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Minnesota Non-Compete Agreements, Sales Person Non-Compete Agreement

Former Sales Rep Beats Dentsply in First Round of Non-Compete Fight

It can be difficult to discuss trends in non-compete litigation, particularly from a national perspective, given that non-compete agreements are governed by state law.  Although many states utilize similar tests for evaluating the enforceability of such agreements, there can be tremendous variation from one state to another.  That said, a number of recent cases from throughout the country demonstrate that courts are pushing back against overzealous attempts to enforce non-compete agreements against salespeople.

A recent case out of Minnesota is illustrative.  Dentsply is a major manufacturer of a broad range of dental products.  Beginning in 2006, Shari Rene worked as a district manager for a Dentsply subsidiary, Tulsa Dental Products, and then directly for Dentsply.  In her role as a district manager, Rene was responsible for marketing dental implant products to dentists, oral surgeons and dental laboratories within a territory that included Minnesota, Wisconsin and other parts of the upper Midwest.  As a condition of her employment with Dentsply, Rene signed an employment agreement that contained a non-compete provision.  Under the terms of her agreement, Rene was barred from working for competitors for two years following the termination of her employment with Dentsply.  In mid-2012, unhappy with certain changes in the corporate culture, Rene resigned from her position at Dentsply.

A few months later, Rene accepted a job with Nobel Biocare as a territory representative.  Nobel is a direct competitor of Dentsply.  In her new job, Rene was selling many of the same dental products to many of the same clients in substantially the same upper Midwest territory.  After Rene contacted a number of Dentsply customers, Dentsply sued alleging breach of her non-compete agreement and misappropriation of confidential information.  Last week, the United States District Court for the District of Minnesota denied Dentsply’s motion for a temporary restraining order.

The court held that, under the terms of the employment contract, any restriction placed on Rene’s ability to work for a competitor was tied to her use of confidential information.  As a result, Rene would not be in violation of the non-compete agreement if she worked for a competitor but did not utilize Dentsply’s confidential information.  Dentsply, as expected, argued that Renee was soliciting Dentsply customers and capitalizing on confidential customer information that she obtained while at the company.  But that was it.  That was Dentsply’s entire argument.  Dentsply offered no evidence to support that claim.

In contrast, Rene established that Dentsply and her new company, Noble, already shared many of the same customers.  Yes, Rene was working for a competitor in the same geographic territory and selling to many of the same dentists and oral surgeons.  But that’s the nature of the industry:   The customers – dentists, oral surgeons, dental labs – are well-known.  The customers do business with multiple manufacturers.  The relationships are not exclusive.  And Rene did not need any of Dentsply’s confidential information to identify and sell to those customers.

In the end, the court concluded that Dentsply had overplayed its hand:

In particular, Plaintiffs have not made a sufficient showing that Rene used information not generally known in the trade or industry in making sales with her new employer. Plaintiffs have offered no evidence that Rene took any documents or other electronic information upon leaving DENTSPLY. Moreover, while Plaintiffs submit evidence that Rene has contacted DENTSPLY customers, they have not put forth evidence that Rene used confidential information in making those contacts.

The case is Dentsply Int’l Inc. v. Rene, 2013 WL 828824 (D. Minn. Mar. 6, 2013).

 

Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida.  He focuses his practice on cases involving non-compete disputes, antitrust and business torts.  He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.  If you have a non-compete question or need a referral to a non-compete lawyer in your area, please contact Jonathan’s Fort Lauderdale office at 954-332-2380.

Discussion

2 thoughts on “Former Sales Rep Beats Dentsply in First Round of Non-Compete Fight

  1. Hi Jonathan,
    this is clearly the correct result. But, doesn’t it simply mean that in the future Dentsply will be smarter about contracting by putting the prohibition on use confidential information after an employee’s departure in a stand alone provision of the employment contract and the non-compete in an independent, separate and severable provision. Denstply messed up by using the conjunctive: “and” instead of “or”.

    Posted by Stephen Cipolla | March 18, 2013, 3:10 pm
    • No, not in my view. The non-compete agreement, as written, prohibits Rene from making use of confidential information in connection with the sale of competing products. In my view, the court latched onto that technical issue as an easy way out.

      But let’s assume that Dentsply just used a blanket prohibition against solicitation of Dentsply customers and prospective customers (stand-alone, as you suggest).

      Even in that scenario, I still think the court reaches the same end result. I have seen dozens of cases with similar facts where the court denied a preliminary injunction. This is because of the nature of the industry. In most states, non-compete agreements can be used to protect substantial or exclusive client relationships. Here, it seems like the relationships at issue do not fit that description. We’re dealing with dentists, oral surgeons and dental labs that have relationships with numerous manufacturers. I don’t think those relationships are the sort that normally can be protected by a non-compete agreement.

      Posted by Jonathan Pollard | March 18, 2013, 4:04 pm

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Need a non-compete or trade secret attorney somewhere other than Florida? I have relationships with non-compete and trade secret attorneys throughout the country. Call my office at 954-332-2380.

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