*1 court whether the district question deciding GTE’s claims abstain from should MANAGED HEALTH CARE ASSOCI v. Compuserve time, see Romine ATES, INC., Acquisition at this MHCA (6th 337, Cir.1998), Corp., MHA/MedEcon, Plaintiffs-Ap d/b/a wholly irrelevant it pellants, jurisdiction the court has to hear
whether v. challenges to a preemption GTE’s federal KETHAN, Regional Ronald East Texas order in a non- state commission entered Cooperative, Coop First Choice d/b/a proceeding. FTA erative, Defendants-Appellees. No. 99-5444. jurisdiction In upholding over 1331, § emphasize claims under we GTE’s United States of Appeals, Court precisely utility it is because state Sixth Circuit. play commissions such a critical role 10, Argued: March administering regulatory the FTA’s frame within they operate strictly work that must 21, Decided and Filed: April the confínes of the statute. We therefore ruling, up the district court’s REVERSE § jurisdiction
hold and re case for determination on the mand the merits if and when the district court finds ripe
GTE’s claims for review.7 In so do ing, hope goals we further the FTA by affirming state commissions’ stat utory rejecting unduly expan role and 252(e)(6) § interpretation
sive state permit regulatory would authorities al to insulate federal review orders to, leged contrary preempted by, to be or federal law. ripe hardship prong
7. To determine whether a claim is
for
tion. Ibid. The
concerns the
decision,
reviewing
consider
petition-
must
imposed
extent of the burden
on the
judicial
both the “fitness of the issues for
compelled
er who would be
to act under
parties
hardship
decision and the
challenged
threat of
enforcement
withholding court consideration.” Abbott
See id. at
OPINION
GILMAN, Judge. Managed Associates, Health Care Inc. Acquisition, MHCA d/b/a *3 MHA), (collectively com- MHA/MedEcon an action in menced state court (Kethan) Ronald Kethan and East Texas Regional Cooperative, First Choice d/b/a (First Choice). Cooperative MHA sought injunction a preliminary prevent Kethan from violating noncompetition clause signed he had when employed by n Services, (MedEcon), MedEcon Inc. predecessor. MHA’s After Kethan and First Choice removed the case to federal on diversity based of citizenship, the district court held that agreement was only by enforceable MedE- con, and that it was assignable by MedEcon to MHA without Kethan’s con- sent. It therefore denied request MHA’s a preliminary injunction and dissolved the temporary restraining order that MHA had obtained state court. For the rea- below, forth sons set we REVERSE the decision the district court and RE- MAND the case for further proceedings consistent with this opinion. (briefed), Dennis D. Murrell William J. I.
Hunter, briefed), BACKGROUND (argued Jr. and Thomas O’Brien, (briefed), P. III Middleton & history A. Procedural Louisville, Reutlinger, Kentucky, Louis M. 5, 1999, January On MHA commenced (briefed), Solomon Daniel L. Abrams an action against Kethan and First Choice (briefed), Swidler, Berlin, Shereff & Fried- County, the Circuit Court of Jefferson man, York, York, New New for Plaintiffs- Kentucky. MHA sought and obtained a Appellants. order, restraining enjoining Kethan from (briefed), Tachau, Gregg R. Hovious violating clause that Maddox, Dickens, Louisville, Hovious & employment agreement of his (briefed), Kentucky, Charles M. Pritchett with MedEcon. briefed), D. (argued James Cockrum 2, 1999, February On Kethan and First Brown, Louisville, Heyburn, Todd & Ken- Choice removed the action to the United tucky, for Defendants-Appellees. States District Court for the Western Dis- Kentucky. trict of Kethan First WELLFORD, SILER, Before: then moved to dissolve the re- Choice GILMAN, Judges. straining order that MHA had obtained GILMAN, J., opinion opposed delivered the state court and MHA’s motion for court, SILER, J., joined. injunction. preliminary On March WELLFORD, 931), (p. J. delivered the district court dissolved re- separate dissenting opinion. straining request order and denied MHA’s resignation no- tendered his In late after Kethan injunction. preliminary
for a tice, using ceased timely ap- First Choice filed MHA/Me- MHA March purchasing services. group dEcon for peal. thirty days passed When background Factual B. notice, he commenced resignation Kethan’s Shortly with First Choice. signed employment December On MedEcon, seeking to thereafter, brought suit agreement (GPO) for organization noncompetition agree- group purchasing enforce of busi- principal place hospitals with MedEcon. ment with contract for the Kentucky. GPOs ness provides as products for array of of a vast purchase follows: They facilities. member healthcare use *4 the term of this during Employee, directly agreements enter into also (2) two period for of agreement and a pur- to member facilities to allow suppliers thereof, the termination will years after prices, reduced products at the chase do, directly indirectly, for himself or of savings a substantial thereby providing of, or on or as an behalf agent or herself money for their members. time and both with, of, any person, conjunction inor in purchasing in bulk engage also GPOs trust, firm, or corporation, partnership, their members even provide to order other than the organization business greater discounts. (“Other Firm”), he or nor will Company through Kethan From she, indirectly, per- or directly or cause agreement and as a salesman worked Firm in he or she any mit Other which job MedEcon. Kethan’s for administrator interest, or or proprietary has a financial var- meeting with responsibilities included director, officer, a he or she of which hospitals from and representatives ious shareholder, rep- or partner, employee, the products them to use encouraging resentative, following[:] of the any to do He agreements. by MedEcon’s covered present or any past, or cause a. solicit in representatives numerous contacted of the termination (up future to time be- on MedEcon’s and Oklahoma Texas (or members) employment) of customers Kethan had the During period, half. any existing of the Company or of of the strong re- develop to business opportunity or affiliates of the or future subsidiaries customers, in- lationships with MedEcon’s Affiliates”) (“Subsidiaries or Company eventually Kethan cluding First Choice. or of their business transfer all for administrator agreement became Company or Subsidiaries from First Choice account. competitive or ser- or Affiliates render MHA, also In of June (or any such mem- customers vices GPO, negotiations with MedEcon began bers). MedEcon’s assets. acquisition of any or to influence attempt induce b. most of MedEcon’s September On existing or future Com- by MHA. Included purchased were assets any of the or Affili- or Subsidiaries pany employment those assets was employment; and ates to leave such MedEcon nor agreement. Neither any the kinds of busi- engage c. written consent to obtained Kethan’s Company activities which ness transaction, Following assignment. or Affiliates any of the Subsidiaries have employ- to be an at-will continued Kethan engaged is now within been or ee, job, receiving the performing same Kansas, Nebraska, Texas, States benefits, reporting salary same Arizona, Oklahoma, Colorado, Idaho, supervisor. the same Wyoming, and Missouri. days the sale of MedE- Twenty after clause, MHA, thirty- addition gave Kethan eon’s assets to provision contained a re- days days’ resignation. agreement notice his Two quiring key that modifications be writ- The first issue thus becomes whether ing signed by parties. both assignment MedEcon’s of Kethan’s em- agreement provided any disputes also ployment agreement was a modification of governed by Kentucky were to be law. the terms of his contract. contract, however, No clause direct- Kentucky courts yet have not addressed
ly addressed the of whether Kethan’s assignment issue whether the of an assigned. contract could be underly- contract modifies the The district court concluded that ing terms of the contract. The Second assignment of Kethan’s contract was a Circuit, however, rejected has the notion modification. Because modification that an assignment modifies underly- writing, had to be in and there was no such ing terms of a contract: writing, the district court held The fact that the Agreement pro- also longer noncompeti- was no bound vided that its terms could not be waived tion clause. The district court also held or altered without the written consent of assign- clauses are not the bank did not justify departure under Kentucky able general New ... York rule debt, parol assignment claim, of a II. ANALYSIS or chose in action is valid. assign- An *5 A. of Standard review modify ment does not the terms of the Although this court reviews a underlying contract. It separate is a challenge to a district court’s decision re agreement between the assignor and as- injunctions garding preliminary for abuse signee merely which transfers the as- discretion, of Michigan see Sandison v. signor’s rights, contract leaving them in Ass’n, High School Athletic F.3d 64. full force and effect as to party the (6th Cir.1995), key 1030 the in two issues charged. Insofar as an assignment questions this case are of law dealing obligations touches on the of the other n assignments Kentucky law. Nei party contract, underlying to the directly ther issue has been by addressed assignee simply moves into the of shoes Supreme Court of Kentucky. “When the assignor. contract, the district court construes Citibank, Tele/Resources, N.A. v. 724 interpretation such is a of law and (2d Cir.1983) (citations F.2d by de appellate reviewable novo court.” omitted); accord, Fabrics, Ametex Inc. v. Co., v. F.D.I.C. Aetna Cas. and Sur. 903 Materials, Inc., Just In 140 F.3d (6th Cir.1990). 1073, 1077 F.2d Our role in (2d Cir.1998) (noting that it is “elementa- diversity of citizenship case “is to ry” that assignments modify do not make [the] best even in the prediction, contract). underlying of a terms Those of direct precedent, absence state court of correctly recognize assignments cases what the Kentucky Supreme Court would completely are different and.modifications do if it were ques confronted with this concepts, im- and that is not States, tion.” Welsh v. United pacted by “boilerplate” provi- modification (6th Cir.1988). 1239, 1245 sions. assignment modify B. An not does reasoning Based on the Citibank underlying employment of an terms Ametex, we conclude that terms contract employment were not modified assignment of his and the contract
Provision fourteen of Kethan’s em substitution MHA for Fol- MedEcon. ployment agreement pro with MedEcon lowing assignment, Kethan’s contractu- waiver, alteration, vides that “[n]o or modi rights employee al and duties an did not fication of as provisions of the of this Agreement change. only writing thing changed shall be valid unless in was signed by parties entity both of hereto.” now entitled to enforce the this issue. Kentucky that addresses pre- had and conditions terms Servs., Inc., Protective into his v. Koorsen when he entered Choate
viously agreed Accordingly, (Ky.1996), we agreement. 929 S.W.2d employment when it erred subject that the district to a clause hold of Kethan’s assignment that the concluded whether it could be silent as to that was the terms contract modified were company assigned. The assets agreement. of his sold, assigned non- and the seller later purchaser. competition clause assigna- clause is AC. Choate, argued that the employee, Kentucky ble did because he was unenforceable clause law, Kentucky long it has Under assignment. consent expressly gener “that a contract recognized been reject County Court The Jefferson by public forbidden unless ally assignable, injunction and issued an argument ed this itself, provi or its contract or the policy This noncompetition clause. enforcing the that one of the as to show are such sions Kentucky by the was affirmed decision confidence reposes personal parties Appeals. Court un other, he would have been the case reached By the time person.” other repose in willing to Court, one-year Kentucky Supreme Creek Lum Co. Miller’s Stave Pulaski expired by Co., Ky. S.W. ber then the issue was omitted). terms. Because own (citation Kentucky (Ky.1910) moot, Supreme de Kentucky Court acknowledged non- also courts have Consequently, a critical role it. play clined address competition they long as as and are favored as enun Kentucky authority point, on business scope and geographic are reasonable appellate trial and the by both the ciated Adjustment Bu Central duration. See Choate, recognizes that noncom- courts *6 Associates, reau, Ingram 622 Inc. v. may assigned as of clauses be petition (not 681, (Ky.Ct.App.1981) 685-86 S.W.2d a a assets. “Where of business’s the sale highly only protection for ing that issue has resolved an appellate court state employees against specialized businesses spoken, we high court has not to which the away clients are resigning taking their decisions ... as normally [those] treat will clauses); v. Lareau noncompetition that strong showing absent authoritative (Ky.1962) O’Nan, 681 355 S.W.2d court would decide highest the state’s (“[T]he state is to enforce policy this Lilly v. Eli & differently.” Kurczi issue very seri unless [noncompetition clauses] (6th Cir.1997) Co., 113 F.3d 1429 result.”); Borg-War would inequities ous (citation quotation marks and internal Services, Corp. v. Guards ner Protective omitted). strong show find no such We mark, Inc., (E.D.Ky. 501 F.Supp. all, showing at in the indeed ing, or Everman, 1996) (distinguishing Calhoun us. case before that (Ky.1951), noting S.W.2d cases, including argue those in Choice modern But Kethan First more “the emphasis on the em Kentucky, place more trial distinguishable because the is Choate employee in the investment ployer’s noncompetition not court did enforce balancing the approach have evolved original employer had been until the the hard importance of factor argu- We find this joined plaintiff. as inter employee public and the to the ship however, unpersuasive, ment because est”). found that all con- circuit court Choate to rights tractual Choate’s key present The second Sexton, clause were transferred however, enforce case, general is not the Koorsen, employer, to original Choate’s clause, but ability of a right that “Koorsen [has] and held a clause is such whether compete not enforce the covenant is one case Kentucky law. There than without reference to stock would exalt against Choate” form over sub- the fact that Sex- stance. Consequently, Sexton. joined party plaintiff had no
ton was as policy enforcing behind non- analysis circuit court’s effect on the competition clauses is protect busi holding. against employees nesses resigning and Kethan and First ar Choice also taking valued clients with them. See Cen unpublished that the decisions of the gue Bureau, Adjustment tral Ingram Inc. v. County Circuit Court and the Jefferson Associates, (Ky.Ct. S.W.2d Kentucky Appeals Court of cannot be con case, App.1981). In this while working 76.28(4)(c) Rule sidered because the MedEcon, Kethan had access to MedE- Kentucky pro Rules of Civil Procedure con’s customer He eventually lists. be unpublished decisions cannot vides be came primary First Choice’s advisor. Be authority. Kentucky proce cited as This that, cause of Kethan developed a special rule, however, controlling dural not relationship business with First Choice. Davis, before Miller v. the case us. See Shortly after Choice First decided to end (6th Cir.1974) (noting its business relationship with MHA/MedE- may that federal pro courts use their own con, Kethan working ceased for MHA and cases). Instead, in diversity cedural rules working commenced for First Choice. 28(g) Rule is the Sixth Circuit relevant The reason was able to devel authority, preclude and it does op unique his relationship business considering persuasive court from rea Choice, go it, First and later to work for soning of cases. unpublished employed was because MedEcon him and placed him in charge the First Choice opinions addition to from the precisely account. He thus type Kentucky, may lower courts of this court for whom adopted by juris use the rule most of the Central, designed. were See 622 S.W.2d dictions that have the assigna- addressed at 685-86. bility persuasive authority issue as in de termining Kentucky Supreme how the Kethan and First Choice re likely question. Court would decide the spond by arguing personal that a services Kurczi, 113 See F.3d at 1429. With re contract assigned. personal cannot be A spect of noncompeti however, contract, services requires that *7 clauses, majority tion permit “[a] of courts parties one of the bound to be render the successor to enforce employee’s personal generally services. See Kenneth restrictive covenant an assignee as of the Corwin, D. Ltd. v. Missouri Medical Ser (the original original employ covenantee vice, (Mo.Ct.App.1985) 600 S.W.2d er).” 6 Riohard A. On LoRD, Williston (“[T]he duty to perform assignable is not (4th ed.1995). § 13:13 Contracts parties.”). without the consent of both In contrast, noncompetition clause re
MHA also correctly points out that if it quires parties that one of the abstain from purchased had the stock of MedEcon rath- generally certain activities. assets, Equifax See er than its MedEcon would have Servs., Hitz, Inc. v. in remained existence and continued to be (10th Cir.1990) (“Although an employee’s employer. assign- Kethan’s Because no duty perform to under an necessary ment would have been under generally delegable, contract not ... circumstances, is such Kethan would have right compete to enforce a covenant not to no to basis even the enforce- generally in ability assignable of the is connection noncompetition clause. Al- business.”) (citation omitted); the sale of a lowing obligations Kethan to avoid his un- (4th Andrews, der the In re simply circumstances of this case F.3d Cir. 1996) (“Although because MHA decided to the Thirteenth Amend structure the a purchase prohibits specifically transaction as of assets rather ment a court from for the the basis contract, law and because an Ohio service enforcing personal unclear, that the we find decision is compete specifically is court’s to agreement not reasonable.”)- Here, in resolving it is not determinative if case is enforceable was employee who at-will was an Kethan action. present Consequently, any time. resign at free to of the lower opinions on the Based require does not clause noncompetition Choate, majority Kentucky courts of Keth- on the action any affirmative have ad that the other states rule from an, assignable. and is thus issue, rea and the additional dressed argue further First Choice Kethan and above, that forth we believe set sons “charac- style and management that would conclude Kentucky Supreme Court purchased MHA when changed ter” assignable. are clauses noncompetition This, however, ir- of MedEcon. assets court we reverse the district Consequently, the non- of whether relevant point. on this assignable because clause is competition management not tied to the clause was reasonably rely not on Kethan could D. fact, of MedEcon. style “character” Larry Irene’s statements changed manage- have could MedEcon ar and First Choice next Kethan time, have would and Kethan ment at if the gue that even by the still been bound MHA, assigned to properly was management would Similarly, clause. rights or is now its contractual if had waived exactly as it did MHA changed have rather its contractual asserting stock of MedEcon from purchased estopped noted, and, previously Larry as Irene president than its assets rights because its had no to com- would have basis MHA would not Kethan that allegedly told plain. him. MHA ar the clause enforce such a state never made gues that Irene argu final and First Choice’s
Kethan’s if Irene did so Kethan. Even in ment to circuit’s decision ment is based on this however, Hargadine, state, 17 Ohio reliance on Kethan’s Grace & Co. W.R. (6th Cir.1968), which F.2d 9 light Misc. unreasonable statement arguably held that all modifica requirement contractual In the Ohio law. are writing. Aside from to be tions have distinguishable place, Grace is first to be no consid appears that there fact present case because the facts of the this is alleged promise, eration for Irene’s op as interpreting Ohio law court was the non- exactly type of claim Second, hold Kentucky posed to designed pre clause was modification respect ing Grace with argu Accordingly, reliance vent. court’s The district ambiguous at best. unavailing. ment is actually MHA’s supports decision Grace new em it held position, because balance the E. district must *8 to enforce the cove right had ployer equities specified for the nant Although we have concluded Id. at 19. But because years. term of two dismissing erred in MHA’s district April two-year had ended covenant injunction based preliminary motion for change, prior corporate of 1962 due to regarding assignability, legal on the issues however, not ac did arid because Grace factual issues unresolved the this leaves May until quire ownership These issues that must be considered. two-year ban court held that district (1) on the the likelihood of success include af Id. This court already lapsed. (2) could irreparable harm that merits, but, in court’s decision firmed district (3) issued, injunction is not result if the dicta, stated that (4) interest, and impact public on the Id. under Ohio were not assignable harm to others. possibility of substantial interpreting at 20. Grace Because Industries, [tjhere Inc., Eagle-Picher See In re adds that one case in Ken- (6th Cir.1992). F.2d Keth- tucky issue,” that addresses this Choate v. strenuously First argue Choice Servs., Koorsen Protective the district court did not abuse its discre- (Ky.1996). S.W.2d 184 We are in agree- refusing grant tion in preliminary particular ment this Kentucky Su- injunction because MHA cannot show preme Court decision did not determine and, event, damages could be ade- (and answer to the quately compensated by monetary certainly not to the issue I would certify to award. These issues will need be re- Court). Pertinent to the issue was solved the district court on remand. unpublished decisions of the Kentucky trial court and the of Appeals Court III. CONCLUSION noted no controlling Kentucky authority on above, For all set forth reasons the necessity of consent to a we REVERSE the decision the district purported assignment by employee. court and REMAND the case for further dissent, I accordingly, favor of certifi- proceedings opinion. consistent this cation under the circumstances. WELLFORD, Judge, dissenting.
This is a difficult my brothers case would reverse and remand to the district proceedings.
court for further respect- I fully I persuaded differ. am that the best
course, light of the uncertainties that
exist in this area of Kentucky, law in certify legal question to the Ken- MARTIN, Dennis L. Plaintiff- tucky Supreme Court: Appellant, non-competition Is the agreement this case between em- MedEcon Kethan, ployee, assignable to the plain- BARNESVILLE EXEMPTED VIL (a tiff company party), third in the ab- LAGE SCHOOL DISTRICT BOARD sence of Kethan’s consent? EDUCATION, Defendant-Appel OF I agree majority do not with the opinion lee. that the district court “held that non-com- No. 99-3263. petition assignable clauses are not in Ken- Rather, tucky.” essence district United States of Appeals, Court judge’s holding was this: Sixth Circuit. non-compete agreement [T]he and the confidentiality applied only to Me- Argued: March ..., Grace, dEcon and they under W.R. Decided April and Filed: were not to MedEcon to employee’s without consent. Reinforcing this is the Keth- notion agreement’s inclusion of a
an/MedEcon requirement that all contract modifica-
tions must be writing written. No such here; thus,
occurred MedEcon did not *9 assign the covenant compete or confi-
dentiality clause to MHA. added.) (emphasis majority holds “a non-competi- tion clause is in Kentucky.” It