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CVS Pharmacy, Inc. v. Lavin

United States District Court, D. Rhode Island

June 18, 2019

CVS PHARMACY, INC., Plaintiff,
v.
JOHN LAVIN, Defendant.

          MEMORANDUM AND ORDER

          JOHN J. MCCONNELL, JR., United States District Judge.

         This case involves the propriety and application of a non-compete agreement. John Lavin worked for CVS Pharmacy, Inc. as a senior executive for 27 years. He signed a Restrictive Covenant Agreement ("Agreement") in 2017. Within two years of signing the Agreement, Mr. Lavin resigned from CVS and started employment with the PillPack unit of Amazon ("PillPack").

         CVS sued Mr. Lavin and the Court granted a temporary restraining order to maintain the status quo. CVS now seeks a preliminary injunction. ECF No. 27. The parties have fully briefed and argued this matter. ECF Nos. 27, 33, 36. All parties waived presentation of testimony but filed substantial and extensive evidence by affidavits attached to their papers. ECF No. 27-1 through 27-8, 30, 33-1 through 33-3, 38, 39.

         Because the Court finds the Agreement enforceable and applicable to Mr. Lavin's new employment with PillPack, the Court GRANTS CVS's Motion for a Preliminary Injunction. ECF No. 27.

         I. BACKGROUND

         Mr. Lavin was a Senior Vice President responsible for leading CVS Caremark's Retail Network. He began work there in the early 1990s. His team totaled 250 employees.

         Mr. Lavin negotiated with retail pharmacies on behalf of CVS Caremark, a Pharmacy Benefits Manager ("PBM"). PBMs manage prescription benefits for their clients (insurance companies, employers, unions, governments) ("Payers"). The PBMs negotiate with retail pharmacies and mail-order distributors to get the best deal for the Payers and the Payers' subscribers. The parties describe this three-tiered system (Payers-PBMs-Pharmacies) as a complex structure applicable to the pharmaceutical industry. ECF No. 27 at 6. CVS owns both a PBM (CVS Caremark) and thousands of retail pharmacies throughout the country. CVS Caremark also has a mail-based pharmacy that competes in the retail market.

         In addition to negotiating with retail pharmacies, the Executive Committee tasked Mr. Lavin with analyzing the terms it had with mail-in retail pharmacies for his last three years at CVS Caremark. He took part in "executive-level strategy" with other CVS executives in both the PBM and retail business. This mattered to CVS because of Amazon's entry into the pharmacy business through its acquisition of PillPack, a mail-in retail pharmacy.

         Mr. Lavin signed the Agreement with CVS in 2017. ECF No. 27-4 at 10-18. In exchange for signing the Agreement, CVS awarded Mr. Lavin Restricted Stock Units ("RSUs") that had a value of $157, 500. Id. at 1-8. The RSU agreement states that the "award of RSU's ... is expressly subject to and contingent upon the requirement that [Mr. Lavin] shall have fully executed and delivered [to CVS] the Restrictive Covenant Agreement provided by [CVS]." Id. at 7, § 12. The Agreement, under the section captioned "Consideration for Agreement" states that CVS "has awarded [Mr. Lavin] restricted stock units contingent on the execution of this Agreement and compliance with its terms." Id. at 10, § 1.

         The Agreement mandates that during his employment with CVS and for 18 months thereafter, Mr. Lavin will not "directly or indirectly" engage in Competition with a Competitor.

• Competition is described as "providing services to a Competitor of [CVS] . . . that' (i) are the same or similar in function or purpose to the services [he] provided to [CVS] at any time during the last two years of [his] employment by [CVS]; or (ii) will likely result in the disclosure of Confidential Information to a Competitor or the use of Confidential Information on behalf of a Competitor." Id. at 10, § 2(a).
• A Competitor is defined as any entity that "competes with one or more of the business offerings of [CVS] . . . including] (i) [PBMs] . . . (ii) retail . . .." Id. at 10, § 2(b).

         The year after he signed the Agreement and received the RSUs, Mr. Lavin began discussions with PillPack about employment. He interviewed with both PillPack and Amazon executives. PillPack offered Mr. Lavin a job as "Director [of] Third-Party Networks & Contracting" reporting directly to PillPack CEO TJ Parker. ECF No. 27-8 at 37.

         Exactly what Mr. Lavin would be doing with PillPack seems to be a moving target. His role and responsibilities at PillPack seem to ebb and flow with this litigation.[1] While PillPack now asserts that Mr. Lavin would be negotiating only with PBMs (excluding CVS Caremark[2]) on behalf of PillPack, the original job description of the position for which PillPack hired Mr. Lavin also included negotiating with Payers. ECF No. 27-8 at 37-38.

         Mr. Lavin is also expected to contribute to PillPack's overall growth strategy and help drive its long term disruptive strategy. PillPack CEO TJ Parker stated that he expected Mr. Lavin to "contribute significantly to [PillPack's] procurement efforts . . . and help [PillPack] develop a long term disruptive strategy." Id. at 35. Mr. Lavin told one of his job interviewers from PillPack that he was "excited about the opportunity for disruption and the strategic components of the work." Id., at 34.

         II. STANDARD OF REVIEW

         To obtain a preliminary injunction, the burden is on CVS to establish that (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm with no preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the public interest. See Winter v. Nat. Res. Def. Council Inc., 555 U.S. 7, 20 (2008). The court should not award the "extraordinary and drastic remedy" of a preliminary injunction unless CVS meets its burden of persuasion with "substantial proof." See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (internal quotation marks omitted); see also Voice of the Arab World, Inc. v. MDTV Med. News Now, Inc., 645 F.3d 26, 32 (1st Cir. 2011) (describing a preliminary injunction as an extraordinary remedy).

         III. DISCUSSION

         The Court must first determine if Mr. Lavin's new position with PillPack violates the Agreement-will the new job have Mr. Lavin directly or indirectly engage in Competition (described as either (1) providing services that are the same or similar, or (2) likely to disclose Confidential Information) with a Competitor of CVS? If it does not, then the analysis ends, and Mr. Lavin is free to join PillPack in his new position. If the new position does violate the Agreement, the Court must then determine whether the Agreement violates public policy because it is not "reasonable." And finally, the Court must determine if all the factors for issuing a preliminary injunction exist.

         A. Does the New Job Violate the Agreement?

         1. CVS's Position-Yes

         i. Same or Similar Services

         CVS argues that the services Mr. Lavin will provide to PillPack will be the same or similar in function or purpose to the services he provided to CVS. At CVS, Mr. Lavin's primary responsibility had been negotiating with pharmacies on behalf of CVS Caremark. At PillPack, Mr. Lavin will negotiate with PBMs for PillPack's participation in Retail Networks. At both jobs he is involved with negotiations between PBMs and retail pharmacies, just on the opposite side of the table. At both jobs his primary goal is to achieve the most favorable terms for his employer in negotiations related to inclusion in the Retail Network. Mr. Lavin will also negotiate and build relationships with private Payers and public Payers, both of whom are current CVS clients.

         Mr. Lavin is also expected to contribute significantly to PillPack's overall growth strategy and help drive its "long term disruptive strategy." ECF No. 27-8 at 35. He will be charged with building a strategy to engage directly with Payers that are traditional clients of PBMs. He is also expected to "own" PillPack's drug procurement strategy and relationships and "contribute significantly" to PillPack's pharmaceutical distribution as a service initiative, which ...


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