CVS Trade Secrets Case Against Former Employee Moves to Western District of Washington

On Wednesday in the District of Rhode Island, Judge William E. Smith ruled to transfer to the Western District of Washington a suit brought by CVS Pharmacy alleging that a former company executive breached his contract after leaving CVS to work at Cigna.

Defendant Timothy Brown, former chief Medicare officer for CVS, signed a non-compete agreement while at CVS that required him to refrain from working for a competitor for one year after leaving CVS, according to CVS’ complaint. Brown announced his departure from CVS and his new role as Cigna’s Medicare Advantage performance officer and managing director in January 2021. CVS alleged that this move was in violation of Brown’s non-compete agreement, claiming that Brown has “highly confidential” and “invaluable” information regarding CVS’ business strategies in the Medicare Advantage market that Cigna would be able to use to “unfairly capture market share,” CVS argued.

Brown filed a motion to dismiss or to transfer venue Feb. 11, arguing that the District of Rhode Island has no personal jurisdiction; the court agreed.

“For a court to exercise personal jurisdiction over an out-of-state defendant, ‘it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,’” the court explained, quoting Hanson v. Denckla.

CVS attempted to argue this purposeful availment through the facts that Brown was employed by CVS, a Rhode Island corporation, that he signed a non-compete agreement governed by Rhode Island law, that he visited Rhode Island one time for a CVS training, and that he received CVS stock through his employment.

The judge contended that the existence of this contract is not enough on its own to establish personal jurisdiction, so the defendant would have to establish “plus” factors to support an argument to keep the case in Rhode Island. Rendering the non-compete agreement irrelevant, the court examined the facts that Brown was employed by Rhode Island company CVS, that he attended a CVS training in the state, and that he accepted CVS stock, but also decided these factors to be too much of a stretch for Rhode Island to claim jurisdiction.

Following the U.S. Supreme Court’s logic in Walden v. Fiore, the court stated that “the plaintiff cannot be the only link between the defendant and the forum” — the connection must come from the defendant’s conduct. Previous court holdings over questions of personal jurisdiction with out-of-state employees have relied on frequency and regularity of interaction between the employee and employees in the asserted venue, according to the court.

“CVS does not make any assertions or provide any evidence regarding whether and with what frequency Brown’s work involved direct interactions with employees in Rhode Island,” the judge explained.

The judge noted that the “purposeful” element of purposeful availment is attenuated by the fact that Brown never actually accepted a position with CVS; he accepted a position with health care provider Aetna, which then acquired CVS.

“Thus, to the extent that his relationship with CVS itself involved a connection with Rhode Island, it was not a connection that he purposefully created,” the court found.

Because Brown lived and worked in the Western District of Washington for the duration of his employment with CVS, the court said it would be the most appropriate venue.

CVS is represented by Nixon Peabody and Shipman & Goodwin. Brown is represented by Pannone Lopes Devereaux & O’Gara and McDougald Law Group.