FILED Nov 25 2024, 9:00 am
CLERK Indiana Supreme Court Court of Appeals and Tax Court
IN THE
Court of Appeals of Indiana MED-1 Solutions, LLC, Complete Billing Services, LLC, Rev-1 Solutions LLC, The WellFund LLC, Perfiniti Insurance II LLC, Bacompt, LLC, ConnectTec LLC, EPI Finance Group LLC, PrivacyDataSystems, LLC, and NHTI Services, LLC d/b/a Intus Technologies, Appellants-Plaintiffs
v.
Jennifer Taylor and Health Care Claims Management Inc., Appellees-Defendants
November 25, 2024
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 1 of 26 Court of Appeals Case No. 24A-PL-450 Appeal from the Marion County Superior Court The Honorable Heather A. Welch, Judge Trial Court Cause No. 49D01-2308-PL-30809
Opinion by Judge Vaidik Judges Weissmann and Foley concur.
Vaidik, Judge.
Case Summary [1] Appellants, whom the parties refer to collectively as the “RevOne Companies,”
sought to enjoin a former employee, Jennifer Taylor, from working for a
competitor based on several non-competition agreements Taylor executed
during her employment. Taylor signed one non-competition agreement as a
condition of her hiring, and then a few years later, she was told she had to sign
a new agreement or she’d be fired. The trial court found that the second
agreement was not supported by consideration because Taylor’s employment
was the consideration for the initial non-competition agreement, so her
continued employment could not serve as consideration for the second
agreement. Concluding that the RevOne Companies failed to show a
reasonable likelihood of success on the merits, the trial court denied their
motion for preliminary injunction.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 2 of 26 [2] The RevOne Companies now appeal. We hold that, where an at-will employee
signs a non-competition agreement as a condition of their hiring and is later
told to sign a new non-competition agreement or they will be fired, the
employee’s continued employment can serve as consideration for the latter
agreement. But because the trial court correctly concluded that the RevOne
Companies failed to show a reasonable likelihood of success, we affirm.
Facts and Procedural History [3] The RevOne Companies are MED-1 Solutions, LLC, Complete Billing
Services, LLC, Rev-1 Solutions LLC, The WellFund LLC, Perfiniti Insurance
II LLC, Bacompt, LLC, ConnectTec LLC, EPI Finance Group LLC,
PrivacyDataSystems, LLC, and NHTI Services, LLC d/b/a Intus
Technologies. William Huff owns the RevOne Companies and operates them
together as an integrated series of revenue-cycle-management companies. As an
individual entity, MED-1 Solutions primarily provides third-party collection
services to hospital systems and hospital-owned physician groups.
[4] In October 2010, Taylor received an offer of employment from MED-1
Solutions. The offer letter provided that Taylor’s employment was “contingent
upon” the execution of a non-competition agreement and would be considered
at-will. Ex. 8. Taylor signed both the offer letter and the non-competition
agreement (“the 2010 Agreement”) and began working for MED-1 Solutions as
Marketing Manager. The 2010 Agreement states that for two years after the
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 3 of 26 termination of Taylor’s employment with MED-1 Solutions (referred to in the
agreement as “the Company”), Taylor
shall not own, manage, operate, control, or otherwise be in any manner affiliated or connected with, or engage or participate in the ownership, management, operation or control of (as principal, agent, proprietor, partner, member, shareholder, director, trustee, officer, administrator, employee, consultant, independent contractor, or otherwise) any business or entity that owns or operates any medical fee collection services within 20 miles of any business owned by the Company on the last day of [Taylor’s] employment.
Id.
[5] In April 2014, Huff presented Taylor and other salaried staff of the RevOne
Companies with a new non-competition and confidentiality agreement and told
them that if they didn’t sign it, they’d be fired. This new agreement (“the 2014
Agreement”) provides, in relevant part:
[I]n consideration of the Recitals, Employee’s employment and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties do hereby agree as follows:
1. Non-Disclosure of Confidential Information: Employee shall at no time hereafter use, misappropriate, divulge, furnish, disclose or otherwise make accessible to any individual . . . or other entity (hereinafter “Person”), any Confidential Information of Company or person or entity controlled by, controlling, or under common control with Company (“Affiliate”). Confidential Information includes, but is not limited to, trade secrets, all forms of manuals,
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 4 of 26 catalogues, pricing information, client fee arrangements, sales literature, past and present client lists and potential client lists, and customers, financial information, methods, systems, business plans, reports, intellectual property, employee manuals, business know-how, and any and all data records of Company not otherwise available to the general public. . . .
...
3. Restrictive Covenant: Employee, for the period Employee is employed by Company or Affiliate and for a period of 12 months after the date of termination of such employment for any reason, shall not, within a 50-mile radius of any client, Company, or person or entity that has been a client of the Company within the 12-month period preceding Employee’s termination, or otherwise within a 50-mile radius of any office Company or Affiliate:
a. Form a business which provides, in whole or in part, receivable management, billing, and collections (hereinafter “Company Services”); or
b. Directly or indirectly become affiliated with, employed by, acquire an interest in any Person that performs, in whole or in part, Company’s Services or any other competitive activity . . . .
6. Cumulative Remedies, Enforceability, Severability And Attorney’s Fees: Employee agrees that:
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 5 of 26 c. Should it be held at any time by a court of competent jurisdiction that any of the covenant or agreements set forth in this Agreement are illegal, invalid or unenforceable, the validity of the remaining parts shall not be affected, and any illegal, invalid or unenforceable part shall be deemed not to be part of this Agreement, and the other portion shall remain in full force and effect. . . .
7. At-Will Employment: Employee agrees that she is employed on an at-will basis, and nothing in this Agreement shall confer upon Employee the right to continue in the employment of Company or to expect employment for any definite duration or affect any right which the Company or the Employee may have to terminate the employment with or without cause and with or without notice at any time.
8. Entire Agreement: This Agreement represents the entire agreement between the parties with respect to the Employee’s covenants of non-disclosure, confidentiality and non-competition and supersedes any other agreements, representation or understanding written or oral, between the parties with respect to those matters.
Ex. 9. Where “Company” in the 2010 Agreement refers solely to MED-1
Solutions, the 2014 Agreement defines “the Company” as MED-1 Solutions,
Complete Billing Services, Rev-1 Solutions, EPI Finance Group, and The
WellFund. Huff signed the 2014 Agreement on behalf of the Company.
[6] Though Taylor was employed and paid by MED-1 Solutions, she performed
work for all the RevOne Companies as part of her role. In 2020, Taylor was
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 6 of 26 promoted to Chief Operating Officer of the RevOne Companies, and Huff
requested she sign another non-competition agreement (“the 2020
Agreement”). However, there is no evidence that Taylor executed the 2020
Agreement.
[7] At the end of 2022, Taylor tendered her letter of resignation to Huff, but she
continued working for the RevOne Companies for several more months until
March 2023. A month later, Taylor began working for Health Care Claims
Management Inc. (HCM), which provides revenue-cycle services to healthcare
clients. Huff learned of Taylor’s employment with HCM in June 2023. In
August, the RevOne Companies sued Taylor and HCM, seeking injunctive
relief and alleging Taylor breached the 2010, 2014, and 2020 Agreements by
working for HCM and using the RevOne Companies’ confidential and
proprietary information. Several weeks later, the RevOne Companies moved
for a preliminary injunction against Taylor and HCM, and the trial court set the
motion for hearing.1
[8] At the hearing, Dan Gietl, Chief Information Officer for the RevOne
Companies, testified about a third-party digital-forensics analysis performed on
Taylor’s company computer. The forensics report showed the number of locally
1 Before the hearing on their motion for preliminary injunction, the RevOne Companies moved for leave to file an amended complaint. Without ruling, the trial court informed the parties that it wouldn’t address anything in that motion during the hearing. Thus, the hearing concerned only the claims in the original complaint. Because this is an appeal from the trial court’s denial of the motion for preliminary injunction, and the amended complaint was not at issue in that determination, the contents of the amended complaint have no bearing on our review here.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 7 of 26 accessed files and the volume of activity on external storage drives, but it didn’t
show whether a particular file was uploaded from the RevOne Companies’
network to an external drive. Gietl testified that he assumed “accessed means
opened, read, copy, moved, potentially deleted,” but based on the forensics
report, he couldn’t determine what action was taken. Tr. Vol. II p. 218. He
explained there was a “tremendous amount of cloud activity” on Taylor’s
company computer, id. at 202, including over 3,000 “Activity References” on
Google Drive between November 2022 and February 2023, Exs. 50, 51. Gietl
opined that there was “a strong correlation between the activity of accessing so
many files in such a short time and the high correlation to when the drives were
accessed.” Tr. Vol. II p. 201. That said, Gietl acknowledged that the only way
to determine whether the locally accessed files were moved to an external drive
would be to log into the external drive itself. Huff testified that, based on
Taylor’s responsibilities between her tender of resignation in December 2022
and her departure in March 2023, there was “no reason” for her to be accessing
some of the locally accessed files shown in the digital-forensics report. Tr. Vol.
III pp. 68-70.
[9] Scott Schoenherr, HCM’s Chief Information Officer and Taylor’s new
coworker, testified that Taylor has never mentioned “methods or approaches or
tools that RevOne Companies used to deliver services to their client” or
provided “any information or data or documents from her tenure at the
RevOne Companies.” Id. at 95, 96.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 8 of 26 [10] Taylor testified that she has a Google Drive account and two Gmail accounts—
one personal email and one for work she does at her church. She provided
screenshots of the Google Drive connected to her personal email, which don’t
show any uploads of information or files from the RevOne Companies. Taylor
testified that she never deleted any RevOne files from her Google Drive. As to
the locally accessed files shown in the digital-forensics report, Taylor explained
that she’d accessed those files after tendering her resignation because she was
putting together a succession plan and working with other employees to
transition her responsibilities to them. And she was still serving some existing
clients and actively onboarding two new clients.
[11] The trial court denied the RevOne Companies’ motion for preliminary
injunction. In its order, the court concluded that based on the “Entire
Agreement” provision in the 2014 Agreement, the 2010 Agreement was
“superseded” by the 2014 Agreement and thus was no longer in effect.
Appellants’ App. Vol. II p. 35. Turning to the 2014 Agreement, though, the
court determined it was not a valid agreement because it was not supported by
sufficient consideration. Specifically, the court found that Taylor’s employment
was the consideration for the 2010 Agreement and thus her continued
employment could not serve as consideration for the 2014 Agreement.
Nonetheless, the court addressed the terms of the 2014 Agreement. Because the
2014 Agreement includes a severability clause, the court considered the
provisions individually and concluded, in relevant part: (1) the covenant not to
compete is not enforceable because it is overbroad; (2) the RevOne Companies
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 9 of 26 did not establish a prima facie case that Taylor violated the non-disclosure
provision; and (3) the inevitable-disclosure doctrine does not apply. Finally, the
court found that the RevOne Companies failed to establish that Taylor executed
the 2020 Agreement, and thus it did not address the substance or enforceability
of that agreement. Concluding that the RevOne Companies failed to show a
reasonable likelihood of success on the merits, the court did not consider the
remaining preliminary-injunction elements.
[12] The RevOne Companies now bring this interlocutory appeal as a matter of right
under Appellate Rule 14(A)(5).
Discussion and Decision [13] The RevOne Companies contend the trial court should have granted their
motion for preliminary injunction. To obtain a preliminary injunction, the
moving party must demonstrate by a preponderance of the evidence the
following: (1) a reasonable likelihood of success at trial; (2) the remedies at law
are inadequate, thus causing irreparable harm pending resolution of the
substantive action; (3) the threatened injury to the moving party outweighs the
potential harm to the nonmoving party that would result from the granting of
an injunction; and (4) the public interest would not be disserved by granting the
requested injunction. Leone v. Comm’r, Ind. Bureau of Motor Vehicles, 933 N.E.2d
1244, 1248 (Ind. 2010).
[14] A judgment entered against the party bearing the burden of proof is a negative
judgment. Smith v. Dermatology Assocs. of Fort Wayne, 977 N.E.2d 1, 4 (Ind. Ct.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 10 of 26 App. 2012). Here, the RevOne Companies are appealing from a negative
judgment and therefore must establish that the trial court’s judgment is contrary
to law. Pinnacle Healthcare, LLC v. Sheets, 17 N.E.3d 947, 953 (Ind. Ct. App.
2014). “A judgment is contrary to law only if the evidence in the record, along
with all reasonable inferences, is without conflict and leads unerringly to a
conclusion opposite that reached by the trial court.” Id. (quotations omitted).
I. The trial court erred in concluding that the 2014 Agreement was not supported by sufficient consideration [15] Before determining whether the RevOne Companies satisfied the requirements
for a preliminary injunction, the trial court had to determine which of the non-
competition agreements is controlling. The RevOne Companies contend the
trial court erred in concluding that the 2014 Agreement is not a valid agreement
due to lack of consideration. The elements of a valid contract are offer,
acceptance, consideration, and a meeting of the minds of the contracting
parties. Bassett v. Scott Pet Prods., Inc., 194 N.E.3d 1185, 1192 (Ind. Ct. App.
2022), trans. denied. “Consideration consists of a bargained-for exchange.” Id.
To constitute sufficient consideration to create a contract, a benefit must accrue
to the promisor or a detriment must accrue to the promisee. Id. A benefit is a
legal right given to the promisor to which the promisor would not otherwise be
entitled, while a detriment is a legal right that the promisee has forborne. Ind.
Dep’t of State Revenue v. Belterra Resort Ind., LLC, 935 N.E.2d 174, 179 (Ind.
2010), modified on reh’g on other grounds, 942 N.E.2d 796 (Ind. 2011).
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 11 of 26 [16] Relying on Buschman v. ADS Corp., 782 N.E.2d 423 (Ind. Ct. App. 2003), Hinkel
v. Sataria Distribution & Packaging, Inc., 920 N.E.2d 766 (Ind. Ct. App. 2010),
and Bassett, the trial court concluded that Taylor’s continued employment was
not sufficient consideration to support the 2014 Agreement because her
employment was the consideration for the 2010 Agreement. In Buschman and
Hinkel, prospective employees discussed certain severance benefits with
employers during hiring negotiations but eventually signed employment
agreements that didn’t include the benefits. In both cases, after the employees
signed the agreements, the employers purportedly made oral promises as to the
severance benefits. But when the employees were terminated, they weren’t paid
severance as promised, so they each sued to enforce the severance promises. On
appeal, we found in each case that the written employment agreements
represented the parties’ final agreements. We then considered whether, to the
extent the employers made oral severance promises after the employment
agreements were executed, the oral promises constituted modifications of the
agreements. We ultimately concluded they did not because the employees
hadn’t provided additional consideration in exchange for those promises. Both
employees contended they had provided consideration by working for their
employers, but we rejected those arguments because their work was the
consideration for each of their initial employment agreements. See Buschman,
782 N.E.2d at 430 (“Buschman’s work at ADS was the consideration for ADS’s
offer embodied in the [employment agreement] and is not new consideration.”);
Hinkel, 920 N.E.2d at 770-71 (“Hinkel had assumed those duties and
employment obligations as consideration for the original agreement. . . . Any Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 12 of 26 subsequent promise by [the employer] respecting severance was not supported
by an independent, bargained-for exchange.”).
[17] Then, we considered both Buschman and Hinkel in Bassett. There, Bassett was
the president of Scott Pet Products, which was acquired by another company.
Bassett executed an employment agreement with the new owners in which they
agreed he would stay on as president. The employment agreement didn’t
mention an ownership interest for Bassett. At various points over the next
several years, Bassett and the new owners negotiated orally and in writing
about him acquiring an ownership interest, but negotiations always died out. As
part of a deal to secure a loan, Bassett was purportedly promised a future
ownership interest, but he was ultimately terminated and told he had no
enforceable interest. Bassett argued that his continued employment provided
consideration for the promise of an ownership interest. In light of Hinkel and
Buschman, we concluded that Bassett’s continued and future employment was
the consideration for the employment agreement, which did not mention an
ownership interest, so his continued employment “could not, therefore, supply
the necessary consideration to render enforceable any promises” that could
have modified the employment agreement. Bassett, 194 N.E.3d at 1194.
[18] Buschman, Hinkel, and Bassett are distinguishable from the circumstances before
us. Each of those cases involved a written agreement executed by the parties
and an additional promise by the employer that wasn’t included in the written
agreement. While the employees later argued that they continued to work in
exchange for the employers’ additional promises, they never expressly
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 13 of 26 conditioned their continuing to work upon those promises. In other words,
there was no bargained-for exchange. Here, by contrast, we have two distinct
written agreements, each resulting from a separate bargained-for exchange: (1)
in exchange for Taylor signing and thereby agreeing to the terms of the 2010
Agreement, MED-1 Solutions promised to commence her employment; and (2)
in exchange for Taylor signing and thereby agreeing to the terms of the 2014
Agreement, Huff promised to continue employing her.
[19] We find Ackerman v. Kimball International, Inc., 634 N.E.2d 778 (Ind. Ct. App.
1994), adopted in relevant part, 652 N.E.2d 507 (Ind. 1995), to be instructive.
There, after Ackerman had been working as an at-will employee for Kimball for
eleven years, he signed an employment agreement under which he promised
not to compete with Kimball for one year following his termination and not to
disclose Kimball’s confidential business information. Under the agreement, in
exchange for Ackerman’s promises, Kimball would continue to employ him,
but Kimball reserved the right to terminate Ackerman’s employment at any
time. When Ackerman was later terminated, he argued that the agreement was
unenforceable for lack of consideration because Kimball “gave nothing”—it
“was not required to provide any additional benefits to him and reserved the
right to terminate his employment at will.” Id. at 781. On appeal, we found that
even though the only obligation the agreement placed upon Kimball was its
promise to continue employing Ackerman, while the remainder of the
agreement set forth Ackerman’s obligations, this still constituted an exchange of
valid consideration. See id. (“Paragraph 1, while a promise by Kimball to
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 14 of 26 continue Ackerman’s employment, also reserves the right to terminate his
employment ‘at any time.’ Nevertheless, we do not inquire into the adequacy of
the consideration exchanged in a contract.” (record citation omitted)). We
ultimately concluded, “An employer’s promise to continue at-will employment
is valid consideration for the employee’s promise not to compete with the
employer after his termination.” Id.; see also Rollins v. Am. State Bank, 487
N.E.2d 842, 843 (Ind. Ct. App. 1986) (finding that continued employment in at-
will position constituted consideration for employee signing non-competition
agreement six months after employment began), reh’g denied, trans. denied.
[20] Like in Ackerman, in exchange for Taylor’s promise not to compete with the
RevOne Companies or divulge their confidential business information, Taylor
received Huff’s promise to continue her at-will employment. Taylor and HCM
suggest that the latter promise cannot serve as consideration for the 2014
Agreement because that same promise was the consideration for the 2010
Agreement. See Appellees’ Br. pp. 45-46. We disagree. While past consideration
generally cannot support a new promise, see Jackson v. Luellen Farms, Inc., 877
N.E.2d 848, 858 (Ind. Ct. App. 2007), we find Huff’s 2014 promise to be
distinct from the consideration for the 2010 Agreement. As noted above, the
promise made in exchange for Taylor executing the 2010 Agreement was that
Taylor’s employment with MED-1 Solutions would commence. In return for
the promises Taylor made by signing the 2014 Agreement, Huff agreed to
continue employing her. As an at-will employee, Taylor had no legal right to
continued employment. Huff’s promise to continue employing Taylor was a
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 15 of 26 benefit to Taylor to which she would not have otherwise been entitled. This is
sufficient independent consideration to support the 2014 Agreement.
[21] It is true that, under the 2014 Agreement, Taylor did not receive a right to
employment for any particular duration and Huff still could have terminated
her at any time, even after she signed the agreement. But “we do not inquire
into the adequacy of the consideration exchanged in a contract.” Ackerman, 634
N.E.2d at 781. Because the parties exchanged valid consideration in the 2014
Agreement, and this consideration is independent of the consideration for the
2010 Agreement, the trial court erred in concluding that the 2014 Agreement is
not supported by sufficient consideration. The 2014 Agreement is a valid
contract.2
[22] The 2014 Agreement’s “Entire Agreement” provision states that it “supersedes
any other agreement” between the parties “with respect to the Employee’s
covenants of non-disclosure, confidentiality and non-competition.”
Accordingly, the 2014 Agreement superseded the 2010 Agreement, and the
2010 Agreement is no longer in effect.
2 We do not give an opinion about a situation where the employer in bad faith has the employee sign a non- competition agreement and shortly afterwards fires the employee. Here, the 2014 Agreement was signed well before Taylor quit her employment with the RevOne Companies.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 16 of 26 II. The trial court did not err in concluding that the RevOne Companies failed to show a reasonable likelihood of success on their claims that Taylor breached the 2014 Agreement [23] The RevOne Companies maintain that the trial court erred in concluding that
they failed to show a reasonable likelihood of success on the merits. As the
moving party, the RevOne Companies needed to show by a preponderance of
the evidence that they have at least a reasonable likelihood of success at trial by
establishing a prima facie case. Ind. Fam. & Soc. Servs. Admin. v. Walgreen Co.,
769 N.E.2d 158, 161 (Ind. 2002).
[24] The trial court concluded that the RevOne Companies did not show a
reasonable likelihood of success on their claim that Taylor breached the
covenant not to compete in the 2014 Agreement because the covenant is
overbroad and therefore unenforceable. The court also found that the RevOne
Companies hadn’t established a prima facie case that Taylor breached the non-
disclosure provision of the 2014 Agreement. We will consider each provision in
turn.
A. Covenant Not to Compete
[25] The RevOne Companies argue the trial court erred in concluding that the
covenant not to compete in the 2014 Agreement is unenforceable because it is
overbroad. Non-competition agreements in employment contracts are in
restraint of trade and have long been disfavored by law. Cent. Ind. Podiatry, P.C.
v. Krueger, 882 N.E.2d 723, 728-29 (Ind. 2008). We construe these agreements
strictly against the employer and will not enforce an unreasonable agreement.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 17 of 26 Id. at 729. “In arguing the reasonableness of a non-competition agreement, the
employer must first show that it has a legitimate interest to be protected by the
agreement. The employer also bears the burden of establishing that the
agreement is reasonable in scope as to the time, activity, and geographic area
restricted.” Id. (citations omitted). The reasonableness of a non-competition
agreement is a question of law, which we review de novo. Id.; Heraeus Med.,
LLC v. Zimmer, Inc., 135 N.E.3d 150, 152 (Ind. 2019).
[26] The RevOne Companies claim they have a legitimate interest in protecting their
customer goodwill and confidential information. See, e.g., Gleeson v. Preferred
Sourcing, LLC, 883 N.E.2d 164, 173 (Ind. Ct. App. 2008) (“In Indiana, the law
recognizes a protectible interest in the good will generated between a customer
and a business. . . . Good will includes secret or confidential information such
as the names and addresses of customers and the advantage acquired through
representative contact.” (quotation omitted)). Taylor and HCM don’t dispute
this legitimate interest, but they contend the covenant not to compete is
unreasonable because it prohibits Taylor from working for a competitor in any
role, “including in a position entirely different than her position at Med-1” or
“any other position that does not even conceivably implicate any of the RevOne
Companies’ protectible business interests.” Appellees’ Br. pp. 39-40. We agree.
[27] While the covenant not to compete defines “Company Services” as “receivable
management, billing, and collections,” it doesn’t merely prohibit Taylor from
performing these particular services for a competitor; rather, the relevant
portion of the covenant, paragraph 3(b), bars her from “[d]irectly or indirectly
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 18 of 26 becom[ing] affiliated with, employed by, [or] acquir[ing] an interest in” any
entity that performs these services, in whole or in part.3 As the trial court
highlighted, the plain language of this provision would bar Taylor from
becoming employed in any role for a business that performs these services,
including, for example, as a security officer or custodian—roles that “do not
implicate a protectable interest of the RevOne Companies.” Appellants’ App.
Vol. II p. 43.
[28] We have found covenants not to compete prohibiting an employee from
working for a competitor in any capacity or from competing with portions of
the business with which the employee was never associated to be unreasonable
because they extend beyond the scope of the employer’s legitimate interests.
See, e.g., Gleeson, 883 N.E.2d at 175-77; MacGill v. Reid, 850 N.E.2d 926, 931-32
(Ind. Ct. App. 2006); Burk v. Heritage Food Serv. Equip., Inc., 737 N.E.2d 803,
812 (Ind. Ct. App. 2000). The language in paragraph 3(b) is substantially
similar to the language of the covenants in those cases. See Gleeson, 883 N.E.2d
at 175 (“[Employee] shall not: directly or indirectly own, manage, operate,
control, invest in, lend to, acquire an interest in, or otherwise engage or
participate in . . . any business . . . which directly or indirectly competes with
any Business of the Company.”); MacGill, 850 N.E.2d at 931 (“[Employee] will
not own, manage, or materially participate in any business substantially similar
3 The covenant not to compete in the 2014 Agreement applies “for a period of 12 months after the date of termination of [Taylor’s] employment.” Ex. 9. Taylor’s last day at the RevOne Companies was March 3, 2023, more than 20 months ago. Neither party argues that the passage of 12 months affects our review.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 19 of 26 to [employer’s] business[.]”); Burk, 737 N.E.2d at 812 (“Employee will not . . .
[o]wn, manage, control or participate in the ownership, management or control
of, or be employed or engaged by or otherwise affiliated or associated . . . with
any . . . other business entity which competes with, or otherwise engages in any
business of the Corporation[.]”). We find that the scope of activity restricted by
the covenant is unreasonably broad.
[29] Yet, the RevOne Companies argue that we may use the blue-pencil doctrine to
render the covenant not to compete enforceable. “If a court deems a
noncompetition provision unreasonable, it will apply the ‘blue pencil doctrine,’
severing unreasonable, divisible portions and then enforcing the reasonable
parts that remain.” Heraeus, 135 N.E.3d at 153. But this doctrine “is really an
eraser”—while the court may erase unreasonable, divisible terms from a
restrictive covenant until only reasonable portions remain, it cannot rewrite the
covenant by adding, changing, or rearranging terms.4 Id. at 151, 153. If the
covenant cannot be blue-penciled in a way that would render it reasonable, it is
void and unenforceable. Id. at 153.
4 The severability clause in the 2014 Agreement also provides:
[I]f any court shall finally determine that the restraints provided for in any such covenants and agreements are too broad as to the area, activity or time covered, said area, activity or time covered may be reduced to whatever extent the court deems reasonable, and such covenants and agreements shall be enforced as to such reduced area, activity or time covered as the court deems appropriate[.] Ex. 9. But “courts cannot add terms to an unenforceable restrictive covenant in a noncompetition agreement—even when that agreement contains language purporting to give a court the power to do so.” Heraeus Med., 135 N.E.3d at 153. Thus, this portion of the severability clause is inoperative.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 20 of 26 [30] Despite urging us to apply the blue-pencil doctrine, the RevOne Companies
don’t point to specific language we could strike that would render the
remainder of the covenant not to compete reasonable. Nor do they specify
whether they want us to delete unreasonable portions from paragraph 3(b) or
strike paragraph 3(b) from the covenant entirely. But either way, blue-penciling
would not improve the RevOne Companies’ likelihood of success on the merits.
Looking at the text of paragraph 3(b), there is no portion we could strike to
render the remainder reasonable; any language that would remain would still
bar Taylor from working for a competitor in any capacity or from competing
with every practice area of the RevOne Companies, even those with which she
was never associated. Compare Clark’s Sales & Serv., Inc. v. Smith, 4 N.E.3d 772,
784 (Ind. Ct. App. 2014) (where scope of activity restricted was overbroad and
unreasonable, rejecting proposed blue-penciling because “Smith would still be
prohibited from providing services competitive to those offered by Clark’s
irrespective of what services Smith actually provided to Clark’s during the term
of his employment.” (quotation omitted)), trans. denied, with Pathfinder Commc’ns
Corp. v. Macy, 795 N.E.2d 1103, 1114-15 (Ind. Ct. App. 2003) (where covenant
not to compete provided that radio-show host “will not engage in activities or
be employed as an on-air personality, either directly or indirectly,” with a direct
competitors, deleting “engage in activities or” from the covenant, thus
rendering the remaining provisions reasonable). Paragraph 3(b) is therefore
unenforceable in its entirety.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 21 of 26 [31] The only way we could blue-pencil the covenant not to compete to make it
reasonable in scope would be to strike paragraph 3(b) altogether. But this
doesn’t help the RevOne Companies because they don’t argue on appeal that
Taylor violated any of the other subsections of the covenant. Since the RevOne
Companies’ only claim on appeal stemming from the covenant not to compete
is that Taylor breached paragraph 3(b), and this paragraph is unenforceable, the
trial court did not err in concluding that the RevOne Companies failed to show
a reasonable likelihood of success on their claim that Taylor breached the
covenant not to compete.
B. Non-Disclosure Provision
[32] The RevOne Companies also claim the trial court erred in concluding that they
did not show a reasonable likelihood of success on their claim that Taylor
breached the non-disclosure provision of the 2014 Agreement. Relying on the
inevitable-disclosure doctrine, they argue that Taylor “will inevitably disclose
RevOne Companies’ confidential and proprietary information,” thereby
violating the non-disclosure provision. Appellants’ Br. p. 30. The inevitable-
disclosure doctrine is the legal theory that “a key employee, once hired by a
competitor, cannot avoid misappropriating the former employer’s trade
secrets.” Inevitable-disclosure doctrine, Black’s Law Dictionary (12th ed. 2024).
[33] Indiana has recognized the inevitable-disclosure doctrine only “on extreme
facts.” Dearborn v. Everett J. Prescott, Inc., 486 F. Supp. 2d 802, 820 (S.D. Ind.
2007) (citing Ackerman, 652 N.E.2d at 510-11). In Ackerman, the day after
Ackerman was made an offer of employment from one of Kimball’s Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 22 of 26 competitors, he requested and received lists of Kimball’s customers and
suppliers. The next day, Kimball terminated Ackerman, and the day after that,
Ackerman accepted the competitor’s offer. Finding that, “in light of
Ackerman’s pre-departure harvesting of Kimball’s proprietary information,
there was a threat of misappropriation” of Kimball’s trade secrets, the trial court
enjoined Ackerman from working for the competitor for one year under the
Uniform Trade Secrets Act. Ackerman, 652 N.E.2d at 510-11. Our Supreme
Court affirmed, holding that a one-year injunction “was arguably necessary to
meet the threat of disclosure of Kimball’s trade secrets.” Id. at 511. The District
Court in Dearborn observed that, while “Ackerman indicates that Indiana courts
may entertain attempts to use the inevitable disclosure theory, . . . the theory
should remain limited to a rare and narrow set of circumstances in which the
departing employee has acted in bad faith in taking or threatening to take
valuable confidential information from the employer.” 486 F. Supp. 2d at 820.
[34] Here, the trial court concluded that the evidence “falls short of demonstrating
that Taylor actually retrieved, downloaded, or transferred any confidential or
proprietary information of the RevOne Companies.” Appellant’s App. Vol. II
p. 47. We agree. While the digital-forensics report shows the number of locally
accessed files and the volume of external storage drive activity on Taylor’s
company computer, the RevOne Companies have not established that the files
accessed contained their confidential or proprietary information or that Taylor
took these files with her when she left. While Gietl opined that there was “a
strong correlation between the activity of accessing so many files in such a short
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 23 of 26 time and the high correlation to when the drives were accessed,” he
acknowledged that he couldn’t determine whether “accessed” meant the locally
accessed files were opened, read, copied, moved, or deleted. Additionally,
though Huff testified that there was “no reason” for Taylor to access some of
these files in the period between her resignation and her departure, Taylor
explained her responsibilities during that period and that she’d accessed the files
in carrying out those responsibilities. The RevOne Companies contend over
3,000 files were uploaded to a Google Drive account from Taylor’s computer,
but this is a mischaracterization of the evidence. The data shows over 3,000
“Activity References” on Google Drive, Ex. 50, but there is no evidence that
these references were uploads. Although the trial court noted in its order that
“Gietl also testified that over 3,000 uploads were made from Taylor’s computer
to a Google Drive account,” Appellant’s App. Vol. II p. 31, this is incorrect.
Gietl referred generally to “Google Drive access” and “drive activity,” Tr. Vol.
II pp. 196, 198, but he never said what actions were taken on the Google
Drive—in fact, he admitted that the digital-forensics report doesn’t show
whether any particular file was uploaded from the RevOne Companies’
network. And while the report shows activity on a Google Drive account, the
RevOne Companies made no showing of whose account it was. For Taylor’s
part, she provided screenshots of her personal Google Drive that don’t show
any uploads of files from the RevOne Companies, and she testified that she
never deleted any RevOne files from her Google Drive. Further, HCM’s Chief
Information Officer testified that Taylor hasn’t disclosed any methods,
information, or documents from her tenure at the RevOne Companies.
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 24 of 26 [35] Despite the RevOne Companies’ attempts to liken this case to Ackerman, they
have failed to demonstrate that Taylor took or threatened to take their
confidential information. Their assertion that Taylor will inevitably disclose
their confidential and proprietary information is little more than speculation.
The trial court did not err in concluding that the RevOne Companies failed to
show a reasonable likelihood of success on their claim that Taylor breached the
non-disclosure provision. Accordingly, we need not address the remaining
requirements for a preliminary injunction.
[36] The RevOne Companies have failed to show that the trial court’s judgment is
contrary to law.
[37] Affirmed.
Weissmann, J., and Foley, J., concur.
ATTORNEYS FOR APPELLANTS Sean T. White Ian T. Keeler Clapp Ferrucci Fishers, Indiana
ATTORNEY FOR APPELLEE JENNIFER TAYLOR Daniel K. Burke DKB Legal LLC Carmel, Indiana
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 25 of 26 ATTORNEYS FOR APPELLEE HEALTH CARE CLAIMS MANAGEMENT INC. Ryan M. Hurley Brian J. Paul Elizabeth A. Charles Faegre Drinker Biddle & Reath LLP Indianapolis, Indiana
Court of Appeals of Indiana | Opinion 24A-PL-450 | November 25, 2024 Page 26 of 26