123 N.E.3d 158
Ind. Ct. App.2019Background
- Zimmer Surgical (a Zimmer Biomet subsidiary) had an exclusive U.S. distribution agreement with Heraeus Medical GmbH for Palacos bone cement running to Dec. 31, 2018; Heraeus GmbH exercised a right in Jan. 2018 to make the final year non‑exclusive and set up a U.S. affiliate (Heraeus) with a direct sales force.
- Robert Kolbe, formerly a Zimmer Biomet regional sales director, signed a 2015 employment agreement (the Kolbe Agreement) containing 18‑month noncompete and non‑solicit covenants (customers, active prospects, and Zimmer employees).
- Kolbe left Zimmer in Nov. 2017 and was hired by Heraeus; several other former Zimmer salespeople also moved to Heraeus.
- Zimmer sued Heraeus and several ex‑employees in Feb. 2018, seeking, among other relief, a preliminary injunction enforcing restrictive covenants.
- The trial court granted a partial preliminary injunction (July 12, 2018) enjoining Kolbe from working for Heraeus in an Eastern U.S. territory, from providing/marketing to or contacting certain Zimmer customers/active prospects, from inducing distributors to leave Zimmer, and from soliciting Zimmer employees; it also enjoined Heraeus from possessing/using Zimmer confidential information received from Heraeus GmbH and from employing the individual defendants in violation of their agreements.
Issues
| Issue | Plaintiff's Argument (Zimmer) | Defendant's Argument (Heraeus/Kolbe) | Held |
|---|---|---|---|
| Geographic scope of restrictive covenant | Covenant covers Kolbe's assigned territory; injunction should enjoin Eastern territory including listed states | Covenant void/uncertain because Kolbe Agreement lacks a single explicit geographic boundary and maps are imprecise | Covenant need not name a single map; court may consider extrinsic evidence; injunction sustained but remanded to clarify portions of Michigan (Upper Peninsula) assigned to East vs West |
| Validity of non‑solicit customers/active prospects covenant | Protects Zimmer's customer relationships; limited to customers/active prospects in Kolbe's restricted territory and limited 6‑month lookback for active prospects | Argument that non‑solicit of prospective customers is per se unenforceable or overbroad | Covenant upheld as reasonable: limited to prior contacts (active prospects) and short temporal scope; not overbroad here |
| Validity of non‑solicit Zimmer employees covenant | Zimmer has a legitimate interest in preventing third‑party raiding by ex‑employees who know its workforce and relationships | Overbroad because it bars solicitation of all Zimmer employees, including low‑level staff with no protectable interest; should be invalidated (relies on Manitowoc) | Covenant as written is overbroad; court reforms covenant (per parties’ agreement authorizing reform) to limit it to employees in whom Zimmer has a legitimate protectable interest; injunction must be narrowed accordingly |
| Scope and language of the preliminary injunction (contacting vs contacting for solicitation) | Broad injunction needed to prevent Kolbe from exploiting relationships (including prohibition on contact) | Injunction improperly expands the Agreement by barring all contact (not limited to contact for selling/soliciting/influencing) and extends Michigan territory improperly | Court finds trial court exceeded the Agreement by (1) enjoining whole state of Michigan when map shows split of Upper Peninsula — remand to clarify; and (2) using “contacting” in an unlimited way — remand to limit contact prohibition to communications for the purpose of selling/soliciting/influencing |
Key Cases Cited
- Ind. Family & Servs. Admin. v. Walgreen Co., 769 N.E.2d 158 (Ind. 2002) (standards for appellate review of preliminary injunctions)
- Harvest Ins. Agency, Inc. v. Inter‑Ocean Ins. Co., 492 N.E.2d 686 (Ind. 1986) (elements required for injunctive relief)
- Seach v. Richards, Dieterle & Co., 439 N.E.2d 208 (Ind. Ct. App. 1982) (overbreadth and temporal scope concerns in non‑solicit covenants)
- Coates v. Heat Wagons, Inc., 942 N.E.2d 905 (Ind. Ct. App. 2011) (reasonableness of covenant as question of law; scope: time, activity, geography)
- Clark’s Sales & Service, Inc. v. Smith, 4 N.E.3d 772 (Ind. Ct. App. 2014) (invalidating an overbroad customer‑protection covenant covering an entire long employment term)
- Gleeson v. Preferred Sourcing, LLC, 883 N.E.2d 164 (Ind. Ct. App. 2008) (courts generally should not rewrite covenants absent parties’ authorization to reform)