Flatiron Health, Inc. v. Tempus, Inc.

Background

Flatiron Health, Inc. sued its former employee, Kenneth Carson, M.D., to enforce a non-compete agreement in the parties’ Covenants Agreement. Flatiron sought a declaration that the agreement barred Carson from working for Tempus Labs, Inc., soliciting Flatiron’s customers and employees for one year after leaving Flatiron, and using or disclosing Flatiron’s trade secrets and confidential information. Flatiron also sought an injunction, meaning a court order requiring or prohibiting particular conduct.

The court held a bench trial on January 27, 28, and 30, 2020. In a February 19, 2020 judgment and a March 20, 2020 decision explaining its findings, the court held that the non-compete was broader than necessary to protect Flatiron’s legitimate business interests and was unenforceable. The court also held that Carson had not anticipatorily breached the non-compete, meaning he had not breached it in advance by stating that he accepted work at Tempus. The court separately held that the agreement’s nondisclosure provision remained enforceable and declared that Carson could not use or disclose Flatiron’s trade secrets and confidential information. It denied a permanent injunction because Flatiron had not shown a sufficient risk that Carson would use or disclose those secrets at Tempus.

Motion pending appeal

After the February judgment, Flatiron moved under Federal Rule of Civil Procedure 62(d) for an injunction pending its appeal to the United States Court of Appeals for the Second Circuit. Flatiron asked first for an order temporarily preventing Carson from working for Tempus while the motion was pending and then for an injunction barring that work during the appeal. Alternatively, Flatiron sought narrower limits on Carson’s work at Tempus.

Flatiron argued that Carson’s Tempus role could require him to use or disclose Flatiron’s trade secrets, that Tempus lacked adequate safeguards, and that Flatiron faced irreparable harm. Carson argued that Flatiron had not shown a meaningful chance of success on appeal or a risk of irreparable harm, and that prohibiting him from working at Tempus would cause him substantial harm and harm the public interest.

Legal standard

For an injunction pending appeal, the court considered four factors: whether the appeal had a substantial possibility of success; whether the moving party faced irreparable injury without an injunction; whether the injunction would substantially harm the opposing party; and how the injunction would affect the public interest. The required showing on the chance of success could vary depending on the other factors.

Court’s analysis

The court found that Flatiron’s arguments largely challenged the court’s earlier credibility determinations and interpretation of the trial evidence. The earlier decision had found that Carson’s work at Flatiron—generating new evidence for pharmaceutical companies—would not overlap with his proposed Tempus work, which would focus on helping doctors understand and use Tempus’s laboratory reports. The court again concluded that Carson’s Tempus role would not create a sufficient risk that he would use or disclose Flatiron’s trade secrets. It also found that Flatiron had not shown a substantial possibility of success on its argument that the non-compete should have been partially enforced.

The court further held that Flatiron had not shown a sufficient risk of irreparable injury. Although the non-compete could expire before the appeal was decided, the court found that the asserted risk of accidental disclosure was speculative because Carson’s proposed Tempus role would not overlap with his former role at Flatiron.

The court concluded that a complete work ban would significantly harm Carson and the public interest. Carson would likely have difficulty finding a short-term oncology position, his investment opportunities would not provide comparable income, and he had identified no expert-witness opportunities before 2021. The court also found a public interest in avoiding enforcement of an obviously overbroad non-compete that could discourage employees from challenging excessive restrictions.

The court found that narrower restrictions would cause substantially less harm and would allow Carson to work on projects concerning physicians’ understanding and use of Tempus’s laboratory reports. It rejected Flatiron’s proposed order because one proposed restriction would effectively prevent Carson from performing that limited role, and because the proposed order improperly incorporated restrictions and definitions by reference rather than describing them in reasonable detail.

Disposition

The court DENIED Flatiron’s request for a temporary restraining order. It also DENIED Flatiron’s request for an injunction prohibiting Carson from working for Tempus pending appeal. The court GRANTED IN PART Flatiron’s request for an injunction requiring Carson to follow specified limitations while working at Tempus pending appeal.

Carson could work at Tempus but was barred, pending appeal or until September 26, 2020, whichever came first, from using or disclosing the specified Flatiron trade secrets and confidential information. He also could not participate in certain Tempus committees concerning business strategy, products, data aggregation, or data-curation methods; discuss new Tempus products or strategies except those concerning physicians’ use of laboratory reports; work for or discuss Tempus’s pharmaceutical-company business; or participate in curating, aggregating, or analyzing specified real-world data. The order allowed him to collect, compile, and analyze data about physicians’ understanding and use of Tempus’s laboratory reports.

The injunction required Carson to submit a compliance certification on the stated schedule. Its issuance was conditioned on Flatiron posting a $25,000 bond by 5:00 p.m. on April 6, 2020.