1RECOMMENDED FOR FULL-TEXT PUBLICATIONPursuant to Sixth Circuit Rule 206ELECTRONIC CITATION: 2000 FED App. 0143P (6th Cir.)File Name: 00a0143p.06UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT_________________MANAGEDHEALTHCAREASSOCIATES,INC.,MHCAACQUISITIONINC., d/b/aMHA/MedEcon,Plaintiffs-Appellants,v.RONALDKETHAN,EASTTEXASREGIONALCOOPERATIVE, d/b/a FirstChoice Cooperative,Defendants-Appellees.;>1No. 99-5444Appeal from the United States District Courtfor the Western District of Kentucky at Louisville.No. 99-00066—Jennifer B. Coffman, District Judge.Argued: March 10, 2000Decided and Filed: April 21, 2000Before: WELLFORD, SILER, and GILMAN, CircuitJudges.2Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444_________________COUNSELARGUED:William J. Hunter, Jr., MIDDLETON &REUTLINGER, Louisville, Kentucky, for Appellants. JamesD. Cockrum, BROWN, TODD & HEYBURN, Louisville,Kentucky, for Appellees.ON BRIEF:William J. Hunter,Jr., Thomas P. O’Brien, III, Dennis D. Murrell,MIDDLETON & REUTLINGER, Louisville, Kentucky,Daniel L. Abrams, Louis M. Solomon, SWIDLER, BERLIN,SHEREFF & FRIEDMAN, New York, New York, forAppellants. James D. Cockrum, Charles M. Pritchett, Jr.,BROWN, TODD & HEYBURN, Louisville, Kentucky,R. Gregg Hovious, TACHAU, MADDOX, HOVIOUS &DICKENS, Louisville, Kentucky, for Appellees.GILMAN, J., delivered the opinion of the court, in whichSILER, J., joined. WELLFORD, J. (pp.14-15), delivered aseparate dissenting opinion._________________OPINION_________________RONALD LEE GILMAN, Circuit Judge. Managed HealthCare Associates, Inc. and MHCA Acquisition, Inc., d/b/aMHA/MedEcon (collectively MHA), commenced an actionin state court against Ronald Kethan (Kethan) and East TexasRegional Cooperative, d/b/a First Choice Cooperative (FirstChoice). MHA sought a preliminary injunction to preventKethan from violating the noncompetition clause that he hadsigned when employed by MedEcon Services, Inc.(MedEcon), MHA’s predecessor. After Kethan and FirstChoice removed the case to federal court based on diversityof citizenship, the district court held that the noncompetitionagreement was enforceable only by MedEcon, and that it wasnot assignable by MedEcon to MHA without Kethan’sconsent. It therefore denied MHA’s request for a preliminaryNo. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.15issue (and certainly not to the issue I would certify to thatCourt). Pertinent to the issue was the unpublished decisionsof the Kentucky trial court and the Court of Appeals whichnoted no controlling Kentucky authority on the question ofnecessity of consent to a purported assignment by theemployee.I dissent, accordingly, in favor of certification under thecircumstances.14Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444_________________DISSENT_________________HARRY W. WELLFORD, Circuit Judge, dissenting. Thisis a difficult case and my brothers would reverse and remandto the district court for further proceedings. I respectfullydiffer. I am persuaded that the best course, in light of theuncertainties that exist in this area of the law in Kentucky, isto certify this legal question to the Kentucky Supreme Court:Is the non-competition agreement in this case betweenMedEcon and its employee, Kethan, assignable to theplaintiff company (a third party), in the absence ofKethan’s consent?I do not agree with the majority opinion that the districtcourt “held that non-competition clauses are not assignable inKentucky.” Rather, the essence of the district judge’s holdingwas this:[T]he non-compete agreement and the confidentialityclause applied only to MedEcon and . . ., underW. R.Grace, they were not assignable to MedEcon to MHAwithout the employee’s consent. Reinforcing this notionis the Kethan/MedEcon agreement’s inclusion of arequirement that all contract modifications must bewritten. No such writing occurred here; thus, MedEcondid not assign the covenant to compete or confidentialityclause to MHA.(emphasis added.)The majority holds that “a non-competition clause isassignable in Kentucky.” It adds that “[t]here is only one casein Kentucky that addresses this issue,”Choate v. KoorsenProtective Servs., Inc., 929 S.W.2d 184 (Ky. 1996). We arein agreement that this particular Kentucky Supreme Courtdecision didnotdetermine the answer to the assignabilityNo. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.3injunction and dissolved the temporary restraining order thatMHA had obtained in state court. For the reasons set forthbelow, weREVERSEthe decision of the district court andREMANDthe case for further proceedings consistent withthis opinion.I. BACKGROUNDA. Procedural historyOn January 5, 1999, MHA commenced an action againstKethan and First Choice in the Circuit Court of JeffersonCounty, Kentucky. MHA sought and obtained a restrainingorder, enjoining Kethan from violating the noncompetitionclause that was part of his employment agreement withMedEcon.On February 2, 1999, Kethan and First Choice removed theaction to the United States District Court for the WesternDistrict of Kentucky. Kethan and First Choice then moved todissolve the restraining order that MHA had obtained in statecourt and opposed MHA’s motion for a preliminaryinjunction. On March 4, 1999, the district court dissolved therestraining order and denied MHA’s request for a preliminaryinjunction. In late March of 1999, MHA filed this timelyappeal.B. Factual backgroundOn December 27, 1991, Kethan signed an employmentagreement with MedEcon, a group purchasing organization(GPO) for hospitals with its principal place of business inKentucky. GPOs contract for the purchase of a vast array ofproducts for use by member healthcare facilities. They alsoenter into agreements directly with suppliers to allow memberfacilities to purchase the products at reduced prices, therebyproviding a substantial savings of both time and money fortheir members. GPOs also engage in bulk purchasing in orderto provide their members even greater discounts.4Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444From 1992 through 1996, Kethan worked as a salesman andan agreement administrator for MedEcon. Kethan’s jobresponsibilities included meeting with various representativesfrom hospitals and encouraging them to use the productscovered by MedEcon’s agreements. He contacted numerousrepresentatives in Texas and Oklahoma on MedEcon’s behalf.During this period, Kethan had the opportunity to developstrong business relationships with MedEcon’s customers,including First Choice. Kethan eventually became theagreement administrator for the First Choice account.In June of 1998, MHA, which is also a GPO, begannegotiations with MedEcon for the acquisition of MedEcon’sassets. On September 9, 1998, most of MedEcon’s assetswere purchased by MHA. Included in those assets wasKethan’s employment agreement. Neither MedEcon norMHA obtained Kethan’s written consent to the assignment.Following the transaction, Kethan continued to be an at-willemployee, performing the same job, receiving the same salaryand benefits, and reporting to the same supervisor.Twenty days after the sale of MedEcon’s assets to MHA,Kethan gave thirty-days’ notice of his resignation. Two daysafter Kethan tendered his resignation notice, First Choiceceased using MHA/MedEcon for group purchasing services.When the thirty days had passed from Kethan’s resignationnotice, he commenced employment with First Choice.Shortly thereafter, MHA brought suit seeking to enforceKethan’s noncompetition agreement with MedEcon.The noncompetition clause provides as follows:Employee, during the term of this agreement and for aperiod of two (2) years after the termination thereof, willnot do, directly or indirectly, for himself or herself or asan agent of, or on behalf of, or in conjunction with, anyperson, trust, firm, partnership, corporation, or businessorganization other than the Company (“Other Firm”), norwill he or she, directly or indirectly, cause or permit anyNo. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.13Kethan’s reliance on the statement was unreasonable in lightof the contractual requirement that all modifications have tobe in writing. Aside from the fact that there appears to be noconsideration for Irene’s alleged promise, this is exactly thetype of claim that the non-modification clause was designedto prevent. Accordingly, Kethan’s reliance argument isunavailing.E. The district court must balance the equitiesAlthough we have concluded that the district court erred indismissing MHA’s motion for a preliminary injunction basedon the legal issues regarding assignability, this leavesunresolved the factual issues that must be considered. Theseissues include (1) the likelihood of success on the merits, (2)the irreparable harm that could result if the injunction is notissued, (3) the impact on the public interest, and (4) thepossibility of substantial harm to others.See In re EaglePicher Industries, Inc., 963 F.2d 855, 859-60 (6th Cir. 1992).Kethan and First Choice strenuously argue that the districtcourt did not abuse its discretion in refusing to grant thepreliminary injunction because MHA cannot show anydamages and, in any event, could be adequately compensatedby a monetary award. These issues will need to be resolvedby the district court on remand.III. CONCLUSIONFor all of the reasons set forth above, weREVERSEthedecision of the district court andREMANDthe case forfurther proceedings consistent with this opinion.12Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444Kethan’s and First Choice’s final argument is based on thiscircuit’s decision inW.R. Grace & Co. v. Hargadine, 392F.2d 9 (6th Cir. 1968), which arguably held thatnoncompetition clauses are not assignable under Ohio law.In the first place,Graceis distinguishable from the facts ofthe present case because the court was interpreting Ohio lawas opposed to Kentucky law. Second, the holding inGracewith respect to assignability is ambiguous at best. The districtcourt’s decision inGraceactually supports MHA’s position,because it held that the new employer had the right to enforcethe covenant against the employee for the specified term oftwo years.Id. at 19. But because the two-year covenant hadended in April of 1962 due to a prior corporate change,however, and because Grace did not acquire ownership untilMay of 1964, the district court held that the two-year ban hadalready lapsed.Id. This court affirmed the district court’sdecision but, in dicta, stated that noncompetition clauses werenot assignable under Ohio law.Idat 20. BecauseGracewasinterpreting Ohio law and because the basis for the court’sdecision is unclear, we find that the case is not determinativein resolving the present action.Based on the opinions of the lower Kentucky courts inChoate, the majority rule from the other states that haveaddressed the issue, and the additional reasons set forthabove, we believe that the Kentucky Supreme Court wouldconclude that noncompetition clauses are assignable.Consequently, we reverse the district court on this point.D. Kethan could not reasonably rely on Larry Irene’sstatementsKethan and First Choice next argue that even if thenoncompetition clause was properly assigned to MHA, MHAwaived its contractual rights or is now estopped fromasserting its contractual rights because its president LarryIrene allegedly told Kethan that MHA would not enforce theclause against him. MHA argues that Irene never made sucha statement to Kethan. Even if Irene did so state, however,No. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.5Other Firm in which he or she has a proprietary orfinancial interest, or of which he or she is a director,officer, employee, shareholder, partner, or representative,to do any of the following[:]a. solicit or cause any past, present or future (up to thetime of the termination of employment) customers (ormembers) of the Company or of any of the existing orfuture subsidiaries or affiliates of the Company(“Subsidiaries or Affiliates”) to transfer all or part oftheir business from the Company or the Subsidiaries orAffiliates or render competitive services to any suchcustomers (or members).b. induce or attempt to influence any existing or futureemployee of the Company or any of the Subsidiaries orAffiliates to leave such employment; andc. engage in any of the kinds of business activities inwhich the Company or any of the Subsidiaries orAffiliates have been or is now engaged within the Statesof Texas, Kansas, Nebraska, Oklahoma, Colorado, Idaho,Arizona, Wyoming, and Missouri.In addition to the noncompetition clause, the agreementcontained a provision requiring that any modifications be inwriting and signed by both parties. The agreement alsoprovided that any disputes were to be governed by Kentuckylaw. No clause in the contract, however, directly addressedthe issue of whether Kethan’s contract could be assigned.The district court concluded that the assignment ofKethan’s contract was a modification. Because anymodification had to be in writing, and there was no suchwriting, the district court held that Kethan was no longerbound by the noncompetition clause. The district court alsoheld that noncompetition clauses are not assignable underKentucky law.6Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444II. ANALYSISA. Standard of reviewAlthough this court reviews a challenge to a district court’sdecision regarding preliminary injunctions for abuse ofdiscretion,see Sandison v. Michigan High School AthleticAss’n, 64 F.3d 1026, 1030 (6th Cir. 1995), the two key issuesin this case are questions of law dealing with assignmentsunder Kentucky law. Neither issue has been directlyaddressed by the Supreme Court of Kentucky. “When thedistrict court construes a contract, such interpretation is aquestion of law and reviewable de novo by the appellatecourt.”F.D.I.C. v. Aetna Cas. and Sur. Co., 903 F.2d 1073,1077 (6th Cir. 1990). Our role in this diversity of citizenshipcase “is to make [the] best prediction, even in the absence ofdirect state court precedent, of what the Kentucky SupremeCourt would do if it were confronted with this question.”Welsh v. United States, 844 F.2d 1239, 1245 (6th Cir. 1988).B. An assignment does not modify the underlying termsof an employment contractProvision fourteen of Kethan’s employment agreement withMedEcon provides that “[n]o waiver, alteration, ormodification of any of the provisions of this Agreement shallbe valid unless in writing and signed by both of the partieshereto.” The first key issue thus becomes whetherMedEcon’s assignment of Kethan’s employment agreementwas a modification of the terms of his contract.Kentucky courts have not yet addressed the issue ofwhether the assignment of an employment contract modifiesthe underlying terms of the contract. The Second Circuit,however, has rejected the notion that an assignment modifiesthe underlying terms of a contract:The fact that the Agreement also provided that its termscould not be waived or altered without the writtenconsent of the bank did not justify a departure from theNo. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.11type of employee for whom noncompetition clauses weredesigned.See Central, 622 S.W.2d at 685-86.Kethan and First Choice respond by arguing that a personalservices contract cannot be assigned. A personal servicescontract, however, requires that one of the parties be bound torender personal services.See generally Kenneth D. Corwin,Ltd. v. Missouri Medical Service, 684 S.W.2d 598, 600 (Mo.Ct. App. 1985) (“[T]he duty to perform is not assignablewithout the consent of both parties.”). In contrast, anoncompetition clause only requires that one of the partiesabstain from certain activities.See generally Equifax Servs.,Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir. 1990)(“Although an employee’s duty to perform under anemployment contract generally is not delegable, . . . the rightto enforce a covenant not to compete generally is assignablein connection with the sale of a business.”) (citation omitted);In re Andrews, 80 F.3d 906, 912 (4th Cir. 1996) (“Althoughthe Thirteenth Amendment prohibits a court from specificallyenforcing a personal service contract, an agreement not tocompete is specifically enforceable if it is reasonable.”).Here, Kethan was an at-will employee who was free to resignat any time. Consequently, the noncompetition clause doesnot require any affirmative action on the part of Kethan, andis thus assignable.Kethan and First Choice further argue that the managementstyle and “character” changed when MHA purchased theassets of MedEcon. This, however, is irrelevant to the issueof whether the noncompetition clause is assignable becausethe clause was not tied to the management style or “character”of MedEcon. In fact, MedEcon could have changed itsmanagement at any time, and Kethan would have still beenbound by the noncompetition clause. Similarly, managementwould have changed exactly as it did if MHA had purchasedthe stock of MedEcon rather than its assets and, as previouslynoted, Kethan would have had no basis to complain.10Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444In addition to opinions from the lower courts of Kentucky,this court may use the rule adopted by most of thejurisdictions that have addressed the assignability issue aspersuasive authority in determining how the KentuckySupreme Court would likely decide the question.See Kurczi,113 F.3d at 1429. With respect to the assignability ofnoncompetition clauses, “[a] majority of courts permit thesuccessor to enforce the employee’s restrictive covenant as anassignee of the original covenantee (the original employer) .”6 RICHARDA.LORD,WILLISTON ONCONTRACTS§ 13:13(4th ed. 1995).MHA also correctly points out that if it had purchased thestock of MedEcon rather than its assets, MedEcon would haveremained in existence and continued to be Kethan’s employer.Because no assignment would have been necessary undersuch circumstances, Kethan would have had no basis to evenquestion the enforceability of thenoncompetition clause.Allowing Kethan to avoid his obligations under thecircumstances of this case simply because MHA decided tostructure the transaction as a purchase of assets rather thanstock would exalt form over substance.The policy behind enforcing noncompetition clauses is toprotect businesses against employees resigning and takingvalued clients with them.See Central Adjustment Bureau,Inc. v. Ingram Associates, 622 S.W.2d 681, 685-86 (Ky. Ct.App. 1981). In this case, while working for MedEcon,Kethan had access to MedEcon’s customer lists. Heeventually became First Choice’s primary advisor. Becauseof that, Kethan developed a special business relationship withFirst Choice. Shortly after First Choice decided to end itsbusiness relationship with MHA/MedEcon, Kethan ceasedworking for MHA and commenced working for First Choice.The reason that Kethan was able to develop his uniquebusiness relationship with First Choice, and later go to workfor it, was because MedEcon employed him and placed himin charge of the First Choice account. He is thus precisely theNo. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.7general New York rule . . . that a parol assignment of adebt, claim, or chose in action is valid. An assignmentdoes not modify the terms of the underlying contract. Itis a separate agreement between the assignor andassignee which merely transfers the assignor’s contractrights, leaving them in full force and effect as to the partycharged. Insofar as an assignment touches on theobligations of the other party to the underlying contract,the assignee simply moves into the shoes of the assignor.Citibank, N.A. v. Tele/Resources, Inc., 724 F.2d 266, 268-69(2d Cir. 1983) (citations omitted);accord,Ametex Fabrics,Inc. v. Just In Materials, Inc., 140 F.3d 101, 107 (2d Cir.1998) (noting that it is “elementary” that assignments do notmodify the underlying terms of a contract). Those casescorrectly recognize that assignments and modifications arecompletely different concepts, and that assignability is notimpacted by “boilerplate” modification provisions.Based on the reasoning ofCitibankandAmetex, weconclude that the terms of Kethan’s employment were notmodified by the assignment of his contract and thesubstitution of MHA for MedEcon. Following theassignment, Kethan’s contractual rights and duties as anemployee did not change. The only thing that changed wasthe entity now entitled to enforce the terms and conditionsthat Kethan had previously agreed to when he entered into hisemployment agreement. Accordingly, we hold that thedistrict court erred when it concluded that the assignment ofKethan’s employment contract modified the terms of hisagreement.C. A noncompetition clause is assignable in KentuckyUnder Kentucky law, it has long been recognized “that acontract is generally assignable, unless forbidden by publicpolicy or the contract itself, or its provisions are such as toshow that one of the parties reposes a personal confidence inthe other, which he would have been unwilling to repose in8Managed Health CareAssociates, et al. v. Kethan, et al.No. 99-5444any other person.”Pulaski Stave Co. v. Miller’s CreekLumber Co., 128 S.W. 96, 101 (Ky. 1910) (citation omitted).Kentucky courts have also acknowledged that noncompetitionclauses play a critical role in business and are favored as longas they are reasonable in geographic scope and duration.SeeCentral Adjustment Bureau, Inc. v. Ingram Associates, 622S.W.2d 681, 685-86 (Ky. Ct. App. 1981) (noting that the onlyprotection for highly specialized businesses againstemployees resigning and taking their clients away arenoncompetition clauses);Lareau v. O’Nan, 355 S.W.2d 679,681 (Ky. 1962) (“[T]he policy of this state is to enforce[noncompetition clauses] unless very serious inequities wouldresult.”);Borg-Warner Protective Services, Corp. v.Guardsmark, Inc., 946 F.Supp. 495, 501 (E.D. Ky. 1996)(distinguishingCalhoun v. Everman, 242 S.W.2d 100 (Ky.1951), by noting that “the more modern cases, including thosein Kentucky, place more emphasis on the employer’sinvestment in the employee and have evolved an approachbalancing the importance of that factor against the hardship tothe employee and the public interest”).The second key issue in the present case, however, is notthe general enforceability of a noncompetition clause, butwhether such a clause is assignable under Kentucky law.There is only one case in Kentucky that addresses this issue.InChoate v. Koorsen Protective Servs., Inc., 929 S.W.2d 184(Ky. 1996), an employee was subject to a noncompetitionclause that was silent as to whether it could be assigned. Theassets of the company were later sold, and the seller assignedthe noncompetition clause to the purchaser. Choate, theemployee, argued that the clause was unenforceable becausehe did not expressly consent to the assignment. The JeffersonCounty Circuit Court rejected this argument and issued aninjunction enforcing the noncompetition clause. Thisdecision was affirmed by the Kentucky Court of Appeals.By the time the case reached the Kentucky Supreme Court,the one-year noncompetition clause had expired by its ownterms. Because the issue was then moot, the KentuckyNo. 99-5444Managed Health CareAssociates, et al. v. Kethan, et al.9Supreme Court declined to address it. Consequently, the onlyKentucky authority on point, as enunciated by both the trialand the appellate courts inChoate, recognizes thatnoncompetition clauses may be assigned as part of the sale ofa business’s assets. “Where a state appellate court hasresolved an issue to which the high court has not spoken, wewill normally treat [those] decisions . . . as authoritativeabsent a strong showing that the state’s highest court woulddecide the issue differently.”Kurczi v. Eli Lilly & Co., 113F.3d 1426, 1429 (6th Cir. 1997) (citation and internalquotation marks omitted). We find no such strong showing,or indeed any showing at all, in the case before us.But Kethan and First Choice argue thatChoateisdistinguishable because the trial court did not enforce thenoncompetition clause until the original employer had beenjoined as a plaintiff. We find this argument unpersuasive,however, because the circuit court inChoatefound that allcontractual rights to Choate’s noncompetition clause weretransferred from Sexton, Choate’s original employer, toKoorsen, and held that “Koorsen [has] the right to enforce thecovenant not to compete against Choate” without anyreference to Sexton. Consequently, the fact that Sexton wasjoined as a party plaintiff had no effect on the circuit court’sanalysis or holding.Kethan and First Choice also argue that the unpublisheddecisions of the Jefferson County Circuit Court and theKentucky Court of Appeals cannot be considered becauseRule 76.28(4)(c) of the Kentucky Rules of Civil Procedureprovides that unpublished decisions cannot be cited asauthority. This Kentucky procedural rule, however, is notcontrolling in the case before us.See Miller v. Davis, 507F.2d 308, 313 (6th Cir. 1974) (noting that federal courts mayuse their own procedural rules in diversity cases). Instead,Sixth Circuit Rule 28(g) is the relevant authority, and it doesnot preclude this court from considering the persuasivereasoning of unpublished cases.