Heraeus Medical, LLC v. Zimmer, Inc., a Delaware corporation d/b/a Zimmer Biomet, and Zimmer US, Inc., a Delaware corporation , 123 N.E.3d 158 ( 2019 )

FILED
Apr 15 2019, 9:07 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES
Damon R. Leichty Joshua B. Fleming
Barnes & Thornburg LLP Lucy R. Dollens
South Bend, Indiana Quarles & Brady LLP
Indianapolis, Indiana
Gerald E. Burns
Buchanan Ingersoll & Rooney, PC
Philadelphia, Pennsylvania
IN THE
COURT OF APPEALS OF INDIANA
Heraeus Medical, LLC, a April 15, 2019
Delaware Limited Liability Court of Appeals Case No.
Company; Devin Childers, an 18A-PL-1823
individual; Robert Kolbe, an Interlocutory Appeal from the
individual; James “Worth” Kosciusko Superior Court
Burns, an individual; Paul Cruz, The Hon. David C. Cates, Judge
an individual; and Kyle Kolbe,
Trial Court Cause No.
an individual, 43D01-1802-PL-21
Appellants-Defendants,
v.
Zimmer, Inc., a Delaware
corporation d/b/a Zimmer
Biomet, and Zimmer US, Inc., a
Delaware corporation,
Appellees-Plaintiffs.
Court of Appeals of Indiana | Opinion 18A-PL-1823 | April 15, 2019 Page 1 of 21
Bradford, Judge.
Case Summary
[1] Beginning in 2012, Heraeus Medical GmbH and Zimmer Surgical, Inc., had an
agreement pursuant to which Zimmer Surgical had exclusive United States
distribution rights to certain bone cements manufactured by Heraeus Medical
GmbH and sold under the brand name Palacos (“the Distribution Agreement”).
Zimmer Surgical is a subsidiary of Zimmer, Inc., d/b/a as Zimmer Biomet. In
late 2017, Robert Kolbe was an employee of Zimmer Biomet and had signed an
agreement containing non-compete and non-solicitation of Zimmer Biomet
customers and employees covenants (“the Kolbe Agreement”). In January of
2018, Heraeus Medical GmbH exercised its right to terminate the Distribution
Agreement as of December 2018. Soon thereafter, Heraeus Medical GmbH
announced that it had established a new direct sales force for Palacos through
its newly-established American affiliate, Heraeus Medical, Inc. (“Heraeus”),
which included Kolbe, who had left Zimmer Biomet in November of 2017.
[2] In February of 2018, Zimmer Biomet and Zimmer US, Inc. (collectively,
“Zimmer”), sued, inter alia, Heraeus and Kolbe on various grounds, also
seeking a preliminary injunction enforcing the Kolbe Agreement and the
restrictive covenants signed by the other individual defendants. On July 12,
2018, the trial court issued a preliminary injunction in which it ordered Kolbe
to generally abide by the terms of the Kolbe Agreement and ordered Heraeus to
not possess, use, or disclose confidential information received from Heraeus
GmbH or employ or engage the individual defendants in a way that violated
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their restrictive covenants with Zimmer Biomet or the trial court’s preliminary
injunction. Heraeus, Kolbe, and four other individual defendants
(“Appellants”) appeal, contending that the Kolbe Agreement is contrary to law
and unenforceable, the trial court misapplied certain provisions of the Kolbe
Agreement, and portions of the preliminary injunction related to Heraeus are
unreasonable.1 While we largely disagree with Appellants’ arguments, we do
agree that the Kolbe Agreement’s covenant not to solicit Zimmer Biomet
employees is overbroad and so reform it to comply with Indiana law. We also
agree that in crafting its preliminary injunction, the trial court (1) incorrectly
defined the geographic scope of the Kolbe Agreement and (2) applied the term
“contact” in a way inconsistent with the Kolbe Agreement. We affirm in part,
reverse in part, and remand with further instructions.
Facts and Procedural History
[3] As of January 1, 2012, Zimmer Surgical and Heraeus Medical GmbH were
parties to the Distribution Agreement, pursuant to which Zimmer Surgical was
granted an exclusive license to distribute, market, promote, and sell certain
bone cements manufactured by Heraeus Medical GmbH, all sold under the
1
The trial court’s order also enjoined former Zimmer Biomet employees Devin Childers and James “Worth”
Burns from violating the terms of their restrictive covenants. However, Appellants do not challenge the
preliminary injunction as it relates to Childers, and Burns is no longer working for Heraeus, rendering
Appellants’ claims related to him moot. “[W]hen we are unable to provide effective relief upon an issue, the
issue is deemed moot, and we will not reverse the trial court’s determination ‘where absolutely no change in
the status quo will result.’” Jones v. State, 847 N.E.2d 190, 200 (Ind. Ct. App. 2006) (citation omitted), trans.
denied. If Appellants were to prevail on any, or even all, of their claims related to Burns, nothing would
change, so we will not address them.
Court of Appeals of Indiana | Opinion 18A-PL-1823 | April 15, 2019 Page 3 of 21
name Palacos. Zimmer has also developed its own line of competing bone
cement. The initial term of the Distribution Agreement was to end on
December 31, 2018, subject to possible extension. Beginning on January 1,
2018, each party had the right to elect to make the Distribution Agreement non-
exclusive for the final year, which Heraeus Medical GmbH did on January 3.
By this time, Heraeus Medical GmbH had established a direct sales force to sell
Palacos in the United States through its newly-organized affiliate Heraeus. As
it happened, several former Zimmer Biomet employees had recently left to take
sales positions at Heraeus, including Devin Childers, Kolbe, James “Worth”
Burns, Paul Cruz, and Kyle Kolbe (“K. Kolbe”).
[4] Kolbe was hired by Heraeus in November of 2017, currently serves as vice-
president of sales, and was previously employed by Zimmer Biomet as Group
Director for Enterprise Solutions for the East. Kolbe signed the Kolbe
Agreement on September 30, 2015, which contains a covenant not to compete
and covenants not to solicit Zimmer Biomet customers or employees. The
covenant not to solicit customers or active prospects provides, in part, that
“[e]mployee will not, directly or indirectly, (i) provide, sell or market; (ii) assist
in the provision, selling or marketing of; or (iii) attempt to provide, sell or
market any Competing Products to any of Company’s Customers or Active
Prospects in the Restricted Territory.” Appellants’ App. Vol. IV p. 153.
[5] The Kolbe Agreement defines “Active Prospect” as
[a]ny person or entity that Company, through its representatives,
specifically marketed to and/or held discussions with regarding
the sale of any of Company’s products or services at any time
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during the last six (6) months of Employee’s employment with
Company and with respect to whom, at any time during the six (6)
months immediately preceding the termination of Employee’s
employment with Company, Employee had (i) any marketing or
sales contact on behalf of Company and/or ii) access to, or gained
knowledge of, any Confidential Information concerning
Company’s business prospects with such Active Prospect.
Appellants’ App. Vol. IV p. 152.
[6] The Kolbe Agreement’s covenant not to solicit Zimmer Biomet employees
provides as follows:
Employee will not employ, solicit for employment, or advise any
other person or entity to employ or solicit for employment, any
individual employed by Company at the time of Employee’s
separation from Company employment, or otherwise induce or
entice any such employee to leave his/her employment with
Company to work for, consult with, provide services to, or lend
assistance to any Competing Organization.
Appellants’ App. Vol. IV p. 153. All covenants have terms of eighteen months
after Kolbe left Zimmer Biomet, to be extended in cases of noncompliance.
Moreover, the Kolbe Agreement contains the following provision: “The parties
agree that any court interpreting the provisions of this Agreement shall have the
authority, if necessary, to reform any such provision to make it enforceable
under applicable law.” Appellants’ App. Vol. IV p. 156.
[7] On February 23, 2018, Zimmer sued Heraeus, Childers, Kolbe, Burns, Cruz,
and K. Kolbe for (1) breach of contract against the individual defendants; (2)
tortious interference with contracts against Heraeus; and (3) and tortious
interference with business relationships, civil conspiracy, and unfair
Court of Appeals of Indiana | Opinion 18A-PL-1823 | April 15, 2019 Page 5 of 21
competition against all defendants. Zimmer also sought a preliminary
injunction to stop violations of the confidentiality, non-compete, and non-
solicitation agreements signed by the various individual defendants. On April
17 and 18 and May 22, 2018, the trial court heard evidence relevant to
Zimmer’s motion for a preliminary injunction. Prior to the hearing, Zimmer
withdrew its request as to K. Kolbe, and, on May 31, 2018, the trial court
issued an agreed injunction order as to Cruz.
[8] On July 12, 2018, the trial court denied Zimmer’s motion for preliminary
injunction in part and granted it in part. The trial court, in part, ordered Kolbe
enjoined from
b. Directly or indirectly working or lending assistance to
Heraeus, its sales managers, employees, or independently
contracted distributors or sales representatives, for the sale
and promotion of Heraeus’ products and services in the
Eastern half of the U.S. (the territory assigned to him in his
last position with Zimmer Biomet), which includes:
Alabama, Arkansas, Connecticut, Delaware, Florida,
Georgia, Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, Mississippi, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina, Tennessee,
Vermont, Virginia, Washington D.C., West Virginia;
c. Providing, selling or marketing to, or contacting any of
Zimmer Biomet’s Customers to whom Kolbe sold during
his last two years or to Zimmer Biomet’s Active Prospects to
whom Kolbe marketed Zimmer Biomet products in his last
six months of employment;
d. Urging, inducing or seeking to induce any distributor or
sales representative with whom Zimmer Biomet had a
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business relationship at the time of Robert Kolbe’s
resignation on November 3, 2017, to terminate its or their
relationship with, or representation of, Zimmer Biomet or
to cancel, withdraw, reduce, limit or in any manner modify
any such person’s or entity’s business with, or
representation of, Zimmer Biomet;
e. Employing or soliciting for employment, or advising
Heraeus to employ or solicit for employment any individual
employed by Zimmer Biomet as of November 3, 2017, or
otherwise directly or indirectly induce or entice any such
employee to leave his/her employment with Zimmer
Biomet to work for, consult with, provide services to, or
lend assistance to Heraeus.
Appellants’ App. Vol. II pp. 58–59.
[9] The trial court, in part, preliminarily enjoined Heraeus as follows:
a. Heraeus shall not possess, use or disclose any Zimmer
Biomet Confidential Information received from the
Individual Defendants, any other Zimmer Biomet employee
or sales representative, or from Zimmer Biomet through its
parent, Heraeus Medical GmbH.
b. Heraeus shall not employ or engage the Individual
Defendants in any capacity that violates their respective
Agreements or this Order for 18 months from the entry of
this Preliminary Injunction.
Appellants’ App. Vol. II p. 60.
Discussion and Decision
[10] Appellants advance several challenges to the trial court’s preliminary
injunction. “The grant or denial of a preliminary injunction rests within the
sound discretion of the trial court, and our review is limited to whether there
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was a clear abuse of that discretion.” Ind. Family & Soc. Servs. Admin. v.
Walgreen Co., 769 N.E.2d 158, 161 (Ind. 2002) (citing Harvest Ins. Agency, Inc. v.
Inter-Ocean Ins. Co., 492 N.E.2d 686, 688 (Ind. 1986)).
In order to obtain injunctive relief, appellee had the burden of
showing that: 1) its remedies at law were inadequate, thus causing
irreparable harm pending resolution of the substantive action; 2) it
had at least a reasonable likelihood of success at trial by
establishing a prima facie case; 3) its threatened injury outweighed
the potential harm to appellant resulting from the granting of an
injunction; and 4) the public interest would not be disserved.
Harvest Ins. Agency, 492 N.E.2d at 688. “If the movant fails to prove any of
these requirements, the trial court’s grant of an injunction is an abuse of
discretion.” Ind. Family & Soc. Servs. Admin., 769 N.E.2d at 161.
I. Restrictive Covenants
[11] Appellants make several claims related to the restrictive covenants entered into
by Kolbe when he was employed by Zimmer Biomet. Specifically, Appellants
claim that some of the provisions of the Kolbe Agreement are unenforceable
and that the trial court abused its discretion by applying other provisions in
such a way as to exceed the actual scope of the covenants. We take these
claims as claims that the trial court abused its discretion in concluding that
Zimmer established a prima facie case.
A. Whether Certain Provisions of the Covenants
Are Overbroad as a Matter of Law
[12] Appellants contend that certain provisions of the Kolbe Agreement are
overbroad as a matter of law. It is well-established that
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Indiana courts disfavor covenants which restrict a person’s liberty
of action in his business or trade. Eaton Corporation v. Appliance
Valves Corporation, 526 F. Supp. 1172, 1182 (N.D. Ind. 1981).
Accordingly, Indiana courts will not hesitate to strike down any
such restrictive covenants which are the least bit overly broad with
respect to the “protectible interest” at stake. Slisz v. Munzenreider
Corporation, 411 N.E.2d 700, 705 (Ind. Ct. App. 1980). Where the
underlying protectible interest is minimal, courts will closely
scrutinize the terms of the restraint. Id. The burden is on the party
seeking to enforce the covenant to demonstrate that the injunction
is necessary to protect a legitimate business interest. Smart
Corporation v. Grider, 650 N.E.2d 80, 83 (Ind. Ct. App. 1995)
(Former employer is not entitled to the enforcement of a restrictive
covenant unless he can show that the former employee gained a
unique competitive advantage or ability to harm the employer
during their relationship), trans. denied.
Wagler Excavating Corp. v. McKibben Const., Inc., 679 N.E.2d 155, 157–58 (Ind.
Ct. App. 1997), trans. denied. “In order to be enforceable, the provisions of a
covenant not to compete must be reasonable, which is a question of law.”
Coates v. Heat Wagons, Inc., 942 N.E.2d 905, 913 (Ind. Ct. App. 2011). “To be
reasonable, an agreement containing such a covenant must protect legitimate
interests of the employer, and the restrictions established by the agreement must
be reasonable in scope as to time, activity, and geographic area.” Id.
1. Geographic Scope
[13] Appellants contend that the Kolbe Agreement is void because it does not
contain a clearly-defined territory. “Restricted Territory” is defined in the
Kolbe Agreement as:
(i) any Customer-specific or geographic territory assigned to, or
covered by, Employee during Employee’s last two (2) years of
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employment with Company; (ii) any state or portion of any state
assigned to Employee by Company for purposes of any sales or
service activities or responsibilities at any time during the two (2)
years preceding the termination of Employee’s employment with
Company; or (iii) any county, municipality or parish of any state
or commonwealth assigned to Employee or in which Employee
engaged in any sales or service activities on behalf of Company at
any time during the two (2) years preceding termination of
Employee’s employment with Company.
Appellants’ App. Vol. IV p. 152.
[14] Appellants first argue that a restrictive employment covenant without a defined
geographic scope is not enforceable in Indiana. Indiana law, however, requires
only that the geographic scope of restrictive employment covenant be
reasonable, not that it be spelled out in explicit terms. See Coates, 942 N.E.2d at
915. Appellants’ argument that the Kolbe Agreement is void because it did not
include an explicit geographic scope is not supported by Indiana law. See also
Zimmer US, Inc. v. Mire, 188 F. Supp. 3d 843, 849–50 (N.D. Ind. 2016) (“So the
issue before the court […] is this: does the fact that the Agreement is silent on
the issue of an assigned restricted geographic area automatically nullify the
restrictive covenants? The answer to that question is no.”).
[15] Moreover, Indiana law also provides that if the trial court cannot determine the
reasonableness of that scope solely from the covenant document, it may
consider extrinsic evidence in the preliminary injunction hearing. See id.
(considering stipulated facts submitted to determine geographic scope of
covenant). As for that evidence in this case, Kolbe conceded that the map
admitted as Plaintiff’s Exhibit 129 accurately reflected his territory while at
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Zimmer Biomet. Exhibit 129 indicates that Alabama, Arkansas, Connecticut,
Delaware, Florida, Georgia, Indiana, Kentucky, Maine, Maryland,
Massachusetts, most of Michigan, Mississippi, New Hampshire, New Jersey,
New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South
Carolina, Tennessee, Vermont, Virginia, Washington D.C., and West Virginia
comprised Kolbe’s territory while at Zimmer Biomet.
[16] Appellants argue that the map that is Exhibit 129 is not accurate enough to
determine precisely which territories are included in the East region. For the
most part, we disagree. The vast majority of the border between the East and
West regions is obviously defined by the borders between various states.
Appellants are correct, however, that Exhibit 129 indicates that not all of
Michigan is in the East and so was not included in Kolbe’s territory at Zimmer
Biomet. Specifically, it appears that a large portion of the Upper Peninsula of
Michigan is, in fact, included in the West region. We remand with instructions
to clarify which portions of Michigan are assigned to the East region and which
are in the West.2
2. Non-Solicitation of Customers Covenant
[17] Appellants contend that the non-solicitation covenant in the Kolbe Agreement
is overbroad because it allegedly prohibits him from soliciting every Zimmer
Biomet customer in the United States, not just customers in Kolbe’s old
2
It appears that portions of Northwestern Arkansas and Southern Mississippi have also been assigned to the
West region. Appellants, however, have made no claim regarding these areas.
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territory. This argument, however, is premised on a mischaracterization of the
terms of the covenant. The language in question, far from enjoining Kolbe
from attempting to solicit business from any of Zimmer Biomet’s customers,
clearly applies only to customers in the restricted territory, or Kolbe’s old
territory. Appellants’ App. Vol. II p. 59. While it is true that the term
“Customer” as defined in the Kolbe Agreement is quite broad, the covenant
plainly limits its scope to customers in Kolbe’s old territory.
[18] Appellants also contend that the order not to solicit “Zimmer Biomet’s Active
Prospects to whom Kolbe marketed Zimmer Biomet products in his last six
months of employment” cannot be enforced because covenants not to solicit
prospective customers are unenforceable under Indiana law. Appellants’ App.
Vol. II p. 59. The cases on which Appellants rely, however, do not stand for
such a broad proposition. In Seach v. Richards, Dieterle & Co., 439 N.E.2d 208
(Ind. Ct. App. 1982), the problem with the covenant was its length, not that it
concerned prospective customers. In invalidating the covenant at issue in that
case, the Seach court stated its reasoning as follows: “The contract prohibits
contact with all past or prospective customers of the Firm, no matter how much
time has elapsed since their patronage ceased or the contact was made. This restraint is
vague and too broad.” Id. at 214 (emphasis added). Indeed, not only did the
Seach court not state that an interest in prospective customers cannot ever be
protectable, it explicitly stated that it was not “decid[ing] whether a solitary
‘contact’ with a prospective customer is sufficient to bestow upon the employer
a protectable interest.” Id. at 214 n.5. In Clark’s Sales & Service, Inc. v. Smith, 4
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N.E.3d 772 (Ind. Ct. App. 2014), trans. denied, the court invalidated as
overbroad a covenant that prohibited Smith from soliciting “anyone who was a
customer of Clark’s during the term of Smith’s employment[,]” which
happened to be fourteen years. Id. at 781. As in Seach, the basis of our ruling
was the covenant’s length: “[W]e agree with the trial court’s conclusion that
Clark’s attempt to protect a customer base spanning the entire term of Smith’s
employment is overly broad and unreasonable.” Id. at 782. Indeed,
prospective customers were not even included in the non-solicitation covenant
at issue in Clark’s. In the absence of any Indiana authority that prospective
customers cannot ever be a protectable interest, we decline to issue so broad a
holding.
[19] None of this means, of course, that a covenant preventing the solicitation of
active prospects is necessarily valid, as it must still be reasonable. We conclude
that, under the circumstances of this case, the covenant regarding active
prospects is reasonable. As mentioned, “Active Prospects” are defined in the
Kolbe Agreement as a person or entity “specifically marketed to and/or held
discussions with regarding the sale of any of Company’s products or services at
any time during the last six (6) months of Employee’s employment with
Company[.]” Appellants’ App. Vol. IV p. 152.
[20] First, it is important to note that the covenant only restricts contact with active
prospects, i.e., those Kolbe had already contacted and/or with whom he had
already communicated, not all potential customers. In our view, this
distinction is significant. While it might be unreasonable to prohibit any
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contact with potential customers altogether, it does seem to us that it would be
unfair for Heraeus to be able to finish building upon a foundation laid by Kolbe
when he worked for Zimmer Biomet. Because the covenant in the Kolbe
Agreement is limited to those with whom Kolbe already had some sort of
association, it is far less broad than a covenant prohibiting solicitation of all
potential customers.
[21] A second point worth noting is that the covenant at issue here is also of quite
limited duration, applying only to the active contacts generated in the six
months before Kolbe left Zimmer Biomet. This six-month look-back period is a
far cry from the unlimited period in Seach. Because the non-solicitation
covenant of the Kolbe Agreement is limited in both scope and duration, we
cannot say that Appellants have established a likelihood of success on the
merits.
3. Non-Solicitation of Zimmer Biomet Employees Covenant
[22] The Kolbe Agreement contains a covenant not to solicit Zimmer Biomet
employees to work for Heraeus, with employees defined as all persons who
were employees at the time of Kolbe’s separation from the company.
Appellants contend that such covenants are overbroad and violate Indiana law.
There is, as Appellants acknowledge, no Indiana authority to support this
proposition. Appellants urge us, however, to adopt the Wisconsin Supreme
Court’s reasoning in Manitowoc Co., Inc. v. Lanning, 906 N.W.2d 130 (Wis.
2018), a recent decision invalidating a similar covenant.
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[23] We decline Appellants’ invitation. Not only is Manitowoc not binding in
Indiana, we are not persuaded by its approach. The Manitowoc court’s decision
was informed by a Wisconsin statute that has no Indiana counterpart and
provides as follows:
A covenant by an assistant, servant or agent not to compete with
his or her employer or principal during the term of the
employment or agency, or after the termination of that
employment or agency, within a specified territory and during a
specified time is lawful and enforceable only if the restrictions
imposed are reasonably necessary for the protection of the
employer or principal. Any covenant, described in this section,
imposing an unreasonable restraint is illegal, void and
unenforceable even as to any part of the covenant or performance
that would be a reasonable restraint.
Wis. Stat. § 103.465. While section 103.465 does not, on its face, seem
significantly different from Indiana law on the topic, suffice it to say that we
largely agree with the dissent’s assessment of the majority opinion in Manitowoc:
“The lead opinion distorts the plain meaning of Wis. Stat. § 103.465, thereby
changing it from a statute that balanced the rights of employees and their
employers into a broad mandate that prevents employers from protecting their
businesses from third-party raiding.” Manitowoc, 906 N.W.2d at 151
(Roggensack, C.J., dissenting).
[24] We think that it almost does not need to be stated that Zimmer Biomet has a
legitimate interest in not having its valuable employees poached by a direct
competitor through the efforts of former employees now working for that
competitor. This interest, of course, must be balanced against the interests of
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Kolbe and Heraeus in being able to recruit a capable sales staff as well as the
interests of the individual employees in being able to compete freely in the
employment marketplace. Generally, we do not think that the covenant unduly
interferes with these interests. If any employee of Zimmer Biomet wishes to
leave and work for Heraeus, the covenant presents no obstacle; indeed, it seems
that any Zimmer Biomet employee can even be actively recruited by Heraeus,
just not with Kolbe’s participation. Appellants do not really dispute any of this,
arguing only that Zimmer Biomet does not have a legitimate interest in
restricting the employment mobility of “employees such as drivers or shelf
stockers[.]” Appellants’ Br. p. 43.
[25] On this point, we agree with Appellants; Zimmer Biomet has not shown that it
has a legitimate protectable interest in its entire workforce, which includes
many employees who would not have access to or possess any knowledge that
would give a competitor an unfair advantage. Appellants would have us
invalidate the entire Kolbe Agreement due to this overbreadth, but we choose
to reform the overbroad provision instead. As a general rule, “[i]f a court finds
that portions of a noncompetition agreement or covenant not to compete are
unreasonable, it may not create a reasonable restriction under the guise of
interpretation, since this would subject the parties to an agreement they have
not made.” Gleeson v. Preferred Sourcing, LLC, 883 N.E.2d 164, 177 (Ind. Ct.
App. 2008). Here, however, the parties specifically agreed that we have the
authority “to reform any [unreasonable] provision to make it enforceable under
applicable law.” Appellants’ App. Vol. IV p. 156. To that end, we reform the
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non-solicitation of employees covenant of the Kolbe Agreement to be limited in
scope to those employees in which the company has a legitimate protectable
interest.
B. Whether the Trial Court Misapplied the Kolbe
Agreement in Crafting the Preliminary Injunction
1. Geographic Scope
[26] Appellants contend that the trial court erred in ordering that Kolbe be enjoined
from operating in the entire state of Michigan when Plaintiff’s Exhibit 129
indicates that the Upper Peninsula is divided between Zimmer Biomet’s East
and West regions. We agree. For the reasons previously mentioned, we
remand with instructions to revise the preliminary injunction to exclude that
portion of Michigan included in the West region.
2. Non-Solicitation of Customers Covenant
[27] Appellants contend that the trial court’s preliminary injunction order is
unreasonable in that its language exceeds the scope of the Kolbe Agreement’s
non-solicitation of customers language. The non-solicitation covenant of the
Kolbe Agreement reads, in full, as follows:
Employee will not, directly or indirectly, (i) provide, sell or
market; (ii) assist in the provision, selling or marketing of; or (iii)
attempt to provide, sell or market any Competing Products to any
of Company’s Customers or Active Prospects in the Restricted
Territory. For purposes of this paragraph, “directly or indirectly”
shall mean, without limitation, that Employee will not be
permitted to contact for the purpose of selling, soliciting or
influencing any Customer or individual affiliated with any
Customer that purchases Competing Products or complimentary
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or ancillary medical services, which Employee agrees is a
reasonable limitation to prevent cross marketing or leveraging of
the Employee’s relationship with Company’s Customers. This
restriction shall not include or prohibit Employee from working
for or on behalf of an individual or entity that is not a Competing
Organization.
Appellants’ App. Vol. IV p. 153. The trial court enjoined Kolbe from
“[p]roviding, selling or marketing to, or contacting any of Zimmer Biomet’s
Customers to whom Kolbe sold during his last two years or to Zimmer Biomet’s
Active Prospects to whom Kolbe marketed Zimmer Biomet products in his last
six months of employment[.]” Appellants’ App. Vol. II p. 59.
[28] Specifically, Appellants contend that the trial court unreasonably (1) deleted the
phrase “in the Restricted Territory,” (2) deleted the last sentence of the
paragraph, and (3) added the word “contacting.” We do not see how the trial
court’s deletion of the phrase “restricted territory” could prejudice Heraeus or
Kolbe. The injunction prohibits Kolbe from soliciting his former customers and
active contacts, who necessarily would have been from the “restricted
territory,” essentially rendering the term unnecessary. Deletion of the last
sentence strikes us as similarly harmless, as it merely states when the covenant
does not apply, information that can easily be inferred from language
explaining when it does.
[29] As for Appellants’ claim that insertion of the word “contacting” into the
preliminary injunction was unreasonable, we acknowledge that they have a
point. The non-solicitation language in the Kolbe Agreement prohibits Kolbe
from contacting his former customers or active contacts, but only if it is “for the
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purpose of selling, soliciting or influencing any Customer or individual
affiliated with any Customer that purchases Competing Products or
complimentary or ancillary medical services[.]” Appellants’ App. Vol. IV p.
153. Although Kolbe was enjoined from contacting former customers and
active contacts for all purposes, the Kolbe Agreement did not go that far. We
remand with instructions to narrow the scope of the preliminary injunction
accordingly.
3. Non-Solicitation of Employees Covenant
[30] As mentioned, we have reformed the Kolbe Agreement to limit the scope of
Kolbe’s obligation not to solicit Zimmer Biomet employees to those in which it
has a legitimate protectable interest. We remand with instructions to narrow
the scope of the preliminary injunction accordingly.
II. Injunction Against Heraeus
[31] Appellants also contend that portions of the trial court’s preliminary injunction
concerning Heraeus were unreasonable. Specifically, Appellants contend that
the prohibitions on Heraeus using confidential information received from its
parent Heraeus Medical GmbH are unreasonable and that the term for Heraeus
to monitor Kolbe’s compliance with the preliminary injunction is unreasonably
longer than the term of the Kolbe Agreement itself.
A. Confidential Information from Heraeus GmbH
[32] The trial court preliminarily enjoined Heraeus from “possess[ing], us[ing] or
disclos[ing] any Zimmer Biomet Confidential Information received from […]
Zimmer Biomet through its parent, Heraeus Medical GmbH.” Appellants’
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App. Vol. II p. 60. On January 3, 2019, however, the parties entered into a
joint stipulation to alter the preliminary injunction to state that Heraeus may,
“beginning on January 1, 2019, possess and/or use the information contained
in the Quarterly Reports identified in Paragraph 2.4(c) of the United States
Distribution and Supply Agreement (‘Distribution Agreement’) dated January
1, 2012.” Appellees’ Supp. App. Vol. III p. 66. Appellants do not claim that
Heraeus is entitled to receive any confidential information from Heraeus
Medical GmbH beyond that contained in the quarterly reports, so Heraeus has
already received the benefit Appellants seek in this appeal. Consequently, this
claim is moot, and we need not address it further. See Jones, 847 N.E.2d at 200.
B. Duration of Heraeus’s Oversight of Kolbe
[33] The trial court’s order provided, in part, that “Heraeus shall not employ or
engage the Individual Defendants in any capacity that violates their respective
Agreements or this Order for 18 months from the entry of this Preliminary
Injunction.” Appellants’ App. Vol. II p. 60. Appellants contend that this part
of the preliminary injunction amounts to an improper extension of Kolbe’s
covenants beyond the terms of the Kolbe Agreement. As Zimmer points out,
however, the language at issue enjoins Heraeus, not Kolbe, and, as such, has no
effect on the length of his covenants. Moreover, we do not see how Heraeus
can establish any possibility of prejudice under the circumstances. Even if we
assume that the trial court’s order has the effect of improperly extending the
term of Heraeus’ oversight obligation past the end of Kolbe’s covenants, there is
simply nothing to oversee once Kolbe’s covenants run. Appellants have failed
Court of Appeals of Indiana | Opinion 18A-PL-1823 | April 15, 2019 Page 20 of 21
to establish the trial court’s preliminary injunction is unreasonable in this
regard.
Conclusion
[34] We conclude that all of Appellants’ claims regarding Burns are moot. We also
conclude that (1) the Kolbe Agreement is not rendered unenforceable because it
lacks a defined geographic scope and (2) its covenant to not solicit customers of
active contacts is not overbroad. We do agree, however, that the Kolbe
Agreement’s covenant not to solicit Zimmer Biomet employees is overbroad,
and so reform it as the parties agreed the court has the power to do. We also
agree with Appellants that the trial court misapplied the Kolbe Agreement in
enjoining Kolbe from operating in the entire state of Michigan and from
contacting his former customers or active prospects for any reason whatsoever.
Finally, we conclude that Appellants have not established that the trial court’s
preliminary injunction as it related to Heraeus was unreasonable in any respect.
[35] We affirm the interlocutory order of the trial court in part, reverse in part, and
remand for further proceedings consistent with this opinion.
Crone, J., and Tavitas, J., concur.
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