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On appeal, exec’s noncompete again deemed enforceable

Although disagreeing on the proper theoretical approach to support its decision, a three-judge panel of the 1st U.S. Circuit Court of Appeals has upheld a federal judge’s preliminary injunction blocking a CVS executive from working for a competitor for the 18-month duration of a noncompete agreement.

When John Lavin, a vice president of CVS Caremark, jumped ship to join PillPack, Amazon’s online retail pharmacy, CVS sued to enforce the parties’ covenant not to compete and moved for a preliminary injunction. Rhode Island U.S. District Court Judge John J. McConnell Jr. granted the requested relief, concluding that the agreement was reasonable and that Lavin’s new position would violate it.

In Lavin’s interlocutory appeal, 1st Circuit Judge Kermit V. Lipez wrote the panel’s lead opinion in affirming, finding the agreement reasonable under either of two analytical frameworks: the “facial” approach, under which a court considers the agreement as a whole, and the “as-applied” approach, in which a court looks only to the facts of a given case and how an employee would violate the covenant.

“The District Court’s factual findings show that Lavin had extensive knowledge of CVS Caremark’s strategic initiatives and detailed information about its contracts with retail pharmacies and payers,” Lipez wrote on the facts “as applied” to Lavin. “It strains credulity to think that a top-echelon executive like Lavin could develop a strategy for PillPack without dipping into this knowledge.”

And the panel further concluded that CVS was likely to succeed on its claim for injunctive relief under a facial approach in light of the “doctrine of partial enforcement.”

“That is, even if the agreement is facially overbroad … the doctrine of partial enforcement permits us to ‘modify’ the overly broad agreement and enforce it to the extent reasonable,” Lipez wrote.

While concurring with the result, the two remaining panelists diverged in their rationales. Judge Sandra L. Lynch declined to join in those portions of Lipez’s opinion purporting to find a basis in Rhode Island law for a facial analysis and partial enforcement.

“If Rhode Island law is to be extended in either of those two ways, it is up to the Rhode Island courts or legislature to do so, not the federal courts,” Lynch wrote.

On the other hand, Judge Bruce M. Selya was confident that the state’s Supreme Court would reject the as-applied test in favor of a facial approach to reasonableness.

The 36-page decision in CVS Pharmacy, Inc. v. Lavin can be found here.

John J. Cotter and Jennifer J. Nagle, both of Boston’s K&L Gates, represented appellant Lavin. Attorneys for CVS were Michael L. Rosen, Richard G. Baldwin and Allison L. Anderson, all with Foley Hoag in Boston.

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