Opinion
Case No: 6:18-cv-823-Orl-41DCI
2019-07-31
James P. LARWETH, Plaintiff, v. MAGELLAN HEALTH, INC., Defendant.
Christopher S. Prater, David J. Yaffe, Jonathan Edgar Pollard, Pollard PLLC, Ft. Lauderdale, FL, for Plaintiff. Joyce Ackerbaum Cox, Mary Caroline Cravatta, Patrick M. Muldowney, Baker & Hostetler, LLP, Robert Clayton Roesch, Shuffield, Lowman & Wilson, PA, Orlando, FL, Ami G. Zweig, Pro Hac Vice, Gary D. Friedman, Pro Hac Vice, Weil, Gotshal & Manges, LLP, New York, NY, Edward Soto, Weil, Gotshal & Manges, LLP, Miami, FL, for Defendant.
Christopher S. Prater, David J. Yaffe, Jonathan Edgar Pollard, Pollard PLLC, Ft. Lauderdale, FL, for Plaintiff.
Joyce Ackerbaum Cox, Mary Caroline Cravatta, Patrick M. Muldowney, Baker & Hostetler, LLP, Robert Clayton Roesch, Shuffield, Lowman & Wilson, PA, Orlando, FL, Ami G. Zweig, Pro Hac Vice, Gary D. Friedman, Pro Hac Vice, Weil, Gotshal & Manges, LLP, New York, NY, Edward Soto, Weil, Gotshal & Manges, LLP, Miami, FL, for Defendant.
ORDER
CARLOS E. MENDOZA, UNITED STATES DISTRICT JUDGE
THIS CAUSE is before the Court on Defendant/Counter-Plaintiff Magellan Health, Inc.'s ("Magellan") Motion for Preliminary Injunction (Doc. 60) and Plaintiff/Counter-Defendant James Larweth's ("Larweth") Response (Doc. 66). A hearing on the matter was held on May 28 and 29, 2019. (Min. Entries, Doc. Nos. 91, 96). As set forth below, the Motion will be granted.
I. BACKGROUND
As relevant here, Magellan is involved in the pharmaceutical rebate management business. By way of background, insurance companies provide drug benefits for their members. As part of these benefits, the insurance company has a list of preferred drugs and a list of non-preferred drugs. (May 28, 2019 Hr'g Tr., Doc. 122, at 54:19–25). The insurance companies encourage their doctors and members to use the preferred drugs. (Id. at 55:2–5). Unsurprisingly, pharmaceutical manufacturers want their drugs to be on the preferred list. So, the manufacturers offer rebates to the insurance companies to encourage the companies to put their drugs on the preferred list. (Id. at 55:6–9). To negotiate these rebates, insurance companies often retain a pharmaceutical benefit management company ("PBM"). (Id. at 56:21–57:3).
Also relevant to this discussion are specialty drugs; those are high-cost drugs that manage complex diseases. (Id. at 55:18–56:6). For example, drugs to treat cancer, hemophilia, HIV, hepatitis C, multiple sclerosis, and rheumatoid arthritis. (Id. ). Often these drugs are injectable or infused and sometimes require administration by a medical provider. (Id. ). They also frequently require special handling, such as refrigeration. (Id. ).
At issue here is the "carve out" pharmaceutical rebate management industry. A "carve out" is when an entity such as Magellan offers to negotiate a rebate on behalf of an insurance company separately from what is generally being done by the PBM—in other words, to "carve out" a specific drug, therapeutic category, or disease state from the insurance company's standard PBM contract. (Id. at 57:7–17). Typically, these carve out contracts involve specialty drugs; the carve out company will negotiate the rebate between the pharmaceutical manufacturer and the insurance company with regard to the specific specialty drug, and that drug will no longer be negotiated by the general PBM company.
An individual named George Petrovas was instrumental in Magellan's carve out business. In 2003, he started a business called ICORE, which was a pioneer in the carve out business. (Id. at 153:10–154:4). In doing so, Mr. Petrovas used his extensive network of relationships with health insurance company executives, which he built primarily by attending events with his wife who was one such executive. (Id. at 85:2–86:1). Without the benefit of his wife's "insider" status, gaining access to such executives would have been extremely difficult. (Id. at 86:2–23).
Magellan purchased ICORE in 2006, and that year they hired Larweth. (Id. at 57:23–25, 141:8–9; May 29, 2019 Hr'g Tr., Doc. 123, 115:20–23). Larweth first started in pharmaceutical sales in 1994. (Doc. 123 at 75:3–17). After becoming an account manager on the sales side, Larweth transitioned into pharmaceutical marketing, where he was the senior brand director for a diabetes portfolio. (Id. at 75:23:–76:6). In that role, Larweth was involved in negotiating the rebate contracts for the pharmaceutical manufacturer. (Id. at 76:8–15). From there, Larweth was hired as the vice president of account management for the division of Magellan that had absorbed ICORE's carve out rebate business. (Id. at 79:17–20; Doc. 122 at 59:6–18).
Subsequently, Petrovas left Magellan and started a new business, CDMI, and Larweth took over Petrovas's role at Magellan. (Doc. 122 at 61:12–24). In 2011, Petrovas hired Larweth to be CDMI's vice president of business development. (Id. at 62:5–9, 63:22–23). Larweth's employment agreement with CDMI included a provision whereby Larweth would get a bonus if there was a sale of CDMI. (Id. at 62:10–16). In 2012, Magellan filed a lawsuit against Petrovas and Larweth, alleging violations of their non-compete agreements. (Id. at 68:11–17). Eventually, that suit was resolved when Magellan purchased CDMI in May 2014, and Larweth and Petrovas became Magellan employees again. (Id. at 68:18–22; 79:25–80:2). Upon his return, Larweth oversaw the business development for all of Magellan's carve out customers. (Id. at 80:22–82:6).
As part of the sale, if certain conditions were met, Larweth was entitled to a bonus with a total value of four percent of the sale—which was approximately $12 million. (Id. at 78:19–25; Magellan Employment Agreement, Doc. 60-3, at 3; CDMI Employment Agreement, Doc. 60-2, at 3–4). This bonus would be paid out over a period of approximately three years and required Larweth to be employed with Magellan through November 2017. (Doc. 122 at 78:3–6, 79:21–24).
In conjunction with the sale and his return to Magellan, Larweth signed a new employment agreement. (See generally Doc. 60-3). The Magellan Employment Agreement contained several restrictive covenants. First, there is a non-competition provision, which states in relevant part, that for a period of three years following the termination of his employment, Larweth cannot:
directly or indirectly, engage or attempt to engage in the business of developing, providing or selling products or services in the United States that are products or services developed, provided or offered by Employer at the time of the termination of his or her employment with Employer, including without limitation the provision of all or any part of the services provided by Employer (directly or through subcontractors) in any way pertaining or related to pharmacy benefits management, pharmaceutical rebate management, or any other component of pharmacy benefits management services or products (whether such products or services are developed, provided or offered by such other person or entity individually or on an integrated basis with other products or services developed, provided or offered directly by such person or entity or through affiliated or subcontracted persons or entities) unless waived in writing by Employer in its sole discretion.
(Doc. 60-3 at 9).
The Magellan Employment Agreement also contains a non-solicitation of customers provision, which provides that Larweth, for a period of three years, cannot:
directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit, divert away, take away or attempt to solicit or take away any Customer of Employer for purposes of providing or selling products or services that are offered by Employer, if Employer is then still engaged in the sale or provision of such products or services at the time of the solicitation.
(Id. at 10). Further, "Customer" is defined as "any individual or entity to whom Employer has provided, or contracted to provide, products or services and with whom Employee had, alone or in conjunction with others, contact with or knowledge of, during the twelve (12) months prior to the termination of his or her employment." (Id. ).
Finally, the Employment agreement contains a non-solicitation of employees provision, which states that Larweth, for a period of three years, cannot:
directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit for employment or hire, directly or indirectly, any employee of Employer who is employed with Employer or who was employed with Employer (x) with respect to the period during Employer's employment of Employee, within the one (I) year period immediately prior to such action by Employee and (y) with respect to the three (3) year period following the termination of Employee's employment within the one year period immediately prior to Employee's termination.
(Id. at 10).
For reasons irrelevant to this discussion, Larweth's employment with Magellan was terminated in January 2018. (Doc. 123 at 135:10–19). Approximately six or seven months after his termination, Plaintiff established two new businesses—Anton Rx and Anton Health. (Id. at 135:20–25). The two businesses appear to be somewhat overlapping and co-mingled, but Plaintiff admitted directly that Anton Rx is in the same business as Magellan and directly competes with Magellan's carve out business. (Id. at 136:12–22). Indeed, in the limited time Anton Rx has been in business, it has solicited contracts from at least twenty of Magellan's clients, (Answers to Interrogs., Doc. 71-4, at 3–4), and it has already been awarded work from four or five of them, (Doc. 123 at 162:13–163:7). Larweth also hired two former employees of Magellan—Craig Caceci and Tom Sak—to work for him at the Anton businesses. (Id. at 138:14–25, 155:17–25).
Magellan has now moved for a preliminary injunction, seeking to enforce the restrictive covenants in the Magellan Employment Agreement. Larweth does not dispute that he has violated each of these covenants, but he argues that the restrictive covenants are not enforceable.
II. LEGAL STANDARD
To obtain a preliminary injunction, the movant must sufficiently establish that (1) "it has a substantial likelihood of success on the merits;" (2) "irreparable injury will be suffered unless the injunction issues;" (3) "the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party;" and (4) "the injunction would not be adverse to the public interest." Forsyth Cty. v. U.S. Army Corps of Eng'rs , 633 F.3d 1032, 1039 (11th Cir. 2011) (quoting Siegel v. LePore , 234 F.3d 1163, 1176 (11th Cir. 2000) (en banc)). "A preliminary injunction, moreover, ‘is an extraordinary and drastic remedy not to be granted unless the movant clearly establishes the burden of persuasion as to the four requisites.’ " Llovera v. Fla. , 576 F. App'x 894, 896 (11th Cir. 2014) (per curiam) (quoting Forsyth Cty. , 633 F.3d at 1039 ).
Both parties agree that Connecticut law applies to the substantive analysis regarding the enforceability of the restrictive covenants.
III. ANALYSIS
A. Likelihood of Success on the Merits
As noted, Larweth does not dispute that he is violating the restrictive covenants. And, indeed, the evidence established that Larweth is directly competing with Magellan in violation of the non-compete, that Larweth solicited former Magellan employees Craig Caceci and Tom Sak in violation of the non-solicitation of employees provision, and that Larweth was directly soliciting Magellan customers in violation of the non-solicitation of customers provision. Thus, if the provisions are enforceable, Magellan has established a substantial likelihood of success on the merits.
To this end, Larweth asserts that covenants prohibiting the non-competition and non-solicitation of customers are unenforceable. "[U]nder Connecticut law, post-employment covenants are valid if reasonable under the circumstances." MacDermid, Inc. v. Raymond Selle & Cookson Grp. , 535 F. Supp. 2d 308, 316 (D. Conn. 2008). "[A] party challenging the enforceability of a restrictive covenant has the burden of proving that the covenant is not enforceable." A.H. Harris & Sons, Inc. v. Naso , 94 F. Supp. 3d 280, 288 (D. Conn. 2015) (quoting Sagarino v. SCI Conn. Funeral Servs., Inc. , No. CV 000499737, 2000 WL 765260, at *3 (Conn. Super. May 22, 2000) and citing Mattis v. Lally , 138 Conn. 51, 82 A.2d 155, 156 (1951) ). To determine reasonableness, Connecticut courts consider the following five factors: "(1) the length of time the restriction operates; (2) the geographical area covered; (3) the fairness of the protection accorded to the employer; (4) the extent of the restraint on the employee's opportunity to pursue his occupation; and (5) the extent of interference with the public's interests." Robert S. Weiss & Assocs., Inc. v. Wiederlight , 208 Conn. 525, 546 A.2d 216, 219 n.2 (1988).
Larweth does not address the reasonableness of the non-solicitation of employees provision.
1. Non-Compete
a. Scope of Non-Compete
As an initial matter, Larweth argues that the non-competition provision is overly broad because it prohibits him from working anywhere in the healthcare industry. Specifically, as drafted, the non-competition provision prohibits Larweth from "directly or indirectly ... developing, providing or selling products or services in the United States that are products or services developed, provided or offered by Employer at the time of the termination of his ... employment with Employer." "Employer" is defined as Magellan and all of its present and future subsidiaries and affiliates. (Doc. 60-3 at 2). Thus, as written, Larweth is correct, this prohibition is overbroad. However, the non-competition provision can be permissibly narrowed and enforced.
Under Connecticut law, where there is "[a] restrictive covenant which contains or may be read as containing distinct undertakings bounded by different limits of space or time, or different in subject matter," portions of that covenant may be severed if the covenant "is in effect a combination of several distinct covenants." Beit v. Beit , 135 Conn. 195, 205, 63 A.2d 161, 166 (Conn. 1948). "Whether the promises in a contract will be treated as severable or not is primarily a matter of the intent of the parties, determined by a fair construction of all the provisions of the contract." Id. at 165.
The Magellan Employment Agreement contains the following severability provision:
If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision will be fully severable and this Agreement and each separate provision will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. In addition, in lieu of such illegal, invalid or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable, to the extent such reformation is allowable under applicable law.
(Doc. 60-3 at 17). Additionally, the non-compete provision provides that Magellan may waive enforcement of any portion of the non-competition prohibitions. (Id. at 9).
With these provisions, the parties explicitly consented to severance and reformation of the contract. However, reformation is not necessary. The non-competition provision sets forth a list of prohibited products and services, "include[ing] but not limited to pharmacy benefits management, pharmaceutical rebate management, or any other component of pharmacy benefits management services or products." (Id. ). The relevant service at issue in Larweth's employment agreement—i.e., the service he was involved in during his employment—is pharmaceutical rebate management. The Court can permissibly sever the other portions of the non-competition provision, leaving only a prohibition against competition in the field of pharmaceutical rebate management. This allows the non-competition provision to continue to protect what was at the heart of the agreement while removing the overly broad portions. Such severance is consistent with the intent of the parties as manifested in the contract and permissible under Connecticut law. Accordingly, the Court's analysis regarding the enforceability of the non-competition provision will be limited to pharmaceutical rebate management services.
b. Time and Geographic Restrictions
The non-competition provisions are in place for three years on a nation-wide basis. Larweth does not challenge the reasonableness of these provisions. Further Connecticut law indicates that the provisions are reasonable. See Scott v. Gen. Iron & Welding Co. , 171 Conn. 132, 368 A.2d 111, 116 (1976) (finding a five-year restriction reasonable where "it had taken years of effort for the defendant to acquire its customers"); Sylvan R. Shemitz Designs, Inc. v. Brown , AANCV136013145S, 2013 WL 6038263, at *8 (Conn. Super. Ct. Oct. 23, 2013) (noting that Connecticut courts have found three to five-year restrictions enforceable depending on the circumstances and finding reasonable a national geographic restriction because it was reasonably related to the former employer's national business).
c. Protection Accorded to Magellan
The protection accorded to Magellan is reasonable. Magellan has invested a huge amount of resources developing its client relationships, including purchasing ICORE and CDMI—and the difficult-to-obtain contacts that came along with those businesses—for hundreds of millions of dollars. Magellan also spent a significant amount of time and effort learning client preferences and becoming familiar with the specific individual at each insurance company who had the authority to make the relevant decisions. Larweth did not have these relationships or this information prior to his employment with Magellan. Although he was involved in pharmaceutical sales, it was from the manufacturer side, and he did not negotiate rebates directly with insurance companies.
Additionally, Larweth's knowledge of Magellan's pricing scheme and business systems gives him an unfair competitive advantage. Although Larweth claims that any such information is "stale," such an argument is belied by Larweth's testimony. He explained that his companies were successful in obtaining clients because they provide more information to their clients and they charge lower prices than competitors like Magellan. Clearly, knowledge of Magellan's business practices and pricing structure has given Larweth the ability to undercut Magellan, and therefore, to unfairly compete.
The non-competition provision is reasonably designed to afford a fair degree of protection to Magellan. See Robert S. Weiss & Assocs. , 546 A.2d at 221 (noting that where "the employment involves ... [the employee's] contacts and associations with clients or customers it is appropriate to restrain the use, when the service is ended, of the knowledge and acquaintance, so acquired, to injure or appropriate the business which the party was employed to maintain and enlarge"); Grillea v. United Nat. Foods, Inc. , 16CV3505SJFSIL, 2016 WL 4573981, at *12 (E.D.N.Y. Aug. 31, 2016) (applying Connecticut law and determining that "[i]n light of, inter alia , the fact that plaintiff held a high-level position with defendant and, thus, has specialized knowledge of defendant's internal structure and business, marketing and pricing strategies, the restrictions in the non-competition clause appear reasonably necessary for the fair protection of defendant's business"); A.H. Harris & Sons, Inc. v. Naso , 94 F. Supp. 3d 280, 297 (D. Conn. 2015) (finding that the former employer had "a legitimate concern about [the employee] being able to utilize her knowledge of [the employer's] inner workings to [the competitor's] benefit and [the employer's] detriment" particularly where there was "a shared set of existing customers, suppliers and contractors between [the employer] and [the competitor]" (quotation omitted)); Roth Staffing Cos. v. Thomas Brown & OEM ProStaffing, Inc. , 3:13 CV 216 (JBA), 2013 WL 12122072, at *10 (D. Conn. Oct. 16, 2013), report and recommendation adopted , 3:13CV216 (JBA), 2014 WL 12576629 (D. Conn. Mar. 14, 2014) (finding similar non-compete reasonable where the defendant's customer relationships were developed over a significant period of time while he was employed by the plaintiff and noting that the "investment of time in getting to know[ ] these customers gave him a distinct advantage in the market as he learned the identities of the individual contact persons at these customers, the pricing applicable to the customers, their buying cycles, the types of jobs they need to fill, the types of candidate they seek, and the customers' likes and dislikes").
d. Restraint on Larweth's Ability to Pursue his Employment
The restrictions in the non-competition provision do not unduly restrain Larweth's ability to pursue employment. Larweth has an extensive background on the pharmaceutical manufacturer side of the business, and nothing in the non-compete prohibits him from pursuing that type of employment. Further, Larweth testified that one of his companies—Anton Health—provides services unrelated to pharmaceutical rebate management. (Doc. 123 at 72:20–73:1). The enforcement of the non-competition provision would not prohibit Larweth from continuing that business.
e. Public Interest
Next, Larweth argues that because his business provides a bigger rebate to insurance companies than Magellan, it is in the public interest to allow him to continue doing so. First, Larweth's argument presumes that the insurance companies are passing on the higher rebate to the public instead of keeping it, but there is no evidence to support such a conclusion. Second, it is undisputed that there are many companies in the market competing against Magellan, thus prohibiting Larweth from doing so for a limited period of time does not have a significant impact on the public interest. See New Haven Tobacco Co. v. Perrelli , 18 Conn.App. 531, 559 A.2d 715, 718 (1989) (indicating that restrictive covenants are not contrary to the public interest where they "do not unreasonably deprive the public of essential goods and services" and where their enforcement would not lead to a probability that a monopoly could be created).
Magellan has established a likelihood of success on the merits as to the non-competition provision.
2. Non-Solicitation—Customers
The customer non-solicitation provision prohibits Larweth from soliciting those who were customers of Magellan during the final twelve months of Larweth's employment and with whom Larweth had contact with or knowledge of. As an initial matter, Larweth does not make any arguments regarding the reasonableness of this provision beyond those made with regard to the non-competition provision. Thus, for the same reasons, those arguments fail.
Instead, most of Larweth's arguments regarding the non-solicitation of customers revolve around whether Magellan's customer list is protectable. But that is not what is at issue. Magellan is seeking to disallow Larweth from directly soliciting customers; it is not seeking to protect the identities of those customers. Further, contrary to Larweth's argument, the non-solicitation of customers provision is very narrowly tailored to only prohibit solicitation of those customers that Larweth actually had contact with or knowledge of due to his employment with Magellan.
Accordingly, Larweth has not met his burden to show that the non-solicitation of customers provision is unreasonable, and Magellan has established a likelihood of success on the merits as to this provision.
3. Non-Solicitation—Employees
Larweth admits that he hired two former Magellan employees—Caceci and Sak—and that doing so was prohibited by the Magellan Employment Agreement. Larweth does not challenge the reasonableness of this provision. Magellan has established a likelihood of success on the merits as to the non-solicitation of employees provision.
B. Irreparable Harm
Magellan has established that it will suffer irreparable injury if an injunction is not issued. "[I]rreparable harm and lack of adequate remedy at law are rebuttably presumed where a covenant not to compete which has found to impose only a reasonable restraint has been violated." Fairfield Cty. Bariatrics & Surgical Assocs., P.C. v. Ehrlich , FBTCV1050291046, 2010 WL 1375397, at *37 (Conn. Super. Ct. Mar. 8, 2010). Moreover, Magellan has proven that Larweth has actually unfairly competed with Magellan by, at least in part, using the contacts and information Larweth gained during his employment with Magellan to obtain contracts with Magellan's clients.
Larweth asserts that Magellan's delay in seeking a permanent injunction weighs against the immediacy of the harm. Magellan's counsel was advised on June 5, 2018, by Larweth's counsel that "Mr. Larweth will be re-entering the rebate sales market immediately." (June 5, 2018 E-mail, Doc. 60-7, at 2). However, the conversations that followed were legal discussions regarding the enforceability of the restrictive covenants and indicated a possibility of settlement. (See June 14, 2018 Letter, Doc. 60-8, at 2–9 (discussing the enforceability of the restrictive covenants); July 13, 2018 Letter, Doc. 60-9, at 2–18 (making legal arguments and explaining the steps that should be taken if Magellan "ha[s] any interest in resolving this matter in the near term")). It was not until Magellan and Larweth engaged in discovery that Magellan was able to obtain the specifics as to Larweth's competition. (Doc. 122 at 185:13–186:23). Moreover, while delay in seeking an injunction is a factor to consider, it is not dispositive. Given the blatant violations and the unrebutted evidence that Larweth has solicited and obtained competing business from Magellan's clients in violation of his restrictive covenants, any delay that may have occurred in this case is not sufficient to overcome the presumption of irreparable harm.
Finally, Larweth's argument that there is no irreparable harm because the business he has taken from Magellan is not permanent—i.e., Magellan could win that business back—due to the volatile nature of the pharmacy rebate market is without merit. First, such an argument ignores the fact that Larweth is unfairly competing with Magellan. Second, it does not appear that the market is as fluid as Larweth would like the Court to believe. (See Doc. 122 at 89:16–90:14, 105:24–9). Magellan has established sufficient irreparable harm to support the issuance of a preliminary injunction. However, with regard to the non-solicitation of employees, Magellan has only shown irreparable harm insofar as those employees are utilized by Larweth to directly compete with Magellan in the pharmaceutical rebate market. To the extent Larweth employs former Magellan employees outside of the pharmaceutical rebate market, Magellan has not proven that a preliminary injunction is warranted.
C. Damage to Larweth
Indisputably, the injunction will cause damage to Larweth by restricting his ability to pursue his business. But, as discussed above, enforcing the covenants will not wholly prohibit him from pursuing his career. Based on the testimony, however, it appears that requiring Larweth to immediately stop working on the contracts he has already secured could be unfairly prejudicial to all involved—including the clients. Thus, Larweth will be prohibited from engaging in any new business that would violate his restrictive covenants, but the injunction will be tailored to allow Larweth to complete his current obligations and wind down his business.
At this stage of the proceedings, the Court makes no findings as to whether Larweth should be allowed to retain the profits from such transactions. Such an analysis involves economic damages, which are not appropriately addressed by a preliminary injunction.
D. Public Interest
An injunction in this case will not be adverse to the public interest. Enforcing a legitimate contract between two parties is typically in the public's interest. See NCL (Bahamas) Ltd. v. O.W. Bunker USA, Inc. , 280 F. Supp. 3d 324, 348 (D. Conn. 2017) ("[I]n light of the parties' right to contract as they desire, the injunction does nothing to disserve the public interest."), vacated on other grounds , 745 F. App'x 416, 417 (2d Cir. 2018). Moreover, as noted above, there is no indication that enforcing the restrictive covenants would allow Magellan to create a monopoly nor is there any evidence that allowing Larweth to violate the restrictive covenants is somehow substantially benefitting the public. Thus, the public interest does not militate against issuance of a preliminary injunction.
E. Affirmative Defenses
Larweth asserts numerous affirmative defenses that he claims prohibits the issuance of a permanent injunction. Each will be addressed in turn.
1. Waiver
First, Larweth argues that because Magellan has allowed other employees to leave and compete against it, Magellan has waived its right to enforce Larweth's non-competition provision. In support, Larweth cites a Florida case that does not involve restrictive covenants; it merely sets forth the elements of waiver under Florida law. As noted, this dispute is controlled by Connecticut law, not Florida law. And, Larweth has failed to provide authority under any law that not enforcing restrictive covenants against other employees in any way impacts the enforceability of Larweth's restrictive covenants. Additionally, Larweth did not present any evidence that there were employees who were similarly situated to him where Magellan did not enforce restrictive covenants. (C.f. Doc. 122 at 210:15–23 (listing former employees with non-compete agreements who complied fully with them)). To the extent Larweth is arguing that Caceci is such an individual, the record evidence establishes that Larweth—while he was employed at Magellan—was the one who was tasked with ensuring that Caceci signed the appropriate restrictive covenants, but Larweth failed to do so. (Id. at 191:7–14). He cannot now argue that his own inaction equates to waiver by Magellan.
2. Prior Breach
Next, Larweth argues that Magellan committed a prior breach of the Magellan Employment Agreement by failing to fully pay his 2015 bonus. The portion of the Magellan Employment Agreement cited by Larweth merely provides that, by virtue of his employment, he will be "eligible to participate in any annual incentive bonus plan and long-term incentive plan applicable to [him]." (Doc. 60-3 at 3). The relevant provisions Larweth contends were breached are the specific terms of the incentive plans, which were set forth in a separate contract. (See generally Proposed Commission Plan, Doc. 1-1). Larweth has not established a prior breach that would negate his duty to comply with the restrictive covenants.
3. Unclean Hands
Larweth also argues that Magellan has unclean hands, and therefore, cannot seek a preliminary injunction. Specifically, Larweth alleges that Magellan defamed him by telling individuals in the industry that Larweth was engaged in illegal conduct and unfair competition. First, Larweth has presented no evidence in support of such alleged defamation. Second, as explained above, Larweth has, indeed, been engaged in unfair competition in violation of his contractual duties.
Similarly, to the extent Larweth claims he was terminated for "blowing the whistle" on Magellan, he has presented no evidence to support such an accusation. Larweth has not established that Magellan has unclean hands.
4. Latches
In one sentence, without any citation in support, Larweth asserts that Magellan's efforts to obtain a preliminary injunction are barred by latches. The only argument made is that Magellan unreasonably delayed seeking an injunction. This argument has already been addressed in the Court's analysis of irreparable harm. Larweth has not established that Magellan's claims are barred by latches.
F. Bond
"The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained." Fed. R. Civ. P. 65(c). Magellan asserts that it should only be required to post a de minimus bond, while Larweth argues a $30 million bond should be required. At the preliminary injunction hearing, Larweth testified that, to date, his business had generated approximately $16 million related to pharmaceutical rebate management and that he expected to generate approximately $30 million in a full year. (Doc. 123 at 112:2–6). Given that Larweth is only being enjoined from engaging in business going forward and that trial in this case is set for the December 2019 trial term, the Court finds that a $10 million bond is appropriate.
IV. CONCLUSION
For the reasons set forth herein, it is ORDERED and ADJUDGED as follows:
1. Defendant/Counter-Plaintiff Magellan Health, Inc.'s Motion for Preliminary Injunction (Doc. 60) is GRANTED .
2. James Larweth, his agents, Anton Rx, and Anton Health are preliminarily enjoined and restrained from:
a. engaging, directly or indirectly, in the provision of pharmaceutical rebate management services. Excepted from this injunction is the
provision of any services necessary to fulfill his current contractual obligations, however, renewal of these contracts is prohibited;
b. directly or indirectly soliciting for employment in the business of pharmaceutical rebate management services any employee of Magellan who is employed with Magellan or who was employed with Magellan within the one-year period immediately prior to Larweth's termination; and
c. directly or indirectly soliciting any customer of Magellan—as defined by the Magellan Employment Agreement—for purposes of providing pharmaceutical rebate management services.
3. This preliminary injunction is conditioned on the posting by Magellan of a surety bond in the sum of $10 million on or before [2 weeks].
DONE and ORDERED in Orlando, Florida on July 31, 2019.