by the Defendants is without
precedent. The Court is unaware of any authority supporting the proposition that a corporate
conviction per se invalidates an otherwise enforceable restrictive covenant covering the corporation’s
employees. In fact, at the in-person conference held on July 31, 2017, counsel for all parties agreed
that there is apparently no factually similar caselaw, other than this Court’s decision in the Record
Case, which weighs decidedly against the Defendants’ position.
The Record Case also governs with respect to the other legal arguments preliminarily
advanced by the Defendants. Of particular note, the Court is not persuaded by the Defendants’
argument that, to the extent the restrictive covenants apply nationwide, they are unreasonable in
scope, as a matter of law.
This argument was expressly considered, and rejected, in the Record Case, where this Court
explained that, “although the Restrictive Covenant is virtually unbounded in geographical scope,
covering the entire continental United States; and despite the relatively undeveloped state of the
record; the Plaintiff’s assertions at this juncture make it plausible that specific facts will be elicited
during discovery to establish the reasonableness of this restriction.” Devos, Ltd., 2015 U.S. Dist.
LEXIS 172929, at *37.
In particular, the Court found that the nationwide reach of the Plaintiff’s business, taken
together with the individual Defendants’ far-flung locations (in the Record Case, the defendants were
based in Arizona, California, and Hawaii; in this case, the individual Defendants are based in
Maryland, New Hampshire, and Kentucky), “militate[d] in favor of upholding an expansive
geographical limitation on employees’ ability to compete with the company after their termination.”
Id. at *37-*38 (citing cases).
On the present record, the Defendants’ reliance on the geographical scope of the restrictive
covenants is even less convincing, as the evidence appears to show that, at least with respect to the

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Defendant Bradhold, after separating from GRX, he made overt attempts to service the same clients
in the same regional territory as he did while employed by the Plaintiff. Thus, there is no reason to
believe that a more narrowly-drawn geographic restriction would have prevented the complained-of
conduct.
Nor is the Court persuaded by the Defendants’ reliance on the more onerous legal standard
that typically applies to mandatory, as opposed to prohibitory, injunctions. To whatever extent the
Defendants contend that the requested preliminary injunction would affirmatively disrupt their
current employment situations, the Court finds that circumstance to be a problem of their own
making.
In particular, the evidence in the record strongly suggests that the individual Defendants
were well aware of the restrictive covenants and the consequences of acting in violation of their
terms after separating from GRX. Nevertheless, for purported reasons discussed more fully below,
the Defendants concede that they did just that, and deliberately embarked on a course of conduct
that appears to flagrantly violate the limitations in their employment agreements. In the Court’s
view, they may not now benefit from that decision by imposing upon the Plaintiff a heightened
burden of proof.
The Defendants’ reliance on the facts proffered through their supporting affidavits fares no
better. Their main argument opposing enforcement of the restrictive covenants is that, postconviction, the Plaintiff cannot continue operating as a going concern. Thus, the Defendants assert
that they were effectively discharged as a result of the conviction because substantial portions of
GRX’s customer base have refused to do business with an entity convicted of fraud.
As an initial matter, the Court notes that the Plaintiff is appealing its conviction. In any
event, while discovery may ultimately reveal facts demonstrating that the conviction had a
materially harmful effect on the Defendants’ employment, so that they were effectively forced to

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resign, at this juncture, there is no evidence to support that theory other than the Defendants’ selfserving accounts.
In this regard, the Court notes that a variation of the same contention was raised in the
Record Case, where the defendants argued that the Plaintiff’s indictment would have a comparably
deleterious effect on their livelihoods. However, the Court noted that, contrary to the Defendants’
description of a mass customer exodus, the preliminary evidence showed that “the Defendants
[were] exploiting the Plaintiff’s inclusion on a federal exclusion list to disparage the Plaintiff . . . and
convert the Plaintiff’s customer base to the Defendants’ benefit.” Id. at *51.
Although the allegations of wrongdoing on the part of the Plaintiff are now established, the
Court nevertheless finds that, as in the Record Case, the position taken by the Defendants in this case
may be somewhat misleading. Namely, contrary to the Defendants’ reports of a large-scale, postconviction departure of GRX’s customers, the record contains evidence indicating that the
individual Defendants actively solicited clients to move their business elsewhere and then attempted
to conceal that fact from GRX.
Further, contrary to the Defendants’ contentions, the record contains materially
uncontroverted evidence from the Plaintiff’s President and CEO regarding the continued viability of
GRX. In sworn statements, Paul Nick stated that the company is very much a going concern; that
internal controls were implemented to prevent any future conduct similar to that which led to the
conviction; that, in any event, the company increased commission rates and salaries for its sales
representatives to offset any potential market backlash from the criminal case; and that at least 30
sales representatives apparently did not share the Defendants’ view that it would be “financially
impossible” to continue working for GRX.
In the Court’s view, this evidence also weighs heavily against the Defendants’ theory that the
overall purpose of the restrictive covenants has been frustrated.

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Based on the foregoing, the Court discerns no compelling basis to depart from the reasoning
and result reached in the Record Case, which, as noted above, was decided on facts substantially
similar to those presented here. Accordingly, pending a final disposition, or until further Order of
the Court, it is:
ORDERED that the individual Defendants are enjoined from using, disclosing or
disseminating any of the Plaintiff’s confidential and/or proprietary information, as those terms are
defined in the restrictive covenants; and it is further
ORDERED that the individual Defendants shall immediately return to the Plaintiff any
confidential and/or proprietary information currently in their possession; and it is further
ORDERED that the individual Defendants are enjoined from working with or for the
corporate Defendant PharmaLink, or any other competitor of the Plaintiff; and it is further
ORDERED that the individual Defendants are enjoined from engaging in, assisting, or
having any active interest or involvement in any business or entity that is engaged in substantially
the same business as the Plaintiff; and it is further
ORDERED that the individual Defendants are enjoined from soliciting, contacting, doing
business with, calling upon or communicating with any customer, former customer or prospective
customer of the Plaintiff; and it is further
ORDERED that the corporate Defendant PharmaLink is enjoined from employing or
otherwise accepting services from the individual Defendants; and it is further
ORDERED that these restrictions are conditioned upon the Plaintiff’s posting of a bond in
the amount $250,000.00 to cover the possible costs and damages that may be incurred by the
Defendants if there is a determination that this preliminary injunction was improvidently granted.
If the bond is not filed within ten days of the date of this Order, the Defendants are granted
leave to return to the Court and make an application to vacate the injunction.

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This case is respectfully referred to United States Magistrate Judge A. Kathleen Tomlinson
for discovery.
It is SO ORDERED:
Dated: Central Islip, New York
August 11, 2017

/s/ Arthur D. Spatt_______________________
ARTHUR D. SPATT
United States District Judge

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