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Stryker Corp. v. Prickett

United States District Court, W.D. Michigan, Southern Division

May 24, 2017

STRYKER CORPORATION et al., Plaintiffs,
WILLIAM PRICKETT et al., Defendants.



         Plaintiffs Stryker Corporation and Stryker Sales Corporation (collectively, “Stryker”) brought this action against a former employee, William Prickett, and Prickett's business, Physician's Choice Medical Repair, Inc. (“PCMR”). Before the Court is Stryker's motion for default judgment. (ECF No. 199.) For the reasons stated herein, the motion will be granted in part.


         Prickett was employed by Stryker as a field service technician, servicing Stryker patient-handling equipment, including: medical-treatment tables, stretchers, cots, hospital beds and emergency-rescue equipment. As part of his employment, he signed an agreement not to solicit business from Stryker customers or to work for a Stryker competitor for twelve months following the termination of his employment. He resigned from Stryker on June 30, 2014. Stryker brought this action in September 2014, alleging that Prickett had breached the terms of his employee agreement by providing services to Stryker customers, using Stryker's confidential pricing and customer information, and using special tools and parts that Prickett improperly retained after the end of his employment. Stryker also alleged that Defendants were improperly using the Stryker name and mark by representing themselves as “Stryker Certified, ” and that Prickett had attempted to obtain additional Stryker parts through several Stryker employees.

         On October 22, 2014, the Court entered a preliminary injunction prohibiting Defendants from using Stryker's name and from competing with Stryker by providing services to its customers. (ECF No. 24.) In August 2016, the Court found Defendants in contempt for violating a discovery order and the terms of the injunction. Defendants failed to produce invoices for work that Defendants performed from July 2014 to December 2015, despite an order to produce these documents. (R&R 19-25, ECF No. 152, adopted by the Court in ECF No. 172.) Defendants claimed that no such invoices existed, but Stryker obtained copies of the invoices from third parties. The invoices demonstrated that Defendants had provided services to Stryker customers in violation of the injunction. (Id. at 17, 19.) As a sanction for Defendants' conduct, the Court required Defendants to pay the gross revenue[1] reflected in the invoices from after the date of the injunction ($112, 217.05), and to pay Stryker's attorney's fees and costs associated with the motion for contempt and the third-party discovery relating to the invoices ($36, 126.84). (Id. at 27; Order Regarding Stryker's Pet. for Attorney's Fees & Objs. to Def.'s Statement of Costs, ECF No. 187.)


         In the motion before the Court, Stryker seeks entry of a default judgment against Defendants for their failure to comply with the Court's orders. See Fed. R. Civ. P. 16(f)(1)(C) (permitting the Court to issue “any just orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party or its attorney . . . fails to obey a scheduling or other order”); see also Fed. R. Civ. P. 37(b)(2)(A)(vi) (permitting the Court to enter default judgment as a sanction). Stryker has offered evidence that, even after the Court found Defendants in contempt for violating the preliminary injunction, they have continued to violate the injunction by servicing Stryker customers. For instance, in December 2016, a Stryker employee observed Prickett at a hospital that is one of Stryker's customers. Prickett was wearing a PCMR jacket and pushing a hospital bed out to the docking area, presumably in order to repair the bed off-site. (Poulk Decl., ECF No. 200-2.) Defendants do not dispute this evidence, or the natural inference arising from it. In addition to entry of a default judgment, Stryker seeks an award of its attorneys' fees for bringing its motion, and a permanent injunction prohibiting Defendants from: (a) using the Stryker mark and name; and (b) engaging in competitive conduct for one year from the date of entry of the default judgment.

         A. Money Judgment

         A district court has the inherent power to sanction a party when that party exhibits bad faith. Chambers v. NASCO, Inc., 501 U.S. 32, 43-50 (1991). “A primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Id. at 44-45. Typically, before entering a default judgment due to a party's failure to obey court orders, the Court must consider the four factors set forth in Regional Refuse Systems, Inc. v. Inland Reclamation Co., 842 F.2d 150 (6th Cir. 1988), namely: (1) whether the party's failure to obey is due to wilfulness, bad faith, or fault; (2) whether the adversary was prejudiced by the party's failure to obey; (3) whether the party was warned that failure to obey could lead to default judgment; and (4) whether less dramatic sanctions were imposed or considered before default judgment was ordered. See Id. at 155. In this case, however, Defendants do not object to entry of a default judgment for money damages. Moreover, there is a “‘clear record of delay or contumacious conduct'” by Defendants. See Pelz v. Moretti, 292 F. App'x 475, 479 (6th Cir. 2008) (quoting Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997)). Defendants have already been found in contempt for violating multiple Court orders, including the preliminary injunction, and it appears that the Court's previous sanctions have had no impact. Therefore, a default judgment against Defendants in the amount of the Court's order for contempt sanctions (ECF No. 187), plus Plaintiffs' reasonable attorney's fees for bringing the motion for default judgment, is appropriate.

         B. Permanent Injunction

         Defendants object to Stryker's motion only to the extent that it seeks a permanent injunction prohibiting Defendants from engaging in competitive conduct for an additional year. Defendants assert that the non-compete and non-solicitation provisions in the employee agreement expired on June 30, 2015, and that Stryker should not be permitted to extend this term, particularly in light of the fact that Stryker has already been awarded damages for Defendants' competitive conduct. Defendants contend that Stryker is essentially asking the Court to impose a four-year term (from 2014 to 2018), which goes well beyond the one-year term agreed upon by parties in the employee agreement.

         Generally, in order to obtain a permanent injunction, a party must demonstrate: “(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006). “The decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court[.]” Id. The Court is satisfied that the considerations support a permanent injunction that prohibits Defendants from using Stryker's name and reputation in pursuit of their own business, but that the considerations do not support any further direct prohibition on good faith business competition.

         1. Extended Non-Compete

         Prickett resigned from Stryker in 2014. His agreement prevented him from competing with Stryker for one year after the end of his employment. After that, both parties were free to compete on a level playing field. Prickett breached his non-compete obligations to be sure. But it is now almost three years after the end of his employment with Stryker. After a period of time, a prohibition on competition by a former employee no longer protects the employer's “reasonable competitive business interests, ” and becomes an unreasonable restraint on trade. See St. Clair Med., P.C. v. Borgiel, 715 N.W.2d 914, 919 (Mich. Ct. App. 2006). “To be reasonable in relation to an employer's competitive business interest, a restrictive covenant must protect against the employee's gaining some unfair advantage in competition with the employer, but must not prohibit the employee from using general knowledge or ...

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