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Medtronic, Inc. v. Endologix, Inc.: US District Court : CIVIL PROCEEDURE | EMPLOYMENT | CONTRACTS - employer defendant bound by new employees' forum-selection contract; no removal to federal court

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Medtronic, Inc. and Medtronic USA, Inc.,
Plaintiffs,
Civ. No. 07-4947 (RHK/AJB)
MEMORANDUM OPINION
AND ORDER
v.
Endologix, Inc., Albert Rotondo, and Brooke
L. Keeler,
Defendants.
Mary R. Vasaly, William Z. Pentelovitch, Wayne S. Moskowitz, Maslon Edelman Borman
& Brand, Minneapolis, Minnesota, for Plaintiffs.
Kathy S. Kimmel, Jeffrey J. Bouslog, Marie L. van Uitert, Oppenheimer Wolff & Donnelly
LLP, Minneapolis, Minnesota, for Defendants.
The Plaintiffs in this action, Medtronic, Inc. and Medtronic USA, Inc. (collectively,
“Medtronic”), have sued two of their former employees, Albert Rotondo and Brooke
Keeler, and those individuals’ new employer, Endologix, Inc. (“Endologix”). Medtronic
alleges that Rotondo and Keeler have violated employment agreements they signed with
Medtronic by soliciting their former Medtronic clients on behalf of Endologix. Medtronic
also alleges that Endologix tortiously interfered with the employment agreements by
causing Rotondo and Keeler to breach the agreements.
Medtronic initially commenced this action in Minnesota state court and, while the
case was pending there, it moved for a temporary restraining order. Before the state court
-2-
could rule on that motion, however, Endologix removed the action to this Court. When
doing so, it filed consents to removal by Rotondo and Keeler. (See Doc. Nos. 1-2.)
Presently before the Court is Medtronic’s Motion to Remand (Doc. No. 4).
Medtronic argues that this action must be remanded to state court due to forum-selection
clauses in Rotondo’s and Keeler’s employment agreements. Each of those agreements
provides, in pertinent part, that “[a]ny dispute arising out of or related to this Agreement, or
any breach or alleged breach hereof, shall be exclusively decided by a state court in the
State of Minnesota. Employee irrevocably waives [his or her] right, if any, to have any
disputes between [him or her] and MEDTRONIC arising out of or related to [his or her]
employment or this Agreement decided in any jurisdiction or venue other than a state court
in the State of Minnesota.” (Compl. Exs. B, D.) According to Medtronic, these forumselection
clauses are binding on Endologix and, hence, they defeat Endologix’s ability to
remove this action on its own accord. (Pl. Mem. at 13.) Medtronic also argues that even if
the forum-selection clauses are not binding on Endologix, at a minimum they are valid
waivers of the right to remove by Rotondo and Keeler. Thus, Medtronic argues, Rotondo
and Keeler could not consent to Endologix’s removal, and without those consents the case
was not removable, since removal is ineffective in the absence of consent by all of the
defendants to an action. (Id. at 13-16.) Medtronic also seeks an award of attorney’s fees in
connection with its Motion. (Id. at 16-17.)
In response, Endologix argues that it is not bound by the forum-selection clauses in
the employment agreements. (Mem. in Opp’n at 5-15.) It further argues that although the
1 Although no party has discussed the issue, the Court recognizes that it has the inherent power
to remand this matter to state court in order to give effect to the forum-selection clauses, even if
subject-matter jurisdiction exists and there has been no “defect” in removal under 28 U.S.C. § 1447(c).
See, e.g., Snapper, Inc. v. Redan, 171 F.3d 1249, 1263 n.26 (11th Cir. 1999); Foster v. Chesapeake
Ins. Co., 933 F.2d 1207, 1214-16 (3rd Cir. 1991); RK Dixon Co. v. Dealer Mktg. Servs., Inc., 284
F. Supp. 2d 1204, 1208-09 (S.D. Iowa 2003).
-3-
forum-selection clauses were valid waivers of Rotondo’s and Keeler’s right to remove,
those individuals nevertheless retained the right to consent to Endologix’s removal. (Id. at
16-23.) Finally, Endologix argues that an award of fees is unwarranted because it had an
objectively reasonable basis to remove this action. (Id. at 23-26.)
The Court agrees with each of Medtronic’s arguments concerning remand and
rejects the Defendants’ arguments. Accordingly, it concludes that this matter must be
remanded to state court.1
First, the Court agrees with Medtronic that Endologix is bound by the forumselection
clauses in the employment agreements. Although Endologix did not sign those
agreements, a third party may be bound by a forum-selection clause where it is “closely
related to the dispute such that it becomes foreseeable that it will be bound.” Marano
Enters. of Kan. v. Z-Teca Rests., L.P., 254 F.3d 753, 757 (8th Cir. 2001). There can be
little doubt that Endologix is “closely related” to the dispute between Medtronic and
Rotondo and Keeler. Indeed, it was Endologix’s employment of Rotondo and Keeler –
while it was fully aware of the employment agreements and, hence, the forum-selection
clauses – and Rotondo’s and Keeler’s subsequent solicitation of Medtronic clients on
behalf of Endologix that gave rise to this action; this caused not only Rotondo and Keeler
-4-
to be sued, but also caused Endologix to be sued in the same case. Moreover, all of the
Defendants clearly share a common interest in this action: the right of Rotondo and Keeler
to solicit their former Medtronic customers on behalf of their new employer, Endologix.
See ELA Med., Inc. v. Arrhythmia Mgmt. Assocs., Inc., Civ. No. 06-3580, 2007 WL
892517, at *6 (D. Minn. Mar. 21, 2007) (noting common interest among parties as key
factor in whether they are “closely related” for purposes of binding non-party to forumselection
clause); Employers Ins. Co. of Wausau v. Equitas Holdings Ltd., 451 F. Supp. 2d
1012, 1024 (E.D. Wis. 2006) (same). Indeed, were Endologix’s interests not so closely
aligned with Rotondo’s and Keeler’s interests, they could not be represented by the same
counsel in this action.
The Defendants argue that the “closely-related-party” doctrine applies only where a
non-signatory to a contract “voluntarily took affirmative steps to join with the signatories
to commence litigation challenging the contract.” (Mem. in Opp’n at 6-13.) The Court
does not agree. It is true that the majority of cases binding a third party to a forumselection
clause under the closely-related-party doctrine involved third parties suing as
plaintiffs, rather than those being sued as defendants. But see ELA Med., 2007 WL
892517, at *6-7. But the Court does not believe that the closely-related-party doctrine is
limited to third-party plaintiffs. Indeed, when deciding whether the doctrine applies, a court
must answer only the following question: should the third party reasonably foresee being
bound by the forum-selection clause because of its relationships to the cause of action and
the signatory to the forum-selection clause? See Marano, 254 F.3d at 757. The Court
2 The parties do not dispute that removal requires the consent of all of the defendants to a
lawsuit (Pl. Mem. at 13; Mem. in Opp’n at 15). See also Marano, 254 F.3d at 755 n.2.
-5-
perceives no reason why a third party sued as a defendant, as opposed to one voluntarily
joining an action as a plaintiff, cannot reasonably foresee that it might be bound by a forumselection
clause agreed to by one or more of its co-defendants. Moreover, accepting the
Defendants’ argument would mean that the application of the closely-related-party doctrine
would turn on timing: if the third party joined the signatory in brining a preemptive
declaratory-judgment action, then the doctrine would apply, but if the third party and the
signatory lost the race to the courthouse and were sued first, then the doctrine would not
apply. This is a nonsensical result that does not comport with the purpose behind the
doctrine.
Second, the Court agrees with Medtronic that even if the forum-selection clauses
are not binding on Endologix – and, hence, do not prevent it from removing – those clauses
nevertheless vitiate Rotondo’s and Keeler’s ability to consent to Endologix’s removal.
And, in the absence of effective consent by Rotondo and Keeler, the unanimity rule is
violated and the case must be remanded.2
Endologix argues that although Rotondo and Keeler waived their right to remove,
they did not waive their right to consent to Endologix’s removal. In support of their
argument, they rely on Marano, a case addressing a completely different issue than that
confronting the Court here. The issue in Marano was when the 30-day clock for removal
under Section 1446 of Title 28 begins to run when there are multiple defendants served at
-6-
different times. Prior to Marano, some courts had held that the 30-day clock begins to run
as soon as the first defendant is served, which meant that if a second defendant were served
more than 30 days after the first defendant, it could not remove because the 30-day clock
would have already expired. The Eighth Circuit held that this was an inequitable result that
undermined the later-served defendant’s statutory right to effect removal. Accordingly, the
Eighth Circuit held that even when a first-served defendant does not effect removal within
30 days, and hence waives its right to removal, a later-served defendant can nevertheless
remove within 30 days of being served, as long as all of the defendants to the action
consent to that removal. See 254 F.3d at 756-57 & n.6.
Endologix argues that, in reaching its decision in Marano, the Eighth Circuit
necessarily distinguished between a defendant waiving the right to removal and waiving the
right to consent to a co-defendant’s removal. A first-served defendant can waive its right to
removal by not removing a case within 30 days of being served, but it nevertheless retains
the right to consent to a later-served defendant’s notice of removal. Endologix attempts to
draw the same distinction here, arguing that all Rotondo and Keeler have waived is the right
to remove, and not their right to consent to Endologix’s removal, a completely separate
issue.
The problem with Endologix’s argument is that the forum-selection clauses are
broad enough to have waived both the right to remove and the right to consent to
Endologix’s removal. Indeed, the clear intent behind the forum-selection clauses is that
matters arising out of the employment agreements are to be litigated only in a Minnesota
-7-
state court. By consenting to Endologix’s removal, Rotondo and Keeler have certainly
violated the spirit of the forum-selection clauses.
Yet, Rotondo and Keeler have also violated the letter of the forum-selection
clauses. Just as the “intent to establish a waiver of the right to removal may be inferred
from the language of a forum selection clause,” RK Dixon Co. v. Dealer Mktg. Servs., Inc.,
284 F. Supp. 2d 1204, 1208-09 (S.D. Iowa 2003) (emphasis added), so, too, can the
language of a forum-selection clause establish a waiver of the right to consent to some
other defendant’s removal. In the Court’s view, that is precisely what has occurred here.
Rotondo and Keeler agreed in the forum-selection clauses that any disputes
concerning the employment agreements “shall be exclusively decided by a state court in
the State of Minnesota.” (Compl. Ex. B § 7.3 (emphasis added).) The only reasonable
interpretation of this provision is that it waived Rotondo’s and Keeler’s right to consent to
removal by Endologix. Were that not the case, and Rotondo and Keeler retained the right
to consent to removal by another party, a state court could not decide a dispute concerning
the agreements. Stated differently, the only way for a state court to actually decide – that
is, render a decision – in a dispute arising out of the agreements is for Rotondo and Keeler
to remain in state court once they have been sued there; they cannot consent to some other
party removing the case, or else the state court will not be afforded the opportunity to
render a decision. Because the forum-selection clauses waived not only Rotondo’s and
Keeler’s right to remove, but also their right to consent to Endologix’s removal, the rule of
unanimity cannot be satisfied here.
3 The Defendants argue that this clause bars Rotondo and Keeler only from “helping someone
[to] start an action or commence a lawsuit.” (Mem. in Opp’n at 23.) The term “prosecution,”
however, clearly means something more than starting or commencing an action. See Black’s Law
Dictionary 1221 (noting that prosecution means “every step in [an] action, from its commencement to
its final determination”) (citing United States v. The Brazil, 134 F.2d 929, 930 (7th Cir. 1943)).
Indeed, were that not the case, then the word “prosecution” would be duplicative of the word
“commencement” in the agreements and, hence, would be mere surplusage. Interpreting the
agreements in that fashion, therefore, would violate the fundamental tenet of contract law that all of a
contract’s terms should be given meaning. See Fortune Funding, LLC v. Ceridian Corp., 368 F.3d
985, 989 (8th Cir. 2004).
-8-
The Court’s conclusion is bolstered by language found elsewhere in the employment
agreements. In addition to consenting to the exclusive jurisdiction of Minnesota state
courts for disputes arising out of the agreements, Rotondo and Keeler also agreed not to
“assist, aid, abet, encourage, be a party to, or participate in the commencement or
prosecution of any lawsuit or action by any third party arising out of or related to [the
employment agreements] in any jurisdiction or venue other than a state court in the State of
Minnesota.” (Id. § 7.4.) In the Court’s view, Rotondo and Keeler have “participated” in the
“prosecution” of this action in a court other than a Minnesota state court by consenting to
Endologix’s removal.3
For all of these reasons, the Court concludes that this matter must be remanded to
state court. All that remains to be addressed, therefore, is Medtronic’s request for
attorney’s fees. That request will be denied. Attorney’s fees should be awarded only when
the removing party had no objectively reasonable basis for removal. Martin v. Franklin
Capital Corp., 546 U.S. 132 (2005). Although the Court has concluded that remand is
appropriate, based on the arguments discussed above the Court does not believe that
-9-
Endologix’s removal of this case (or Rotondo’s and Keeler’s consents thereto) was
objectively unreasonable. Accordingly, an award of fees is unwarranted.
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that Medtronic’s Motion to Remand (Doc. No. 4) is GRANTED IN PART and
DENIED IN PART as follows:
1. This matter is REMANDED to the Hennepin County District Court. The
Clerk of the Court shall mail to the Clerk of the Hennepin County District Court a certified
copy of this Order; and
2. Medtronic’s request for attorney’s fees is DENIED.
Dated: January 7 , 2008 s/Richard H. Kyle
RICHARD H. KYLE
United States District Judge
 

 
 
 

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