Justices vacate preliminary injunction in nonsolicitation dispute

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The Indiana Supreme Court has vacated a preliminary injunction prohibiting a medical sales representative from recruiting employees away from his former employer, finding a nonsolicitation agreement he had previously signed with the company cannot be reformed.

In Heraeus Medical, LLC, et al. v. Zimmer, Inc., et al., 19S-PL-471, a dispute between medical components company Zimmer Inc. and its former employee Robert Kolbe began after Kolbe recruited other Zimmer employees to work with him at his new job with Heraeus Medical.

When he began working for Zimmer, Kolbe signed a noncompetition agreement prohibiting him from recruiting Zimmer employees to work for a competitor. After several Zimmer employees began filling position with Heraeus, litigation ensued.

Zimmer alleged Kolbe violated the nonsolicitation covenant by recruiting former Zimmer employees to work for Heraeus. The company sought a preliminary injunction to enforce the Kolbe agreement, which the Kosciusko Superior Court granted, thereby prohibiting Kolbe from recruiting Zimmer employees.

The Indiana Court of Appeals found the nonsoliciation agreement to be overbroad and thus unenforceable, but revised the nonsolicitation covenant to make it reasonable after finding that a reformation clause in the Kolbe agreement authorized the court to modify unenforceable provisions.

Indiana Supreme Court justices granted transfer to the case in September and ultimately rejected Zimmer’s argument that reforming the overbroad covenant wouldn’t upend Indiana’s blue pencil doctrine but would rather “give effect to the parties’ stated intent.

“We disagree with Zimmer,” Chief Justice Loretta Rush wrote for the unanimous court. “Consistent with the history and purpose of Indiana’s blue pencil doctrine, 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. And because Zimmer’s nonsolicitation covenant is overbroad and cannot be blue-penciled in a way that would render it reasonable under Indiana law, the covenant is void and unenforceable.”

Likewise, parties to noncompetition agreements cannot then use a reformation clause to contract around the principle, the high court found. It therefore concluded that the blue pencil doctrine applies in the case at hand, despite the Kolbe agreement’s reformation clause, to bar an interpreting court from adding language to limit the scope of its restrictive covenants.

“Because the Kolbe Agreement’s unenforceable covenant not to solicit Zimmer employees cannot be reformed, we vacate section 1(e) of the trial court’s preliminary injunction order — which purports to enforce that covenant — and remand,” the high court concluded.

All justices concurred, affirming the appellate court’s decision in all other respects.

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