Takeaway: Employers should not hesitate to enforce employment agreements if they have a substantial, verifiable claim against a former employee.
A former employee was ordered to pay $1.7 million in damages and attorney fees to his former employer. The 1st U.S. Circuit Court of Appeals found that the appellant ex-employee had breached his employment contract with his former employer. The lawsuit involved allegations that the ex-employee, in doing business with customers of his former employer on behalf of his new employer, violated certain noncompetition and nonsolicitation obligations.
The appellant was employed by NuVasive Inc. as a medical products sales representative. On Jan. 1, 2019, Rival Medical LLC became the exclusive distributor for NuVasive’s products in Massachusetts and Rhode Island. Under the sales agreement, the appellant left NuVasive and became an independent distributor for the sale and promotion of NuVasive products as Rival’s president.
On March 30, 2019, the appellant emailed NuVasive that Rival was being dissolved. The next day, he told NuVasive that he would no longer perform services for the company. He then began his employment at Alphatec Spine Inc., which NuVasive said was a competitor in the spinal products market.
NuVasive sued the appellant in U.S. District Court for the District of Massachusetts, alleging several claims, including breach of contract, arising out of the appellant doing business with customers of his prior employer on behalf of his new employer in violation of noncompetition and nonsolicitation obligations in the appellant’s employment contract with NuVasive. The district court ordered the appellant to pay his former employer more than $1.7 million in damages and attorney fees for his contractual breaches and spoliation, or destruction, of evidence.
The appellant appealed the decision to the 1st Circuit. The appellate court limited its review to the damages and fees awarded and affirmed the district court’s rulings.
Under Delaware law, which applies in this action, a plaintiff seeking to recover damages for breach of contract must prove with reasonable certainty that the damages claimed were caused by the defendant’s breach, the 1st Circuit stated.
The appellant asserted that the district court erred in finding the “requisite causal nexus between his improper solicitations and the decisions of three surgeons” to switch from NuVasive to Alphatec as their primary supplier of spine-related surgical products, according to the court. The appellant argued that NuVasive failed to establish the required connection between specific improper conduct on his part and specific damages to the company.
The appellate court disagreed, however, stating that in so claiming, the appellant “disregards the substantial circumstantial evidence in the record.”
“In short, the district court identified a pattern of improper activity seemingly aimed at switching the affiliation of multiple surgeons from NuVasive to Alphatec … and reached the reasonable conclusion that the campaign worked,” the court said. “Moreover … NuVasive’s damages claim was boosted by an adverse inference imposed on the appellant because he had spoliated evidence.”
The appellate court also found no clear error in the amount of or methodology for determining damages awarded.
NuVasive successfully sought sanctions against the former employee based on spoliation of evidence—the appellant’s failure to preserve certain text messages relevant to his interactions with NuVasive customers after he left the company. The district court awarded NuVasive $127,214.50 in attorney fees and $2,103.85 in costs related to the spoliation, including compensation for the company’s efforts to recover the lost messages.
The appellate court said there was no error in the calculation of fees by the district court and no abuse of discretion in the amounts awarded, and affirmed the damages awarded and sanctions-based award of attorney fees.
NuVasive Inc. v. Day, No. 21-1797, 1st Cir., No. 22-1339 (Aug. 9, 2023).
D.M. Fera is a freelance writer in the Washington, D.C., area.