Orthofix, Inc. v. Eric W. Hunter

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 15a0755n.06
Case No. 15-3216
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ORTHOFIX, INC.,
Plaintiff-Appellant,
v.
ERIC W. HUNTER,
Defendant-Appellee.
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ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF
OHIO
Before: MERRITT, McKEAGUE, and WHITE, Circuit Judges.
MERRITT, Circuit Judge. This case is about the relationship of three separate
categories of business information: (1) “trade secrets,” (2) contractually protected “confidential
information,” and (3) “general skills and knowledge.” The Restatement (Third) of Unfair
Competition succinctly sets out the legal meaning of these three categories of information and
how the three should be applied in this case.
According to the Restatement, a trade secret is “any information that can be used in the
operation of a business or other enterprise and is sufficiently valuable and secret to afford an
actual or potential economic advantage over others.” RESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 39 (AM. LAW INST. 1995). Meanwhile, “a nondisclosure agreement prohibiting
the use or disclosure of particular information can clarify and extend the scope of an employer’s

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rights” beyond the protection afforded by trade secret statutes. RESTATEMENT (THIRD) OF
UNFAIR COMPETITION § 42 cmt. g. (AM. LAW INST. 1995) (emphasis added). But the rules
governing trade secrets are still relevant in analyzing the reasonableness and enforceability of
non-disclosure provisions because, in order to justify the contractual restraint, information
subject to non-disclosure provisions must share at least some characteristics with information
protected by trade secret statutes. Id.; RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 41
Reporters’ Note cmt. d. (AM. LAW INST. 1995). Finally, information forming the “general skill,
knowledge, training, and experience of an employee cannot be” a trade secret or subject to a non-
disclosure agreement. RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 42 cmt. d. (AM. LAW
INST. 1995). Whether particular information is part of an employee’s general skill or knowledge
depends on the facts or circumstances of a particular case. Id. But the “fact that other
competitors have been unsuccessful in independent attempts to [obtain] the information may
suggest that the information” does not constitute general skill or knowledge. Id. at 4.
In this Ohio diversity case, the dispute over these three categories of business
information is between plaintiff-appellant Orthofix, Inc. and defendant-appellee Eric W. Hunter,
its former employee. Orthofix is suing Hunter for the misappropriation of Orthofix’s trade
secrets and the use and disclosure of “confidential information” covered by the non-disclosure
provision in Hunter’s employment agreement. Hunter left Orthofix for a competitor and
immediately started selling his old customers the same medical device made by his new
employer. After a bench trial, the district court held that Hunter was not liable to Orthofix
because (1) Orthofix did not protect its trade secrets with measures “that are reasonable under the
circumstances”; and (2) the non-disclosure provision in Hunter’s employment agreement

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prohibited Hunter from using his general skills and knowledge and, therefore, formed an
unenforceable non-compete agreement.
The district court’s primary error in this case arose because it confused Orthofix’s
contract claim against Hunter for disclosure of “confidential information” with a claim for
misappropriation of trade secrets under the Ohio Uniform Trade Secrets Act (“the Ohio Act”).
In its conclusions of law, the district court said that “because Orthofix cannot maintain a
misappropriation claim [under the Ohio Act], it cannot maintain a breach of contract claim”
under Texas contract law governing the disclosure of “confidential information.” This
conclusion of law led the court to its subsequent conclusion that the “non-disclosure provision
here [forms] a lifetime non-compete clause” under Texas law because it prohibits Hunter from
using his general skills and knowledge.
We conclude that Hunter breached his employment agreement with Orthofix by using
and disclosing “confidential information” that, while not necessarily qualifying as trade secrets,
did not constitute his general skills or knowledge. Therefore, we REVERSE the court’s
judgment in favor of Hunter on Orthofix’s breach of contract claim. Because Orthofix prevails
on its breach of contract claim, we need not reach Orthofix’s alternative trade secret
misappropriation claim.1
I. Background
Eric Hunter is a medical-device salesman. This case centers on his possession and use of
the aggregate of information about physicians in his sales territory—information that Orthofix
1 Orthofix explained that the relief it seeks under its Ohio statutory claim is identical to the relief it seeks under its
breach-of-contract claim, except that it may be entitled to attorneys’ fees only under the latter. (Reply Br. 19).

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colloquially refers to as its “playbook.” Hunter claims that his possession and use of this
information was innocent.
Orthofix employed Hunter, who had no previous experience selling medical devices,
from 2000 to November 2012. As an Orthofix salesman, Hunter primarily sold bone growth
stimulators,2 devices typically worn on the skin of patients who have fractured a bone or
undergone spinal fusion surgery. Three main competitors—Orthofix, DonJoy Orthopedics, and
Biomet—control the bone growth stimulator field.
Upon hiring Hunter, Orthofix presented him with an employment agreement containing
both non-compete and non-disclosure provisions.3 Before signing the agreement, Hunter
consulted with an attorney and underlined the term “confidential information” on the signed
copy of the agreement. Hunter began his employment at Orthofix as a territory sales manager
for northwest Ohio and a portion of southeast Michigan. He worked to make contacts with
orthopedic doctors, podiatrists, and neurosurgeons in the Toledo area. Hunter developed
customers and acquired detailed information about practices of the doctors in his territory,
inquiring about their schedules, prescribing habits, and preferred brands of bone growth
stimulators. Over time, Hunter became a district sales manager and his territory expanded to
include part of northern Indiana and Metro Detroit.
2 “Bone growth stimulators” are devices that use either electrical stimulation or ultrasonic waves to augment bone
repair. A noninvasive electrical stimulator “is characterized by an external power source which is attached to a coil
or electrodes placed on the skin or on a cast or brace over a fracture or fusion site” while an ultrasonic
stimulator applies an ultrasound signal “to the skin surface at the fracture location via
ultrasound conductive coupling gel in order to stimulate fracture healing.” Bone Growth Stimulators,
http://www.aetna.com/cpb/medical/data/300_399/0343.html (last visited Sept. 16, 2015).
3 The contract between Orthofix and Hunter provides in pertinent part for the confidentiality of Orthofix information
as follows:
Employee agrees that he/she will never use or disclose any confidential information which employee has acquired
during the term of his/her employment with the corporation . . . . The term “confidential information” shall include
customer lists or identification, trade secrets, processes . . . business and trade practices, sales or distribution
methods and techniques, regulatory agreements and business strategies, and other confidential information
pertaining to the Corporation’s business or financial affairs . . . which are developed by corporation at considerable
time and expense, and which could be unfairly utilized in competition with the corporation.

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In July 2012, Hunter and his fellow employee, Bob Lemanski, began negotiations to join
DonJoy Orthopedics, Orthofix’s competitor. Richard Spina, DonJoy’s area vice president of
sales for the central United States, contacted Hunter, and negotiations progressed quickly. By
August 2012, Hunter had disclosed to Spina much of the information he had acquired over
twelve years that he would use if he transferred his business to DonJoy, including his Orthofix
employment agreement, his W-2 wage statement, copies of his Orthofix sales reports, and an
account-by-account breakdown of some of his sales of bone growth stimulators.
The three men then developed a plan for Lemanski and Hunter to join DonJoy while
trying to avoid legal issues presented by the non-disclosure and non-compete provisions in their
Orthofix employment agreements. Upon joining DonJoy, Hunter would, through an introduction
by Lemanski, sell bone growth stimulators to those doctors who were former Lemanski clients.
Hunter would cease selling bone growth stimulators to his Orthofix customers and would instead
introduce his customers to other DonJoy representatives.
Hunter resigned, effective immediately, from Orthofix via email just after midnight on
November 13, 2012. Later that morning, he signed an employment agreement with DonJoy.
Hunter resigned with no notice in order to thwart any Orthofix efforts to send in a new sales
representative to service Hunter’s existing Orthofix sales accounts before Hunter could contact
them on behalf of DonJoy.
Upon resigning from Orthofix, Hunter maintained Orthofix “confidential information” in
the form of documents and spreadsheets on his personal laptop and in his memory. Orthofix
claims that its “playbook” is protected as a trade secret or as “confidential information” under
Hunter’s employment agreement. The “playbook” includes: customer lists, wholesale price
information, sales data, staff contacts, physician schedules and preferences, and physicians’

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prescribing habits. At the time of Hunter’s resignation, Orthofix had no protocol in place for
departing employees to return or destroy Orthofix “confidential information.” Consequently, no
Orthofix employee directed Hunter to return or destroy his “playbook.”
Hunter disclosed and used Orthofix’s “confidential information” when, as a DonJoy
employee, he introduced other DonJoy representatives to his former Orthofix customers and
provided information on their buying and use habits. Orthofix’s damages expert calculated
$2,224,490 in annual lost sales and $1,623,877 in total lost profits for accounts serviced by
Hunter and Lemanski.
Orthofix filed this diversity suit against Hunter in the United States District Court for the
Northern District of Ohio alleging (1) misappropriation of trade secrets under R.C. §§ 133.61-69,
the Ohio Act; (2) breach of contract for violating the non-disclosure and non-compete provisions
of Hunter’s employment agreement; and (3) tortious interference with Orthofix sales contracts.
Hunter filed a counterclaim for disputed unpaid commissions.
On October 24th, 2014, the District Court found in favor of Hunter on Orthofix’s claims
of trade-secret misappropriation and breach of non-disclosure provision and in favor of Orthofix
on its tortious interference claim. The court awarded Orthofix $62,039 in damages for Hunter’s
tortious interference. The Court found in favor of Hunter on his counterclaim and awarded
Hunter $8,710 for unpaid commissions.4
II. Analysis
A. The Non-disclosure Provision
The district court made two related errors in finding that Hunter was not liable for
breaching the non-disclosure provision in his employment agreement. First, the court
4 Previously, the parties jointly moved to reform the non-compete provision because it was overbroad and
unenforceable. The district court granted the motion, which had the practical effect of dismissing the non-compete
claim from the case.

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misinterpreted Hunter’s non-disclosure provision when it determined that “confidential
information” covered only trade secrets instead of the full measure of information agreed to by
the parties as set forth in the agreement. Second, the court misinterpreted Texas law when it held
that Hunter’s non-disclosure provision constituted an unenforceable non-compete agreement
without limitation as to time or geography. We address each of these errors in turn. Without
regard to established conflict-of-laws rules, the parties agree that Hunter’s non-disclosure
provision is governed by Texas law.5
1) The “Confidential Information” in Hunter’s Non-Disclosure Provision Covers
more than Trade Secrets
Orthofix argues that the district court erred in interpreting Hunter’s non-disclosure
provision to cover only trade secrets because Texas law provides for the enforcement of non-
disclosure provisions covering confidential information that does not qualify as a trade secret.
The interpretation of a contract is a question of law that this Court reviews de novo. Meridian
Leasing, Inc. v. Assoc. Aviation Underwriters, Inc., 409 F.3d 342, 346 (6th Cir. 2005);
Healthcare Cable Sys., Inc. v. Good Shepherd Hosp., Inc., 180 S.W.3d 787, 791 (Tex. App.
2005).
Both Texas courts and federal courts applying Texas law have given effect to non-
disclosure provisions regardless of whether the information covered by the provisions achieves
trade-secret status. See Corp. Relocation, Inc. v. Martin, No. 3:06-CV-232-L, 2006 WL
4101944, at *15 n.17 (N.D. Tex. Sept. 12, 2006) (“Regardless of whether the information
contained in the 24 missing files qualifies for trade secret status, the court is satisfied that such
5 Under both Texas and Ohio law, Restatement (Second) of Conflict of Laws § 187 provides the framework for
determining whether the parties’ agreement as to choice of law is enforceable. Sekeres v. Arbaugh, 508 N.E.2d 941,
942 (Ohio 1987); Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319, 324 (Tex. 2013). Section 187(2)(b) indicates
that a court should not apply the law of the chosen state if application of the chosen state law “would be contrary to
a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of
the particular issue and which . . . would be the state of applicable law” in the absence of the choice of law
provision. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 (AM. LAW INST. 1971).

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information is confidential pursuant to Section 5(a) of the Employment Agreement, to which the
parties expressly agreed.”); Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452,
471 (Tex. App. 2004) (“Liu’s non-disclosure obligations under the PIA are not limited solely to
protection of trade secrets.”); Simplified Telesys, Inc. v. Live Oak Telecom, L.L.C., 68 S.W.3d
688, 693 (Tex. App. 2000) (“Whether the plaintiffs have any valuable secret or not[,] the
defendant knows the facts, whatever they are, through a special confidence that he accepted; and
while a trade-secret status may be denied, the confidence cannot be.”) (alterations in the original)
(internal quotation marks and citations omitted); see also RESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 42 cmt. g. (AM. LAW INST. 1995) (stating that a non-disclosure provision’s
prohibition on use or disclosure of particular information “can clarify and extend” the scope of
an employer’s rights beyond the protection afforded by a trade-secret statute.) (emphasis added).
Finally, Texas courts have found that non-disclosure provisions may protect information
maintained in an employee’s memory. See, e.g., M.N. Dannenbaum, Inc. v. Brummershop,
840 S.W.2d 624, 632 (Tex. App. 1993) (stating memorized information may constitute
confidential information if the information is not readily accessible).
Here, Hunter promised that he would “never use or disclose any confidential information
which [he] . . . acquired during the term of his[] employment with [Orthofix].” According to the
agreement, “confidential information” included, among other items, Orthofix “customer lists or
identification,” “business and trade practices,” “sales or distribution methods and techniques,”
“business strategies,” and “other confidential information pertaining to [Orthofix’s] business or
financial affairs.” Hunter’s understanding and acceptance of the agreement’s definition of
“confidential information” is only underscored by his underlining of the term “confidential
information” and his consultation with an attorney before signing the agreement. Finally, the

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record establishes that the information Hunter retained—both through tangible documents and in
his memory—and eventually disclosed to DonJoy meets the agreement’s definition of
“confidential information.” See Orthofix, Inc. v. Hunter, 55 F. Supp. 3d 1005, 1013 (N.D. Ohio
2014) (determining that Orthofix information disclosed by Hunter was “as a whole, valuable, not
readily available, and acquired at great expense and effort by Orthofix and its sales force
(including Hunter).”); Because Texas law provides for the enforcement of non-disclosure
provisions covering information that is not a protected trade secret, Hunter’s non-disclosure
provision may prohibit Hunter from disclosing “confidential information” that does not qualify
as a trade secret.6
Still, Hunter argues that Texas law requires information subject to a non-disclosure
provision to be secret, and thus argues that the district court was correct in finding that
‘“confidential information’ protected by the non-disclosure provision is coterminous with
information protected” by the Ohio Act. Orthofix, Inc., 55 F. Supp. 3d at 1015. But neither of
the Texas cases Hunter cites to support this contention addresses a claim based on the breach of a
non-disclosure provision. M.N. Dannenbaum, 840 S.W.2d at 631; Tom James of Dallas, Inc. v.
Cobb, 109 S.W.3d 877, 888 (Tex. App. 2003). While Hunter makes much of the court’s
statement in Tom James that “[t]o warrant protection, the information must have a substantial
element of secrecy,” this statement refers to trade secrets, not information subject to a non-
disclosure provision. Tom James, 109 S.W.3d at 888. Similarly, the court’s reasoning in M.N.
Dannenbaum, which Hunter relies upon to support his secrecy argument, is based on a wrongful
6 In limiting the scope of Hunter’s non-disclosure provision, the district court seemed to rely, in part, on its finding
that the information in the provision did not achieve trade-secret status under the Ohio Act. Orthofix, Inc., 55 F.
Supp. 3d at 1015; The Ohio Act, however, has no effect on the scope of Hunter’s non-disclosure provision because
the contractual provision is governed by Texas law. Because the non-disclosure provision is enforceable under
Texas law regardless of whether the covered information qualifies as a trade secret, this Court need not determine
whether information covered by Hunter’s non-disclosure provision would qualify for protection under Texas’s trade
secret act.

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misappropriation of information claim, not a breach of contract claim. M.N. Dannenbaum,
840 S.W.2d at 631.
Finally, Hunter argues Orthofix cannot claim that the scope of Hunter’s non-disclosure
provision extends beyond trade secrets because Orthofix failed to “articulate [at the post-trial
hearing] information that would constitute confidential information but not be classified as a
trade secret.” Orthofix, Inc., 55 F. Supp. 3d at 1015. This argument is without merit. Orthofix
was unwilling to identify specific confidential information that did not qualify as a trade secret
because it claimed all of the information covered by Hunter’s non-disclosure provision also
qualified as a trade secret. Although it sought to bring all of the information covered by Hunter’s
non-disclosure provision within the scope of its trade-secrets claim, Orthofix never conceded that
its breach-of-contract claim must rise and fall with its trade-secrets claim. Counsel for Orthofix
reemphasized this point in a post-trial hearing:
I have always envisioned [the relationship between confidential information and
trade secrets] as a [Venn] diagram, a big circle I call confidential information.
There’s a circle within that that I call trade secrets, and the Court is going to
decide whether that interior circle is smaller than the confidential information
circle . . . . I think an alternative finding that what does not fall under the Ohio
trade secret statute does fall within the confidential information definition of the
nondisclosure agreement, I think that is prudent, it is judicial economy at work,
and of course it has the added benefit of affording Orthofix all of the economic
relief to which it is entitled.
Because Orthofix articulated that information covered by Hunter’s non-disclosure provision
could constitute confidential information but not be classified as a trade secret, Hunter’s estoppel
and waiver arguments fail.
2) The Non-Disclosure Provision Is Not an Unenforceable Non-Compete
Agreement under Texas Law
Orthofix argues that the district court erred in finding Hunter’s non-disclosure provision
to be an unenforceable non-compete clause without limitation as to time or geography. The

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district court’s conclusion regarding the enforceability of the agreement is a question of law that
this Court reviews de novo. Chi. Title Ins. Corp. v. Magnuson, 487 F.3d 985, 990 (6th Cir.
2007); Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 663 (Tex. App. 1992).
Under Texas law, “non-disclosure covenants are more readily enforced than non-
competition covenants because they are not restraints on trade, do not prevent the employee from
making use of the general experience he acquired during his employment, and do not offend
public policy.” CDX Holdings, Inc. v. Heddon, No. 3:12-CV-126-N, 2012 WL 11019355, at *11
(N.D. Tex. Mar. 2, 2012); see also Alliantgroup, L.P. v. Feingold, 803 F. Supp. 2d 610, 622
(S.D. Tex. 2011) (stating that a non-disclosure provision may be enforceable when a covenant
not to compete is not). In addition, non-disclosure provisions need not contain geographic and
durational limits to be enforceable. See Marsh USA Inc. v. Cook, 354 S.W.3d 764, 768 (Tex.
2011) (stating that non-disclosure agreements are not expressly governed by the Texas
Covenants Not to Compete Act, which requires reasonable temporal and geographic restrictions);
Zep Mfg. Co., 824 S.W.2d at 662-63 (finding no law requiring that non-disclosure agreements
contain durational and geographic limitations).
Indeed, the Restatement (Third) of Unfair Competition parallels Texas law in concluding
that the absence of geographic and durational limitations in a non-disclosure agreement does not
render it unenforceable. RESTATEMENT (THIRD) OF UNFAIR COMPETITION §41 cmt. d. (AM. LAW
INST. 1995). However, a non-disclosure agreement prohibiting employees from using general
knowledge, skill, and experience acquired in their former employment is more properly
characterized as a non-compete agreement. Oxford Global Res., 2005 WL 350580 at *2. Texas
law does subject non-compete agreements to durational and geographic limitations. See Tex.

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Bus. & Com. Code §§ 15.50(a) (West 1983) (stating that a non-compete agreement is
enforceable if it is reasonable in time, scope, and geography).
When the district court erroneously determined that the scope of Hunter’s non-disclosure
provision validly extended only to trade secrets, it necessarily made a subsequent finding that the
provision constituted an unenforceable non-compete agreement because it attempted to cover
“confidential information” that, in the court’s view, concerned Hunter’s general knowledge or
skills, not trade secrets. Orthofix, Inc., 55 F. Supp. 3d at 1015. This subsequent finding was also
in error. As we have already determined (supra, 8-9), Texas law is clear: “confidential
information” is generally defined by the parties, and not by achieving trade-secret status, so long
as it does not encompass publicly available information or an employee’s general knowledge or
skills. See, e.g., Corp. Relocation, 2006 WL 4101944, at *15 n.17 (“Regardless of whether the
information contained in the 24 missing files qualifies for trade secret status, the court is satisfied
that such information is confidential pursuant to Section 5(a) of the Employment Agreement, to
which the parties expressly agreed.”); Glattly v. Air Starter Components, Inc., 332 S.W.3d 620,
629, 639-40 (Tex. App. 2010) (affirming the trial court’s finding that a non-disclosure provision
prohibiting an employee from ever selling a competing product to a list of companies on his
former employer’s customer list constitutes a covenant not to compete). Here, the “confidential
information” covered by Hunter’s non-disclosure provision does not merely concern publicly
available information or Hunter’s general knowledge. Nor does it prevent Hunter from working
for DonJoy or competing with Orthofix. Id. Instead, the provision only ensures Orthofix may
recover damages for Hunter’s use and disclosure of its information—information which the
district court found, “as a whole, [to be] valuable, not readily available, and acquired at great
expense and effort by Orthofix and its sales force (including Hunter).” Orthofix, Inc., 55 F.

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Supp. 3d at 1013; Because Hunter’s non-disclosure provision protects Orthofix’s confidential
information, and not Hunter’s general knowledge, the provision is not an unenforceable non-
compete agreement under Texas law.
3) Application of Texas Law to Orthofix’s Breach of Contract Claim
Because the district court misinterpreted Texas law and left this court with a full record
on review, we now apply Texas law to determine whether Hunter breached his employment
agreement.
To prevail on its breach of contract claim under Texas law, Orthofix must establish
(1) the existence of a binding contract; (2) that Hunter breached the contract; and (3) that it
suffered damages caused by Hunter’s alleged breach. E. Tex. Med. Ctr. Cancer Inst. v.
Anderson, 991 S.W.2d 55, 62 (Tex. App. 1998).
The trial record demonstrates that Hunter and Orthofix are parties to a valid and binding
contract. Orthofix, Inc., 55 F. Supp. 3d at 1007; While the district court found that the non-
disclosure provision in Hunter’s contract acted as an unenforceable non-compete agreement, we
have already determined that this provision is valid under Texas law. Supra, 11.
Hunter breached the non-disclosure provision of his employment agreement when he
turned over to a competitor his old company’s confidential information. First, Hunter breached
his non-disclosure provision when he disclosed to DonJoy an account-by-account breakdown of
his Orthofix bone growth stimulator sales, information that qualifies as “confidential
information” under the agreement. Hunter also breached his agreement when he failed to return
to Orthofix forty-six converted customer orders, which underlie Orthofix’s tortious interference
recovery and contain confidential Orthofix information. Orthofix, Inc., 55 F. Supp. 3d at 1015-
16; Finally, Hunter breached the non-disclosure provision of his contract when he drew upon his

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knowledge of his former customers’ prescribing habits, schedules, and contact information in
introducing DonJoy representatives to these very customers. While Hunter may not be liable
under Texas law for his general use or disclosure of publicly available information, the
compilation of information Hunter acquired as an Orthofix employee and later used to introduce
DonJoy representatives to his former customers extends far beyond information that could
reasonably be considered public. See Orthofix, Inc., 55 F. Supp. 3d at 1013; (finding that
Orthofix’s confidential information “is, as a whole, valuable, not readily available, and acquired
at great expense and effort by Orthofix and its sales force (including Hunter).”); (Hunter’s
admission that it could take as long as six months for someone to acquire his level of detailed
knowledge about a surgeon).
Because Orthofix has demonstrated both the existence and breach of a valid contract
under Texas law, the judgment of the district court is REVERSED and the case is REMANDED
to the district court for the calculation of damages and further proceedings consistent with this
opinion.

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