Orthofix Inc. vs. Hunter: The Case Study Essay

Introduction

Orthofix, Inc. filed a discrimination lawsuit against Eric Hunter, a former employee. When Orthofix employed Hunter in 2000, he was tasked with selling bone growth stimulators. Hunter was handed Orthofix’s “playbook,” which comprised client lists, staff contacts, sales statistics, wholesale price information, physician preferences and their corresponding schedules, and also physicians’ prescription practices during his time at the company. When he left Orthofix, Hunter sent his new employer, DonJoy, the majority of Orthofix’s “playbook” and other personal and professional information.

The plaintiff sued the defendant for misappropriating the litigant’s trade secrets and utilizing and disseminating sensitive information covered by the defendant’s employment contract’s non-compete provision. The defendant resigned from the firm in question, the complainant, and immediately started selling the medical equipment given by his new employer to former customers (Varadhan, 2018). Non-compete agreements are legally enforceable contracts that prohibit an employee from working for a competitor. These agreements often prohibit an employee from competing with the firm directly or indirectly for a particular time after the termination of their employment. Non-compete agreements are legal and enforceable in certain circumstances. In the United States, individual states recognize and enforce non-compete agreements. Certain states, including California, Oklahoma, and North Dakota, prohibit or restrict non-compete agreements.

Issue

The issues for determination, in this case, were as follows: (1) Did Hunter institute any misuse of trade secrets in violation of Ohio law? (2) Was there a breach of contract when Hunter violated his employment agreement’s non-compete and non-disclosure provisions? (3) Was there any tortious interfering with Orthofix contracts of sale? Orthofix sued Hunter for trade secret misappropriation under Ohio law, breach of contract for violating the “NDP” and non-compete sections of Hunter’s contract, and tortious interference with Orthofix contracts for providing DonJoy with the Orthofix “playbook.” Similarly, Hunter filed a counterclaim for commissions that were not paid.

Rule

Each state upholds or employs different laws that govern the use, legality, and enforcement of non-compete agreements. Generally, in all states that allow a non-compete agreement, the courts must find a non-compete agreement legitimate to uphold it. It is unreasonable for an employer to impose restrictive limits that employees cannot obtain employment outside their current position (Sellers & Fort, 2022). When a court considers whether a non-compete agreement is rational and binding, it will look for the following:

1. The company has a legit business requirement to safeguard its interests.
2. The geographic breadth is of an acceptable scale.
3. Employees can look for new jobs that will not require them to break their contracts.
4. The non-compete agreement’s duration is sensibly limited.
5. The agreement is overly broad regarding the prohibited types of work.

President Joe Biden signed Executive Order 14036 in July 2021, encouraging the newly appointed chairperson of the Federal Trade Commission to restrict the improper usage of non-compete provisions and other contracts which may unjustly limit worker flexibility.

Analysis

The court noted that two types of confidential material might be protected: trade secrets and data that do not fit the trade secret’s criteria but have any of its characteristics (Sellers & Fort, 2022). Confidential information is not publicly available or is not within an employee’s general knowledge and competence. Thus, the parties establish and define the meaning of private information. Consequently, an employer might widen the definition of privileged information by using well-drafted non-compete agreements to include private information and trade secrets. Hunter argued that the plaintiff’s inability to identify the knowledge that would qualify as private did not establish the material’s status as a trade secret (Sellers & Fort, 2022). The court rejected this argument by applying the Texas interpretations of confidential information to this case, noting that the plaintiff had explicitly asserted that the defendant’s coverage of all information amounted to a trade secret consumer.

Conclusion

The plaintiff’s violation of contract claim was upheld by the Sixth 6th Circuit Court of Appeals, which reversed the district court’s ruling. The court was of the understanding that the respondent had violated the parties’ confidentiality arrangement by disclosing the plaintiff’s private data to his new boss. Businesses may be disincentivized from being detailed in their non-disclosure agreements. Additionally, this judgment could provide similar rights under federal law to businesses with confidential information that does not qualify as a trade secret, thereby short-circuiting

References:

Sellers, A., & Fort, T. (2022). Non-compete agreements: How fiduciary duty and covenants not to compete restrict managers’ mobility. Business Horizons, 65(2), 215-225.

Varadhan, S. (2018). Next Generation App to Update Phone Number Automatically to all Contacts. RA Journal of Applied Research, 15(6), 492-619. Web.