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Optum, Inc. v. Smith

United States District Court, D. Massachusetts

February 5, 2019

OPTUM, INC. and OPTUM SERVICES, Inc., Plaintiffs,


         WOLF, D.J. February 5, 2019 This dispute arises out of defendant David William Smith's departure from his former employer, Optum, Inc. and Optum Services, Inc. ("Optum"), [1] a health services business, and his employment at a newly established firm, TCORP62018 LLC, which the parties refer to as "ABC." ABC is an independent health care venture established by Amazon, JPMorgan Chase & Co. and Berkshire Hathaway. In the complaint filed January 16, 2019, Optum alleges that Smith breached non-compete, nondisclosure, and non-solicitation covenants contained in stock and stock option awards that were part of his contract for employment with Optum. Optum also asserts that Smith misappropriated its trade secrets in violation of the Massachusetts Uniform Trade Secrets Act, M.G.L. c.93 §§42-42G, and the federal Defend Trade Secrets Act, 18 U.S.C. §1839(3).

         On January 16, 2019, Optum also filed a motion for a temporary restraining order: "(1) prohibiting Smith from working for, or soliciting on behalf of, ABC so Optum may conduct expedited discovery so this Court can then hear and rule on a preliminary injunction motion; (2) barring Smith from using or disclosing Optum's trade secrets or other confidential information; and (3) requiring Smith to return Optum1s property and information, including devices where such information was stored." Docket No.4 at 2.

         On January 22, 2019, Smith responded by filing a motion to compel arbitration immediately, asserting that all of the temporary relief Optum seeks is subject to arbitration, including the requests for a TRO and expedited discovery. Smith relies on an Employment Arbitration Policy that was also part of his contract for employment with Optum. See UnitedHealth Group Employment Arbitration Policy (Docket No. 17-1) (the "Arbitration Policy"). The court then ordered Smith to respond to the motion for a TRO and to address the implications of Teradyne Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st Cir. 1986), in which the First Circuit held that the district court has authority to issue an injunction pending arbitration required by a contract.

         On January 22, 2019, Smith responded to the motion for a TRO. On January 24, 2019, he submitted a memorandum addressing the implications of Teradyne. On January 25, 2019, Optum filed a response to Smith's motion to compel arbitration and a reply to his opposition to the motion for a TRO.

         In response to Smith's request that the court compel arbitration immediately, rather than rule on Optum's motion for a TRO, Optum argues that the parties' contract authorizes it to seek, and the court to issue, a TRO maintaining the status quo before requiring that the dispute be submitted to arbitration. As explained below, this contention is correct.

         The Arbitration Policy is a contract that requires covered claims to be resolved through binding arbitration. See Docket No. 25-1 at 2 of 8. It applies to, among other things, "claims for unfair competition and violations of trade secrets . . . ." Id. Therefore, Optum1s claims that Smith is violating his contractual covenant not to compete, and his contractual and statutory duties not to disclose or misuse its confidential information, must be arbitrated. In addition, the Arbitration Policy provides that any dispute concerning "its interpretation" or "arbitrability" is a covered claim to be resolved by arbitration. Id.

         However, the Arbitration Policy also states that:

[T]his Policy does not preclude either an employee or [Optum] from seeking emergency or temporary injunctive relief in a court of law in accordance with applicable law. However, after the court has issued a ruling concerning the emergency or temporary injunctive relief, the employee and [Optum] are required to submit the dispute to arbitration pursuant to this Policy.

Id. at 3 of 8 (emphasis added).[2]

         Smith began his employment with Optum in 2016 and, therefore, agreed to the Arbitration Policy as part of his employment contract. Id. at 2 of 8. As noted, that contract provided that Optum could request that a court issue temporary injunctive relief in accordance with applicable law before submitting the dispute to arbitration. The applicable law then included Ortho Pharmaceutical Corp. v. Amqen, Inc., 882 F.2d 806 (3d. Cir. 1989). In 1989, relying on the First Circuit decision interpreting Massachusetts law in Teradyne Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st Cir.1986), the Third Circuit in Ortho Pharmaceutical Corp. held that the Federal Arbitration Act authorizes courts to issue temporary injunctive relief because "'the congressional desire to enforce arbitration agreements would frequently be frustrated if the courts were precluded from issuing preliminary injunctive relief to preserve the status quo pending arbitration and, ipso facto, the meaningfulness of the arbitration process."' 882 F.2d at 812 (quoting Teradyne, 797 F.2d at 51).

         More recently, the First Circuit has explained that "even where preliminary relief is for the arbitrator, a district court retains power to grant an interim preliminary injunction, where otherwise justified, for the interval needed to resort to the arbitrator - that is, for the period between the time the district court orders arbitration and the time the arbitrator is set up and able to offer interim relief itself." Next Step Med. Co. v. Johnson & Johnson Int'l, 619 F.3d 67, 70 (1st Cir. 2010). The court expects that the Third Circuit would agree with the reasoning of Next Step as it agreed with the reasoning of Teradyne.

         Therefore, both the express language of the Arbitration Policy, which is part of Smith's employment contract, and the applicable law it incorporates provide this court the authority to issue a temporary restraining order to maintain the status quo pending arbitration to assure that the arbitrator will have the ability to order the relief Optum seeks if persuaded that it is justified.

         Nevertheless, Smith argues that the only injunction that the court can order pursuant to the Arbitration Policy is an order compelling arbitration. See Mem. in Supp. Def.'s Mot. to Compel Arb. (Docket No. 17) at 7. He asserts that: this contention creates a dispute that requires "interpretation" of the contract; the Arbitration Policy requires that an arbitrator resolve any dispute concerning the "interpretation" of the contract and "arbitrability"; and, therefore, the court must at least order that the arbitrator resolve the dispute concerning whether the court has the authority to decide Optum's motion for a TRO. This argument is not meritorious.

         The Arbitration Policy is not ambiguous. Smith's disagreement with the court's understanding of the plain meaning of the relevant language does not create an ambiguity. In the absence of an ambiguity there is no issue of interpretation to be decided by an arbitrator. Rather, the court must give effect to the plain meaning of the language at issue. See JFE ...

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