Oregon Federal Court Issues Order in Employment Noncompetition Case

The complexities of business and commercial litigation in our diverse and widespread economy are legion. From disputes over contracts and trade secrets to battles with government agencies over environmental issues and land use, companies large and small need ready access to sound legal advice to survive legal challenges and build solid foundations for continued growth.

When those legal challenges require resolution in courts of law, commercial litigation attorneys must assemble diverse types of evidence and assess clients' cases in light of a variety of state and federal laws. Their clients may need to assert or defend business interests in other states, and choice of venue (court location) has significant implications for legal strategy.

A recent order from the United States District Court for the District of Oregon considered jurisdictional issues in a case involving a former corporate employee who had been hired by a competitor in another state. The plaintiff, Biotronik, a German multinational with U.S. headquarters in Lake Oswego, Oregon, manufactures, sells and markets the cardiac rhythm management devices commonly known as pacemakers.

Biotronik initiated the legal action in Oregon state court against the Minnesota-based medical technology company Medtronic over issues regarding the new Biotronik employee who had worked for Medtronic for over a decade. Prior to leaving Medtronic, the employee had twice signed employment agreements that included post-termination obligations, as well as a separation agreement when he left his position as regional vice president of sales.

Deciding on a Venue for Resolving Commercial Disputes

In an earlier related lawsuit, Medtronic had sued the employee in Minnesota state court, claiming that he had breached his obligations to the company by allegedly recruiting Medtronic employees to work for Biotronik. Medtronic sought recovery of severance pay, as well as monetary damages for the alleged breach of his agreements with his former employer.

While not named in the Minnesota suit, Biotronik sought declaratory relief - an order from the court clarifying certain legal issues - from the Minnesota judge with respect to its right to hire the employee free from any noncompetition or nonsolicitation obligations he might have to Medtronic. Biotronik also sought a declaration that it did not cause the employee to violate a post-employment condition that prohibited solicitation of Medtronic employees to work for other employers.

As complicated as this case may sound, the recent Oregon order concerned only a preliminary issue based on the legal concept of diversity jurisdiction. This governs not only whether disputes are heard in state or federal court, but also potentially which state's federal district will be the ultimate venue for a legal dispute.

After Biotronik filed its lawsuit against Medtronic in Oregon state court, Medtronic sought removal of the action from state to federal court. This is generally possible when two conditions are met: the parties are from different states and the amount in dispute exceeds $75,000.

The removal action was first heard by a federal magistrate judge, who recommended that the case be remanded (sent back) to the Clackamas County court in which it originated, because the amount in controversy was insufficient to meet the federal minimum amount. The magistrate also recommended that if the U.S. District Court disagreed with his remand recommendation, that Medtronic's supplemental motion to dismiss the case for improper venue or, in the alternative, transfer it to the federal District Court in Minnesota, should be denied.

Choice of Law and the Notion of Home-Field Advantage

Jurisdictional issues have important implications for the legal standards that will be applied to a particular case. Different states' laws can differ considerably from each other, as well as from relevant federal laws. Just as important, federal courts in different parts of the country are guided by divergent decisions from their own federal circuits' appeals courts for issues that have yet to be resolved by the U.S. Supreme Court.

The U.S. District Court in Oregon disagreed with the magistrate's recommendation to remand the case to the Oregon state court, finding that the amount in controversy was indeed satisfied, but the court also denied Medtronic's motion to dismiss or transfer the case to Minnesota federal court. With that order, the two biomedical companies are cleared to present their cases in the U.S. District Court of Oregon regarding the key issue of whether Biotronik can be drawn into the litigation of the alleged breach of the noncompete clause.

By acting swiftly and proactively, a business dispute lawyer can protect his or her commercial client's interests by insulating it from litigation or fighting to keep a case in a jurisdiction whose business law favors the client's legal prospects. Diligent case preparation, familiarity with emerging law and insightful understanding of a client's business interests are the hallmarks of sound commercial litigation representation.