2011 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-12-2011

Joseph Figueroa v. Precision Surgical

Precedential or Non-Precedential: Non-Precedential

Docket No. 10-4449

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Recommended Citation

"Joseph Figueroa v. Precision Surgical" (2011). 2011 Decisions. Paper 1450.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 10-4449

____________ 

JOSEPH FIGUEROA,

 

v.

PRECISION SURGICAL, INC.,

 Appellant.

v.

JOSEPH FIGUEROA D/B/A FIGUEROA MEDICAL-PUERTO RICO; 

FIGUEROA MEDICAL & ASSOCIATES, LLC

___________ 

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 02-10-cv-05575)

District Judge: Honorable Peter G. Sheridan

___________ 

Submitted Under Third Circuit LAR 34.1(a)

March 11, 2011

Before: SCIRICA, AMBRO and VANASKIE, Circuit Judges

(Filed: April 12, 2011)

___________ 

OPINION OF THE COURT 

___________
2

VANASKIE, Circuit Judge.

Appellant Precision Surgical, Inc. (“Precision”) appeals a decision by the District 

Court denying its motion to preliminarily enjoin a former sales representative, Appellee 

Joseph Figueroa, from working for a competitor. Because we find that the District Court 

did not abuse its discretion in denying the motion for a preliminary injunction, we will 

affirm.

I.

As we write only for the parties, who are familiar with the facts and procedural 

history of the case, we will set forth only those facts necessary to our analysis. Precision 

is a distributor of surgical supplies and equipment, actively marketing in New York, New 

Jersey, Delaware, and Pennsylvania, with a customer base throughout the United States 

and abroad. It represents on an exclusive basis six manufacturers of surgical equipment 

and supplies, and also represents approximately 50 manufacturers on a non-exclusive 

basis. 

In October, 2003, Precision employed Joseph Figueroa (“Figueroa”) as an 

independent sales representative. On April 23, 2004, Precision and Figueroa entered into 

a written Independent Contractor Agreement (“ICA”). The ICA contained a number of 

restrictive covenants, including a non-solicitation covenant, a non-competition covenant,

and a confidentiality covenant, all of which extended for a 24-month period beyond the 

termination of the ICA.

During the course of his relationship with Precision, Figueroa worked from his 

home while also maintaining an office at Precision. His official Job Description called
3

Figueroa an “account executive.” It mandated that “[a]proximately, eighty percent, 80%, 

of representative[‟]s time ... be spent selling primary exclusive manufacturer product line 

. . . . [and] [a]pproximately twenty percent, 20%, of representative‟s time to be spent 

selling non-exclusive „support‟ products offered by Precision....” (J.A. 475.) Numerous 

other restrictions were also placed on Figueroa‟s work performance, including daily 

reporting, attending monthly or semi-monthly meetings, reporting absences, posting his 

schedule on a corporate electronic calendar, instructions on how to dress, orders to 

receive immunizations, and obtaining permission to give quotes to companies outside his 

territory. In 2008, at Precision‟s direction, Figueroa created a limited liability company, 

Figueroa Medical & Associates, LLC, to which Precision began making Figueroa‟s 

commission payments. 

It appears from the record that numerous problems developed between Figueroa, 

who wanted to be an independent contractor free from what he regarded as Precision‟s 

micromanagement of his performance, and Precision, who felt that the restrictions on 

Figueroa were consistent with the ICA. Tensions reached a boiling point when Figueroa 

claimed that his accountant discovered that Precision had made deductions from

Figueroa‟s commissions. On September 23, 2010, Figueroa met with John Kalman, 

Precision‟s president, and asked Kalman to enter into a new independent contractor 

agreement with him. Precision, however, had determined that it desired to “move people 

towards an employee relationship” and abolish its independent contractor positions. 

Accordingly, it countered by proposing to convert Figueroa to employee status. Figueroa 

refused, and Precision terminated the ICA. 
4

Figueroa then brought a civil action against Precision in the Superior Court of 

New Jersey, Bergen County, alleging that the restrictive covenants in the ICA were 

unenforceable. The case was removed to the District Court for the District of New 

Jersey. Precision filed a counterclaim against Figueroa as well as a third-party complaint 

against Figueroa‟s companies, Figueroa Medical & Associates, LLC, and Figueroa 

Medical-Puerto Rico. In its counterclaim, Precision alleged that Figueroa was acting in 

violation of the ICA by working as an independent sales representative for R. C. Sales, 

one of Precision‟s direct competitors. Precision further alleged that Figueroa‟s 

establishment of Figueroa Medical-Puerto Rico, which sought to distribute products in 

Puerto Rico, violated the ICA because Precision was entitled to a right of first refusal to 

sales in that region. Precision filed an Emergency Motion for Entry of an Order to Show 

Cause and Issuance of a Preliminary Injunction, seeking to uphold the ICA‟s restrictive 

covenants. Following a hearing, the District Court denied the requested relief. Precision

now appeals.

II.

The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction 

pursuant to 28 U.S.C. § 1292(a)(1).

Although we apply state law to the substantive issues in this diversity action,see

Erie Railroad v. Tompkins, 304 U.S. 64 (1938), 1“[w]e utilize a federal standard in 

examining requests to federal courts for preliminary injunctions.” See Instant Air Freight 

 

1

The parties agree that Pennsylvania law applies to the substantive issues in this case.
5

Co. v. C. F. Air Freight, Inc., 882 F.2d 797, 799 (3d Cir. 1989). There are four factors to 

consider in assessing a motion for a preliminary injunction: (1) whether the movant has 

shown a reasonable probability of success on the merits; (2) whether the movant will be 

irreparably harmed by the denial of relief; (3) whether granting preliminary relief will 

result in even greater harm to the nonmoving party; and (4) whether granting the 

preliminary relief will be in the public interest. Council of Alternative Political Parties v. 

Hooks, 121 F.3d 876, 879 (3d Cir. 1997). 

“[W]hen reviewing a decision to grant or deny a preliminary injunction, this court 

reviews a district court's findings of fact for clear error, conclusions of law de novo, and 

the ultimate decision to grant or deny the preliminary injunction for an abuse of 

discretion.” McTernan v. City of York, 577 F.3d 521, 526 (3d Cir. 2009). “It frequently 

is observed that a preliminary injunction is an extraordinary and drastic remedy, one that 

should not be granted unless the movant, by a clear showing, carries the burden of 

persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (internal quotation marks 

and citation omitted). Moreover, covenants not to compete are disfavored in 

Pennsylvania, and their provisions may be equitably enforced “only so far as reasonably 

necessary for the protection of the employer‟s protectible [sic] business interests.” Hess 

v. Gebhard & Co., Inc., 808 A.2d 912, 920 (Pa. 2002). 

A.

The District Court found that Precision was not entitled to the extraordinary 

injunctive relief that it sought because it had not demonstrated a substantial likelihood of 

prevailing on the merits due to its apparent failure to abide by the terms of the ICA. 
6

Specifically, the District Court concluded that Precision had likely breached the ICA by 

treating Figueroa as an employee, as opposed to according him the flexibility to be 

accorded an independent contractor, the status contemplated by the parties in the ICA. 

The District Court also found that Precision had likely breached the ICA by failing to pay 

the commissions to which Figueroa was entitled. We discern no error in the District 

Court‟s findings.

First, there was ample evidence presented at the hearing to suggest that Precision 

had breached the ICA by treating Figueroa as an employee rather than as an independent 

contractor. Figueroa‟s title was “Account Executive.” Precision established primary and 

secondary levels of reporting authority, as well as dress requirements, training 

obligations, and sales goals. (See J.A. 238.) Figueroa testified that he “wasn‟t allowed 

to” solicit clients independent of Precision‟s involvement, and that “[i]f I had a 

relationship or even talked to someone, they were all over me.” (J.A. 755.) Figueroa was 

given what “looks almost like an employment identification picture,” a Precision business 

card, and a Precision headquarters telephone number. He was required to devote 100% 

of his time to Precision, and he was apparently required to inform Precision of future 

market opportunities, such as those cultivated in Puerto Rico. (J.A. 831-32.) All of these 

factors make it look much more likely that Figueroa was treated as an employee in 

derogation of Precision‟s agreement in the ICA to retain Figueroa as an independent 

contractor.2 

 

2

Precision responds that restrictive covenants are enforceable as a matter of law, whether 

they are in the context of an employment agreement or an agreement with an independent 
7

Second, there was sufficient evidence to support a determination that Precision 

breached the ICA by failing to pay commissions to which Figueroa was entitled. On 

numerous occasions, Figueroa attempted to use subcontractors for service or maintenance 

work on equipment sold to hospitals. Precision repeatedly instructed Figueroa to use 

Northeast Medical for service and maintenance work.3 Northeast Medical was owned by 

John Kalman. Figueroa was told that his failure to use Northeast as a subcontractor “is 

not an acceptable response to our service hiring protocol.” (J.A. 270.) Figueroa rejoined 

that he was an independent contractor and would proceed as he saw fit. (J.A. 546-47.) 

When Figueroa invoiced Precision for payments connected with subcontractor 

maintenance expenses, Precision deducted the amount of the invoices from his 

commission. (J.A. 759-60.) For this reason, the parties dispute whether Precision has 

paid Figueroa in full. Precision claims that it has; Figueroa claims that he should be 

compensated for the amount of the deductions as well.4 

 

contractor. While true in the abstract, the manner in which Precision treated Figueroa is 

relevant to the issue of whether its breaches of the parties‟ contract militates against 

preliminary injunctive relief. 

3

In fact, Kalman indicated that “[t]here was a policy written that we wanted that done.” 

(J.A. 727.) This policy appears to be a directive from Robert F. Sariego, Vice President 

of Sales & Project Management, dated September 11, 2009. (J.A. 304.)

4 We agree with Precision‟s contention that, pursuant to its previous agreement with 

Figueroa, it is not responsible for paying commissions on sales made by Figueroa for 

which Precision has not received payment. Such “accelerated” payments are not 

supported by the agreement or by past practice, as Figueroa acknowledges by 

acknowledging that they are “new rules,” and Figueroa can hardly complain that a failure 

to pay them renders the agreement unenforceable. (See J.A. 627.) 
8

“The burden lies with the plaintiff to establish every element in its favor, or the 

grant of a preliminary injunction is inappropriate.” P. C. Yonkers v. Celebrations of the 

Party and Seasonal Superstore, 428 F.3d 504, 508 (3d Cir. 2005). It is, of course, a wellsettled principle of contract law that “a material breach by one party to a contract entitles 

the non-breaching party to suspend performance.” Widmer Engineering, Inc. v. Dufalla,

837 A.2d 459, 467 (Pa. Super. Ct. 2003). In the context of a motion for a preliminary 

injunction seeking to enforce a restrictive covenant, an apparent material breach of 

contract by the employer undermines its claim to such extraordinary relief. The District 

Court found that the evidence indicated that Precision did not perform as required by the 

ICA, observing that Precision “has not shown that it has consistently paid Mr. Figueroa 

all the compensation due him under his contract.” (J.A. 830.) The District Court‟s 

findings are not clearly erroneous, and provide a rational basis for denying preliminary 

injunctive relief.

There appears to be another basis for denying preliminary injunctive relief not 

addressed by the District Court, and that is whether the restrictive covenants at issue here 

were supported by adequate consideration.5 Under Pennsylvania law, a restrictive 

covenant imposed subsequent to the establishment of an employment or independent 

contractor relationship “must be supported by new consideration.” Gagliardi Bros., Inc. 

v. Caputo, 538 F. Supp. 525, 528 (E.D. Pa. 1982) (quoting George W. Kistler, Inc. v. 

O’Brien, 347 A.2d 311, 316 (Pa. 1975)). In Caputo, an employer sought to enforce a 

 

5 We, of course, may affirm the District Court‟s ruling on any ground supported by 

the record. See Tourscher v. McCullough, 184 F.3d 236, 240 (3d Cir. 1999).
9

covenant not to compete which was contained in a contract executed two years after the 

employment relationship was formed. Id. at 526. Although the employee was given a 

raise at about the time of the contract‟s execution, the raise was found to be a routine 

salary increase. Id. Accordingly, the court found that there was insufficient 

consideration to support the restrictive covenants. 

The situation here appears similar. By letter dated October 23, 2003, Figueroa 

was offered a “subcontractor position” with Precision as an “Executive Account 

Manager.” According to this letter, Figueroa‟s compensation was initially set at $8,000 

per month, from November 1, 2003, through April 30, 2004. From May 15, 2004, 

through October 15, 2004, he would be put “on a conventional draw against 

commissions,” and on September 30, 2004, Figueroa was to be evaluated for the purpose 

of determining whether his commissions exceed the amount drawn on his account; if so, 

he would be compensated for the extra amount. His commission rate was set in October, 

2003, at 50% of net profits less a 10% administrative fee, for amounts $500,000 or less. 

For amounts from $500,001 and above, he was to receive 55% of net profits less a 10% 

administrative fee. Figueroa commenced working for Precision in October of 2003.

Figueroa signed the ICA on April 23, 2004, nearly six months after the parties‟ 

contractual relationship was formed. The ICA is silent about compensation, providing

only that Figueroa “shall be paid in the form of commissions pursuant to a calculation 

mutually agreed upon by the parties.” (J.A. 252.) Significantly, Kalman, Precision‟s 

president, admitted at the preliminary injunction hearing that there was no alteration of 

compensation between October 2003 and December of 2004. (J.A. 702.) He further 
10

stated that “[t]he intent [behind the ICA] was to have an agreement,” and that his “intent 

was not to give [Figueroa] any more benefits or anything additional to what he was 

getting before the agreement.” (J.A. 711.) In light of the evidence, there is a substantial 

issue as to whether there was adequate consideration for the restrictive covenants, thus 

warranting denial of preliminary injunctive relief.

In summary, the record discloses ample reasons for concluding that Precision had 

not demonstrated a reasonable probability of succeeding on the merits. Accordingly, the 

District Court did not abuse its discretion in denying Precision‟s motion for a preliminary 

injunction. 

B.

Even if Precision had demonstrated a likelihood of prevailing on the merits, 

preliminary injunctive relief was foreclosed by the District Court‟s finding that Precision 

did not demonstrate irreparable injury. In the context of the grant of a preliminary 

injunction in this Circuit, irreparable injury has been defined as “potential harm which 

cannot be redressed by a legal or an equitable remedy following a trial.” Instant Air 

Freight Co. v. C. F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989). Indeed, such 

loss must not be merely economic, but “of a peculiar nature, so that compensation in 

money cannot atone for it.” A. O. Smith Corp. v. F.T.C., 530 F.2d 515, 525 (3d Cir. 

1976) (internal quotation marks omitted). No less than a “clear showing of immediate 

irreparable injury” is required. Ammond v. McGahn, 532 F.2d 325, 329 (3d Cir. 1976). 

When asked to discuss the harm Precision sustained as a result of Figueroa‟s 

conduct, John Kalman, the President of Precision, opined that he had received letters 
11

“terminating the . . . exclusive territory that we had with Dornoch Medical Systems,” 

(J.A. 655), and that “Lista International has also reduced our territory,” although he could 

not state with certainty that Figueroa was handling sales for either supplier. (J.A. 658). 

Kalman also testified that a purchase order of $36,000 had been cancelled by the 

Maimonides Medical Center, (J.A. 660), and that Figueroa had attempted, apparently 

unsuccessfully, to solicit business from another Precision customer, Englewood Surgical 

Center. (J.A. 664.) Although Kalman testified that he believed that Figueroa was 

diverting business to Precision‟s competitor, R.C. Sales, he conceded that, even if the 

injunction were granted, direct competition with R.C. Sales would continue. (J.A. 687.) 

The District Court concluded that “[t]here‟s nothing in the proofs before me today that 

shows that Precision could not remedy the situation through monetary damages.” (J.A. 

833.) 

We have previously held that even when an action will result in the destruction of 

a business, a District Court was still justified in refusing to grant a preliminary injunction 

when the loss was “capable of ascertainment and award at final judgment if [petitioner]

prevails.” Instant Air Freight Co. v. C. F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 

1989). Precision‟s evidence focused on its projected loss of income and the diversion of 

its business interests, indicating that any injury was compensable through a monetary 

damages award. Precision failed to meet the high standard required for the granting of a 

preliminary injunction to enforce a covenant not to compete. For this reason as well, the 

District Court did not abuse its discretion when it denied Precision‟s request for a 

preliminary injunction.
12

III.

For the foregoing reasons, we will affirm the judgment of the District Court.