MANAGED HEALTH CARE ASSOCIATES, INC., MHCA ACQUISITION INC., d/b/a MHA/MedEcon,Plaintiffs-Appellants, v. RONALD KETHAN, EAST TEXAS REGIONAL COOPERATIVE, d/b/a FirstChoice Cooperative, Defendants-Appellees.No. 99-5444UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT209 F.3d 923; 2000 U.S. App. LEXIS 7207; 2000 FED App. 0143P (6th Cir.); 140 Lab. Cas.(CCH) P58,895March 10, 2000, Argued April 21, 2000, Decided April 21, 2000, Filed PRIOR HISTORY: [**1] Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 99-00066. Jennifer B. Coffman, District Judge. DISPOSITION: REVERSED and REMANDED. CASE SUMMARY PROCEDURAL POSTURE: Appellant former employer challenged the judgment of the United States District Court for the Western District of Kentucky denying its request for a preliminary injunction and dissolving its restraining order against appellee employee, holding that appellant could not enforce the noncompetition agreement signed by appellee.OVERVIEW: Appellant sued appellees and obtained a restraining order enjoining appellee from violating the noncompetition clause of his employment agreement. Appellee had worked as a sales account administrator for a company that was purchased by appellant, and assigned appellee's employment contract to appellant. After the purchase, one of appellee's accounts canceled their agreement with appellant, and hired appellee. The action was removed to federal court, which dissolved the restraining order. On appeal, the court reversed. The trial court erred in concluding that the assignment of appellee's employment contract modified the terms of his agreement. The trial court also erred in concluding that the noncompetition clause was not assignable, as decisions of lower Kentucky courts and other states had concluded otherwise. Therefore, the court reversed the decision of the trial court, but remanded the case for the trial court to resolve factual issues in determining whether a preliminary injunction should be ordered.OUTCOME: Judgment reversed because the trial court erred in concluding that the assignment of appellee's employment contract modified the terms of his agreement and that the noncompetition clause was unassignable.CORE TERMS: noncompetition, assignable, modification, preliminary injunction, assignability, assigned, covenant, employment agreement, modify, subsidiaries, affiliates, employment contract, business relationships, customer, compete, restraining order, contractual rights, key issues, right to enforce, citations omitted, non-competition, injunction, diversity, enforcing, assignor, assignee, resignation, purchasing, notice, stockCOUNSEL: ARGUED: William J. Hunter, Jr., MIDDLETON & REUTLINGER, Louisville, Kentucky, for Appellants.James D. Cockrum, BROWN, TODD & HEYBURN, Louisville, Kentucky, for Appellees.ON BRIEF: William J. Hunter, Jr., Thomas P. O'Brien, III, Dennis D. Murrell, MIDDLETON & REUTLINGER, Louisville, Kentucky, Daniel L. Abrams, Louis M. Solomon, SWIDLER, BERLIN, SHEREFF & FRIEDMAN, New York, New York, for Appellants.James D. Cockrum, Charles M. Pritchett, Jr., BROWN, TODD & HEYBURN, Louisville, Kentucky, R. Gregg Hovious, TACHAU, MADDOX, HOVIOUS & DICKENS, Louisville, Kentucky, for Appellees. JUDGES: Before: WELLFORD, SILER, and GILMAN, Circuit Judges. GILMAN, J., delivered the opinion of the court, in which SILER, J., joined. WELLFORD, J., delivered a separate dissentingopinion. OPINION BY: RONALD LEE GILMANOPINION [***2] [*925] RONALD LEE GILMAN, Circuit Judge. Managed Health Care Associates, Inc. and MHCA Acquisition, Inc., d/b/a MHA/MedEcon (collectively MHA), commenced an action in state court against Ronald Kethan [**2] (Kethan) and East Texas Regional Cooperative, d/b/aFirst Choice Cooperative (First Choice). MHA sought a preliminary injunction to prevent Kethan from violating the noncompetition clause that he had signed when employed by MedEcon Services, Inc. (MedEcon), MHA's predecessor. After Kethan and First Choice removed the case to federal court based on diversity of citizenship, the district court held that the noncompetition agreement was enforceable only by MedEcon, and that it was not assignable by MedEcon to MHA without Kethan's consent. It therefore denied MHA's request for a preliminary [***3] injunction and dissolved the temporary restraining order that MHA had obtained in state court. For the reasons set forth below, we REVERSE the decision of the district court and REMAND the case for further proceedings consistent with this opinion.I. BACKGROUNDA. Procedural historyOn January 5, 1999, MHA commenced an action against Kethan and First Choice in the Circuit Court of Jefferson County, Kentucky. MHA sought and obtained a restraining order, enjoining Kethan from violating the noncompetition clause that was part of his employment agreement with MedEcon. [**3] On February 2, 1999, Kethan and First Choice removed the action to the United StatesDistrict Court for the Western District of Kentucky. Kethan and First Choice then moved to dissolve the restraining order that MHA had obtained in state court and opposed MHA's motion for a preliminary injunction. On March 4, 1999, the district court dissolved the restraining order and denied MHA's request [*926] for a preliminary injunction. In late March of 1999, MHA filed this timely appeal.B. Factual backgroundOn December 27, 1991, Kethan signed an employment agreement with MedEcon, a group purchasing organization (GPO) for hospitals with its principal place of business in Kentucky. GPOs contract for the purchase of a vast array of products for use by member healthcare facilities. They also enter into agreements directly with suppliers to allow member facilities to purchase the products at reduced prices, thereby providing a substantial savings of both time and money for their members. GPOs also engage in bulk purchasing in order to provide their members even greater discounts.[***4] From 1992 through 1996, Kethan worked as a salesman and an agreement administrator for MedEcon. Kethan's [**4] job responsibilities included meeting with various representatives from hospitals and encouraging them to use the products covered by MedEcon's agreements. He contacted numerous representatives in Texas and Oklahoma on MedEcon's behalf. During this period, Kethan had the opportunity to develop strong businessrelationships with MedEcon's customers, including First Choice. Kethan eventually became the
View Full Document
Unlocking...