The Sixth Circuit recently issued an opinion affirming the entry of broad injunctive relief against Stryker’s former employee. In Stryker Employment Co. v. Abbas, 60 F.4th 372 (6th Cir. 2023), the court held that an injunction prohibiting the former employee from working in a similar position with one of plaintiff’s competitors (Alphatec) or any other competitor in the market was not an impermissible “industry wide” ban on employment. Further, the Sixth Circuit affirmed the portion of the district court’s injunction that prohibited the former employee from having ex parte communications with Alphatec’s attorneys, finding that such a restriction was necessary to prevent irreparable harm to Stryker in other cases involving Alphatec.

Case Background

Defendant Abbas was employed by Stryker – a medical device manufacturer – for approximately nine years in various roles across the company, including in finance and sales. Throughout his time at Stryker, Abbas led various finance and sale projects, developed reporting tools, built relationships with customers and others in the industry, and, in so doing, regularly used “significant amounts” of Stryker’s confidential information and supported Stryker’s litigation efforts. Abbas’ employment agreement with Stryker contained confidentiality and non-competition provisions. The non-competition clause prohibited Abbas from working for any “Conflicting Organization” if the services he was going to provide would enhance the use or marketability of a competing product due to Abbas’ knowledge of Stryker’s confidential information.

Non-party Alphatec is one of Stryker’s competitors. When it sued Abbas, Stryker was prosecuting three separate cases against Alphatec involving other former employees.

Alphatec began recruiting Abbas for a finance position in summer, 2021, but after Abbas met with Alphatec’s in-house counsel, Alphatec determined that Abbas could not do so without running afoul of his contractual obligations to Stryker. Nearly a year later, Abbas nevertheless resigned from Stryker to accept a newly developed “sales role” with Alphatec.  Alphatec assured Stryker that Abbas’ new role was created to “protect” Stryker’s confidential information, but Stryker was unassuaged with Alphatec’s assurances, particularly given suspicious activity by Abbas in the days leading up to his resignation. As a consequence, Stryker sued Abbas and filed a preliminary injunction motion seeking to enforce the restrictive covenants in his employment contract.

The district court granted Stryker’s request for a preliminary injunction. On appeal, Abbas challenged (among other things) the first and fifth paragraphs of the preliminary injunction order, which (i) prohibited Abbas from working or rendering services “in any capacity” not only for Alphatec, but for any other “Conflicting Organization,” as that term was defined by the parties’ agreement (i.e., Paragraph 1); and (ii) prohibited Abbas from having any ex parte communications with Alphatec’s attorneys or any of the defendants in the other cases that Stryker had pending against its former employees or Alphatec (i.e., Paragraph 5). 

The Sixth Circuit’s Decision

The Sixth Circuit affirmed the district court’s preliminary injunction order in its entirety. On appeal, Abbas argued that Paragraph 1 of the preliminary injunction was impermissible because: (1) the injunction amounted to an “industry-wide” ban; and (2) the district court’s order was inconsistent with Abbas’ agreement with Stryker. The Sixth Circuit disagreed. First, the court noted that such broad language was necessary to maintain the status quo and, even more importantly, that it came with a “proviso.”  Specifically, the district court “encouraged” Stryker, Alphatec, and Abbas to work together to try to craft a position for Abbas that would not violate Abbas’ agreement with Stryker. Moreover, the district court stated that it would entertain a motion to dissolve or modify the injunction should Stryker unreasonably withhold approval of a newly crafted position that did not violate the parties’ agreement. Second, the Sixth Circuit found that  the injunction was consistent with the express terms of the contract and, coupled with the district court’s willingness to modify the injunction upon motion, indicated that the district court was within its discretion in crafting Paragraph 1.

With respect to Paragraph 5 of the injunction, Abbas argued that it impermissibly disqualified counsel because it prohibited Abbas from having any ex parte communications, written or verbal, with any Alphatec attorney. The Sixth Circuit rejected that argument, citing the district court’s finding that Abbas was privy to confidential information that would “detrimentally affect” Stryker if disclosed to Alphatec or Alphatec’s counsel. The Sixth Circuit also found persuasive Stryker’s argument that any attorney representing both Abbas and Alphatec would necessarily need to inquire into Abbas’ knowledge of Stryker’s confidential information in order to fulfill their “competing ethical duty of loyalty” to Alphatec and that, in doing so, the attorney may run afoul of other rules of professional conduct (i.e., rules that prohibit an attorney from obtaining evidence in violation of a third party’s rights).

Takeaways

The Sixth Circuit’s opinion in Stryker Employment Co. v. Abbas demonstrates the court’s willingness to permit broad injunctive relief where it is consistent with the parties’ agreement and is necessary to preserve the status quo and prevent irreparable harm. Of particular note, however, is the district court’s “proviso” that Abbas should work with both Stryker and Alphatec to try to craft a position that would not violate Abbas’ agreement with Stryker and that it would entertain motions to dissolve the preliminary injunction should Stryker act unreasonably in that process. This additional language was especially significant to the Sixth Circuit when finding that the district court did not abuse its discretion.

On January 5, 2023, the US Federal Trade Commission unveiled a proposed regulation that would effectively prohibit the enforcement of noncompetition agreements. The Stryker decision underscores the power of noncompetition agreements coupled with injunctive relief to prevent the misuse of confidential information before irreparable harm has been done.