U.S. District Court Refuses to Enjoin Former Employees for Violation of Employment Agreements

February 12, 2013

The U.S. District Court for the District of Massachusetts recently denied a preliminary injunction to a pathology laboratory which had hoped to hold former employees to restrictions in their employment agreements.

Dr. Thomas Horn and Dr. Lisa Cohen owned and operated a dermatopathology laboratory called Metroplex Pathology Associates. In 2007, the two doctors sold the dermatopathology company for $80 million. As part of the sale, the two doctors agreed to several restrictive employment covenants, including a covenant not to compete directly with the buyers, a covenant to not disparage the buyers, and covenants to not solicit or hire former employees of the business. The doctors continued to work for the new buyers.

When the two doctors became disenchanted with how the new buyers were running the business, they left and began working for a pathology laboratory--MGPO Dermatopathology Associates--operated by a local hospital. MGPO offered the same specialized pathology laboratory services that the doctors' old dermatopathology company had, and was designed to compete directly with their old company. Once at MGPO, the doctors also hired three of their former employees to work with their new pathology company.

The buyers sued the two doctors for breach of their employment agreements. The buyers also sued MGPO for tortious interference, alleging that MGPO was using confidential information that Horn and Cohen covenanted to keep confidential. The buyers moved the U.S. District Court to enter a preliminary injunction enjoining the parties from using confidential information and competing with their company in violation of the doctors' employment agreements.

In denying the motion for a preliminary injunction, the court held that the buyers had failed to proffer sufficient evidence that the two doctors had violated any of the restrictive provisions in their employment contract. The buyers could not provide evidence of any occasions where the doctors had disclosed or used any confidential information from their previous business. Additionally, the buyers provided no evidence that the Horn and Cohen had disparaged their former company. Regarding MGPO, the court noted that the buyers again failed to show that the local hospital had intentionally interfered in any way with the buyer's contractual relationships with the physicians.

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