Astro-Med, Inc. v. Nihon Kohden America, Inc.

591 F.3d 1, 92 U.S.P.Q. 2d (BNA) 1705, 29 I.E.R. Cas. (BNA) 1543, 2009 U.S. App. LEXIS 23298, 2009 WL 3384786
CourtCourt of Appeals for the First Circuit
DecidedOctober 22, 2009
Docket08-2334, 08-2335
StatusPublished
Cited by359 cases

This text of 591 F.3d 1 (Astro-Med, Inc. v. Nihon Kohden America, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Astro-Med, Inc. v. Nihon Kohden America, Inc., 591 F.3d 1, 92 U.S.P.Q. 2d (BNA) 1705, 29 I.E.R. Cas. (BNA) 1543, 2009 U.S. App. LEXIS 23298, 2009 WL 3384786 (1st Cir. 2009).

Opinions

WOODCOCK, District Judge.

Astro-Med, Inc. (Astro-Med) and Nihon Kohden America, Inc. (Nihon Kohden) are rivals in the highly competitive life sciences equipment market, and in October 2006, when Nihon Kohden hired away Kevin Plant, a valuable Astro-Med employee, Astro-Med reviewed its legal options. When first hired at Astro-Med in 2002, Plant signed an employee agreement that contained non-competition and nondisclosure provisions. Relying in large part on those provisions, in December 2006, Astro-Med filed suit against Plant alleging breach of contract and misappropriation of trade secrets. Astro-Med later added a third claim of unfair competition against Plant and joined Nihon Kohden as a defendant, against whom it alleged claims of tortious interference and misappropriation of trade secrets.1 The lawsuit was especially hard-fought, and Nihon Kohden and Plant were disappointed on April 7, 2008, when a jury returned a verdict against them, awarding $375,800 in damages in favor of Astro-Med. Following the verdict, on July 25, 2008, the district court awarded exemplary damages [6]*6against Nihon Kohden and Plant in the amount of $560,000, added an award of attorney’s fees and costs, and imposed a sanction pursuant to Federal Rule of Civil Procedure 37. All told, the judgment against Nihon Kohden and Plant equals $1,159,823.60. On appeal, Nihon Kohden and Plant wage a frontal assault against the judgment, itemizing nine separate claims of legal error. After careful consideration, we reject each of Nihon Kohden’s and Plant’s contentions and affirm.

I.

Background

Astro-Med is a Rhode Island corporation with its principal place of business in West Warwick, Rhode Island. Its Grass Technologies product group manufactures, sells, and distributes instruments for sleep and neurological research and clinical applications of sleep science and brain wave recording and analysis. Although the identity of some of its customers is well known, Astro-Med’s financial arrangements with its sales people, its marketing strategy, and its pricing and cost structures are all highly confidential, and Astro-Med makes strenuous efforts to protect its trade secrets and other confidential information.

In October 2002, even though Plant had no prior experience in the medical industry or in medical equipment sales, Astro-Med hired him as a Product Specialist, responsible for the demonstration and training of its Grass Technologies product line. Astro-Med provided Plant with extensive training about its business, products, customers, and competitors, and it was AstroMed’s training that later made him marketable to Nihon Kohden. When AstroMed hired Plant, he signed an Employee Agreement, which contains a non-competition clause:

I recognize that the Company sells its products throughout North America and Europe; as such, upon termination of my employment at the Company, for whatever reason, I shall not directly or indirectly enter into or engage in a business that competes with the Company, in a territory consisting of North America, and Europe, either as an individual, partner, joint venturer, employee, agent or salesman for any person, or as an officer, director or stockholder of a corporation or otherwise, for a period of one year thereafter.

And a trade secrets clause:

[I hereby agree] [t]hat any inventions, discoveries or improvements and any technical data, trade secrets, (including, but not limited to, customer lists), information or know-how, made, discovered or conceived or acquired by me during the period of my employment, whether patentable, patented or not, are to be and remain the property of the Company; that, without the written authorization of the Company, I will neither use nor disclose to any person other than my superiors in the Company, any information, trade secrets, technical data or know-how relating to the Company’s products, processes, methods, equipment and business practices, which I have acquired during my employment.

The Employee Agreement also contained a choice-of-law and forum-selection clause, which stated that it shall be governed by the laws of the state of Rhode Island and that Plant consented to jurisdiction in Rhode Island for any dispute arising out of the Agreement.

Subsequently, Plant asked to be transferred to the state of Florida and become a field sales representative; Astro-Med granted his request and paid to relocate him to Florida. On July 12, 2004, AstroMed promoted Plant to District Sales [7]*7Manager for sales of Grass Technologies products. As District Sales Manager, Plant had access to and used Astro-Med’s trade secrets, including confidential marketing, pricing, and customer information. He became intimately familiar with AstroMed’s customers and their preferences as well as Astro-Med’s pricing strategy and cost data. He also learned about AstroMed’s suppliers, products they supplied, and the customers who purchased these products. Finally, he was informed about Astro-Med’s research and development efforts with respect to its Grass Technologies product line.

Nihon Kohden, a California corporation, has its principal place of business in Foothill Ranch, California. As a manufacturer of instrumentation for patient monitoring, sleep assessment, and neurology, Nihon Kohden competes directly with Astro-Med. In 2006, Brian Kehoe, the Florida sales representative for Nihon Kohden, was about to leave the company, and on July 21, 2006, he emailed Gary Reasoner, the Director of the Neurology Business Unit for Nihon Kohden, and informed him that he had met a man, Kevin Plant, who was a potential replacement for the Florida sales territory. Plant was indeed interested in employment with Ni-hon Kohden and in subsequent discussions, he emphasized his Astro-Med experience. He reminded Nihon Kohden that he was “coming from the industry and one of the competitors in the field” and in his employment application, he touted his “in-depth knowledge of neurology-based applications.”

In September 2006, Plant sent a resume to Reasoner, and Reasoner interviewed Plant several times over the telephone. In late September 2006, Plant traveled to Foothill Ranch and met with Michael Ohsawa, the Director of Operations for Nihon Kohden, and with Reasoner. Directly after the interview, Nihon Kohden made Plant a job offer, which he accepted. After Plant accepted the Nihon Kohden position, Kehoe emailed Plant: “I will be interested in seeing what you have in the works with Grass [Technologies].” Plant replied, “Sounds good.”

Before offering Plant employment, Ni-hon Kohden became aware of the AstroMed Employment Agreement with Plant and referred the contract to counsel for review. Nihon Kohden’s lawyer advised Nihon Kohden that there was some minimal risk in hiring Plant; notwithstanding that advice, Nihon Kohden hired Plant to sell its products in competition with AstroMed in the sales territory he had covered for Astro-Med.

II.

Discussion

A. The Jurisdictional Issue

From the very outset of this litigation, Nihon Kohden has vigorously maintained that, as a California business, it should not have been haled into court in Rhode Island to defend its hiring of a Florida resident to sell its product in Florida.2

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Bluebook (online)
591 F.3d 1, 92 U.S.P.Q. 2d (BNA) 1705, 29 I.E.R. Cas. (BNA) 1543, 2009 U.S. App. LEXIS 23298, 2009 WL 3384786, Counsel Stack Legal Research, https://law.counselstack.com/opinion/astro-med-inc-v-nihon-kohden-america-inc-ca1-2009.