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June 10, 2024

CT employee ‘poaching’ lawsuit, filed days before FTC ban ruling, provides window into debate over noncompete agreements

IMAGE | ADOBE STOCK
PHOTO | COSTAR Healthcare digital marketing agency Primacy is headquartered in a Farmington office building (shown above), at 1577 New Britain Ave.
By David Krechevsky

A Farmington-based healthcare digital marketing agency recently sued a competitor claiming it “poached” a top employee in an effort to steal clients and gain inside knowledge of its business and offerings.

In its lawsuit, Primacy LLC, based at 1577 New Britain Ave., named former employee Matt Cyr, of South Carolina, and Unlock Health, based in Nashville, Tennessee, as plaintiffs.

The case, which recently reached an undisclosed settlement, is noteworthy because it involved contract-breach allegations, including violations of noncompete agreements and other restrictive covenants that have come under scrutiny on the state and federal levels in recent weeks and months.

The lawsuit was filed in U.S. District Court for the District of Connecticut on April 17, just six days before the Federal Trade Commission issued a ruling that banned most forms of noncompete agreements between employers and employees. The new rule, which has touched off an intense debate over the fairness of and need for noncompete agreements, was published in the Federal Register on May 7, and is scheduled to take effect 120 days later on Sept. 4, though there are active legal challenges to it.

Some legal experts say the ban may get overturned and never go into effect.

The FTC’s new rule treats some noncompete agreements differently from others, allowing those for senior executives to remain in force while ruling those for other workers unenforceable.

‘A top leadership role’

Primacy’s 47-page lawsuit provides a window into how and why employers use noncompete clauses.

The suit described Cyr as “a senior level marketing executive,” and stated he “worked for Primacy or its predecessor in a top leadership role for over seven years.”

Cyr originally was hired as “strategic lead, vice president (VP Strategy)” by Farmington-based ACSYS Inc. in August 2016, the suit notes. Six years later, in June 2022, ACSYS merged with Primacy; the deal included the transfer of all ACSYS employees and all rights under any contracts to Primacy.

The company claimed Cyr was “intimately familiar with every aspect of Primacy’s sales and marketing strategy,” as well as with its clients and specific projects being developed for them. That included “spearheading the development of a suite of services to be offered to Primacy’s clients through the use of Artificial Intelligence (AI),” it states.

Unlock Health began recruiting Cyr in February 2024, when he documented a call with that company by typing notes on his Primacy work email and sending them to his personal email, the lawsuit states.

During that initial conversation, the suit continued, “Cyr spoke with Unlock Health about his ability to ‘take clients with’ him, the name and contact person of a Primacy client and plans to capitalize on ‘AI.’”

There was also a notation in the email indicating some discussion of a “non-compete, non-solicit (employees and clients).”

“Cyr’s employment agreement with Primacy contains all three of these restrictive covenants,” the lawsuit notes, referring to employee confidentiality, non-solicitation and noncompete agreements.

‘Acts of misconduct’

Unlock Health was formed in April 2023 by the merger of healthcare marketing services firms DECODE and Eruptr, according to an announcement issued at that time.

Seven months later, Unlock Health announced it had acquired SPM Group, a network of health and healthcare agencies, saying the acquisition brought “an incredible depth of expertise and marketing capability to the Unlock platform.”

In April of this year, the company announced it was unifying under the Unlock Health brand.

When Cyr spoke to Unlock Health in February, the lawsuit stated, that company “was undaunted by Cyr’s non-compete and non-solicit as to clients and employees,” and spoke with Cyr about what they could offer him and what he could offer them.

Primacy claimed that after Cyr provided the client name and contact person to Unlock Health, he followed up on March 11 by soliciting that client via email and telling them he was leaving to join Unlock Health.

Cyr emailed notes about that call to his personal email, Primacy stated, adding that his notes also suggested he should speak to Unlock Health CEO Brandon Edwards “about AI opps — how are you capitalizing on this?” Primacy stated it inferred that to mean Cyr intended to help Unlock Health with their AI offerings to clients.

The lawsuit claimed Cyr, who worked remotely but had full access to Primacy’s computer system, “engaged in several other acts of misconduct,” including sending confidential company information to his personal email. He also attempted to “cover his tracks” by deleting approximately 15,000 emails from his work email account, Primacy claimed.

‘Independent consultant’

According to the lawsuit, Cyr submitted a resignation letter on March 5 that indicated his last day at Primacy would be March 15.

The lawsuit also accused Cyr of not returning “any of the documents emailed to his personal email address to Primacy.”

The lawsuit added that, according to his LinkedIn page, Cyr joined Unlock Health as “head of Integrated Marketing Growth.” That listing is no longer part of his LinkedIn profile; instead, above his listing for his three years at Primacy, he describes himself only as a “Public Speaker–AI” and as a part-time independent consultant.

Unlock Health is not mentioned at all.

Primacy stated in its lawsuit that it was seeking a jury trial, as well as injunctive relief and damages from both Cyr and Unlock Health, including for violating the Connecticut Uniform Trade Secrets Act (CUPTA) and federal Defend Trade Secrets Act.

Primacy also requested a temporary restraining order, preliminary injunction and permanent injunction against Cyr to keep him from working for Unlock Health or any other similar entity for the full term of the restriction, as well as to prevent him from luring any Primacy employees and to require him to maintain confidentiality of Primacy information.

The lawsuit also sought actual, compensatory and exemplary damages “to be determined at trial.”

A negotiated settlement was reached in the case in late May, but details were not available. Attorneys representing Primacy, Unlock Health and Cyr did not respond to requests for comment.

‘You can’t unring a bell’

While the case has been settled, its timing, given the FTC’s pending ban, raised questions not just about the validity of most noncompete agreements but also about the ability of businesses to protect proprietary information.

Salvatore G. Gangemi, a partner with law firm Murtha Cullina LLP who was not involved with the Primacy case, said one key aspect of the lawsuit would have been whether the FTC’s noncompete ban would apply.

Salvatore G. Gangemi

While Primacy described Cyr as a senior executive, which would make his noncompete agreement enforceable under the FTC ban, the rule provides a specific definition that must be met, Gangemi said.

“In order to be considered a senior executive under the ban, he would have to be earning over $151,164 per year,” he said of Cyr. In addition, Cyr would need to have had “final authority to make policy decisions that control significant aspects of a business entity and does not include authority limited to advising or exerting influence” over such policy decisions.

Since the case was settled before it went to trial, we don’t know whether Cyr “earned the requisite salary and/or had the type of ‘final’ authority required to be considered a senior executive,” Gangemi said.

But if he did, “the FTC ban would have no effect on him for his breach,” he said.

If Cyr was not a senior executive, however, “then several aspects of his restrictive covenants could not be enforced,” including the noncompete clause, Gangemi said.

The FTC’s ban does not expressly prohibit clauses that bar the solicitation of employees or customers, but it does make clear “that if a non-solicitation clause functions as a noncompete, then the clause would be invalid,” he said.

Still, the FTC’s ruling does not mean employees can abscond with confidential information or trade secrets, but Gangemi believes the noncompete ban could make it significantly harder for employers to prevent it.

“The FTC ban disregards an employer’s difficulty in protecting its confidential information or trade secrets,” he said. “Under current law, noncompetes that exist for these purposes are perfectly legitimate as long as the employee was aware of the confidential information or trade secrets and could potentially use such information for the benefit of another employer.”

Gangemi said the FTC’s ban will require employers to come up with different ways to prevent the theft of such information, “without outright prohibiting an employee from working for a subsequent employer.”

In other words, he said, “Employers would have to prove that a sharing of such information with a new employer actually occurred. This is not easy to do, and without initial proof that it has happened would likely make it more difficult for an employer to secure a temporary injunction.”

By the time an employer learned of a misappropriation, he added, “it might be too late to protect itself. You can’t unring a bell.”

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