NuVasive, Inc. v. Day ( 2020 )

United States Court of Appeals
For the First Circuit
No. 19-1611
NUVASIVE, INC.,
Plaintiff-Appellee,
v.
TIMOTHY DAY,
Defendant-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Howard, Chief Judge,
Thompson and Barron, Circuit Judges.
Bryan E. Busch, with whom Busch Slipakoff Mills & Slomka,
LLC, Steven D. Weatherhead, and Marathas Barrow Weatherhead Lent
LLP were on brief, for appellant.
Mary Taylor Gallagher, with whom Holly M. Polglase, Michael
S. Batson, Hermes, Netburn, O'Connor & Spearing, P.C., Christopher
W. Cardwell, M. Thomas McFarland, and Gullett, Sanford, Robinson
& Martin, PLLC, were on brief, for appellee.
April 8, 2020
BARRON, Circuit Judge. In this appeal, Timothy Day, a
Massachusetts resident, challenges a preliminary injunction that
the United States District Court for the District of Massachusetts
granted to his former employer, NuVasive, Inc., which is a health-
care company incorporated in Delaware. The injunction, which
enforces a nonsolicitation clause in the employment contract
between Day and NuVasive, bars Day from engaging in certain work
for his new employer, Alphatec Spine, Inc., which is one of
NuVasive's competitors.
Day's challenge to the injunction turns on a choice-of-
law issue under Massachusetts law. The District Court held that
Massachusetts' choice-of-law rules permitted it to enforce the
choice-of-law provision set forth in Day's employment contract
with NuVasive, which explicitly stated that the "[a]greement shall
be interpreted and enforced in accordance with Delaware law,
without giving effect to its laws pertaining to conflict of laws."
The District Court thus premised its issuance of the preliminary
injunction that is at issue on its application of Delaware law.
Day contends, however, that Massachusetts' choice-of-law rules
required the District Court to apply Massachusetts law and that,
under Massachusetts law, NuVasive could not show that it was
entitled to the preliminary injunction, even if NuVasive could
make that showing under Delaware law. We affirm.
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I.
NuVasive designs and manufactures products for the
treatment of spine disease. NuVasive distributes these products
through both its own employees and exclusive distributors.
Day first became affiliated with NuVasive in 2008 while
he was working for Integrity Medical, Inc., which at the time was
an exclusive distributor for NuVasive. Thereafter, Day became an
employee of NuVasive, where he worked as a sales representative
from August of 2011 until December of 2012.
At that time, Day left NuVasive to become a sales
representative for another one of NuVasive's exclusive
distributors, Magellan Medical LLC. But, five years later, on
January 1, 2018, Day once again became an employee of NuVasive,
this time as a sales director for the company in Massachusetts and
Rhode Island.
It was during this period of employment with NuVasive
that Day signed, as a condition of his employment, a Proprietary
Information, Inventions Assignment, Arbitration and Restrictive
Covenant Agreement ("PIIA"). The PIIA included a nonsolicitation
clause and a noncompetition clause, which applied during Day's
engagement with NuVasive and for one year immediately after.1
1 The nonsolicitation clause provides, in relevant part, that
the employee agrees not to:
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On January 3, 2019, however, Day once again left
NuVasive, this time to become an employee and owner of Rival
Medical LLC, which was, at that time, itself an exclusive
distributor for NuVasive. But, then, several months later, in
solicit, entice, persuade, induce, call upon or provide
services to any of the Customers . . . , accounts or
clients that [the employee] worked with, had
responsibility or oversight of, provided services
related to, or learned significant information about
during my employment (or other association) with the
Company for any purpose other than for the benefit of
the Company . . . .
And, the noncompetition clause forbids the employee from any
affiliation with a "Conflicting Organization," which is defined
as:
any person, group of persons, or organization that is
engaged in, or about to be engaged in, research on,
consulting regarding, or development, production,
marketing or selling of any product, process, invention
or service, which resembles, competes with, or replaces
a product, process, machine, invention or service upon
which [the employee] shall have worked or about which
[the employee] became knowledgeable as a result of [the
employee's] relationship with the Company, and whose use
or marketability could be enhanced by the application of
Proprietary Information to which [the employee] shall
have had access during such relationship.
For employees with certain titles, including Sales Director, Sales
Associate, and "any substantially similar position[s]," the "post-
employment restrictions" described in the noncompetition clause
are limited to Customers for which the employee "was assigned
responsibility for by the Company, participated in sales calls
and/or marketing efforts on behalf of the Company, and/or covered
medical procedures on behalf of Company, during the last twelve
months of [the employee's] employment with Company."
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April of 2019, Day dissolved Rival and terminated its relationship
with NuVasive.
In response, NuVasive sent Day and Rival a notice of
material breach of contract. Notable for present purposes,
NuVasive also reminded Day of his noncompetition and
nonsolicitation obligations under the PIIA. Nonetheless, soon
after ending his employment at Rival, Day began working as an
employee of Alphatec Spine, which is one of NuVasive's competitors.
At that point, NuVasive sued Day in the District of Massachusetts
based on its diversity jurisdiction. See 28 U.S.C. § 1332.
NuVasive's complaint against Day alleged tortious
interference and breach of contract and requested a preliminary
injunction to bar Day from violating his noncompetition and
nonsolicitation obligations under the PIIA in his work for
Alphatec. Day opposed the request for the preliminary injunction
on the ground that, notwithstanding the choice-of-law provision in
his contract with NuVasive, Massachusetts rather than Delaware law
applied to NuVasive's breach of contract claims and that those
claims must be dismissed under Massachusetts law. NuVasive
countered that, pursuant to the choice-of-law provision contained
in its employment contract with Day, Delaware law applied to the
breach of contract claims and that, under Delaware law, Day's
opposition to the request for the preliminary injunction lacked
merit.
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To resolve the threshold choice-of-law dispute
concerning NuVasive's breach of contract claims, the District
Court applied Massachusetts' choice-of-law rules.2 The District
Court then held that, under those rules, the choice-of-law
provision in Day's employment contract with NuVasive governed.
The District Court thus held that Delaware law applied to
NuVasive's breach of contract claims and that, although NuVasive
had not shown "a reasonable likelihood of success" on its claim
that Day had breached the noncompetition clause of the PIIA by
taking his new job with Alphatec, NuVasive had "shown a reasonable
likelihood of success" on its claim that he had breached the
nonsolicitation clause of the PIIA by doing so. After considering
the other factors that bear on whether a party is entitled to a
preliminary injunction, the District Court then issued a
preliminary injunction that enforced the PIIA's nonsolicitation
clause against Day. This timely appeal followed.
II.
To secure a preliminary injunction, a plaintiff must
show: "(1) a substantial likelihood of success on the merits, (2)
a significant risk of irreparable harm if the injunction is
2
Although NuVasive also asserted a tortious interference
claim against Day, the focus of its preliminary injunction motions
was on its claims for breach of contract, and thus the District
Court’s analysis was just focused on those claims.
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withheld, (3) a favorable balance of hardships, and (4) a fit (or
lack of friction) between the injunction and the public interest."
Nieves-Márquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003);
see also Lanier Prof'l Servs., Inc. v. Ricci, 192 F.3d 1, 3 (1st
Cir. 1999) ("We apply the federal preliminary injunction standard
in a diversity case, at least where the parties have not suggested
that state law supplies meaningfully different criteria."). The
only one of these four requirements that is in dispute on this
appeal concerns the likelihood-of-success requirement.
When reviewing "a trial court's ruling on a motion for
a preliminary injunction, we scrutinize abstract legal matters de
novo, findings of fact for clear error, and judgment calls with
considerable deference to the trier." Corp. Techs., Inc. v.
Harnett, 731 F.3d 6, 10 (1st Cir. 2013) (internal quotation marks
and citation omitted). We review choice-of-law determinations de
novo. See Reicher v. Berkshire Life Ins. Co. of Am., 360 F.3d 1,
4 (1st Cir. 2004).
Here, the parties agree that Massachusetts' choice-of-
law rules control, given that Massachusetts is the forum state.
See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
Moreover, Day does not challenge the District Court's ruling that,
under Delaware law, NuVasive has made the requisite likelihood-
of-success showing on its claim that Day breached the
nonsolicitation clause in his employment contract with NuVasive
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through his work with Alphatec. Instead, Day contends,
Massachusetts' usual choice-of-law rule, which is that the law of
the state that a contract's choice-of-law clause selects is the
law that controls, does not apply. In consequence, Day contends,
Massachusetts and not Delaware law applies to NuVasive's breach of
contract claims against him and thus determines whether NuVasive
can show that it can satisfy the likelihood-of-success requirement
in seeking a preliminary injunction based on those claims. This
contention is critical, because, Day further contends, if
Massachusetts rather than Delaware law applies, then NuVasive
cannot satisfy that requirement and thus the preliminary
injunction against him cannot be sustained.
In pressing this line of argument, Day relies on two
exceptions to the usual choice-of-law rule under Massachusetts
law, which is that the choice-of-law provision in an employment
contract should be enforced. See Oxford Glob. Res., LLC v.
Hernandez, 106 N.E.3d 556, 564 (Mass. 2018). But, as we will
explain, neither of those exceptions applies here.
The first exception prevents a choice-of-law provision
in an employment contract from being enforced when such a provision
chooses the law of a state that "has no substantial relationship
to the parties or the transaction and there is no other reasonable
basis for the parties' choice." Oxford Glob. Res., 106 N.E.3d at
564 (quoting Restatement (Second) of Conflict of Laws § 187(2)
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(1971)). But, this exception plainly does not apply here, because
Delaware is NuVasive's place of incorporation and NuVasive is the
plaintiff. See id. (citing to the Restatement); Restatement
(Second) of Conflict of Laws § 187(2) cmt. f (1971) (recognizing
the validity of choice-of-law provisions where "the state of [the
chosen law] is that where performance by one of the parties is to
take place or where one of the parties is domiciled or has his
principal place of business"); see also Cream of Wheat Co. v. Grand
Forks Cty., 253 U.S. 325, 328 (1920) (explaining that a company is
domiciled in the state where "it was incorporated under the laws
of that state").
The second exception prevents a choice-of-law provision
in an employment contract from being enforced when the "application
of the law of the chosen state would be contrary to a fundamental
policy of a state which has a materially greater interest than the
chosen state [in the determination of the particular issue]," and
the law of the state with the greater interest would otherwise
apply "in the absence of an effective choice of law by the
parties." Oxford Glob. Res., 106 N.E.3d at 564 (alterations in
original) (quoting Restatement (Second) of Conflict of Laws
§ 187(2) (1971)). But, even if we were to assume that
Massachusetts "has a materially greater interest than" Delaware in
the granting of the preliminary injunction and that Massachusetts
law would apply "in the absence of an effective choice of law"
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provision in an employment contract, Day has failed to show that
the application of Delaware law in this case would be contrary to
"a fundamental policy" of Massachusetts. Id.
In contending otherwise, Day first argues that the
Massachusetts Noncompetition Agreement Act ("MNCA"), Mass. Gen.
Laws ch. 149, § 24L, which sets forth the requirements for an
employee noncompetition agreement to be enforceable, represents a
fundamental Massachusetts policy that would be violated by the
application of Delaware law here, insofar as Delaware law would
allow NuVasive to enforce the PIIA's nonsolicitation clause
against Day pursuant to its breach of contract claim. But, the
MNCA "only applies to employee noncompetition agreements entered
into on or after October 1, 2018," Automile Holdings, LLC v.
McGovern, 136 N.E.3d 1207, 1217 n.15 (Mass. 2020); see St. 2018
Mass., ch. 228, § 71 ("Section 24L of chapter 149 of the General
Laws may be referred to as the Massachusetts Noncompetition
Agreement Act and shall apply to employee noncompetition
agreements entered into on or after October 1, 2018."), and Day
signed the PIIA nearly a year earlier, on January 6, 2018.
Moreover, none of the MNCA's provisions are relevant to the PIIA's
nonsolicitation clause because, "[b]y its terms, the [MNCA] does
not apply to nonsolicitation agreements." Automile Holdings, 136
N.E.3d at 1217 n.15; see Mass. Gen. Laws ch. 149, § 24L (excluding
"covenants not to solicit or hire employees of the employer" and
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"covenants not to solicit or transact business with customers,
clients, or vendors of the employer" from the definition of
"noncompetition agreement").
Day's remaining contention is that Massachusetts'
"material change" doctrine constitutes a "fundamental"
Massachusetts policy and that the enforcement of the PIIA's
nonsolicitation provision against him, pursuant to NuVasive's
breach of contract claim, would violate that doctrine. Under the
"material change" doctrine, a "non-solicitation agreement or
covenant not to compete may be deemed void if there are material
changes in the employment relationship between an employee and the
employer." Patriot Energy Grp., Inc. v. Kiley, No. SUCV2013–
04177–BLS1, 2014 WL 880880, at *7 (Mass. Super. Ct. Feb. 26, 2014).
But, while Day did remain affiliated with NuVasive when
he left it to work for Rival Medical, as Rival was one of NuVasive's
exclusive distributors, Day himself stated both that "on January
3, 2019, Day ceased being a NuVasive employee," as he had by then
moved over to Rival, and that this date marked the "terminat[ion]"
of his "employment relationship with NuVasive." That is
significant because Day has not identified any precedent that
indicates that such a "termination" -- at least when it has been
occasioned, as it was in this case, by an employee's own choice to
terminate that employment -- is a qualifying "change" under
Massachusetts' "material change" doctrine. Rather, the only cases
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that Day cites in support of his position as to what constitutes
such a qualifying "change" involve changes in the conditions of
employment of an employee who continued to be employed by the same
employer, such as an employer cutting the employee's pay, an
employer demoting the employee, or an employer materially
breaching some term of the employee's employment contract. See
Agero Admin. Serv. Corp. v. Campolo, 366 F. Supp. 3d 170, 174 (D.
Mass. 2019); Rent-A-PC, Inc. v. March, Civil Action No. 13–10978–
GAO, 2013 WL 2394982, at *3 (D. Mass. May 28, 2013); Patriot Energy
Grp., 2014 WL 880880, at *7; Akibia, Inc. v. Hood, No.
SUCV201202974F, 2012 WL 10094508, at *7-8 (Mass. Super. Ct. Oct.
9, 2012), aff'd, No. 12–J–390, 2012 WL 12370255 (Mass. App. Ct.
Nov. 21, 2012); Getman v. USI Holdings Corp., No. 05-3286-BLS2,
2005 WL 2183159, at *2-4 (Mass. Super. Ct. Sept. 1, 2005); see
also KNF & T Staffing, Inc. v. Muller, No. SUCV201303676BLS1, 2013
WL 7018645, at *3 n.4 (Mass. Super. Ct. Oct. 24, 2013) (explaining
that the "broadest restatement of the doctrine is that '[e]ach
time an employee's employment relationship with the employer
changes materially such that they have entered into a new
employment relationship[,] a new restrictive covenant must be
signed'" (first alteration in original) (emphasis added) (quoting
Iron Mountain Info. Mgmt., Inc. v. Taddeo, 455 F. Supp. 2d 124,
132-33 (E.D.N.Y. 2005))); Astro-Med, Inc. v. Nihon Kohden Am.,
Inc., 591 F.3d 1, 16 (1st Cir. 2009) (quoting Lycos, Inc. v.
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Jackson, No. 2004–3009, 2004 WL 2341335, at *3 (Mass. Super. Ct.
Aug. 25, 2004) for the same definition of the doctrine). This
body of precedent satisfies us that, whatever the precise scope of
the "material change" doctrine may be under Massachusetts law, it
is not capacious enough to encompass Day's circumstance.
Thus, we see no basis for concluding that the District
Court erred in finding that the fundamental public-policy
exception to Massachusetts' choice-of-law rules did not apply to
Day's case, such that the choice-of-law provision in his employment
contract with NuVasive that selected Delaware law could not be
given effect.3 Accordingly, we see no basis for concluding that
the District Court erred in applying Delaware law to assess whether
NuVasive had satisfied the "likelihood of success" requirement in
seeking a preliminary injunction based on its breach of contract
claim alleging Day's violation of the nonsolicitation clause in
the PIIA. And, that being so, we see no basis for finding merit
in Day's challenge to the issuance of the preliminary injunction
against him.
III.
The judgment of the District Court is affirmed.
3 Because we conclude that applying Delaware law does not
contravene either the MNCA or the "material change" doctrine, we
need not and do not resolve whether either embodies a "fundamental"
Massachusetts policy.
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