An increasingly fierce court fight unfolding in Boston between a major health care company and a former senior executive who jumped to a new venture highlights the pressure established players feel when rivals show up and threaten to disrupt an industry.
The UnitedHealth Group Inc. subsidiary Optum sued last month to stop its former director of product strategy, David Smith, from working at the upstart venture involving Amazon, Berkshire Hathaway and JPMorgan Chase that promised to “address health care for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.”
Optum’s lawyers at Boston-based firm Beck Reed Riden contend the company faces “irreparable harm” if Smith is allowed to join the new—and still nameless—health care company. Lawyers for Optum argue that Smith is violating various nondisclosure and noncompete restrictions and should be barred from “sharing his insider knowledge of Optum’s most valuable and competitively sensitive trade secrets.”
The case is attracting widespread attention as industry titans such as UnitedHealth and other competitors try to discern the full scope of the Amazon initiative. The new venture has been on a hiring spree for months, luring top executives from the insurance and tech fields.
Smith, represented by a team from Boston’s Bello Welsh LLP and McDermott Will & Emery, lost an early effort to immediately push the case to arbitration before any restraining order could be issued. His lawyers this week went to the U.S. Court of Appeals for the First Circuit to argue that Optum’s employment contract dispute doesn’t belong in court.
Optum on Thursday lawyered up for the appeal. Two appellate veterans—Thomas Goldstein and Sarah Harrington of the Washington boutique Goldstein & Russell—filed notices that they were representing the company.
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As the appeal gets underway, Optum’s trial lawyers filed new papers seeking an injunction that would restrict Smith from working at the Amazon-JPMorgan-Berkshire venture, referred to in court papers as “ABC.”
“Because the stakes are high and the risk of irreparable harm grows with each passing day, Optum is using every available tool to expeditiously obtain interim relief that will preserve the ability of an arbitrator to grant meaningful relief should it determine that Optum’s claims are meritorious,” Russell Beck, a lawyer for Optum, said in the new filing. “Prompt resolution of Optum’s pending motion is both necessary and warranted.”
Lawyers for both sides did not immediately return calls seeking comment. U.S. District Judge Mark Wolf of the District of Massachusetts is presiding over the case.
Optum’s lawsuit said Smith cannot perform his new job without giving away Optum’s information and should be barred from working at the company. The complaint also accuses him of intentionally taking information in his previous position when he knew he would be resigning.
Smith’s role at Optum involved working on strategy, including preparing for future opportunities in the health care field, the company said in the complaint.
Optum contends that Smith was regularly exposed to Optum’s trade secrets and other confidential information. The covenant he signed also agreed not to work for a competitor for at least 36 months after employment. The agreement also said he would not recruit or solicit Optum’s workers for two years.
“While the full scope of ABC’s ultimate activities is still unknown, the expectation is that the venture aims to disrupt the healthcare industry as it exists today,” Optum’s attorneys said in the complaint. “Against this quickly evolving and highly competitive backdrop, Optum’s continued success depends largely on preserving its intellectual property, including its trade secrets, maintaining the goodwill of its customers and business partnerships, and retaining and relying on its top-level talent.”