Wotton v. Veterinary Orthopedic Implants, LLC

CourtDistrict Court, N.D. Ohio
DecidedSeptember 22, 2022
Docket1:22-cv-01002
StatusUnknown

This text of Wotton v. Veterinary Orthopedic Implants, LLC (Wotton v. Veterinary Orthopedic Implants, LLC) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wotton v. Veterinary Orthopedic Implants, LLC, (N.D. Ohio 2022).

Opinion

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

HAROLD WOTTON, ) Case No. 1:22-cv-01002 ) Plaintiff and ) Judge J. Philip Calabrese Counterclaim Defendant, ) ) v. ) ) VETERINARY ORTHOPEDIC ) IMPLANTS, LLC, ) ) Defendant and ) Counterclaim Plaintiff. ) )

OPINION AND ORDER This case involves an employment agreement between Plaintiff Harold Wotton and non-party Steris Instrument Management Services, Inc. As part of his employment with Steris, Mr. Wotton agreed to several restrictive covenants. Steris later assigned those covenants to Defendant Veterinary Orthopedic Implants, LLC, which sought to enforce them against Mr. Wotton. As a result, Mr. Wotton filed a complaint seeking a declaratory judgment that Veterinary Orthopedic Implants cannot enforce the restrictive covenants. Defendant moves to dismiss Plaintiff’s complaint for failure to state a claim under Rule 12(b)(6) on the ground that the specific assignment provision of the employment agreement at issue and its related covenants control over an assignment provision in the asset purchase agreement by which Steris acquired Mr. Wotton’s company and which requires his consent to an assignment. For the reasons that follow, the Court GRANTS Defendant’s motion. FACTUAL AND PROCEDURAL BACKGROUND On this motion to dismiss, the Court takes the following allegations in the complaint as true and construes them in Plaintiff’s favor.

Plaintiff Harold Wotton was the founder and majority shareholder of Everost, Inc., a company that “invented and developed products related to veterinary surgeries, including orthopedic trauma products, internal fixation products, bone anchors, specialty plates, and advanced bio absorbable implants.” (ECF No. 1, ¶ 6, PageID #2.) About five years after founding Everost, Mr. Wotton entered into an asset purchase agreement with Steris Instrument Management Services, Inc. (Id.,

¶ 7.) A. Asset Purchase Agreement Through the asset purchase agreement, Steris acquired Everost. (Id., ¶ 7.) As part of that agreement, Mr. Wotton entered into an employment agreement in which he became an employee of Steris as the director, lead product development engineer. (Id., ¶ 8; ECF No. 1-2, ¶ 2(a), PageID #110.) According to the complaint, Mr. Wotton’s “execution of the Employment Agreement was a condition of the [asset purchase

agreement], and the Employment Agreement was attached and incorporated into the [asset purchase agreement]” as an exhibit. (ECF No. 1, ¶ 8, PageID #2.) Based on the interpretation provision in Section 9.03 of the asset purchase agreement, “[t]he schedules and exhibits referred to in [the asset purchase agreement] will be construed with, and as an integral part of, [the asset purchase agreement] to the same extent as if they were set forth verbatim in this Agreement.” (ECF No. 1-1, PageID #59.) In case of inconsistency between the asset purchase agreement and the documents attached to it, the asset purchase agreement contains a priority clause under which the text in the body of the asset purchase agreement controls:

In the event of any inconsistency between the statements in the body of this Agreement and those in the Transaction Documents, the Exhibits or the Schedules (other than an exception expressly set forth as such in the Schedule corresponding to such exception), the statements in the body of this Agreement will control. (ECF No. 1, ¶ 14, PageID #4; see also ECF No. 1-1, § 9.06, PageID #60.) In addition, Section 9.07 of the asset purchase agreement contains an assignment clause, which requires written consent to any assignment for the parties to the asset purchase agreement: “This Agreement will be binding upon and will inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party hereto may assign its rights or obligations hereunder without the prior written consent of the other party[.]” (ECF No. 1, ¶ 10, PageID #3; see also ECF No. 1-1, § 9.07, PageID #60.) B. Employment Agreement Mr. Wotton’s employment agreement also contains an assignment clause, which provides that: “This Agreement will be binding in all respects upon, and shall be enforceable by and inure solely to the benefit of, the parties hereto, the Released Parties and the respective successors and permitted assigns of the parties and the Released Parties.” (ECF No. 1, ¶ 10, PageID #3; see also ECF No. 1-2, ¶ 10, PageID #107.) This assignment clause, unlike the one in the asset purchase agreement, refers only to “permitted assigns of the parties” and does not specifically require consent to assignment. (Id.) Additionally, the employment agreement contains two restrictive covenants: (1) a non-compete and non-solicitation provision, which is attached to the employment agreement as an exhibit; and (2) a non-disclosure and non-competition

agreement, contained in an incentive agreement attached to the employment agreement as a schedule. (ECF No. 1, ¶ 9, PageID #3; see also ECF No. 1-2, PageID #112–14 & #158–62.) The incentive agreement’s non-disclosure and non-competition agreement contains a separate assignment provision that extends Mr. Wotton’s obligations to “the successors or assigns of Steris”:

This Agreement is entered into by [Mr. Wotton] and STERIS. However, all obligations owed by [Mr. Wotton] to STERIS shall also be owed by [Mr. Wotton] to each Affiliate and their respective successors and assigns. This Agreement shall be valid and effective whether [Mr. Wotton] is employed directly by STERIS, or one of its Affiliates, or by one or more of the successors or assigns of STERIS or its Affiliates, or by any combination of these entities. (ECF No. 1, ¶ 12, PageID #3; see also ECF No. 1-2, § 2, PageID #159.) Further, it provides that in the event of a breach of the restrictive covenants, Steris’ “successors and assigns shall be entitled to injunctive relief, attorney fees, and such other relief as is proper in the circumstances.” (ECF No. 1-2, § 6, PageID #161; ECF No. 1, ¶ 13, PageID #3.) C. Veterinary Orthopedic Implants’ Asset Purchase Agreement In early 2021, Steris informed Mr. Wotton of its intention to either close or sell its veterinary surgery business. (ECF No. 1, ¶ 16, PageID #4.) By late 2021, Veterinary Orthopedic Implants entered into a letter of intent to purchase the assets of Steris’ veterinary surgery business. (Id., ¶ 18, PageID #4–5.) During that time, Veterinary Orthopedic Implants and Mr. Wotton discussed a possible employment arrangement under which Mr. Wotton would continue to lead the veterinary surgery business after the acquisition was finalized. (Id., ¶ 19, PageID #5.) However, these

discussions did not pan out. (Id., ¶ 21.) According to the complaint, Veterinary Orthopedic Implants “had no intention of hiring Wotton.” (Id.) In early 2022, Veterinary Orthopedic Implants finalized the purchase of Steris’ veterinary surgery business through an asset purchase agreement. (Id., ¶ 22.) According to the complaint, this asset purchase agreement assigned Mr. Wotton’s employment agreement and its accompanying restrictive covenants to Veterinary

Orthopedic Implants. (Id.) STATEMENT OF THE CASE Following the purchase, Veterinary Orthopedic Implants sought to enforce the restrictive covenants in Mr. Wotton’s employment agreement with Steris. (Id., ¶¶ 24–26, PageID #5–6.) In response, Mr. Wotton filed a complaint, seeking a judgment declaring that Veterinary Orthopedic Implants may not enforce the restrictive covenants. (Id., ¶¶ 27–29, PageID #6.) Veterinary Orthopedic Implants

counterclaimed for breach of contract to enforce the restrictive covenants against Mr. Wotton (see generally ECF No. 10) and moves to dismiss the complaint against it (ECF No. 7).

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