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InterMetro Industries Corp. v. Kent

April 17, 2007


The opinion of the court was delivered by: (judge Vanaskie)


In this action brought in this Court on the basis of diversity jurisdiction, Plaintiff InterMetro Industries Corporation ("Metro") seeks a preliminary injunction to enforce against its former regional sales manager, Jonathan Scott Kent, a one-year, nationwide covenant not to compete. The Court conducted an evidentiary hearing on March 22, 2007. Finding that the duration and geographic scope of the non-compete clause are reasonable as applied to Mr. Kent's employment with Metro, where he was responsible for a sales territory covering 21 states and privy to confidential information pertaining to Metro's nationwide business in the healthcare field, the motion for a preliminary injunction will be granted. The Court now enters the following Findings of Fact and Conclusions of Law as required by Federal Rule of Civil Procedure 52(a).


Metro, a Delaware corporation with its principal place of business in Wilkes-Barre, Pennsylvania, is a manufacturer and distributor of storage products, such as shelving, cabinets, and carts. (Decl. of Edward Thompson (Dkt. Entry 13) ("Thompson Decl.") ¶ 2.) Metro's business is divided into four divisions: commercial, healthcare, foodservice, and consumer products.

On April 10, 2000, Metro hired Defendant Jonathan Scott Kent*fn1 as a territory manager in its healthcare division for the Houston, Texas area. (Aff. Jonathan Scott Kent, Def.'s Br. Opp. Ex. A (Dkt. Entry 62-2) ("Kent Aff.") ¶ 2.) In connection with his employment as a "territory manager" for Metro, Mr. Kent signed a "General Employment Agreement." (Id. ¶ 3.) Mr. Kent signed the employment agreement without attempting to negotiate any of the terms of the agreement. (Id.)

Under the employment agreement, Mr. Kent agreed to serve Metro "in the general area of Territory Mgr - Houston." (General Employment Agreement, Compl. Ex. A (Dkt. Entry 1) ("Employment Agreement") § 1.) The Employment Agreement set forth a salary for Mr. Kent as a territory manager -- $32,000 per year plus commission.*fn2 (Id. § 3.) The Employment Agreement contained confidentiality, non-competition, and return of records provisions to protect Metro's business interests. (Id. §§ 4, 6, 8.) The "Confidentiality" provision stated:

EMPLOYEE acknowledges that the identities of EMPLOYER'S trade customers and prospects and trade secrets, including, but not limited to, the methods, processes, and analytical concepts used by EMPLOYER in rendering its services, and any and all other information which EMPLOYEE learns from EMPLOYER as the result of his/her employment with EMPLOYER, are the property of EMPLOYER and are valuable and unique assets to EMPLOYER'S business. EMPLOYEE agrees that during the term of this Agreement and thereafter, he/she will not, directly or indirectly, divulge to any person, firm, or corporation, the names, addresses or confidential credit or any other information concerning customers of EMPLOYER, EMPLOYER'S confidential and other business records, EMPLOYER'S volume of business, records, plans, business secrets, or any other confidential information of EMPLOYER (except to person or persons directed by EMPLOYER). . . . (Id. § 4.)

The "Non-Competition" provision stipulated that:

For a period of one (1) year after the termination of this Agreement, the EMPLOYEE shall not, within the continental United States, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the EMPLOYER at the time this Agreement terminates. (Id. § 8.) Mr. Kent signed the non-competition provision separately. (Id.)

Metro territory managers sell storage products to individual hospitals, hospital groups, and other healthcare providers in their assigned area. (Kent Aff. ¶ 4.) These customers are typically members of a group purchasing organization ("GPO"), which negotiates discounted prices for all group members with individual vendors such as Metro.*fn3 (Id.) As a territory manager, Mr. Kent was responsible for acquiring new customers and servicing existing customer accounts in the State of Texas. (Kent Aff. ¶ 11.)

Metro competes for business with other vendors that provide similar storage products. (Tr. of Mar. 22, 2007 Prelim. Inj. Hr'g (Dkt. Entry 67) ("Hearing Tr.") at 65-66.) While price is a substantial selling factor, customers also consider other non-price factors, such as quality and size, in making purchasing decisions. (Id. at 61-66)

All hospitals, hospital groups, and healthcare providers are potential customers. (Id. ¶ 6.) The most lucrative prospects involve healthcare expansion projects, such as new clinics, floors, or buildings. (Id. ¶ 7.) Territory managers learn about these expansion projects by reviewing trade publications and searching the internet. (Id. ¶¶ 7, 11.) While a territory manager is initially involved in negotiations with customers, Metro uses a sales support department to generate quotes for customers. (Id. ¶ 15.) Metro authorizes territory managers to offer even greater discounts to individual customers up to a certain point. (Hearing Tr. at 8-9, 24-25, 58, 90.) A territory manager must seek permission from a regional manager for a discount beyond the territory manager's authority.*fn4 (Id.) Individual discount offers are confidential information. (Id. at 8-11, 90.)

In October 2004, Metro promoted Mr. Kent to the position of Regional Manager for Metro's Western Region. (Id. ¶ 13.) As a regional manager, Mr. Kent was responsible for managing territory managers in ten (10) to fourteen (14) territories comprising twenty-one (21) states. (Id. ¶¶ 13-14.) He also prepared annual strategy plans for the western region, including identifying the top ten customer prospects. (Id. ¶ 20.) He had only limited contact with customers as a regional manager. (Id. ¶ 14.) The parties did not execute a new agreement concerning this change in the employment relationship.

As a regional manager, Mr. Kent participated in Metro national quarterly business reviews in Wilkes-Barre, Pennsylvania, in 2005 and 2006. (Id. ¶ 21.) During the reviews, Mr. Kent would meet with Metro's Director of Sales, Marketing Manager, and other regional managers in the healthcare division to discuss previous sales performance by customer accounts and product lines, business issues in each region, and prospective customers in each region. (Id. ¶ 21.) The last quarterly business review that Mr. Kent participated in was in November 2006. (Id. ¶ 24.)

In November 2006, Mr. Kent's supervisor, Edward Thompson, evaluated Mr. Kent's fiscal year 2006 performance. (Performance Management Evaluation, Kent Aff. Ex. A-4.) In his review, Mr. Thompson noted that Mr. Kent failed to meet quotas for his region. (Id. at 1-2.) Mr. Thompson praised Mr. Kent's knowledge of the healthcare market, but faulted his management skills. (Id. at 2.) Overall, Mr. Thompson found that Mr. Kent "Needs Improvement: Results fall somewhat below expected levels of accomplishment." (Id. at 3.) In the comments section of the review, Mr. Thompson wrote:

Although I believe that Scott is capable of making important contributions to Metro, he does not appear to be well suited for the position of Regional Manager. I believe that his talents and strengths would be better served in a position that does not involve as much administrative responsibility or the management of people. It is recommend [sic] that Scott be considered for a senior sales position requiring strong strategic thinking or one that is focused on the development of key strategic accounts. (Id.) Mr. Kent was provided a copy of the review around November 18, 2006. (Hearing Tr. at 104.) Mr. Kent believed he could be demoted based on the evaluation. (Kent Aff. ¶ 26.)

In early December 2006, a recruiter contacted Mr. Kent concerning a position with InnerSpace Corporation, a competing company that sells storage products to the healthcare industry. (Id. ΒΆ 27.) Having forgotten that he signed a non-compete with Metro, Mr. Kent told InnerSpace that he was not bound by a non-compete with Metro during an initial telephone interview. (Id.) During a second interview with InnerSpace, Mr. Kent outlined a plan for his first ninety (90) days at InnerSpace, which would involve an analysis of competitor's products, strategy, and future plans. ...

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