Court Opinion

ID: 616372
Source: CourtListenerOpinion
Date Created: 2011-10-31 16:17:00+00
Date Added: 2024-06-11T17:50:36.992218
License: Public Domain

FILED
                                                           United States Court of Appeals
                                                                   Tenth Circuit

                                                                October 31, 2011
                   UNITED STATES COURT OF APPEALS
                                                Elisabeth A. Shumaker
                                                                   Clerk of Court
                          FOR THE TENTH CIRCUIT

    BOSTON SCIENTIFIC
    CORPORATION,

              Plaintiff-Counter-
              Defendant- Appellant,
                                                        No. 10-4201
    v.                                         (D.C. No. 2:10-CV-00467-CW)
                                                          (D. Utah)
    MIKELLE MABEY; ADVANCED
    NEUROMODULATION SYSTEMS,
    doing business as St. Jude
    Neuromodulation Division,

              Defendant-Counter-
              Plaintiffs-Appellees,

    v.

    BOSTON SCIENTIFIC
    NEUROMODULATION
    CORPORATION,

              Third-Party-
              Defendant-Appellant.

                          ORDER AND JUDGMENT *

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Before LUCERO, BALDOCK, and TYMKOVICH, Circuit Judges.

      Boston Scientific Corporation and Boston Scientific Neuromodulation

Corporation (collectively “Boston Scientific”) filed suit to enforce a non-compete

agreement against Mikelle Mabey, a former employee, and St. Jude Medical

Neuromodulation Division (“St. Jude”), her current employer. The district court

held in favor of Mabey and St. Jude, and Boston Scientific appealed. Exercising

jurisdiction under 28 U.S.C. § 1291, we reverse and remand.

                                         I

      The underlying facts are not in dispute. Mabey began working for Boston

Scientific as an at-will employee in 2006. Throughout her tenure with the

medical device manufacturer, she earned variable compensation through a bonus

program in addition to her base salary. Boston Scientific’s 2008 bonus program

guaranteed Mabey a minimum bonus of 12 percent of her base salary unless she

failed to meet certain compliance requirements.

      In 2009, after Mabey had worked for Boston Scientific for three years, the

company asked her to sign a non-compete agreement. If she signed, she would

remain eligible for her quarterly bonus under a program substantially identical to

the 2008 program. If she did not sign, Boston Scientific would reduce her bonus

eligibility by $1,000 for each of the final three quarters of 2009; however, she

would remain employed at-will and would continue to receive the same base

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salary. Mabey signed the agreement on March 2, 2009. As a result, she earned

$3,000 more in bonus pay than if she had not signed the agreement.

      In May 2010, Mabey left Boston Scientific to work for its competitor, St.

Jude. Boston Scientific filed suit in Utah federal district court to enforce the

non-compete agreement. Both sides moved for summary judgment. The parties

stipulated that Massachusetts law governed, and they agreed to have the district

court decide the case based on the record and oral argument.

      The district court held in favor of Mabey and St. Jude. It concluded that

the non-compete was unenforceable due to a lack of consideration because Boston

Scientific “merely kept Mabey’s compensation the same” in exchange for her

signing the agreement. 1

                                          II

      We review the district court's legal conclusions de novo. Admin. Comm. of

Wal-Mart Assocs. Health & Welfare Plan v. Willard, 393 F.3d 1119, 1121

(10th Cir. 2004) (de novo review applies when the parties agree that oral

argument on cross motions for summary judgment can be treated as a bench trial).

1
      Finding this conclusion dispositive, the district court did not consider
whether Boston Scientific’s promise of a bonus was illusory, or whether the
agreement was an unconscionable contract of adhesion.

                                         -3-
                                          A

      For a non-compete agreement to be enforceable under Massachusetts law, it

must be supported by consideration. Marine Contractors v. Hurley, 310 N.E.2d

915, 918 (Mass. 1974). An employer must provide the employee some “clear

additional benefit.” Cypress Grp. v. Stride & Assocs., No 036070BLS2, 2004

WL 616302, at *3 (Mass. Super. Ct. Feb. 11, 2004) (unpublished). To interpret

this requirement, the district court looked to a series of cases holding that

continued employment is insufficient consideration to support a non-compete

agreement, even when employment is at-will. See IKON Office Solutions v.

Belanger, 59 F. Supp. 2d 125, 131 (D. Mass. 1999); Eng’g Mgmt. Support v.

Puca, No. MICV200501082L, 2005 WL 1476462, at *1 (Mass. Super. Ct. Apr. 11,

2005) (unpublished) (citing IKON); Rellstab v. John Hancock Fin. Servs.,

No. 011281B, 2004 WL 1050748, at *1 (Mass. Super. Ct. Mar. 24, 2004)

(unpublished) (quoting IKON). According to IKON and its progeny, for a

post-employment agreement to withstand scrutiny, there must be “some evidence

that the terms of the underlying employment contract had been [re]negotiated.”

IKON, 59 F. Supp. 2d at 131.

      Reasoning by analogy, the district court extended IKON to the facts of this

case. The court concluded that “merely continuing compensation at the same

level, in exchange for the Non-Compete Agreement, no more constituted a ‘clear

additional benefit’ than continuing a person’s employment does in an at-will

                                         -4-
employment situation.” Although Boston Scientific had the “authority” as an

at-will employer “to change Mabey’s compensation from year-to-year,” it could

not provide sufficient consideration for a restrictive covenant simply by agreeing

not to reduce her compensation.

                                         B

      Massachusetts courts have been less than clear on the issue of consideration

for non-compete agreements formed post-employment. See, e.g., EMC Corp. v.

Donatelli, No. 091727BLS2, 2009 WL 1663651, at *6 (Mass. Super. Ct. May 5,

2009) (unpublished) (“[T]o the extent that IKON stands for the proposition

that . . . mere continuation of [a] defendant’s existing employment [is] not

sufficient [consideration] . . . IKON does not reflect current Massachusetts law.”);

see also Optos, Inc. v. Topcon Med. Sys., 777 F. Supp. 2d 217, 231 (D. Mass.

2011) (stating that “Massachusetts has recognized the doctrine that continued

employment alone may suffice to support non-competition or other restrictive

covenants”); Wilkinson v. QCC, No. 99-P-1854, 2001 WL 1646491, at *1 (Mass.

App. Ct. Dec. 21, 2001) (unpublished) (concluding that “to the extent new

consideration was required [for the non-compete agreement], continued

employment was the consideration”). Because there appears to be intrastate

confusion, we must first determine whether IKON and the other continued

employment cases relied upon by the district court correctly state Massachusetts

law. See Grain Dealers Mut. Ins. Co. v. Lower, 979 F.2d 1411, 1416 (10th Cir.

                                        -5-
1992) (“As a court sitting in diversity, we must apply a state supreme court’s

most recent statement of state law.” (quotation omitted)).

       Although the Massachusetts Supreme Court has not addressed this issue for

several decades, its most recent relevant decision held that a non-compete

agreement supported only by continued employment was “not void for lack of

consideration.” Sherman v. Pfefferkorn, 135 N.E. 568, 569 (Mass. 1922); see

also Econ. Grocery Stores v. McMenamy, 195 N.E. 747, 747-48 (Mass. 1935)

(reiterating this rule in dicta).

       The IKON court declined to follow this precedent based on two cases

decided by lower Massachusetts courts. IKON, 59 F. Supp. 2d at 131 (citing First

E. Mortg. Corp. v. Gallagher, No. 943727F, 1994 WL 879546 (Mass. Super. Ct.

July 21, 1994) (unpublished) and Sentry Ins. v. Firnstein, 442 N.E.2d 46 (Mass.

App. Ct. 1982)). Neither case, however, directly addresses the question of

whether continued employment can constitute sufficient consideration in this

context. Instead, these cases hold that when an employer forces an employee to

sign a non-compete agreement on threat of termination, that agreement is formed

under “practical duress.” First E. Mortg. Corp., 1994 WL 879546, at *1; Sentry

Ins., 422 N.E.2d at 47-48. Duress and consideration are distinct inquiries. More

importantly, as the IKON court itself acknowledged, these lower-court decisions

could not “specifically abrogate” the holdings of Massachusetts’ highest court.

59 F. Supp. 2d at 131.

                                        -6-
      To the extent that it contradicts the Massachusetts Supreme Court in

Pfefferkorn, we decline to follow IKON. See Salt Lake Tribune Publ’g Co. v.

Mgmt. Planning, 454 F.3d 1128, 1134 (10th Cir. 2006) (stating that Courts of

Appeals sitting in diversity may not predict that a state supreme court will

overrule its own precedent in the “complete absence of any indication from that

court of its inclination to do so” (quotation omitted)). Because we discern no

binding Massachusetts precedent holding that continued at-will employment is

insufficient consideration for a post-employment agreement, we reject the district

court’s extension of this principle to covenants supported by an employer’s

agreement to continue compensation at the same level.

                                         C

      Having resolved this threshold issue, we now turn to whether Boston

Scientific provided adequate consideration to support its non-compete agreement

with Mabey. We hold that it did.

      Because Mabey was an at-will employee, Boston Scientific was free to

reduce her future compensation at any time. It had no preexisting legal obligation

to pay Mabey the $3,000 she received in exchange for signing the non-compete

agreement. This payment, accordingly, constitutes sufficient consideration under

Massachusetts law. See Fall River Hous. Joint Tenants Council, Inc. v. Fall River

Hous. Auth., 448 N.E.2d 70, 73 (Mass. App. Ct. 1983).

                                         -7-
      Mabey and St. Jude nevertheless argue that there was a failure of

consideration because Boston Scientific incurred no additional expense.

Consideration is sufficient, however, “if there is either a benefit to the promisor

or a detriment to the promisee.” Marine Contractors, 310 N.E. 2d at 919

(rejecting “the notion that consideration to support a promise must flow only from

the promisee”). In exchange for signing the non-compete, Mabey received a

benefit to which, as an at-will employee, she had no legal right. This was

sufficient to form a valid agreement.

                                         III

      The judgment of the district court is REVERSED and the case

REMANDED for reconsideration consistent with this order and judgment.

                                               Entered for the Court

                                               Carlos F. Lucero
                                               Circuit Judge

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