Maxxim Medical, Inc. v. Professional Hospital Supply, Inc. (In Re Maxxim Medical Group, Inc.)

434 B.R. 660, 2010 WL 2572395
CourtUnited States Bankruptcy Court, M.D. Florida
DecidedMarch 31, 2010
DocketBankruptcy No. 03-10438 (PJW). Adversary No. 8-03-mp-00026-MGW
StatusPublished
Cited by1 cases

This text of 434 B.R. 660 (Maxxim Medical, Inc. v. Professional Hospital Supply, Inc. (In Re Maxxim Medical Group, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Maxxim Medical, Inc. v. Professional Hospital Supply, Inc. (In Re Maxxim Medical Group, Inc.), 434 B.R. 660, 2010 WL 2572395 (Fla. 2010).

Opinion

*668 FINDINGS OF FACT AND CONCLUSIONS OF LAW

MICHAEL G. WILLIAMSON, Bankruptcy Judge.

In this adversary proceeding, the Plaintiff, Maxxim Medical, Inc., 1 alleges that Defendant, Karen McCauley, a sales representative of Maxxim, violated a covenant not to compete contained in her sales representative agreement with Maxxim when she went to work for a competitor, Defendant Professional Hospital Supply, Inc. (“PHS”)- Maxxim further alleges that not only did both McCauley and PHS lure away Maxxim’s customers when McCauley went to work for PHS, but in the process also misappropriated trade secrets primarily in the form of the design and contents of custom procedure trays (“CPTs”) that were McCauley’s primary product within her sales area.

In summary, after considering carefully the evidence produced at trial, 2 the Court finds that while McCauley knowingly violated her covenant not to compete in going to work for PHS, at the end of the day, Maxxim suffered no damages as a result of McCauley’s actions. That is, the loss of the Maine business by Maxxim was due to the poor quality of Maxxim’s services and goods, the loss of a key group purchasing contract, and the filing of its Chapter 11. Neither PHS nor McCauley were in any way responsible for these factors. It was Maxxim’s own failures rather than any action by PHS or McCauley that resulted in the loss of the CPT business in Maine by Maxxim. Accordingly, for the reasons set forth below, judgment will be entered in favor of the Defendants.

FINDINGS OF FACT

1. The Parties

a. Maxxim

When Maxxim commenced this adversary proceeding on October 17, 2003, it was a debtor in possession in a Chapter 11 case pending in the United States Bankruptcy Court for the District of Delaware. Maxxim was a medical services and supply company. Its business included the assembly and sale of CPTs used for surgeries and other medical procedures.

b. Karen McCauley

Maxxim employed Karen McCauley as a sales representative from July 1, 2002 until June 27, 2003. Her geographical area was the entire state of Maine, and two preexisting Maxxim accounts in New Hampshire. 3 The product lines assigned to McCauley included all of Maxxim’s vascular, surgical, and medical products, including CPTs. 4

c. PHS

At the time Maxxim commenced this adversary proceeding, PHS was a California corporation with its principal place of business in Temecula, California. Like Maxxim, PHS was also engaged in the CPT business but had only recently expanded into the New England region. When McCauley left her employment with *669 Maxxim on June 27, 2003, she became an employee of PHS working in the same product line and geographical area in which she had worked for Maxxim.

d. Medline

Subsequent to the commencement of this adversary proceeding, on October 28, 2003, Medline Industries, Inc. (“Medline”) purchased all of the assets of Maxxim in a sale authorized pursuant to 11 U.S.C. § 363 by the bankruptcy court in which Maxxim’s Chapter 11 case was pending. Subsequently, Medline intervened as a party plaintiff in this adversary proceeding. Based on an agreement between Maxxim and Medline, Medline would be entitled to damages or settlement proceeds relating to the Defendants’ conduct on or after November 10, 2003, and Maxxim would be entitled to damages or settlement proceeds relating to the Defendants’ conduct prior to November 10, 2003. 5

2. McCauley’s Contract and Employment by Maxxim

Prior to working for Maxxim, McCauley had twelve years’ experience in the health care industry. 6 McCauley’s level of experience appealed to Maxxim. 7 In this respect, she was considered by Maxxim as a “turn-key employee.” 8 That is, one who could be handed an existing client base knowing that the clients would be serviced because of her general skills and knowledge. 9 As a result, McCauley was able to “step right in.” 10 Importantly, at the time she started her employment at Maxxim, she already knew the decision makers at some of the major medical facilities and important customers in her territory: Maine Medical Center (“Maine Medical”), Maine General Medical Center (“Maine General”), Penobscot Bay Medical Center (“Penobscot Bay”), and St. Joseph’s Hospital (“St. Joseph’s”). 11

Tom Pilkington was McCauley’s direct supervisor at Maxxim. He was involved with hiring McCauley. During the discussions leading up to McCauley’s employment, Pilkington sent McCauley a standard form of sales representative agreement (“SRA”). McCauley received this in an email of June 24, 2002. 12 In the email, Pilkington wrote: “Karen, Please see attachment requiring your signature. Return it to: Shira Blumenstein, Maxxim Medical [street address in original] .... If you have any questions, please advise. Thanks, TP ([cell phone number in original]).” 13

The SRA contains a covenant not to compete. 14 It prohibits McCauley, while she was a Maxxim sales representative and for one year thereafter, from rendering services to any competitor within her assigned territory, from entering into any service agreement, from being employed by, or from acting as agent or independent contractor for a competing business. 15 This provision concerned McCauley because Maxxim’s business in her geographical area depended in substantial part on *670 the renewal of a contract that Maxxim had with Novation, a major hospital group purchasing organization (“GPO”) in the Northeast. McCauley printed the SRA, read it, and was concerned about the covenant not to compete. As a result, McCau-ley attempted to change the duration of the covenant not to compete from one year to thirty days. Maxxim refused. 16 Pilk-ington told McCauley that even though she had commenced working for Maxxim, that she would not be paid unless she signed the contract with the covenant not to compete. 17

Around this time, in the third week of July, 2002, McCauley called Bill Booth, a friend who had previously been a Maxxim employee.

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Cite This Page — Counsel Stack

Bluebook (online)
434 B.R. 660, 2010 WL 2572395, Counsel Stack Legal Research, https://law.counselstack.com/opinion/maxxim-medical-inc-v-professional-hospital-supply-inc-in-re-maxxim-flmb-2010.