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SIEMENS MEDICAL SOLUTIONS HEALTH v. CARMELENGO

April 12, 2001

SIEMENS MEDICAL SOLUTIONS HEALTH SERVICES CORP.
V.
BRIAN J. CARMELENGO.



The opinion of the court was delivered by: O'neill, District Judge.

    MEMORANDUM

Plaintiff Siemens seeks to enforce a restrictive covenant contained in an employment agreement signed by its former employee, defendant Brian Carmelengo. Before me is plaintiffs motion for a preliminary injunction as well as defendant's motion to dismiss the complaint for failure to state a claim. Plaintiffs motion for an injunction will be granted in part and denied in part and defendant's motion to dismiss will be denied.

BACKGROUND

Shared Medical Systems Corporation ("SMS") was a provider of software applications and consulting services for the healthcare industry until July 2000, when Siemens Corporation acquired all the stock of SMS and changed the name of the corporation to Siemens Medical Solutions Health Services Corporation ("Siemens"). Brian Carmelengo was employed by SMS/Siemens from January 3, 1989 to January 21, 2001. Before beginning at SMS, Carmelengo signed an employment agreement dated December 28, 1988. Section four of the agreement is a general confidentiality provision prohibiting the employee from disclosing trade secrets and other confidential information. Section 4(b) states: "upon and subsequent to termination of his employment hereunder for any reason whatever [the employee] will not, at any time, make any use whatever of . . . Restricted Information,*fn1 either on his own or in conjunction with or on behalf of any other person or entity." Section five is a covenant not to compete for one year following the employee's termination date and requires the employee not to engage in any employment or line of business that is "substantially similar" to the duties he or she performed for SMS or would require the employee to disclose or use restricted information. The covenant in section five also limits contact with any current or former customers of SMS, stating:

(b) for a period of one year from the date of . . . termination, EMPLOYEE will not, on behalf of himself or any competitor . . ., compete for, or engage in the solicitation of any customer of EMPLOYER . . . or any person or entity that EMPLOYEE has, during the year immediately preceding such termination, solicited or serviced on behalf of EMPLOYER . . . or that has been solicited or serviced, during such period, by any person under EMPLOYEE's supervision.
EMPLOYEE's obligation under this section . . . shall extend to all geographic areas of the world in which EMPLOYER or any of its related companies, is offering its services, either directly or indirectly, through licenses or otherwise. . . . Provided, however, that if EMPLOYEE's duties . . . involve only sales and/or marketing, EMPLOYEE's obligation . . . shall extend only to that geographical territory for which he had significant sales, marketing or supervisor responsibility at any time during the year preceding the date of termination of his employment hereunder.

Section 12 of the agreement states that it is governed by Pennsylvania law.

Carmelengo started out at SMS as a programmer and over the next several years received a number of promotions. In 1994 he was promoted to the position of Senior Network Consultant, also known as a Technology Sales Consultant, which was primarily a sales position. On April 15, 2000 he was promoted again to New Business Sales Representative, also a sales position.

Cerner Corporation is a competitor of Siemens and sells health information systems and services to hospitals and businesses in the healthcare industry. On January 24, 2001, Siemens' corporate counsel, Michelle Nofer, wrote to Cerner's corporate counsel, Tanya Wilson, informing her that SMS understood that Cerner had made an offer of employment to Carmelengo and advising her of Carmelengo's obligations under his employment agreement. Wilson responded by stating that Cerner believed hiring Carmelengo would not be in violation of his employment contract with Siemens because he would be working in a territory — Wisconsin and Illinois — in which he had not been involved with SMS/Siemens. Siemens disagrees, maintaining that these states were part of Carmelengo's sales territory while an employee at SMS/Siemens. Specifically, according to Siemens, in his position as a Senior Network Consultant (a position he held from January 1, 1998 until April 15, 2000) Carmelengo was responsible for selling SMS technology services to specific customers in the Midwest Valley Region, which included Illinois, Wisconsin, Minnesota, Iowa, North Dakota and South Dakota and the Missouri Valley Region which included Kansas City, Nebraska and Missouri. Siemens also asserts that following his promotion to New Business Associate on April 15, 2000, Carmelengo was placed in charge of selling SMS products and services to new customers in Missouri and Illinois. Carmelengo continued to work for Siemens until January 29, 20001. He has since accepted an offer of employment with Cerner.

On February 16, 2001, plaintiff moved for a temporary restraining order and a preliminary injunction. On March 9, 2001, defendant moved to dismiss Siemens' complaint. On March 26, 2001 Siemens filed an amended complaint containing claims against Carmelengo for (1) breach of contract and (2) breach of fiduciary duty. The complaint also included counts against both Carmelengo and Cerner Corporation for (3) misappropriation of trade secrets and confidential information, and against Cerner alone for (4) tortious interference with contractual relations, and (5) unfair competition. Siemens seeks an injunction for a period of one year from January 29, 2001: (1) prohibiting Cerner from employing Carmelengo, (2) prohibiting Carmelengo from accepting or seeking employment with any person or entity engaged in the same or similar business as SMS, and (3) prohibiting Carmelengo from soliciting any customer or potential customer of SMS that Carmelengo solicited or served on behalf of SMS. Siemens also seeks: (4) a permanent injunction prohibiting Carmelengo from misappropriating SMS's trade secrets, (5) an injunction directing Carmelengo to return to SMS all information, documents, software, materials, work product, or equipment taken by him from SMS, and (6) compensatory, consequential and punitive damages in an amount to be determined at a trial of this matter.

There was a preliminary injunction hearing on March 27, 2001. At the hearing, plaintiff withdrew all claims against Cerner Corporation due to lack of subject matter jurisdiction.

DISCUSSION

I. Preliminary Injunction

Prior to granting a preliminary injunction the court must weigh four factors: (1) whether the movant has demonstrated a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured if the request for relief is not granted; (3) whether granting the preliminary relief will result in even greater harm to the non-movant; and (4) the public interest. See Vector Security, Inc. v. Stewart, 88 F. Supp.2d 395, 399 (E.D.Pa. 2000). Weighing these four factors I find preliminary injunctive relief is warranted. For the following reasons I hold that plaintiff has demonstrated a reasonable probability of success on the merits. Further, I also find that if injunctive relief is not granted plaintiff will suffer irreparable harm in the form of an erosion in the business relationship Siemens has cultivated with ...


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