By Justin Beyer
Thompson Reuters (Healthcare) Inc. sued three former executive employees, all formerly working for Thompson Reuters in its pharmacy benefits management and consulting division of its healthcare services arm, in the United States District Court for the Eastern District of Wisconsin on Monday and immediately filed a motion for partial summary judgment against the former executives for a declaration that their non-solicitation agreements are enforceable under Wisconsin law.
According to the complaint, all three former employees were originally employed by Trivantage Pharmacy Strategies, LLC, a private company located in Milwaukee, Wisconsin, which Thompson Reuters acquired in 2009.
As alleged in the complaint, Trivantage was in the business of providing pharmacy benefit management consulting and auditing services to assist companies in lowering their healthcare costs, and specifically lowering their pharmacy costs. Prior to Thompson Reuters acquisition of Trivantage, one of the employee defendants was allegedly a co-founder of Trivantage and had served as its Vice President of Business Development and the other two individual defendants served as Vice Presidents of Consulting Services. Between the three defendants, they were allegedly responsible for identifying potential clients, marketing Trivantage’s services, developing and maintaining relationships with Trivantage’s customers and prospective customers, and developing relationship with the appropriate personnel for each customer, for the purpose of establishing goodwill and maintaining customer relationships.
According to the pleadings, during the course of their employment with Trivantage, each of the defendants also executed various employment agreements, which, among other things, prohibited them from soliciting Trivantage’s customers; specifically, one of the individual defendants agreed not to solicit Trivantage’s customers for two years and the other two individual defendants agreed not to solicit for 18 months. Also included in each of the various agreements was an assignment clause, in which each of the defendants agreed that their non-solicitation agreement was assignable to any Trivantage successor.
In April 2009, Thompson Reuters entered into an agreement to purchase Trivantage, according to the complaint. Before the deal was executed, one of the individual defendants allegedly entered into a separate deal with Trivantage, through which Caldwell allegedly reaffirmed his non-solicitation obligations in exchange, in part, for receiving five percent of the net proceeds from Thompson Reuters’ acquisition of Trivantage. Thompson Reuters attached an unexecuted copy of the alleged agreement to its complaint and claims that its agreement with that individual defendant constitutes an alleged oral contract.
For the following two years, the defendants continued to be employed by Thompson Reuters, performing the same functions that they had performed at Trivantage. In mid-2011, Thompson Reuters discovered that the defendants were not allegedly devoting their full energies to Thompson Reuters and suspected that the defendants were setting up and/or operating a new business. Specifically, Thompson Reuters claims that one of the individual defendants stopped logging his sales efforts into Thomson Reuters’ computer system, the other two individual defendants allegedly exchanged emails that seemed to indicate that they were brainstorming about the name for a new company, and, on at least one occasion, according to the complaint, the individual defendants or one of their associates appear to have funneled a Thomson Reuters’ payment to an unauthorized vendor.
Subsequently, Thompson Reuters terminated the individual defendants in August 2011. After their termination, Thompson Reuters sent a letter to each of the defendants reminding each of their non-solicitation agreements, but each defendant responded claiming that their non-solicitation agreement was unenforceable.
Also after terminating the defendants, Thompson Reuters allegedly discovered that the defendants, in May 2011 and while still in Thompson Reuters’ employ, incorporated Remedy Analytics, a business which is competitive to Thompson Reuters and which is operated from two of the individual defendants’ home. In November 2011, Thomson Reuters further learned that the defendants, through Remedy Analytics, were allegedly soliciting and attempting to poach certain Thompson Reuters’ clients.
Interestingly, Thompson Reuters does not seek injunctive relief against the defendants in the complaint, instead seeking a declaration that the non-solicitation agreements are enforceable and seeking money damages for breaches of contract. In addition to filing its complaint, Thompson Reuters filed a motion for partial summary judgment seeking an immediate ruling from the court that the non-solicitation agreements are enforceable.
This case is worth watching as it addresses significant issues such as the enforceability of the non-solicitation agreements under Wisconsin law, including whether the court will enforce non-solicitation agreements acquired through a stock purchase agreement. Also, should the Court find that the restrictive covenants are enforceable, the amount of damages, if any, recovered, by Thompson Reuters should be interesting to follow.