Idexx, Covetrus settle lawsuit, providing no clarity on enforceability of non-competes

Idexx Laboratories Inc. on April 24 filed a notice with the U.S. District Court in Maine that it was dropping the lawsuit it had filed against Vets First Choice and two of its former employees concerning allegations of stolen trade secrets and the violation of non-compete agreements.

Idexx filed the lawsuit in August 2018, alleging that two former employees—Daniel Leach and Agostino Scicchitano—“misappropriated” confidential and proprietary trade secrets before taking new jobs at rival Vets First Choice. It also claimed Leach and Scicchitano violated their non-compete agreements when they went to work for Vets First Choice, which Idexx considers a direct competitor in the provision of services to veterinarian practices.

Vets First Choice never formally responded to the complaint, continually requesting from the judge more time to file a response and/or to preempt the need by finalizing a settlement.

The settlement is confidential. A joint statement released by Idexx and Covetrus claims the companies “acknowledge their respective obligations to their customers and employees to take appropriate measures to safeguard and ensure proper handling of confidential information.”

It continues: “All parties, including the Covetrus employees named in the complaint, cooperated to bring this matter to an amicable resolution.”

The high-stakes case pitted Maine’s two largest publicly traded companies against each other (Vets First Choice merged with Henry Schein Animal Health in February, retaining its public listing and changed its name to Covetrus) and, as I discussed in my initial article, raised the possibility that we’d gain an opinion from a federal judge on the enforceability in Maine of non-compete agreements.

It’s the latter part that I believe is of most interest to Maine’s startup community and tech workers. Non-competes are contractual agreements that companies can make employees sign to ensure they can’t leave and immediately go work for, invest in, mentor, or be involved in a competitor or new startup in the same space. While companies maintain that the agreements are necessary to protect trade secrets and for competitive purposes, many argue that they stifle innovation (not to mention violate an employee’s right to earn a living). Some of the states with the most robust innovation ecosystems have moved to ban or limit the use of non-competes. California has all but banned their use, Massachusetts late last year passed a law that severely limits their use, and Washington recently became the latest state to attempt to prevent companies from using them.

The Maine Legislature actually considered a bill earlier this session that sought to limit non-competes, but it wasn’t really geared toward helping tech workers. It would have prohibited an employer from requiring an employee to sign a non-compete agreement if that employee earned wages that are at or below 300% of the federal poverty level, which would be about $37,470 for a one-person household. The bill never made it out of committee after suffering a divided report along party lines on March 6.

The non-competes that Leach and Scicchitano signed when they accepted employment at Idexx (in 2015 and 2010, respectively) specify that upon “voluntary termination” they would agree that for a period of two years they would not “engage (whether for compensation or without compensation) as an individual proprietor, partner, stockholder, officer, employee, director, joint venture, investor, lender, or in any other capacity whatsoever … in any business enterprise which competes with the Company in any business area in which the Company is engaged including, but not limited to, the animal and agricultural diagnostic field and the food and environmental testing field.”

Idexx argued in its initial complaint that Vets First Choice told Leach and Scicchitano—who left Idexx in, December 2017 and April 2018 respectively—that the non-compete agreements were unenforceable. It would have been nice to find out if they were right.

And while Idexx may not have received the trial and verdict it requested in the original complaint, perhaps it accomplished what it set out to do in the first place: Send a message to other Idexx employees that the company isn’t afraid to pursue legal action to enforce its non-competes.