Antitrust Law Daily Wrap Up, ANTITRUST—Ga. App. Ct.: Biomaterial products consulting agreement illegally restrains trade, (Feb 11, 2015)

By Greg Hammond, J.D.

A consulting agreement between a biomaterial products maker and a consulting company, which required a designated employee to devote her full working time to the performance of the consultant’s duties under the agreement, constituted an illegal and unenforceable restraint of trade under Georgia law, a Georgia appeals court has concluded. The trial court’s order denying the employee’s motion for judgment on the pleadings was therefore reversed (Early v. MiMedx Group, Inc., February 10, 2015, McMillian, C.).

MiMedx Group, Inc. develops, manufacturers, and markets patent protected biomaterial-based products, such as bioimplants. Ryanne Early, as founder and president of ISE Professional Testing & Consulting Services, Inc., entered into a consulting agreement with MiMedx for ISE to provide product, research, and development consulting services to MiMedx. The consulting agreement contained a “full-working-time provision” that required Early to devote her full working time of at least 40 hours per week to the performance of ISE’s duties under the agreement.

MiMedx later terminated the agreement and filed suit against ISE and Early, seeking damages, specific performance, and injunctive relief. The company alleged that Early failed to devote her full working time to ISE’s performance under the agreement. Early filed a motion for judgment on the pleadings, asserting that the full-working-time provision was void and unenforceable as either a general or partial restraint of trade. The trial court denied the motion without explanation, and Early sought interlocutory review.

On appeal, Early and ISE asserted that the full-working-time provision prohibited Early from performing any kind of work during the term of the agreement other than for MiMedx, and that the provision was consequently an illegal restraint of trade. Conversely, MiMedx contended that the requirement was merely a loyalty provision, no different from a requirement that an employee devote her time on the job to her employer’s business.

The court determined that the provision was a restraint of trade, rather than a loyalty provision, because it precluded Early from engaging in any work apart from the contract with MiMedx. Regardless of whether the provision was a partial or general restraint of trade, the court concluded that the provision failed as a matter of law under any level of scrutiny, as the provision contained absolutely no limitation with regard to either scope or territory. The trial court’s order denying Early’s motion for judgment on the pleadings was therefore reversed.

The case number is A14A2141.

Attorneys: Erika Clarke Birg (Nelson Mullins Riley & Scarborough LLP) for MiMedx Group, Inc. Neal Fredric Weinrich (Berman Fink Van Horn PC) for Ryanne Early.

Companies: MiMedx Group, Inc.; ISE Professional Testing & Consulting Services, Inc.

Cases: Antitrust GeorgiaNews