Court Awards NuVasive $1.6 Million for Employee Non-Compete Breach
On March 28, 2022, Judge Denise Casper of the District of Massachusetts awarded NuVasive, Inc. $1.6 million in damages after finding that the defendant, a former employee of NuVasive, Timothy Day, breached his non-compete and non-solicitation clauses in his employment agreement with NuVasive.
NuVasive, a medical device manufacturer for spinal diseases, hired Day in August 2011 as a sales representative for an exclusive distributor of NuVasive’s products. In January 2019, NuVasive assigned its distribution rights in Massachusetts and Rhode Island to Rival Medical LLC and transferred Day to Rival to serve as an independent distributor of NuVasive products and promoted him to the position of President at Rival. Day entered into an employment contract with NuVasive, which included twelve-month post-employment non-compete and non-solicitation clauses.
The non-compete required Day to not serve as an employee of any organization that competed in the same business as NuVasive. The non-solicitation clause required Day to refrain from soliciting, calling upon or providing services to any customers “that he had worked with, had responsibility or oversight of, provided services related to or learned significant information about during his employment with NuVasive for any purpose other than for the benefit of NuVasive.”
In April 2019, Day left NuVasive and Rival to join Alphatec, a NuVasive competitor. At Alphatec, Day solicited NuVasive customers and encouraged them switch to Alphatec. Day succeeded in having three Boston-area surgeons switch to buying spinal surgery products from Alphatec instead of NuVasive. Upon learning of the violations of the non-solicitation and non-compete clauses, NuVasive sued Day, seeking damages based on lost profits from missed sales.
The District of Massachusetts held that Day had violated his non-compete and non-solicitation clauses while employed by Alphatec. During discovery in the case, the court found that Day engaged in spoliation by deleting his text messages from before he had left NuVasive through July 2019. The deletion activity continued after Day received notification of a litigation hold in April 2019. As a sanction, the court adopted an inference that Day’s texts were unfavorable to him in ruling on NuVasive’s damages.
Although monetary awards for breaches of non-compete or non-solicitation clauses in employment contracts are relatively rare, the failure to preserve evidence, including intentional spoliation activities, can lead to the imposition of sanctions, including a default judgment or an adverse inference. Executives who are concerned about the ramifications of a non-compete or non-solicitation clause should engage with counsel to determine whether the clauses are enforceable before engaging in any competitive activity. Also, working with counsel, executives should preserve all evidence relevant to their prior employers’ potential claims, even before they receive a litigation hold notice.