Biotronik, Inc. et al v. St. Jude Medical S.C., Inc.

Filing 31

ORDER: Denying Plaintiffs' Motion to Remand Case to State Court 4 ; Granting Defendant's Motion to Dismiss 13 . Signed on 8/5/2012 by Chief Judge Ann L. Aiken. (lg)

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON

Case No. 3:12-cv-446-AA
OPINION AND ORDER

BIOTRONIK, INC., an Oregon
Corporation; RUSSELL BROMING;
ROSS FISHBERGER; SHANE
McLAUGHLIN; SCOTT McCULLOUGH;
and WALTER PAWLIW,
Plaintiffs,

v.
ST. JUDE MEDICAL S.C., INC.,
a Minnesota corporation,
Defendant.
Aiken, Chief Judge:
Plaintiffs filed suit in state court seeking a declaration
regarding

the

scope

of

the

individual

plaintiffs'

post-

termination obligations to defendant St. Jude Medical S.C., Inc.
(St. Jude), their former employer. St. Jude removed the action
to

federal

court

pursuant

- OPINION AND ORDER

to

28

U.S.C.

§§

1332

and

1441,

alleging jurisdiction based on diversity of citizenship and the
amount in controversy.
to

28

U.S.C.

relief

1447,

§

and do

not

Plaintiffs now move for remand pursuant
arguing that

allege

the

they seek only declaratory

threshold amount

necessary to establish di versi ty jurisdiction.

in

St.

controversy
Jude opposes

the motion for remand and moves to dismiss or to transfer the
case to the District of Minnesota on grounds of improper venue.
The motion

to

remand is

denied and the motion

to

dismiss

is

granted.
BACKGROUND
Plaintiff
corporation

Biotronik,

doing

business

Inc.
in

(Biontronik)
the

State

individual plaintiffs are residents

of

is

an

Oregon,

Oregon
and

all

of the State of New York.

St. Jude is a Minnesota corporation with its principal place of
business in Texas.
Biotronik
marketing

of

and

St.

cardiac

Jude

are

rhythm

competitors

management

in

(CRM)

the

sale

devices.

and
CRM

devices use electrical pulses to treat improperly beating hearts
and

other

complaint,

cardiac
the market

conditions.

According

for CRM devices

to

Biotronik's

is very competitive and

the devices are technologically complex. As such, the people who
sell

and

manage

the

sale

of

these

devices

must

be

salespeople and managers with technical and clinical
2

- OPINION AND ORDER

skilled
knowledge

of the devices. Accordingly, both Biotronik and St. Jude require
their

sales

representatives
that

agreements

and

post-termination

confidentiality,

include
and

managers

to

non-solicitation

sign

employment

noncompetition,

obligations

(Post-

Termination Obligations) .
In 2007,

Biotronik and St.

Jude entered into a Settlement

Agreement that required the parties to provide forty-eight hours
written notice of any intended lawsuit or claim "against each
other

or

their

representatives."
resol ve

the

respective
CompI.

dispute

'lI

employees,
13.

wi thin

If

the

agents,

or

parties

forty-eight

independent

are

hours,

unable
"the

to

party

providing notice of the claim shall file the action necessary to
resolve the claim if so desired." Id.
Plaintiffs also allege that Biotronik and St.

Jude entered

into an "informal agreement" regarding noncompeti tion disputes.
Under this alleged agreement,
employee

called

upon

or

"only those

supported

four

[accounts]
or

more

times

their last year of employment will be included as
accounts."

See

Compl.

Ex.

1

(email

which the
during

non-compete

communications

between

Biotronik and St. Jude representatives).
Plaintiff Shane McLaughlin is a former sales manager at St.
Jude who was
York area.
3

responsible for accounts in the Long Island,

The other individual plaintiffs were St.

- OPINION AND ORDER

New

Jude sales

representatives in the same region. During their employment with
St. Jude, all individual plaintiffs signed Employment Agreements
that included Post-Termination Obligations regarding competition
and solicitation.
Specifically, McLaughlin's Employment Agreement provided:
7. Confidential Information and Assignment of Inventions

***
. . . . Employee will not disclose to a third party or
use for Employee's benefit Confidential Information of
[St. Jude Medical S.C., Inc., "SJMSC"]. "Confidential
Information" means any information used or useful in
SJMSC's business that is not generally known outside
of SJMSC and that is proprietary to SJMSC relating to
any
aspect
of
SJMSC's
existing
or
reasonably
foreseeable business which is disclosed to Employee or
concei ved,
discovered
or
developed
by
Employee.
Confidential Information includes but is not limited
to: product designs, including drawings and sketches;
marketing materials; marketing plans or proposals;
customer information; manufacturing processes; price,
accounting
and
cost
information;
clinical
data;
administrative
techniques
and
documents;
and
information designated by SJMSC as "Confidential."

***
8. Non-Competition. During Employee's employment and
for a period of one (1) year after the date of
termination of employment with SJMSC 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
SJMSC 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)
4

- OPINION AND ORDER

year after the date of termination of employment with
SJMSC for any reason, Employee will not directly or
indirectly sell,
demonstrate,
promote,
solicit or
support the
sale of,
support
of
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 SJMSC 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 SJMSC.
9. Non-Solicitation. During Employee's employment and
for a period of one (1) year after termination of
Employee's employment with SJMSC for any reason,
Employee will not, directly or indirectly, solicit on
Employee's own behalf or on behalf of another person
or entity, the services of any person who is an
employee or sales representative of SJMSC or any of
its affiliates, or solicit any of SJMSC's or its
affiliates'
employees or sales representatives to
terminate their employment in order to compete with
st. Jude Medical, Inc. , SJMSC or any of their
affiliates.

Fox Decl. Ex. 1 at 41-43.
The

Employment

Agreements

also

contained

provisions

governing choice of law, forum selection, and jurisdiction:
10. Miscellaneous

***
G. Governing Law. This Agreement will be governed
by the laws of the state of Minnesota without
gi ving effect to the principles of conflict of
laws of any jurisdiction.

5

- OPINION AND ORDER

H.
Exclusive
Jurisdiction.
All
actions
or
proceeding relating to this Agreement will be
tried and litigated only in the Minnesota State or
Federal
Courts
located
in
Ramsey
County,
Minnesota.
Employee
submits to the exclusive
jurisdiction of these courts for the purpose of
any such action or proceeding, and this submission
cannot be revoked.
Employee understands that
Employee is surrendering the right to bring
litigation against SJMSC outside the State of
Minnesota.
Fox Decl. Ex. 1 at 44.
During

the

week

of

February

27,

2012,

the

individual

plaintiffs announced that they were resigning to follow former
St.

Jude

Division Vice

President

Paul

Woodstock

to

Biotronik

under guaranteed-compensation contracts. Subsequently,

Biotronik

provided St. Jude with a list of accounts
the

individual

Jude

disputes

plaintiffs'
the

accuracy

(the List)

Post-Termination
of

addi tional

physician and hospital

individual

plaintiffs'

the

List

accounts

Post-Termination

subj ect to

Obligations.
and

are

St.

asserts

that

subj ect to

the

Obligations.

St.

Jude

also alleges that the individual plaintiffs are in violation of
their Employment Agreements.
After the parties could not resolve their disagreement over
the List,

plaintiffs filed suit in Circuit Court for Clackamas

County seeking a declaration that the

~Individual

Post-Termination Obligations

to

relating

noncompetition

are as described in the List." Compl. at 4-5.
6

- OPINION AND ORDER

Plaintiffs[']

St.

Jude

removed

the

di versi ty jurisdiction.

case

to

federal

court

based

on

Plaintiffs move to remand the case to

state court for lack of subj ect matter jurisdiction,

and St.

Jude moves to dismiss or transfer the action to the District of
Minnesota

pursuant

to

the

forum

selection

clause

in

the

Employment Agreements. 1
DISCUSSION
A. Subject Matter Jurisdiction
A

party

asserting

di versi ty

jurisdiction

must

allege

complete di versi ty of citizenship between the parties and an
amount in controversy of at least $75,000. 28 U.S.C.

§

Caterpillar Inc.

(discussing

requirements

of

v.

Lewis,

519 u.S.

diversity

to

61,

68

establish

(1996)

1332(a);

subject

matter

jurisdiction). Here, the parties are of diverse citizenship and
the only issue is the amount in controversy.
To warrant dismissal or remand, "'it must appear to a legal
certainty

that

the

claim

is

really

for

less

than

the

jurisdictional amount.'" Budget Rent-A-Car Inc. v. Higashiguchi,
IOn March 27, 2012, St. Jude filed suit against Biotronik and
several former St. Jude employees, including individual
plaintiffs, alleging violations of restrictive covenants
contained in the relevant Employment Agreements. On May 29,
2012, St. Jude amended the complaint and added another former
employee as a defendant. The Minnesota state court recently
denied Biotronik's motions to stay and granted St. Jude's
motions for temporary injunctive relief. Notice of Filing in
Related Case (doc. 29) Ex. A.
7 - OPINION AND ORDER

109 F.3d 1471,
Indem.
this

Co.

v.

1473

(9th Cir.

Red Cab Co.,

'legal certainty'

1997)

303 U.S.

standard,

matter jurisdiction unless

(quoting St.
283,

289

the federal

Paul Mercury

(1938)).

"Under

court has subj ect

'upon the face of the complaint,

it

is obvious that the suit cannot involve the necessary amount."
Travelers Prop. ·Cas. Co. of Am. v.
3042993,

at

*1

(D.

Ariz.

July

Zurich Am.

25,

2012)

Ins. Co., 2012 WL

(internal

quotation

marks and citation omitted) .
On the

face

of

plaintiffs'

damages or monies owed by St.
declaration

that

the

complaint,

Jude.

individual

they do

Rather,

not

claim

plaintiffs seek a

plaintiffs'

Post-TerrEination

Obligations are reflected accurately in the List provided to St.
Jude. Stated another way, plaintiffs seek a declaration that the
individual

plaintiffs

may

accordance

with

Post-Termination

the

solicit

the

disputed

accounts

Obligations

of

in

their

Employment Agreements.
When declaratory relief is sought,

"it is well established

that the amount in controversy is measured by the value of the
obj ect
Cornm'n,

of

the

litigation."

432 U.S.

333,

347

Hunt

(1977).

v.
St.

Wash.

State

Apple

Adver.

Jude bears the burden of

establishing by a preponderance of the evidence that the value
in this case exceeds $75,000.
837, 839 (9th Cir. 2002)
8

- OPINION AND ORDER

Cohn v.

Petsmart,

Inc.,

281 F. 3d

("To support removal based on diversity

jurisdiction,

[the defendantl

has the burden of proving,

preponderance of the evidence,
exceeds
later

$75,000.").
provided

that

the amount

by a

in controversy

A court may consider supplemental evidence

by

the

removing

defendant,

which

was

not

of

the

originally included in the removal notice. Id. at 840.
Contrary

to

plaintiffs'

assertion,

the

object

litigation is not the accuracy of the List or the terms of the
Settlement Agreement between Biotronik and St. Jude. Rather, the
object of the litigation is the individual plaintiffs'
to

solicit

the

Agreements.

disputed

See Hunt,

accounts

432 U. S.

of the litigation was

under

at 347

their

ability

Employment

(finding that the obj ect

"the right of the individual Washington

apple growers and dealers to conduct their business affairs in
the

North

Carolina

challenged

statute"

measured

by

1302736,

at *2

free

from

cf.

and

that

"[tlhe

losses

the

enforcement");

market

that

will

the

interference

value

follow

of

that

from

the

Davis v. Advanced Care Tech.,

(E.D.

Cal.

May 02,

2007)

of

the

right

is

statute's

Inc.,

2007 WL

("Where the object of

the litigation is a noncompetition agreement designed to protect
a company's confidential information,

the value to the company

of protecting that information is the amount in controversy.").
St.

Jude

argues

individual plaintiffs'
9

- OPINION AND ORDER

that

in

determining

the

solicitation of accounts,

value

of

the

the court may

look to the value of the disputed accounts and the plaintiffs'
compensation,

and that based on such evidence, this case easily

meets the threshold amount.
Inc.,

2007

WL

3341389,
to

at

See Mahoney v.
*5-6

prohibit

(E.D.

Depuy Orthopaedics,

Cal.

enforcement

Nov.
of

8,

2007)

(in

action

seeking

clause,

court looked to the plaintiff's compensation and sales

revenue to determine amount in controversy);

non-competition

see also Luna v.

Kemira Specialty, Inc., 575 F. Supp. 2d 1166,1172-73 (C.D. Cal.
2008)
1286

(accord); Basicomputer Corp. v.
(N.D.

Ohio 1991),

Scott,

aff'd 973 F.2d 507

action seeking enforcement

791 F. Supp. 1280,
(6th Cir.

1992)

of non-competition covenants,

(in

court

looked to commissions, profits from sales revenue, and estimated
loss of revenue to determine the amount in controversy).
For

example,

St.

Jude

emphasizes

that

the

individual

plaintiffs had collective responsibility for the sales territory
encompassing

the

Long

Island,

New

Francis Hospital and other major St.
Declo at 2-24.

York

area,

including

Jude accounts.

St.

See Arancio

st. Jude's CRM devices cost approximately $3,400

to $18,000 each, and annual CRM sales revenues for the disputed
accounts

totaled over

$22 million

at

the

time

the

individual

plaintiffs left their employment with St. Jude. Arancio Decl. at
24.

Thus,

St.

Jude

maintains

ability to solicit St.
10 - OPINION AND ORDER

that

the

individual

plaintiffs'

Jude accounts in the Long Island region

could result in losses of sales revenue for St. Jude, and gains
in

revenue

amount.

for

Biotronik,

Further,

plaintiffs'

St.

annual

approximately

that

Jude

far

emphasizes

compensation

$150,000

to

exceed

with

$400,000,

the

jurisdictional

that
St.

thus

the

Jude

individual
ranged

from

providing

additional

evidence of the value of the individual plaintiffs'

ability to

solicit the disputed accounts. See Hawks Decl. at 2.

st. Jude's assertions regarding the

Plaintiffs argue that

amount in controversy are conclusory and speculative. Plaintiffs
maintain
direct

that
link

St.

Jude

between

presents

the

no

evidence

individual

to

plaintiffs'

establish

a

ability

to

solicit the disputed accounts and the potential losses to St.
Jude.

Lowdermilk v.

(9th

Cir.

2007)

U.S.
(a

court

defendant's

"speculation

Med.,

Case No.

Inc.,

Bank Nat'l Ass'n,

and

"failed to show a

loss

revenue

Plaintiffs

further

and

base

conjecture");

BC 357665

defendant
of

cannot

(C.D.

Cal.

jurisdiction
Biotronik
2006)

1002
on

v.

a
ELA

(finding that

direct link between its proj ected

non-enforcement

contend

479 F.3d 994,

that

a

of

the

declaration

Agreement"). 2
regarding

the

Plaintiffs and St. Jude also cite Judge Simon's ruling in
Biotronik, Inc. v. Medtronic USA, Inc., 840 F. Supp. 2d 1251 (D.
Or. Jan, 4, 2012) to support their respective arguments.
However, that case did not involve a claim asserted by a former
employee to resolve the scope of existing non-competition
obligations. Thus, while informative, I do not find the case
particularly supportive of the parties' positions in this case.

2

11 -

OPINION AND ORDER

~pecuniary

accuracy of the List results in no
party.

See In re Ford Motor Co./Citibank

264 F.3d 952, 958

(9th Cir. 2001)

result" to either

(South Dakota),

(~Under

N.A.,

the 'either viewpoint'

rule, the test for determining the amount in controversy is the
pecuniary

result

to

either

party

which

the

judgment

would

directly produce.").
Importantly,
the

evidence

St.

that

Jude need only show by a preponderance of
the

value

of

the

individual

plaintiffs'

ability to solicit the disputed accounts exceeds $75,000.
281 F.3d at 839.

Cohn,

Plaintiffs do not dispute that the individual

plaintiffs received high levels of compensation in exchange for
their

sales

services

and

Termination Obligations.

their

acceptance

Viewed collectively

of

the

Post-

(or individually),

such evidence renders

the court hard-pressed to find that

the

individual plaintiffs'

ability to solicit the disputed accounts

is valued at less than $75,000 by Biotronik or by the individual
plaintiffs.

See Luna,

575 F. Supp. 2d at 1172-73; Mahoney, 2007

WL 3341389, at *5-6.
Further, a declaration in plaintiffs' favor would allow the
individual

plaintiffs

to

solicit

the

disputed

accounts,

resulting in potential sales revenue to Biotronik and potential
sales

losses

exceed

the

12 -

to

St.

Jude

jurisdictional

OPINION AND ORDER

revenues
amount

given

and
the

losses
value

that
of

easily
the

CRM

2007 WL

devices and the amount of sales revenue at stake.
1302736,
sales

at

*1-2.

revenue

Again,

from

the

plaintiffs
disputed

millions of dollars. Thus,

do

not

accounts

dispute

that
into

extends

the
the

I cannot find to a "legal certainty"

that the amount in controversy is less than $75,000.
In

sum,

I

find

that

St.

Jude

has

established

by

a

preponderance of the evidence that the value of the individual
plaintiffs'

ability to

solicit

the disputed accounts,

and the

potential gains and losses resulting from that ability,
the

jurisdictional threshold of $75,000.

Therefore,

exceed

the motion

to remand is denied.
B. Forum Selection Clause and Venue
St.

Jude moves

for

dismissal

or transfer of

this

action

based on the forum selection clause contained in the individual
plaintiffs'

Employment

Agreements

with

St.

Jude.

The

forum

selection clause unambiguously provides that "[alII actions or
proceeding

relating

to

this

Agreement

will

be

tried

and

litigated only in the Minnesota State or Federal Courts located
in Ramsey County, Minnesota." Fox Declo Ex. I at 44.
In the Ninth Circuit,
"presumptively
compelling

and

valid"

and

forum selection clauses
"should

countervailing

362 F.3d 1133,
13 - OPINION AND ORDER

be

reason.'

1140

honored
II

Murphy

(9th Cir.

2004)

are deemed

'absent
v.

some

Schneider

(quoting Mis

404 U.S. 1, 12

(1972)). A forum

selection clause generally is upheld unless:
(1) its incorporation into the contract was the result
of fraud, undue influence, or overweening bargaining
power; (2) the selected forum is so gravely difficult
and inconvenient that the complaining party will for
all practical purposes be deprived of its day in
court;
or
(3)
enforcement
of
the
clause would
contravene a strong public policy of the forum in
which the suit is brought.
R.A. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir.
1996)

(internal

quotation

marks

and

party challenging the clause bears a

citations

omitted).

"The

'heavy burden of proof.'"

Murphy, 362 F.3d at 1140 (quoting MIS Bremen, 407 U.S. at 17).
Plaintiffs do not argue that the forum selection provision
resulted

from

fraud

or

undue

influence.

Rather,

plaintiffs

contend that the forum selection clause does not apply because
the declaratory relief

sought

implicates

only the accuracy of

the List pursuant to the terms of the Settlement Agreement and
information

agreement

between

Biotronik

and

St.

Jude.

Accordingly, plaintiffs argue that this dispute does not involve
the

individual

plaintiffs'

obligations

under

the

accuracy

of

Employment

Agreements. I disagree.
Granted,

the

which

Biotronik

terms

of

the

parties

dispute

purportedly

Settlement

the

provided

Agreement

in

the

accordance

between

Biotronik

Lists,

with

the

and

St.

Jude. However, the crux of this case is not whether Biotronik or
14 - OPINION AND ORDER

St. Jude has complied with the Settlement Agreement but whether
individual

plaintiffs

may

solicit

accounts

disputed

in

accordance with their Post-Termination Obligations set forth in
their Employment Agreements.
for

remand,

plaintiffs

"focuses

on

the

Indeed,

in support of their motion

specifically
scope

termination obligations"

of

assert

Individual

and seeks

a

that

this

Plaintiffs'

case
post-

declaration "that all

of

the Individual Plaintiffs are properly performing all of their
enforceable

post-termination

Reply Mem. at 2,
opposing

8. Thus,

dismissal,

individual

to

St.

Jude."

PIs.'

contrary to plaintiffs' assertions in

the

plaintiffs'

obligations

court

must

analyze

solicitation

of

whether

disputed

the

accounts

complies with their Post-Termination Obligations. See PIs.' Mem.
in Opp'n to Dismiss/Transfer at 7.
Plaintiffs also argue that Biotronik cannot be bound by the
forum

selection

clause

because

it

was

not

a

party

to

the

Employment Agreement. However,

the Ninth Circuit has ruled that

a

be

forum

selection clause may

when the

conduct

enforced against

of the non-party is

a

non-party

"closely related to the

contractual relationship" between the signatory parties. Holland
Inc. v. Wartsila N. Am.
Cir. 2007)
F.2d 509

(citing Manetti-Farrow,
(9th Cir.

1988)). Here,

15 - OPINION AND ORDER

Inc.

485 F.3d 450,

Inc. v. Gucci Am.,

456

(9th

Inc.,

858

Biotronik's claim arises from

the Employment Agreements between the individual plaintiffs and
St. Jude and is therefore

~closely

related" to those contractual

relationships. Absent the Employment Agreements, Biotronik would
have

no

need

for

a

declaration

that

the

List

reflects

the

individual plaintiffs' Post-Termination Obligations.
Accordingly,
selection
Agreements,

I find that plaintiffs are bound by the forum

clause

in

the

individual

plaintiffs'

Employment

and that venue is improper in this District. Rather

than transfer this case,

I

find dismissal appropriate in light

of the pending state court action in Minnesota.
CONCLUSION
Plaintiffs'

Motion

to

Remand

(doc.

4)

is

DENIED,

and

defendant's Motion to Dismiss and Alternative Motion to Transfer
(doc.

13)

is

GRANTED.

This

action

is

prejudice.
IT IS SO ORDERED.
Dated this

~~u.q

, 2012.

Ann Aiken
United States District Judge

16 - OPINION AND ORDER

DISMISSED

without