NuVasive, Inc. v. Day

954 F.3d 439

• Court: Court of Appeals for the First Circuit
• Decided: April 8, 2020
• Docket: 19-1611P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 19-1611

NUVASIVE, INC.,

Plaintiff-Appellee,

v.

TIMOTHY DAY,

Defendant-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Denise J. Casper, U.S. District Judge]

Before

Howard, Chief Judge, Thompson and Barron, Circuit Judges.

Bryan E. Busch, with whom Busch Slipakoff Mills & Slomka, LLC, Steven D. Weatherhead, and Marathas Barrow Weatherhead Lent LLP were on brief, for appellant. Mary Taylor Gallagher, with whom Holly M. Polglase, Michael S. Batson, Hermes, Netburn, O'Connor & Spearing, P.C., Christopher W. Cardwell, M. Thomas McFarland, and Gullett, Sanford, Robinson & Martin, PLLC, were on brief, for appellee.

April 8, 2020 BARRON, Circuit Judge. In this appeal, Timothy Day, a

Massachusetts resident, challenges a preliminary injunction that

the United States District Court for the District of Massachusetts

granted to his former employer, NuVasive, Inc., which is a health-

care company incorporated in Delaware. The injunction, which

enforces a nonsolicitation clause in the employment contract

between Day and NuVasive, bars Day from engaging in certain work

for his new employer, Alphatec Spine, Inc., which is one of

NuVasive's competitors.

Day's challenge to the injunction turns on a choice-of-

law issue under Massachusetts law. The District Court held that

Massachusetts' choice-of-law rules permitted it to enforce the

choice-of-law provision set forth in Day's employment contract

with NuVasive, which explicitly stated that the "[a]greement shall

be interpreted and enforced in accordance with Delaware law,

without giving effect to its laws pertaining to conflict of laws."

The District Court thus premised its issuance of the preliminary

injunction that is at issue on its application of Delaware law.

Day contends, however, that Massachusetts' choice-of-law rules

required the District Court to apply Massachusetts law and that,

under Massachusetts law, NuVasive could not show that it was

entitled to the preliminary injunction, even if NuVasive could

make that showing under Delaware law. We affirm.

- 2 - I.

NuVasive designs and manufactures products for the

treatment of spine disease. NuVasive distributes these products

through both its own employees and exclusive distributors.

Day first became affiliated with NuVasive in 2008 while

he was working for Integrity Medical, Inc., which at the time was

an exclusive distributor for NuVasive. Thereafter, Day became an

employee of NuVasive, where he worked as a sales representative

from August of 2011 until December of 2012.

At that time, Day left NuVasive to become a sales

representative for another one of NuVasive's exclusive

distributors, Magellan Medical LLC. But, five years later, on

January 1, 2018, Day once again became an employee of NuVasive,

this time as a sales director for the company in Massachusetts and

Rhode Island.

It was during this period of employment with NuVasive

that Day signed, as a condition of his employment, a Proprietary

Information, Inventions Assignment, Arbitration and Restrictive

Covenant Agreement ("PIIA"). The PIIA included a nonsolicitation

clause and a noncompetition clause, which applied during Day's

engagement with NuVasive and for one year immediately after.1

1 The nonsolicitation clause provides, in relevant part, that the employee agrees not to:

- 3 - On January 3, 2019, however, Day once again left

NuVasive, this time to become an employee and owner of Rival

Medical LLC, which was, at that time, itself an exclusive

distributor for NuVasive. But, then, several months later, in

solicit, entice, persuade, induce, call upon or provide services to any of the Customers . . . , accounts or clients that [the employee] worked with, had responsibility or oversight of, provided services related to, or learned significant information about during my employment (or other association) with the Company for any purpose other than for the benefit of the Company . . . .

And, the noncompetition clause forbids the employee from any affiliation with a "Conflicting Organization," which is defined as:

any person, group of persons, or organization that is engaged in, or about to be engaged in, research on, consulting regarding, or development, production, marketing or selling of any product, process, invention or service, which resembles, competes with, or replaces a product, process, machine, invention or service upon which [the employee] shall have worked or about which [the employee] became knowledgeable as a result of [the employee's] relationship with the Company, and whose use or marketability could be enhanced by the application of Proprietary Information to which [the employee] shall have had access during such relationship.

For employees with certain titles, including Sales Director, Sales Associate, and "any substantially similar position[s]," the "post- employment restrictions" described in the noncompetition clause are limited to Customers for which the employee "was assigned responsibility for by the Company, participated in sales calls and/or marketing efforts on behalf of the Company, and/or covered medical procedures on behalf of Company, during the last twelve months of [the employee's] employment with Company."

- 4 - April of 2019, Day dissolved Rival and terminated its relationship

with NuVasive.

In response, NuVasive sent Day and Rival a notice of

material breach of contract. Notable for present purposes,

NuVasive also reminded Day of his noncompetition and

nonsolicitation obligations under the PIIA. Nonetheless, soon

after ending his employment at Rival, Day began working as an

employee of Alphatec Spine, which is one of NuVasive's competitors.

At that point, NuVasive sued Day in the District of Massachusetts

based on its diversity jurisdiction. See 28 U.S.C. § 1332.

NuVasive's complaint against Day alleged tortious

interference and breach of contract and requested a preliminary

injunction to bar Day from violating his noncompetition and

nonsolicitation obligations under the PIIA in his work for

Alphatec. Day opposed the request for the preliminary injunction

on the ground that, notwithstanding the choice-of-law provision in

his contract with NuVasive, Massachusetts rather than Delaware law

applied to NuVasive's breach of contract claims and that those

claims must be dismissed under Massachusetts law. NuVasive

countered that, pursuant to the choice-of-law provision contained

in its employment contract with Day, Delaware law applied to the

breach of contract claims and that, under Delaware law, Day's

opposition to the request for the preliminary injunction lacked

merit.

- 5 - To resolve the threshold choice-of-law dispute

concerning NuVasive's breach of contract claims, the District

Court applied Massachusetts' choice-of-law rules.2 The District

Court then held that, under those rules, the choice-of-law

provision in Day's employment contract with NuVasive governed.

The District Court thus held that Delaware law applied to

NuVasive's breach of contract claims and that, although NuVasive

had not shown "a reasonable likelihood of success" on its claim

that Day had breached the noncompetition clause of the PIIA by

taking his new job with Alphatec, NuVasive had "shown a reasonable

likelihood of success" on its claim that he had breached the

nonsolicitation clause of the PIIA by doing so. After considering

the other factors that bear on whether a party is entitled to a

preliminary injunction, the District Court then issued a

preliminary injunction that enforced the PIIA's nonsolicitation

clause against Day. This timely appeal followed.

II.

To secure a preliminary injunction, a plaintiff must

show: "(1) a substantial likelihood of success on the merits, (2)

a significant risk of irreparable harm if the injunction is

2 Although NuVasive also asserted a tortious interference claim against Day, the focus of its preliminary injunction motions was on its claims for breach of contract, and thus the District Court’s analysis was just focused on those claims.

- 6 - withheld, (3) a favorable balance of hardships, and (4) a fit (or

lack of friction) between the injunction and the public interest."

Nieves-Márquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003);

see also Lanier Prof'l Servs., Inc. v. Ricci, 192 F.3d 1, 3 (1st

Cir. 1999) ("We apply the federal preliminary injunction standard

in a diversity case, at least where the parties have not suggested

that state law supplies meaningfully different criteria."). The

only one of these four requirements that is in dispute on this

appeal concerns the likelihood-of-success requirement.

When reviewing "a trial court's ruling on a motion for

a preliminary injunction, we scrutinize abstract legal matters de

novo, findings of fact for clear error, and judgment calls with

considerable deference to the trier." Corp. Techs., Inc. v.

Harnett, 731 F.3d 6, 10 (1st Cir. 2013) (internal quotation marks

and citation omitted). We review choice-of-law determinations de

novo. See Reicher v. Berkshire Life Ins. Co. of Am., 360 F.3d 1,

4 (1st Cir. 2004).

Here, the parties agree that Massachusetts' choice-of-

law rules control, given that Massachusetts is the forum state.

See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).

Moreover, Day does not challenge the District Court's ruling that,

under Delaware law, NuVasive has made the requisite likelihood-

of-success showing on its claim that Day breached the

nonsolicitation clause in his employment contract with NuVasive

- 7 - through his work with Alphatec. Instead, Day contends,

Massachusetts' usual choice-of-law rule, which is that the law of

the state that a contract's choice-of-law clause selects is the

law that controls, does not apply. In consequence, Day contends,

Massachusetts and not Delaware law applies to NuVasive's breach of

contract claims against him and thus determines whether NuVasive

can show that it can satisfy the likelihood-of-success requirement

in seeking a preliminary injunction based on those claims. This

contention is critical, because, Day further contends, if

Massachusetts rather than Delaware law applies, then NuVasive

cannot satisfy that requirement and thus the preliminary

injunction against him cannot be sustained.

In pressing this line of argument, Day relies on two

exceptions to the usual choice-of-law rule under Massachusetts

law, which is that the choice-of-law provision in an employment

contract should be enforced. See Oxford Glob. Res., LLC v.

Hernandez, 106 N.E.3d 556, 564 (Mass. 2018). But, as we will

explain, neither of those exceptions applies here.

The first exception prevents a choice-of-law provision

in an employment contract from being enforced when such a provision

chooses the law of a state that "has no substantial relationship

to the parties or the transaction and there is no other reasonable

basis for the parties' choice." Oxford Glob. Res., 106 N.E.3d at

564 (quoting Restatement (Second) of Conflict of Laws § 187(2)

- 8 - (1971)). But, this exception plainly does not apply here, because

Delaware is NuVasive's place of incorporation and NuVasive is the

plaintiff. See id. (citing to the Restatement); Restatement

(Second) of Conflict of Laws § 187(2) cmt. f (1971) (recognizing

the validity of choice-of-law provisions where "the state of [the

chosen law] is that where performance by one of the parties is to

take place or where one of the parties is domiciled or has his

principal place of business"); see also Cream of Wheat Co. v. Grand

Forks Cty., 253 U.S. 325, 328 (1920) (explaining that a company is

domiciled in the state where "it was incorporated under the laws

of that state").

The second exception prevents a choice-of-law provision

in an employment contract from being enforced when the "application

of the law of the chosen state would be contrary to a fundamental

policy of a state which has a materially greater interest than the

chosen state [in the determination of the particular issue]," and

the law of the state with the greater interest would otherwise

apply "in the absence of an effective choice of law by the

parties." Oxford Glob. Res., 106 N.E.3d at 564 (alterations in

original) (quoting Restatement (Second) of Conflict of Laws

§ 187(2) (1971)). But, even if we were to assume that

Massachusetts "has a materially greater interest than" Delaware in

the granting of the preliminary injunction and that Massachusetts

law would apply "in the absence of an effective choice of law"

- 9 - provision in an employment contract, Day has failed to show that

the application of Delaware law in this case would be contrary to

"a fundamental policy" of Massachusetts. Id.

In contending otherwise, Day first argues that the

Massachusetts Noncompetition Agreement Act ("MNCA"), Mass. Gen.

Laws ch. 149, § 24L, which sets forth the requirements for an

employee noncompetition agreement to be enforceable, represents a

fundamental Massachusetts policy that would be violated by the

application of Delaware law here, insofar as Delaware law would

allow NuVasive to enforce the PIIA's nonsolicitation clause

against Day pursuant to its breach of contract claim. But, the

MNCA "only applies to employee noncompetition agreements entered

into on or after October 1, 2018," Automile Holdings, LLC v.

McGovern, 136 N.E.3d 1207, 1217 n.15 (Mass. 2020); see St. 2018

Mass., ch. 228, § 71 ("Section 24L of chapter 149 of the General

Laws may be referred to as the Massachusetts Noncompetition

Agreement Act and shall apply to employee noncompetition

agreements entered into on or after October 1, 2018."), and Day

signed the PIIA nearly a year earlier, on January 6, 2018.

Moreover, none of the MNCA's provisions are relevant to the PIIA's

nonsolicitation clause because, "[b]y its terms, the [MNCA] does

not apply to nonsolicitation agreements." Automile Holdings, 136

N.E.3d at 1217 n.15; see Mass. Gen. Laws ch. 149, § 24L (excluding

"covenants not to solicit or hire employees of the employer" and

- 10 - "covenants not to solicit or transact business with customers,

clients, or vendors of the employer" from the definition of

"noncompetition agreement").

Day's remaining contention is that Massachusetts'

"material change" doctrine constitutes a "fundamental"

Massachusetts policy and that the enforcement of the PIIA's

nonsolicitation provision against him, pursuant to NuVasive's

breach of contract claim, would violate that doctrine. Under the

"material change" doctrine, a "non-solicitation agreement or

covenant not to compete may be deemed void if there are material

changes in the employment relationship between an employee and the

employer." Patriot Energy Grp., Inc. v. Kiley, No. SUCV2013–

04177–BLS1, 2014 WL 880880, at *7 (Mass. Super. Ct. Feb. 26, 2014).

But, while Day did remain affiliated with NuVasive when

he left it to work for Rival Medical, as Rival was one of NuVasive's

exclusive distributors, Day himself stated both that "on January

3, 2019, Day ceased being a NuVasive employee," as he had by then

moved over to Rival, and that this date marked the "terminat[ion]"

of his "employment relationship with NuVasive." That is

significant because Day has not identified any precedent that

indicates that such a "termination" -- at least when it has been

occasioned, as it was in this case, by an employee's own choice to

terminate that employment -- is a qualifying "change" under

Massachusetts' "material change" doctrine. Rather, the only cases

- 11 - that Day cites in support of his position as to what constitutes

such a qualifying "change" involve changes in the conditions of

employment of an employee who continued to be employed by the same

employer, such as an employer cutting the employee's pay, an

employer demoting the employee, or an employer materially

breaching some term of the employee's employment contract. See

Agero Admin. Serv. Corp. v. Campolo, 366 F. Supp. 3d 170, 174 (D.

Mass. 2019); Rent-A-PC, Inc. v. March, Civil Action No. 13–10978–

GAO, 2013 WL 2394982, at *3 (D. Mass. May 28, 2013); Patriot Energy

Grp., 2014 WL 880880, at *7; Akibia, Inc. v. Hood, No.

SUCV201202974F, 2012 WL 10094508, at *7-8 (Mass. Super. Ct. Oct.

9, 2012), aff'd, No. 12–J–390, 2012 WL 12370255 (Mass. App. Ct.

Nov. 21, 2012); Getman v. USI Holdings Corp., No. 05-3286-BLS2,

2005 WL 2183159, at *2-4 (Mass. Super. Ct. Sept. 1, 2005); see

also KNF & T Staffing, Inc. v. Muller, No. SUCV201303676BLS1, 2013

WL 7018645, at *3 n.4 (Mass. Super. Ct. Oct. 24, 2013) (explaining

that the "broadest restatement of the doctrine is that '[e]ach

time an employee's employment relationship with the employer

changes materially such that they have entered into a new

employment relationship[,] a new restrictive covenant must be

signed'" (first alteration in original) (emphasis added) (quoting

Iron Mountain Info. Mgmt., Inc. v. Taddeo, 455 F. Supp. 2d 124,

132-33 (E.D.N.Y. 2005))); Astro-Med, Inc. v. Nihon Kohden Am.,

Inc., 591 F.3d 1, 16 (1st Cir. 2009) (quoting Lycos, Inc. v.

- 12 - Jackson, No. 2004–3009, 2004 WL 2341335, at *3 (Mass. Super. Ct.

Aug. 25, 2004) for the same definition of the doctrine). This

body of precedent satisfies us that, whatever the precise scope of

the "material change" doctrine may be under Massachusetts law, it

is not capacious enough to encompass Day's circumstance.

Thus, we see no basis for concluding that the District

Court erred in finding that the fundamental public-policy

exception to Massachusetts' choice-of-law rules did not apply to

Day's case, such that the choice-of-law provision in his employment

contract with NuVasive that selected Delaware law could not be

given effect.3 Accordingly, we see no basis for concluding that

the District Court erred in applying Delaware law to assess whether

NuVasive had satisfied the "likelihood of success" requirement in

seeking a preliminary injunction based on its breach of contract

claim alleging Day's violation of the nonsolicitation clause in

the PIIA. And, that being so, we see no basis for finding merit

in Day's challenge to the issuance of the preliminary injunction

against him.

III.

The judgment of the District Court is affirmed.

3 Because we conclude that applying Delaware law does not contravene either the MNCA or the "material change" doctrine, we need not and do not resolve whether either embodies a "fundamental" Massachusetts policy.

- 13 -