The Indiana Court of Appeals partially agreed with a medical components company and one of its employees after it concluded a trial court’s order restricting the vice president of sales from contacting clients from his previous employer was overbroad.
Heraeus Medical GmbH severed ties with Zimmer Surgical, Inc., in January 2018, after the two had previously entered into an agreement giving Zimmer exclusive U.S. distribution rights to certain bone cements manufactured by Heraeus GmbH and sold under the brand name Palacos.
Heraeus GmbH terminated that agreement when it announced it had established a new direct sales force for Palacos through Heraeus Medical, Inc. The new affiliate included Robert Kolbe, a former Zimmer Biomet employee who left that company in November 2017 to take a sales position at Heraeus Medical.
Kolbe, who had also previously signed a noncompete and nonsolicitation agreement concerning Zimmer Biomet customers and employees’ covenants, was joined by several other former Zimmer Biomet employees who had recently left to take sales positions Heraeus Medical.
Zimmer then sued Kolbe and the former employees for breach of contract, among other things, and the Kosciusko Superior Court ultimately ordered Kolbe to abide by the agreement he had previously signed with Zimmer Biomet.
The trial court also ordered Heraeus to not possess, use, or disclose confidential information received from Heraeus GmbH or employ or engage the individual defendants in a way that violated their restrictive covenants with Zimmer Biomet or the trial court’s preliminary injunction.
On appeal, Heraeus, Kolbe and the other employees contended that the agreement Kolbe signed was contrary to law and unenforceable, that the trial court misapplied certain provisions of it, and that portions of the preliminary injunction related to Heraeus were unreasonable.
But the Indiana Court of Appeals found most of the appellants’ arguments to be moot in Heraeus Medical, LLC, et al. v. Zimmer, Inc., a Delaware corporation d/b/a Zimmer Biomet, and Zimmer US, Inc., a Delaware corporation, 18A-PL-1823.
Specifically, the panel concluded that the noncompete and nonsolicitation agreement was not unenforceable due to its lack of a defined geographic scope and that its covenant to not solicit customers of active contacts was not overbroad.
“We do agree, however, that the Kolbe Agreement’s covenant not to solicit Zimmer Biomet employees is overbroad, and so reform it as the parties agreed the court has the power to do,” Judge Cale Bradford wrote for the court.
It noted that the insertion of the word “contacting” into the preliminary injunction was unreasonable, pointing out that Kolbe was enjoined from contacting former customers and active contacts for all purposes by the trial court, although his former agreement was not so restrictive.
The appellate court thus reformed that agreement to limit the scope of Kolbe’s obligation not to solicit Zimmer Biomet employees to those in which it had a legitimate protectable interest.
“We also agree with Appellants that the trial court misapplied the Kolbe Agreement in enjoining Kolbe from operating in the entire state of Michigan and from contacting his former customers or active prospects for any reason whatsoever,” Bradford continued. “Finally, we conclude that Appellants have not established that the trial court’s preliminary injunction as it related to Heraeus was unreasonable in any respect.”
The appellate court thus affirmed in part, reversed in part, and remanded the case with instructions to narrow the scope of the preliminary injunction accordingly.