Taylor v. Cordis Corp.
1986 U.S. Dist. LEXIS 26095, 634 F. Supp. 1242 (1986)
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Rule of Law:
A non-competition agreement is enforceable if it is reasonably necessary for the protection of the employer's business interests, without imposing an undue hardship on the employee. Courts may reform a geographically overbroad agreement to apply it to a reasonable scope, such as prohibiting contact with specific former clients.
Facts:
- Daniel J. Taylor, an experienced medical supplies salesman, was hired by Cordis Corporation, a heart pacemaker manufacturer, on February 13, 1981.
- As a condition of employment, Taylor signed an agreement containing a non-competition clause, prohibiting him for one year after termination from soliciting Cordis customers with whom he had contact.
- Cordis provided Taylor with extensive and expensive technical training on pacemaker technology, and his sales grew substantially over four years as he developed close relationships with implanting physicians.
- The pacemaker sales industry relies heavily on the trust and personal relationship between the salesman and the physician, with salesmen often present during implant surgeries to provide technical support.
- Between 1983 and 1986, Cordis issued several product recalls and safety notifications regarding defects in its pacemakers, which Taylor felt damaged his professional credibility.
- Taylor voluntarily resigned from Cordis on February 18, 1986, and began working for Cardio-Life Systems, a distributor for a direct competitor, the next day.
- Immediately after his resignation, Taylor assisted a former Cordis customer, Dr. Harvey Sanders, with the implant of a competitor's pacemaker and informed his other former clients of his new employment.
- Another Cordis salesman who was not bound by a non-competition agreement, Robert Poole, had previously left the company and taken approximately 80% of Cordis's business in his territory with him.
Procedural Posture:
- Plaintiff Daniel J. Taylor filed a complaint in U.S. District Court for a declaratory judgment that his non-competition agreement with Defendant Cordis Corporation was void.
- Cordis Corporation counterclaimed, seeking a preliminary injunction to enforce the agreement.
- The court entered a temporary restraining order (TRO) partially enjoining Taylor from soliciting certain customers.
- Cordis then sought a preliminary injunction to incorporate, extend, and broaden the relief granted in the TRO, leading to the current proceeding.
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Issue:
Is a non-competition agreement that lacks a specific geographical territory enforceable against a former employee who alleges he resigned due to the employer's product defects?
Opinions:
Majority - Tom S. Lee
Yes, a non-competition agreement is enforceable under these circumstances, but it may be reformed by the court to be reasonable in scope. The court rejected Taylor's arguments that Cordis breached a duty of good faith or provided unmerchantable products, finding Cordis's actions regarding product defects were reasonable and the products were still commercially viable. The court then analyzed the non-compete agreement under Mississippi law, which requires such covenants to be reasonable in duration, geographic scope, and necessary to protect the employer's legitimate business interests. Cordis demonstrated a legitimate interest in protecting the customer goodwill that it had invested in developing through Taylor, especially given the highly personal nature of pacemaker sales. The court found the one-year duration reasonable, as it gave Cordis time to hire and train a replacement. Since the agreement lacked a specific geographical territory, the court exercised its equitable power to reform the agreement. Instead of a broad geographical ban, the court narrowed the restriction to prohibit Taylor from soliciting or contacting the specific physicians to whom he had sold Cordis products. The court then granted the preliminary injunction, finding Cordis established a substantial likelihood of success on the merits, a threat of irreparable harm (loss of goodwill), that the balance of harms favored Cordis, and that the injunction would not disserve the public interest.
Analysis:
This case is significant for its application of the reformation or 'blue-pencil' doctrine to a non-competition agreement lacking a specific geographic scope. Instead of voiding the entire covenant, the court modified it to be reasonable and enforceable, focusing on protecting the employer's specific, proven business relationships rather than enforcing a broad territorial ban. The decision underscores that in industries reliant on personal goodwill and specialized knowledge, courts are more likely to find a legitimate business interest worthy of protection. The opinion provides a clear example of how a court will balance an employer's need to protect its investment in customer relationships against an employee's right to earn a living.
