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Guidant Sales Corp. v. Baer: US District Court : EMPLOYMENT - TEMPORARY RESTRAINING ORDER to enforce non-compete; consideration not just money; defendant didn't wine, dine doctor's for nothing

Case No. 09-CV-0358 (PJS/FLN)
Robert L. Schnell, Jr., Martin S. Chester, and Christina Rieck Loukas, FAEGRE
& BENSON LLP, for plaintiff.
George R. Wood, LITTLER MENDELSON, P.C., for defendant.
Defendant Christopher Baer is a former regional sales manager for plaintiff Guidant
Sales Corporation (Guidant). Baer left his employment with Guidant in December 2008 to
work as a sales representative for Biotronik, Inc. (Biotronik), a competitor of Guidant.
Guidant brings this breach-of-contract action against Baer alleging that Baer is violating a
noncompete agreement. This matter is before the Court on Guidants motion for a temporary
restraining order enforcing the terms of the noncompete agreement. The Court heard argument
on Guidants motion on February 24, 2009. For the reasons stated below, the Court grants the
motion in part.
Guidant is a wholly-owned subsidiary of Boston Scientific Corporation, a manufacturer
of cardiac rhythm management (CRM) devices such as pacemakers, implantable cardioverter
defibrillators, and cardiac resynchronization therapy defibrillators. Baer started working for
1Baers compensation structure at Guidant was fairly complex and is not easily
summarized. The Court will discuss further details of Baers compensation as necessary in its
analysis of Guidants motion.
Guidant in 2002 as a sales representative selling CRM devices in the Philadelphia area. Baer
was originally an at-will employee, but in 2005 Baer entered into a written Employment
Agreement with Guidant under which Baer received a base salary and certain guaranteed
payments and could be terminated only for cause.1 See Baer Decl. Ex. 2 2, 3, 9. As part of
the consideration for the Employment Agreement, Baer signed a separate noncompete and
confidentiality agreement. Id. at 1. The Employment Agreement was to last through 2009, at
which time Baers employment would revert to at-will. Id. 10.
In December 2006, Guidant promoted Baer to the position of regional sales manager. To
that end, Guidant and Baer executed an Addendum to the Employment Agreement that modified
the Employment Agreement in several respects. See Baer Decl. Ex. 1. For example, under the
Addendum, Baers term-of-years employment ended in December 2008, rather than
December 2009. Id. 1. Moreover, Baers base salary and guaranteed payments were altered
somewhat. One important change was that Baer was permitted to participate in the regional
manager compensation plan. Id. 2, 3. Baers new position was based in Pittsburgh rather
than in Philadelphia.
In conjunction with his promotion, Baer also signed a new noncompete and
confidentiality agreement. See Compl. Ex. A. It is this agreement that Guidant alleges Baer is
now breaching. The noncompete agreement prohibits Baer from selling or supporting the sale of
2Specifically, the noncompete agreement states that Baer shall not sell, solicit the sale
of, support the sale of, support or supervise the sale or implantation or other use of, or otherwise
have any involvement whatsoever with the sale, manufacturing, research and development,
marketing or other business aspect of any Competitive Product with respect to any GSC
Account. Compl. Ex. A 3. This prohibition applies regardless of whether [Baer] acts
directly or indirectly or . . . personally or as an employee, agent or otherwise for another. Id.
competing products to any GSC Account for a period of 365 days following the termination of
Baers employment with Guidant.2 Id. 3. A GSC Account is defined as follows:
GSC Account means those physicians, hospitals, clinics, and
other persons and entities to whom or for whom, [Baer] or persons
under [Baer]s supervision sold, solicited the sale of, supported or
supervised the sale of, or supported or supervised the implantation
or other use of any [Guidant] Product during the twelve (12)
months immediately preceding the termination of [Baer]s GSC
employment. GSC Account includes not only the persons and
entities themselves, but also those employees, agents, or other
affiliated persons involved in the purchase, implantation, or use of
any [Guidant] Product.
Id. 2(e).
Baer resigned his job at Guidant on December 19, 2008 to become an independent
distributor of CRM products for Biotronik. Sheehan Decl. 28. As discussed in more detail
below, during the twelve-month period preceding his resignation Baer had numerous contacts
with doctors in Philadelphia. Since leaving Guidant, Baer has contacted some of those same
doctors on behalf of Biotronik. Guidant now moves for a temporary restraining order prohibiting
Baer from selling Biotronik products to those doctors or any other GSC Accounts.
A. Standard of Review
A court must consider four factors in deciding whether to grant a TRO or a preliminary
injunction: (1) the movants likelihood of success on the merits; (2) the threat of irreparable
harm to the movant; (3) the balance between this harm and the injury that granting the injunction
will inflict on the other litigants; and (4) the public interest. Dataphase Sys., Inc. v. C L Sys.,
Inc., 640 F.2d 109, 114 (8th Cir. 1981). TROs and preliminary injunctions are extraordinary
remedies, and the party seeking such relief bears the burden of establishing the Dataphase
factors. Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).
B. Likelihood of Success
The parties do not dispute that, pursuant to their various written agreements, Minnesota
law governs this breach-of-contract action. Under Minnesota law, noncompete agreements are
disfavored and will be upheld only if they are reasonable in scope. Freeman v. Duluth Clinic,
Ltd., 334 N.W.2d 626, 630 (Minn. 1983); Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d
698, 703 (Minn. Ct. App. 1989). In addition, if the noncompete agreement is not ancillary to the
initial employment contract, it must be supported by independent consideration. Freeman, 334
N.W.2d at 630.
Baer concedes that the noncompete agreement is reasonable in scope, but argues that it is
invalid for lack of independent consideration. The Court disagrees. In determining whether a
noncompete agreement is supported by independent consideration, courts examine whether the
employee gained anything in exchange for signing the agreement. See Freeman, 334 N.W.2d at
630; Natl Recruiters, Inc. v. Cashman, 323 N.W.2d 736, 740-41 (Minn. 1982); Davies & Davies
3Baer also points out that his term of employment that is, the time in which he could
be fired only for cause was shortened by one year when he was promoted. In response,
Guidant argues that Baers commitment to work for Guidant was also shortened by one year,
allowing Baer to become a free agent and seek alternative employment sooner. Baer then took
advantage of his freedom by accepting a generous offer from Biotronik.
Agency, Inc. v. Davies, 298 N.W.2d 127, 130-31 (Minn. 1980); Sanborn Mfg. Co. v. Currie, 500
N.W.2d 161, 164 (Minn. Ct. App. 1993). Here, it is clear that Baer received something
substantial in exchange for signing the agreement a promotion to a management position.
This promotion gave Baer increased authority and responsibility. Baer Decl. 6 (as a regional
sales manager, Baer managed and supervised Guidants CRM sales employees in Pittsburgh);
Sheehan Decl. 10 (regional sales managers develop and coordinate overall sales strategies for
their region and must understand the characteristics and needs of all the customers in their
region). Cf. Davies, 298 N.W.2d at 131 (finding independent consideration where the employee
continued his employment for ten years after signing the agreement and advanced to a position
that would not have been open to him if he had not signed the contract); Sanborn Mfg. Co., 500
N.W.2d at 164 (finding no independent consideration because there was no difference between
what the employee was promised in his initial employment contract and what he received in the
course of his employment). Just as in Davies, and unlike in Sanborn, the managerial position
would not have been open to Baer if he had refused to sign the noncompete agreement. Baers
promotion is thus sufficient consideration for the noncompete agreement.
Baer disagrees, arguing that he actually lost income as a result of his promotion.3 But in
deciding whether a noncompete agreement is supported by independent consideration, a court
must consider the entire context, and not just the money. Every day, workers accept positions
that pay them less but that offer more challenging or satisfying work, or a better chance of future
4The Court arrives at this and related figures by calculating the amount of Baers base
salary and guaranteed payments under the relevant contracts.
5The Court cannot be sure because, under the original Employment Agreement, Baer was
also entitled to the difference between his actual earned commissions and the payments
guaranteed under the Employment Agreement (assuming that his actual earned commissions
were greater than the guaranteed payments). Baer Decl. Ex. 2 3(b).
advancement, or shorter or more predictable hours, or less travel, or less stress, or a host of other
nonmonetary benefits that more than make up for the reduction in salary. Baer ignores the
overall context in which he signed the noncompete agreement. It is highly unlikely that Baer
would have accepted promotion to a management position unless something about the position
made it more satisfying than continuing on as a sales representative. That something provided
the independent consideration for the noncompete agreement.
Moreover, even if this Court were to focus only on money, Guidant is likely to succeed in
proving that Baers compensation structure was more favorable to him under the Addendum than
it was under the original Employment Agreement. As noted earlier, Baers compensation
structure was quite complex, and it is not possible to determine Baers exact compensation on
the current record. But it does not appear to be true that Baers compensation decreased upon his
promotion at least not initially. According to the original Employment Agreement, Baer was
guaranteed income of at least 7,376 in 2007. See Baer Decl. Ex. 2 2, 3.4 But after signing
the Addendum, Baer was entitled to at least 8,608 in 2007. Baer Decl. Ex. 1 2, 3. And
Guidant asserts, without contradiction, that Baer was actually paid 9,000 in 2007. Sheehan
Decl. 12. It thus appears that, in 2007, Baer received more under the Addendum than he would
have received under the original Employment Agreement.5
6On the current record, it is not possible to say whether Baer received less in 2008 than
he would otherwise have been entitled to under the original Employment Agreement. Under the
original Employment Agreement, Baers guaranteed compensation for 2008 and 2009 was based
on the average commissions Baer earned in 2006 and 2007, Baer Decl. Ex. 2 3(a), which
information is not before the Court.
True, Baers compensation apparently decreased in 2008, to 5,000.6 Sheehan Decl.
12. But it would be a mistake to rely exclusively on the actual amount that Baer was paid to
assess whether he received a less favorable compensation package. Suppose, for example, that a
sales representative is given a choice: He can remain as a sales representative and be guaranteed
a salary of 0,000 for 2010, without any opportunity to earn more. Or he can accept a
promotion to management, be guaranteed only 0,000 for 2010, but have the chance to earn
up to 0,000, depending on the performance of the company. If the employee accepts the
promotion, it may be because he finds that a compensation package that gives him a chance to
earn bigger dollars is more attractive than a compensation package that guarantees him smaller
dollars. The fact that his gamble does not pay off the fact that he earns, say, only 0,000 in
2010 does not mean that the compensation package that he received when he was promoted
was less favorable than the compensation package that he would have received by remaining a
sales representative.
Baers compensation was largely dependent on sales performance and, as a manager,
Baer was eligible for additional types of compensation, such as bonuses that were tied to
regional sales goals. Second Sheehan Decl. 4; Baer Decl. 15-16. It thus appears likely that,
whatever actual compensation Baer received, he was eligible to receive more as a manager than
he was eligible to receive as a sales representative. Even if money were the only relevant
7Guidant also alleges that Baer has had impermissible contact with GSC Accounts in
Pittsburgh since his resignation. As discussed at the hearing on Guidants motion, Guidant does
not have any admissible evidence to show that this is true. But Baer admits that the noncompete
agreement (assuming it is valid) bars him from selling to the Pittsburgh doctors at issue.
consideration and, as explained above, it is not Guidant is likely to succeed in proving that
the noncompete agreement is supported by independent consideration.
Baer next contends that Guidant is unlikely to succeed in proving that he is violating the
noncompete agreement. The parties dispute on this issue largely comes down to whether the
contacts that Baer had with doctors in Philadelphia during 2008 render those doctors GSC
Accounts under the noncompete agreement.7 Guidant argues that Baers 2008 contacts with the
Philadelphia doctors supported . . . the sale of Guidants products within the meaning of the
noncompete agreement and thus that the doctors with whom Baer had contact are GSC
Accounts. See Compl. Ex. A 2(e).
Baer first argues that, because noncompete agreements are disfavored under the law, the
Court should narrowly construe the word support to find that Baers activities were not in
support of sales to the Philadelphia doctors. But, as noted, Baer is not contesting the substantive
reasonableness of the restrictions imposed under the noncompete agreement. Baers decision is
wise. Courts have consistently found one-year restrictions that are limited to a former
employees sales area to be reasonable. See Guidant Sales Corp. v. Niebur, No. 01-1772, 2001
WL 1636502, at *7 (D. Minn. Oct. 18, 2001). The noncompete agreement in this case is even
more narrowly drawn. Rather than using a geographical limitation, the agreement applies only
to customers with whom Baer had sales-related contacts in the year preceding the termination of
his employment. The scope of the noncompete agreement is eminently reasonable, and there is
no reason to narrow it further by a strained reading of the definition of GSC Accounts.
Having reviewed the evidence, the Court finds that Guidant is likely to succeed in
proving that certain of the doctors with whom Baer had contact in 2008 specifically,
Drs. George Yesenosky, Christopher Schulze, Kataneh Maleki, Suman Jaswal, Fermin Garcia,
and Glen Miske are GSC Accounts within the meaning of the noncompete agreement.
Throughout 2008, Baer spoke on the telephone on multiple occasions with Drs. Yesenosky,
Jaswal, Maleki, and Schulze. Plf.s Ex. 3; Sheehan Decl. 23. All of these calls were paid for
by Guidant. Plf.s Ex. 3; Sheehan Decl. 23. Baer also flew to Philadelphia on Guidants
behalf five times during 2008 and, while in Philadelphia on Guidant business, also entertained
Drs. Maleki, Jaswal, and Miske at Guidants expense. Plf.s Exs. 1, 2; Sheehan Decl. 20.
Baers only explanation for these calls and dinners is that they were based on his personal
friendship with these doctors, see Baer Decl. 10-11, but that does not explain why Baer asked
Guidant to pay for them.
In addition to these contacts, Baer attended a Guidant event in Philadelphia to publicize
the rollout of two new CRM products in November 2008. Winiecki Decl. 8. After attending
the event, Baer hosted a dinner, at Guidants expense, for Drs. Yesenosky, Jaswal, and Garcia.
Winiecki Decl. 9. The fact that Guidant paid for Baer to attend an event that was intended to
promote new Guidant products to doctors in Philadelphia including doctors who were former
customers of Baers and with whom Baer had maintained a relationship strongly suggests that
Baers presence was in support of the sale of these products. That, in turn, further underscores
the likelihood that Baers other Philadelphia contacts were also intended to support the sale of
8Baer denies receiving such a bonus, but does not dispute Guidants assertion that he was
eligible for one.
Guidant products. Furthermore, Baer admits that four of the Philadelphia doctors
(Drs. Yesenosky, Schulze, Jaswal, and Maleki) were his customers when he was a sales
representative in Philadelphia. Baer Decl. 8. Baers preexisting sales relationships with these
doctors also supports an inference that Baers later contacts with them were for the purpose of
supporting sales.
It is true, as Baer asserts, that he did not have managerial responsibility for sales in
Philadelphia. But Baer was eligible for a bonus based on sales goals for an area that included
Philadelphia, which gave Baer an incentive to help Guidant make sales in Philadelphia.8
Sheehan Decl. 25-26. Baer points out that all regional sales managers were eligible for such
bonuses, but it does not follow, as Baer contends, that his individual efforts were therefore
Based on the evidence outlined above, the Court finds that Guidant is likely to succeed in
establishing that Drs. Yesenosky, Schulze, Maleki, Jaswal, Garcia, and Miske are GSC
Accounts within the meaning of the noncompete agreement. There is also evidence that Baer
has contacted three of these doctors (Drs. Yesenosky, Jaswal, and Schulze) since he began
working for Biotronik. Koenig Decl. 6-8, 11. Baer does not really dispute that these contacts
violated the noncompete agreement if those doctors are GSC Accounts within the meaning of
the noncompete agreement. Given the Courts conclusion that Guidant is likely to succeed in
demonstrating that Drs. Yesenosky, Schulze, Maleki, Jaswal, Garcia, and Miske are indeed
GSC Accounts, there is a strong likelihood that Baer is violating or intends to violate the
noncompete agreement with respect to these doctors.
With respect to other doctors: As explained more fully at the hearing, Guidants
evidence regarding other doctors is either inadmissible or too weak to support an inference that
Baer was supporting the sale of Guidant products to them at the relevant times. For example,
Guidant points to a 2008 educational seminar in Pittsburgh to which Baer invited several doctors
from Philadelphia. Although it may be the case, as Guidant contends, that the Philadelphia
doctors presence at the conference was intended to support the sale of Guidant products to those
doctors, an equally plausible inference is that Baer was relying on those doctors to help him sell
Guidant products to doctors in Pittsburgh. Guidant has thus not established that it is likely to
succeed in proving that Baer is violating or intends to violate the noncompete agreement with
respect to the remaining doctors.
C. Threat of Irreparable Harm
The customer base for CRM devices consists of highly trained medical specialists, a very
sophisticated and demanding clientele. Sheehan Decl. 5-6. To be successful, CRM
salespeople must be both skilled at sales and have substantial technical and clinical knowledge.
Sheehan Decl. 4. CRM salespeople are often in the operating room when CRM devices are
implanted, and they provide technical assistance to the doctor both during the implantation
procedure and during patients followup visits. Sheehan Decl. 4. CRM salespeople are also
expected to learn about doctors individual practices to better communicate with the doctors and
be more effective at making sales. Sheehan Decl. 7. Not surprisingly, Guidant values the
relationships between its sales force and its customers very highly and devotes substantial time,
effort, and money to developing those relationships and training and supporting its salespeople.
Sheehan Decl. 5-7.
Courts have consistently found that long-term customer relationships in the CRM
industry are a legitimate business interest that may be protected by a noncompete clause. Prow
v. Medtronic, Inc., 770 F.2d 117, 120-21 (8th Cir. 1985); Guidant Sales Corp., 2001 WL
1636502, at *7. Baer argues, though, that because doctors are ethically and legally obligated to
make treatment decisions based on the best interests of their patients, Guidant cannot show that
its customer relationships are an important factor in making sales.
The Court rejects this argument for several reasons. First, under Minnesota law,
irreparable harm may be inferred from the breach of a valid noncompete agreement. Guidant
Sales Corp., 2001 WL 1636502, at *8. Second, Baers argument overlooks the fact that a sales
representatives ability to persuade a doctor that use of Guidant products is in the best interests
of the doctors patients depends on the sales representative learning a lot about the doctors
practice, and the doctor learning a lot about Guidants products. This, in turn, depends on the
sales representative and the doctor developing a trusting, long-term relationship. Baer himself
spent hundreds of hours fostering such relationships with doctors while being paid by Guidant
and spent thousands of Guidants dollars entertaining those doctors. Baer must understand as
well as anyone that, in a competitive industry in which the clientele is particularly sophisticated
and the products are technically complex, the trust and personal knowledge of the customer
engendered by a long-term relationship is helpful to making sales. Finally, even if these
considerations were not enough to establish irreparable harm, Guidant offers evidence that when
a successful salesperson leaves, Guidant often experiences a loss of sales in the accounts served
9Guidants evidence on this point is hearsay, see Sheehan Decl. 32, but the Court takes
it as true because Baer has not disputed it and because it appears highly unlikely that Baer could
have been lured away from Guidant without a substantial guaranteed salary.
by the former salesperson. Sheehan Decl. 6. The Court therefore finds that Guidant has
established a likelihood of irreparable harm if its motion is not granted.
D. Balance of Harms and the Public Interest
Guidant asserts, and Baer does not dispute, that Baer is entitled to guaranteed
compensation of 0,000 during his first year at Biotronik.9 Given that Baers compensation is
guaranteed regardless of the outcome of Guidants motion, the balance of harms tilts strongly in
Guidants favor. In addition, the public interest favors the enforcement of a valid noncompete
E. Conclusion
The Court finds that each of the Dataphase factors favors the issuance of an order
enforcing the noncompete agreement and enjoining Baer from violating it. Pursuant to Fed. R.
Civ. P. 65(c), the Court will order Guidant to post security in the amount of 0,000. Such
amount is proportional to the amount by which Baers compensation varied while at Guidant and
represents the Courts best estimate, on this sparse record, of the possible damages Baer could
suffer from a wrongful injunction.
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
1. Plaintiffs motion for a temporary restraining order [Docket No. 2] is GRANTED
2. Defendant is hereby ENJOINED from directly or indirectly selling, soliciting the
sale of, supporting the sale of, supporting or supervising the sale or implantation
or other use of, or otherwise having any involvement whatsoever with the sale,
manufacturing, research and development, marketing or other business aspect of
any cardiac rhythm management product with respect to any GSC Account.
3. For purposes of 2 of this order, GSC Account means those physicians,
hospitals, clinics, and other persons and entities to whom or for whom, defendant
or persons under defendants supervision sold, solicited the sale of, supported or
supervised the sale of, or supported or supervised the implantation or other use of
any Guidant product during the period from December 20, 2007 through
December 19, 2008. GSC Account includes not only the persons and entities
themselves, but also those employees, agents, or other affiliated persons involved
in the purchase, implantation, or use of any Guidant product. The GSC Accounts
to whom the injunction in 2 of this order apply include, but are not limited to,
the following individuals:
a. Dr. George Yesenosky
b. Dr. Christopher Schulze
c. Dr. Kataneh Maleki
d. Dr. Suman Jaswal
e. Dr. Fermin Garcia
f. Dr. Glen Miske
4. The injunction in 2 of this order will take effect on plaintiffs posting of security
in the amount of 0,000.
5. The injunction in 2 of this order will remain in effect through and including
December 18, 2009 unless vacated at an earlier date by order of the Court.
6. Plaintiffs motion is DENIED in all other respects.
Dated: February 26, 2009 s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge


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