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 First Choice Cooperative Defendants Appellees No 99 5444 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT 209 F 3d 923 2000 U S App LEXIS 7207 2000 FED App 0143P 6th Cir 140 Lab Cas CCH P58 895 March 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 stock COUNSEL 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 dissenting opinion OPINION BY RONALD LEE GILMAN OPINION 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 a First 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 BACKGROUND A Procedural history On 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 States District 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 background On 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 business relationships with MedEcon s customers including First Choice Kethan eventually became the agreement administrator for the First Choice account In June of 1998 MHA which is also a GPO began negotiations with MedEcon for the acquisition of MedEcon s assets On September 9 1998 most of MedEcon s assets were purchased by MHA Included in those assets was Kethan s
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