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HILLARD v. MEDTRONIC

July 21, 1995

RONALD L. HILLARD, et al., Plaintiffs
v.
MEDTRONIC, INC., Defendant



The opinion of the court was delivered by: NEALON

 Plaintiffs, Ronald L. Hillard (Hillard), Richard W. Conklin (Conklin), Intermedics, Inc., and CarboMedics, Inc. initiated this declaratory judgment action on April 7, 1995, against defendant Medtronic, Inc. (Medtronic). Plaintiffs Hillard and Conklin are former employees of Medtronic and seek a judgment declaring that restrictive covenants signed by them, while employed by Medtronic, are now unenforceable. On May 9, 1995, Medtronic filed an answer and counterclaim against all four plaintiffs. In the counterclaim, which alleges breach of contract and tortious interference with business relationships, Medtronic asserts that Hillard and Conklin violated the restrictive covenants, which it contends are valid and enforceable. On May 26, 1995, plaintiffs filed a motion for summary judgment and a supporting brief on June 6, 1995. On May 26, 1995, Medtronic moved for a preliminary injunction or, in the alternative, for a temporary restraining order with brief in support. A brief in opposition to this motion was submitted on June 6, 1995, by the plaintiffs, and defendant filed a reply brief on June 19, 1995. On June 29, 1995, a supplemental brief was filed by plaintiffs in support of their summary judgment motion and an additional brief in opposition to Medtronic's motion for a preliminary injunction.

 The motion for a preliminary injunction filed by Medtronic and the motion for summary judgment filed by the original plaintiffs are ripe for disposition. For the reasons that follow, plaintiffs' motion for summary judgment will be denied and defendant's motion for a preliminary injunction will be granted.

 I.

 Conklin

 Richard W. Conklin was employed as a "clinical specialist" for Medtronic providing "technical support for Medtronic customers" from March or early April, 1988 until March 17, 1995. Conklin signed a document entitled "MEDTRONIC EMPLOYEE AGREEMENT" on March 25, 1988, which contained a restrictive covenant, as follows:

 
Employee agrees that for two (2) years after termination of employment he/she will not directly or indirectly render services (including services in research) to any person or entity in connection with the design, development, manufacture, marketing or sales of a Competitive Product that is sold or intended for use or sale in any geographic area in which Medtronic actively markets a Medtronic Product or intends to actively market a Medtronic Product of the same or general type or function. It is expressly understood that the employee is free to work for a competitor of Medtronic provided that such employment does not include any responsibilities for, or in connection with, a Competitive Product as defined in this Agreement for the two year period of the restriction. If the Employee's only responsibilities for Medtronic during the last two years of employment have been in a field sales or a field sales management capacity, this provision shall only prohibit for one (1) year the rendition of services in connection with the sales of a Competitive Product to persons or entities located in any sales territory the Employee covered or supervises for Medtronic during the last year of employment.

 Under the terms of the covenant contained in Conklin's employment agreement, for two years subsequent to his termination, an employee would be prohibited from future employment with any entity involved in the "design, development, manufacture, marketing, marketing or sales of a Competitive Product" which is sold or intended to be sold in a Medtronic's current market or any geographic area in which Medtronic intends to market its products. This restriction would not apply, however, if the employee's "only responsibilities for Medtronic during the last two years of employment have been in a field sales or a field sales management capacity" in which case he would be prohibited, for one year, from sales of a competitive product to "persons or entities located in any sales territory [he] covered or supervised for Medtronic during the last year of employment." The thrust of both the one and two year agreements, with their accompanying explanations of a competitive product, was that the employee was free to work for a competitor except that he would be restricted for a specific period of time, viz., one or two years, from employment involving responsibilities for, or in connection with, a product similar to any Medtronic products on which the employee had worked during the last two years of employment.

 Conklin contends that he was not in a field sales capacity and that only the two year general restriction would apply to him. He further argues that the two year restriction is "so overbroad as to geography and products as to be invalid." (Doc. 50, p. 3). He supports his argument that the two year limitation applies by pointing to various deposition testimony and the stipulation of the parties which would reveal that: (1) Conklin did not sell Medtronic products; (2) he did not receive sales commissions from Medtronic; (3) the vast majority of Conklin's time was spent rendering technical advice in operating rooms; and (4) the job description of a Clinical Specialist differs from that of Field Sales Representative.

 Medtronic counters that Conklin in his position as a clinical specialist is subject to the one year restriction, and that it is reasonable and limited. It asserts that the two year restriction was intended to cover employees who did not directly develop relationships with Medtronic customers. Conklin worked directly with Medtronic customers and assisted at surgical implant procedures when the Sales Representative was not available. Since he had some sales support duties, including reporting only to the Sales and Marketing Division, it is argued that he operated in a sales capacity and falls under the one year restriction. During his deposition, he testified that he "would meet on occasion [with Ron Hillard, a Medtronic salesman], it may not be quarterly, but we meet on occasion to discuss his territory in order to see where he needed to be spending more time as a salesman in accounts interfacing with his customers." (Conklin deposition at P. 202). He also testified that his "role was to tell them [customers] about the newer products and explain the differences of the product because that was my job as a TSI." This was done because "the company wanted to move to newer stuff." (Conklin deposition at P. 204). Medtronic argues further that, even if the court decides that Conklin was not engaged in a field sales capacity and the broader two year covenant applies, that it should not be penalized for this misinterpretation and the court should resort to the "blue pencil" approach approved by the Pennsylvania appellate courts and grant the relief necessary to reasonably protect its business interests.

 As to plaintiffs' summary judgment motion, in Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), the United States Supreme Court outlined the proper interpretation of Rule 56(c):

 
Under Rule 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is entitled to a judgment "as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of her case to which she has the burden of proof.

 Celotex, 477 at 322-23. "Any credible evidence contrary to the moving party's version of events will defeat the summary judgment motion." Losch v. Borough of Parkesburg, Pa., 736 F.2d 903, 908 (3d Cir. 1984).

 Based on the foregoing, the court believes that a material issue of fact exists as to which restriction applies to Conklin. Accordingly, the plaintiffs' motion for summary judgment, predicated on the assertion that the one year restriction applies, will be denied.

 Turning to the motion for a preliminary injunction, Medtronic contends that, while this factual dispute precludes summary judgment for plaintiff, it is not dispositive of its motion for preliminary injunctive relief. As previously noted, it argues that even if the two year restriction applies, that ...


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