WebMD Health Corp. v Martin

[*1] WebMD Health Corp. v Martin 2006 NY Slip Op 51325(U) [12 Misc 3d 1180(A)] Decided on July 11, 2006 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 11, 2006
Supreme Court, New York County

WebMD Health Corp., WEBMD, INC., and EMDEON CORPORATION f/n/a WEDMD CORPORATION, Plaintiffs,

against

Marjorie Martin, Defendant.



601654-06



Attorneys for Plaintiffs: Attorneys for Defendant:

Alston & Bird, LLPBaker Hostetler

99 Park Avenue 666 Fifth Avenue

New York, NY 10016 New York, NY 10103

By: Karl Geercken, Esq. By: John Siegal, Esq.

Lisa Cassilly, Esq.

Douglas W. Wamsley, Esq.

WebMD Executive Vice President

General Counsel

111 Eighth Avenue

New York, NY 10011-5201

Bernard J. Fried, J.

Plaintiffs WebMD Health ("WebMD Health") Corporation, WebMD, Inc., and Emdeon Corporation f/n/a [sic] WebMD Corporation (collectively, "WebMD"[FN1]) brought this motion by an Order to Show Cause seeking a preliminary injunction enjoining Defendant Marjorie Martin ("Martin") from violating the restrictive covenants of stock option agreements that she signed while employed at WebMD.[FN2] The underlying Complaint brings causes of action for breach of contract, breach of fiduciary duty and duty of loyalty, tortious interference with business relations, misappropriation of trade secrets, and unjust enrichment. [*2]

WebMD provides health information services through online portals and publications. (Forte Aff. ¶ 8.) WebMD generates revenue through the sale of sponsorships and advertising. (Forte Aff. ¶ 8.) To state a few of its services: through online portals, WebMD provides information about particular health issues or diseases and enables consumers to analyze symptoms, locate a physician, receive e-newsletters, enroll in interactive courses, and participate in online communities. (Forte Aff. ¶ 9.) WebMD also operates a public portal for healthcare professionals, which offers medical news, commentary, coverage of conferences, and continuing medical education, and publishes an online "peer review general medical journal." (Forte Aff. ¶ 10.) It also provides private portals for health plan members. (Forte Aff. ¶ 11.) In addition, WebMD provides offline health publications; in early 2005, it launched "WebMD, the Magazine." (Forte Aff. ¶ 12.)

Martin is a journalist who has specialized in medical journalism since 1989. (Martin Aff. ¶¶ 1, 7.) Martin worked as a journalist with CNN for several years, eventually as executive producer overseeing all of CNN's medical news coverage. (Martin Aff. ¶ 7; Forte Aff. Ex. D.) Martin joined WebMD's predecessor, Medcast, in 1998. Most recently, Martin was employed as WebMD's Vice President of Content and Executive Editor of its publication, "WebMD the Magazine." (Forte Aff. ¶¶ 3, 12.) Martin's responsibilities included managing and editing the content of WebMD's Internet portals and "WebMD the Magazine." Martin also identified and developed relationships with members of the healthcare and academic communities who would be able to supply WebMD with healthcare information. (See Forte Aff. ¶¶ 14-15.)

Martin reported directly to Nan-Kirsten Forte, WebMD's Executive Vice President for Consumer Services. In March 2006, Martin notified WebMD of her intent to resign, effective April 14, 2006. (Forte Aff. ¶ 5.) Martin informed Forte that she would be working in New York with the New York Times. (Forte Aff. ¶ 5.) Martin's last day in the office was March 17, 2006. (Martin Aff. ¶ 5.) As Forte later learned, beginning on April 17, 2006, Martin began working as General Manager of the Health Channel of About.com, an Internet property of The New York Times Company. (Martin Aff. ¶¶ 1, 18; Forte Aff. ¶ 6.)

The Health Channel is one of About.com's 22 content channels, which offers original content, including articles and videos, on a range of health topics. (Forte Aff. Ex. D.) About.com was founded in 1996 but acquired by The New York Times Company in March 2005. (Forte Aff. Ex. D.) In its press release, it describes its core purpose as "to enhance society by creating, collecting and distributing high-quality news, information and entertainment." (Forte Aff. Ex. D.)

In an April 17, 2006 press release, About.com's President and CEO characterized the hiring of Martin as About.com's "latest move to dramatically expand and further differentiate our high quality Health offering." (Forte Aff. Ex. D.) In her new role, Martin was expected to "leverage her extensive experience in health media to help us grow our health channel well past its current 4.9 million monthly visitors." (Forte Aff. Ex. D.) Further, About.com expected Martin to "lead the growth and strategic direction of About Health" by developing "new content tools and features." (Forte Aff. Ex. D.) In this regard, About.com's Press Release emphasized Martin's work for WebMD, stating that "Martin helped transform [WebMD] from a start-up into the leading online health content provider[,]... led the development of in-depth health content and tools as well as award-winning coverage of important health news and clinical advances[, and] also led the successful launch of "WebMD the Magazine," the first offline publication from WebMD." (Forte Aff. Ex. D.)

[*3]The Stock Option Agreement(s)

In 2001, 2004, and 2005, Martin entered into three Non-Qualified Stock Option Agreements ("agreements") with WebMD Corporation, in which Martin received options to purchase shares of stock, in exchange for agreeing to certain restrictive covenants.

The 2001 agreement provides: In the event that you breach any restrictive covenants to which you are bound..., in addition to any other remedy available to the Company, the Option, whether or not vested, will immediately terminate without any notice or consideration being paid therefor. By signing below, you acknowledge the representations and agree to the covenants set forth....

(Compl. Ex. A, at 1; Compl. Ex. B, at 1.)

Three restrictive covenants are pertinent here: (a) the noncompete covenant barring Martin from working for a U.S. competitor of WebMD for one year; (b) a non-solicitation covenant, restricting Martin from hiring Plaintiffs' employees and independent contractors and from soliciting customers with whom she dealt during her employment; and (c) a confidentiality and nondisclosure covenant.

The noncompete covenant provides that the signatory, Martin, would not, during her employment and for one year after its termination, without express permission, "directly or indirectly (including through the Internet), own, control, manage, operate, participate in, be employed by, or act for or on behalf of, any Competitive Business'" in the United States. (Compl. Ex. A, Annex A ("2001 Agt.") at 3, ¶ 2(b).)[FN3] "Competitive Business" is defined to include "any enterprise engaged in developing, selling or providing a consumer or physician Internet healthcare portal" and "any enterprise engaged in any other type of business in which the Company is also engaged, or plans to be engaged, so long as I am directly involved in such business or planned business on behalf of the Company." (2001 Agt. ¶ 2(b); Compl. Ex. B, Annex A ("2004 Agt.") at 3, ¶ 2(b).)

The non-solicitation covenant provides that the signatory would not, during her employment and for one year after its termination: solicit, induce, hire, engage, or attempt to hire or engage any employee or independent contractor of the Company, or in any other way interfere with the Company's employment or contractual relations with any of its employees or independent contractors, nor will I solicit, induce, hire, engage or attempt to hire or engage any individual who was an employee of the Company at any time during the one (1) year period immediately prior to the termination of my employment.

(2001 Agt. ¶ 3(a); 2004 Agt. ¶ 2(a).)

Also as part of the non-solicitation covenant, Martin promised not to "contact, call upon or solicit, on behalf of a Competitive Business, any existing or prospective client, or customer of the Company who [sic] I serviced, or otherwise developed a relationship with, as a result of my employment with the Company, nor will I attempt to divert or take away from the Company the business of any such client or customer." (2001 Agt. ¶ 3(b); 2004 Agt. ¶ 2(b).) [*4]

The confidentiality and nondisclosure covenant provides as follows: I agree at all times, both during and after my employment with the Company, to hold all of the Company's Trade Secret and Proprietary Information in a fiduciary capacity for the benefit of the Company and to safeguard all such Trade Secret and Proprietary Information. I also agree that I will not directly or indirectly disclose or use any such Trade Secret and Proprietary Information to any third person or entity outside the Company.

(2001 Agt. ¶ 1(b); 2004 Agt. ¶ 1(b).)

"Trade Secret and Proprietary Information" is defined to "include, but [] not be limited to": (a) specifications, manuals, software in various stages of development; (b) customer and prospect lists, and details of agreements and communications with customers and prospects; (c) sales plans and projections, product pricing information, acquisition, expansion, marketing, financial and other business information and existing and future products and business plans of the Company; (d) sales proposals, demonstrations systems, sales material; (e) research and development; (f) computer programs; (g) sources of supply; (h) identity of specialized consultants and contractors and Trade Secret and Proprietary Information developed by them for the Company; (i) purchasing, operating and other cost data; (j) special customer needs, cost and pricing data; and (k) employee information (including, but not limited to, personnel, payroll, compensation and benefit data and plans), including all such information recorded in manuals, memoranda, projections, reports, minutes, plans, drawings, sketches, designs, formula books, data, specifications, software programs and records, whether or not legended or otherwise identified by the Company as Trade Secret and Proprietary information, as well as such information that is the subject of meetings and discussions and not recorded.

(2001 Agt. ¶ 1(a); 2004 Agt. ¶ 1(a).)

Paragraph 1(a) further provides that "Trade Secret and Proprietary Information": shall not include such information that I can demonstrate (i) is generally available to the public (other than as a result of a disclosure by me), (ii) was disclosed to me by a third party under no obligation to keep such information confidential, or (iii) was known by me prior to, and not as a result of, my employment or anticipated employment with the Company.

(2001 Agt. ¶ 1(a); 2004 Agt. ¶ 1(a).)

The confidentiality covenant further provides: I also acknowledge that, by virtue of my employment with the Company, I have gained or will gain knowledge of the business needs of, and other information concerning, Third-Parties, and that I would inevitably have to draw on such information were I to solicit or service any of the Third-Parties... on behalf of a Competitive Business.[*5]

(2001 Agt. ¶ 1(e); 2004 Agt. ¶ 1(e).)

The stock purchase options were subject to vesting provisions and carried expiration dates. These agreements provided that, after the options vested, Martin could exercise these options no later than six months following the last day of her employment with WebMD. On March 16, 2006, Martin exercised all of her 2001 options, for which she received proceeds totaling $42,851.15. (Martin Aff. ¶ 25; Forte Aff. ¶ 20.) WebMD also contends that Martin exercised the portion of her 2004 options that had vested as of the date of her resignation. (Forte Aff. ¶ 22.) There is a dispute as to whether Martin exercised any of the options from the 2004 agreement.

It is undisputed that at some point Martin also signed an employment agreement with WebMD, which did not contain restrictive covenants. (Martin Aff. ¶ 4.)

Plaintiffs filed this action seeking a preliminary injunction enjoining Defendant from violating the non-compete, non-solicitation, and confidentiality and nondisclosure covenants of the agreements by working at About.com's Health Channel, and specifically from:

disclosing, using, modifying, or adapting any of Plaintiffs' trade secrets;

disclosing, using, modifying, or adapting any of Plaintiffs' confidential or proprietary business information;

competing against Plaintiffs by owning, controlling, managing, operating, participating in, being employed by, or acting on behalf of any entity engaged in business in the United States that is identical or substantially similar to the business of Plaintiffs in which Defendant previously worked on Plaintiffs' behalf, specifically to include competing against Plaintiffs as General Manager for About.com's Health Channel or in any other capacity on behalf of About.com;

recruiting, hiring or engaging Plaintiffs' employees or independent contractors or otherwise interfering with Plaintiffs' employment or contractual relationships; and

soliciting any of Plaintiffs' customers or clients with whom Defendant developed a relationship on behalf of Plaintiffs or attempting to divert or take away the business of such customers or clients.

(Order Show Cause at 1-2.)

The parties submitted evidentiary affidavits, and an argument was held on June 5, 2006, at which the parties had a further opportunity to present evidence in support of their positions. Counsel for Plaintiffs stated that I could resolve the motion for a preliminary injunction based solely on the argument at that hearing and the affidavits submitted, without ordering discovery or an evidentiary hearing. (Hear'g Trans. at 12-13, 16.)

Under C.P.L.R. § 6301, a preliminary injunction may be granted "in any action where the plaintiff has demanded and would be entitled to a judgment restraining the defendant from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the plaintiff." Although there was some confusion on this point during the oral argument, I conclude that New York law governs the evidentiary standard for granting a preliminary injunction pursuant to C.P.L.R. § 6301. See Tanges v. Heidelberg N. Amer., [*6]Inc., 93 NY2d 48, 54 (1999) ("Under common law rules the law of the forum governs matters of procedure, while matters of substantive law fall within the course charted by choice of law analysis"); Rest. 2d Confl. § 122 ("A court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case.").

In order to be entitled to a preliminary injunction, a plaintiff must show "a probability of success, danger of irreparable injury in the absence of an injunction, and a balance of the equities in [its] favor." Aetna Ins. Co. v. Capasso, 75 NY2d 860, 862 (1990). Under New York law, the plaintiff bears the burden of proof, which generally requires a "strong showing in affidavits and other proof supplying evidentiary detail." David D. Siegel, NY Practice, 499 (3d ed., West 1999). This burden requires that a plaintiff demonstrate likelihood of success on the merits and irreparable injury by means of detailed, competent evidence, not merely conclusory assertions. See TMP Worldwide Inc. v. Franzino, 269 AD2d 332, 332 (1st Dept. 2000) (motion for a preliminary injunction was properly denied, where there was no indication that defendant had access to or misappropriated any customer lists, trade secrets, business plans or other confidential information); H. Meer Dental Supply Co. v. Commisso, 269 AD2d 662, 664 (3d Dept. 2000) (vacating preliminary injunction, where plaintiff had "not put forth sufficient evidentiary proof to show what specific data the individual defendants misappropriated or used" on behalf of subsequent employer); Business Networks of New York, Inc. v. Complete Network Solutions Inc., 265 AD2d 194, 194-95 (1st Dept. 1999) (plaintiff's motion for preliminary injunction properly denied for failure to establish likelihood of success, where plaintiff failed to present evidentiary support for "conclusory" assertions that defendants misappropriated confidential information and used it to compete with plaintiff).

The parties agree that Delaware law governs the interpretation and enforceability of the agreements containing the restrictive covenants at issue.

Non-Competition Covenant

The noncompete covenant prohibits, inter alia, employment in the United States with any Competitive Business,'" which is defined to include "any enterprise engaged in developing, selling or providing a consumer or physician Internet healthcare portal," and "any enterprise engaged in any other type of business in which the Company is also engaged, or plans to be engaged, so long as I am directly involved in such business or planned business on behalf of the Company." (2001 Agt. ¶ 2 (b).)

Plaintiffs contend that About.com's Health Channel is a "Competitive Business," because it is engaged in the development, provision, and sale of health information on internet portals. Affidavits by Forte and Doug Wamsley, WebMD's Executive Vice President and General Counsel, affirm that WebMD considered About.com's Health Channel to be "one of WebMD's competitors." (Wamsley Aff. ¶ 5; accord Forte Aff. ¶ 6.) Plaintiffs cite various items in support of this contention. First, they have submitted an April 17, 2006 press release issued by the New York Times Co., which announces Martin's new position as General Manager of the Health Channel for About.com, and which indicates that the Health Channel provides online health information and advice in a public portal and generates revenues through advertising sales and sponsorship packages on its website. (Forte Aff. ¶¶ 26-27.) The press release reports that About.com's Health Channel has ranked second in the Nielsen NetRatings for on-line health and fitness content sites, while WebMD ranks first. (Forte Aff. ¶ 28.) About.com's press release also boasts that Martin will "lead[] the Health Channel's [*7]strategic direction" and develop "new content, tools and features." (Forte Aff. Ex. D.)

Attached to Wamsley's affidavit, Plaintiffs have submitted two print-outs from Internet sites whose addresses and dates of publication Plaintiffs have not clearly identified. The first print-out, seemingly posted on the Internet in August 2005, appears to contain an interview with the President and CEO of About, Inc., in which he states that "our health channel competes with WebMD." (Wamsley Aff. Ex. C.) The second, apparently published on the Internet in May 2006, refers to WebMD as About.com's "archrival." (Wamsley Aff. Ex. C.) Plaintiffs have also submitted an email from About.com to Martin, which indicates that as part of her job application process, Martin was expected to be interviewed by About.com's directors of technology and business development. (Forte Supp'l Aff. ¶ 11.)

Defendant contends, on the contrary, that the "journalism business" she managed at WebMD was neither involved in "developing, selling or providing a consumer or physician Internet healthcare portal," nor "engaged in any other type of business in which [WebMD] is also engaged, or plans to be engaged," and in which she was "directly involved... on behalf of [WebMD]." (Martin Aff. ¶ 29.) Martin maintains that About.com is "not a traditional news service"; it publishes pieces written by independent contractors who may not be journalists, scientists, or medical professional, without first reviewing the content. (Martin Aff. ¶ 17.) In addition, About.com offers 21 other channels besides Health. (Martin Aff. ¶ 19.)

Furthermore, Defendant alleges that WebMD never considered About.com to be a competitor. (Martin Aff. ¶ 4.) In support of this allegation, Defendant has submitted a February 16, 2006 email sent to About.com by a web design consulting firm, which was also engaged by WebMD, informing About.com that WebMD "does not see About.com as competition" and offering to help the firm develop a new client relationship with About.com. (Siegal Aff. Ex. 1.) An undated print-out from a web page of Hoover's, an online business information service of Dun & Bradstreet, lists WebMD's competitors, which do not include About.com. (Siegal Aff. Ex. 2.)

Based on the evidence described above, I find it likely that Plaintiffs will be successful in demonstrating that About.com's Health Channel is a "Competitive Business" under the 2001 and 2004 agreements, because it is engaged in a substantially similar business as WebMD the development, sale, and provision of health information on the Internet.

This is not the end of the inquiry, however, as to whether Plaintiffs can enforce the non-compete. Under Delaware law, covenants not to compete in employment agreements "will not be mechanically or automatically specifically enforced. Because such provisions deal with the ability of a person to earn a livelihood, in each instance a court will look to all of the facts and circumstances in deciding whether specific enforcement is to be granted or not." McCann Surveyors, Inc. v. Evans, 611 A.2d 1, 5 (Del. Ch. Ct. 1987).

Under Delaware law, an agreement restricting competition will be enforced only if "(1) its duration is reasonably limited temporally, (2) its scope is reasonably limited geographically, (3) its purpose is to protect legitimate interests of the employer, and (4) its operation is such as to reasonably protect those interests."[FN4] Research & Trading Corp. v. Pfuhl, 1992 WL 345465, *6 (Del. [*8]Ch. Ct. 1992).[FN5] In seeking specific performance of Martin's covenant not to compete on the merits, Plaintiffs bear the burden of establishing their case by clear and convincing evidence. All Pro Maids, Inc. v. Layton, 2004 WL 1878784, *5 (Del. Ch. Ct. Aug 09, 2004), aff'd, 880 A.2d 1047 (Del. 2005). Because the covenants in this case are part of a contract for the sale of stock, the inquiry is less searching than if they had been contained in an employment contract. Tristate Courier & Carriage, Inc. v. Berryman, 2004 WL 835886, *10 (Del. Ch. Ct. 2004).

I begin the analysis by addressing the third and fourth elements. These two elements can be collapsed into a single inquiry: will the restriction reasonably protect the legitimate interests of Plaintiffs? The existence of the restrictive covenant, without more, is not proof of the employer's legitimate interest in enforcing it. Delaware courts will not enforce a non-competition agreement "that is more restrictive than an employer's legitimate interests justify or that is oppressive to an employee." Elite Cleaning Co., Inc. v. Capel, 2006 WL 1565161, *8 (Del. Ch. Ct. Jun. 2, 2006) (finding scope of two-year non-competition agreement unreasonable) (quoting RHIS, Inc. v. Boyce, 2001 WL 1192203, at **6-7 (Del. Ch. Ct. Sept. 26, 2001)). Under Delaware law, an employer's legitimate interests include "protection of employer goodwill [of its clients] and protection of employer confidential information from misuse."[FN6] Research & Trading Corp., 1992 WL 345465, at **12-13.

Plaintiffs asserts that it is entitled to specific performance of Martin's non-compete, based on evidence that Martin will be able to compete with WebMD by (1) using confidential and trade secret information about WebMD's "content strategies" and its "business and future strategic plans, and (2) taking "unfair competitive advantage of her reputation and relationships with medical professionals and members of the academic communities which are WebMD's source for content," and which were established at Plaintiffs' expense. (Forte Aff. ¶¶ 31-33.)

"Content Strategies" and "Business and Future Strategic Plans"

As evidence of Defendant's knowledge of Plaintiffs' confidential and trade secret information, Plaintiffs have submitted affidavits by Forte, Martin's former supervisor, asserting generally that Martin participated in WebMD's strategic planning and was familiar with proprietary and trade secret information (See Forte Aff. ¶¶ 16-19.) Forte states that Martin participated in daily business meetings, which included discussions of plans to redesign WebMD's website and website content for Fall 2006 and early 2007, as well as business and strategic planning for technology, growth and expansion, marketing, and advertising. (Forte Supp'l Aff. ¶¶ 2-5.) Forte also asserts that Martin was [*9]"directly involved in sales and marketing initiatives," by making presentations to WebMD customers and sponsors and participating in customer and prospective customer meetings and presentations. (Forte Supp'l Aff. ¶ 7.)

Citing "[c]oncern regarding public access to filings in this case," other than the Forte affidavits, WebMD elected not to provide "too many detailed documents as evidence of Ms. Martin's actual familiarity with the business side of WebMD's operations." (Forte Supp'l Aff. ¶ 4.) Instead, it attached several heavily redacted emails, most of them to or from Martin. (Forte Supp'l Aff. Ex. A.) In these emails, virtually all substantive content has been redacted with a thick black marker. The few terms that are still discernable include "product update planning," "marketing," "sales," "planning," and "portal initiatives." (Forte Supp'l Aff. Ex. A.) At most, what can be seen from these emails is that Martin was invited to and possibly participated at meetings at which these terms were discussed.

Plaintiffs contend that these redacted emails, together with the affidavits, provide "overwhelming" evidence that Martin regularly communicated about the subjects mentioned above with fellow WebMD executives and that Martin was aware of certain general types of confidential information concerning WebMD.[FN7] (Trans. at 30.) Plaintiffs have taken the position that it is unnecessary for me to consider further evidence in order to reach a decision.[FN8] [*10]

Plaintiffs' counsel asserted at oral argument that Delaware law requires them only to demonstrate the "nature" of the confidential information, and not to "actually shar[e] the secret information," even with the Court.[FN9] (Hear'g Trans. at 24-25.) [*11]

Contrary to Plaintiffs' assertions, Defendant insists that she participated only in the journalistic aspects of WebMD's business, and was not responsible for the business side of WebMD's operations. (Martin Aff. ¶¶ 3, 13.) Martin insists that she has no knowledge of WebMD's technical operations or its advertising or sales materials. (Martin Aff. ¶¶ 3, 10, 12-13.) While Martin acknowledges that she participated in conference calls with senior executives, she disputes Forte's characterization of them; she contends that they concerned only company plans to redesign its website. (Martin Aff. ¶¶ 22-23.) She avers, moreover, that most of the redesign has by now already been implemented. (Martin Aff. ¶ 23.)

Plaintiffs further allege that Martin acquired most of her expertise in print or Internet content development through her employment at WebMD. (Forte Supp'l Aff. ¶ 10.) Plaintiffs contend that Martin will use this experience at About.com's Health Channel. In support of their contention, Plaintiffs cite About.com's press release, which boasts that Martin will "lead[] the Health Channel's strategic direction" and develop "new content, tools and features." (Forte Aff. Ex. D.)

I do not credit Plaintiffs' allegation that Martin had little experience in print or Internet content development before joining WebMD. The same New York Times press release, on which Plaintiffs rely, reports that Martin was a journalist with CNN for several years, and later an executive producer overseeing all medical news coverage for CNN. (Forte Aff. Ex. D.) Clearly, Martin had medical journalism expertise for many years, even before she came to WebMD.

Beyond conclusory statements and heavily redacted emails, Plaintiffs have provided little indication of what knowledge of "content strategies" or "business and future strategic plans" Martin might have acquired at WebMD, except with respect to plans to redesign WebMD's website, and no credible basis on which to find that Martin is about to disclose any such information to her new employer. Plaintiffs have not adduced specific evidence that Martin both had specific knowledge of proprietary information and took it with her to her future employer. But cf. Tristate, 2004 WL 835886, at **10-11 (employer, a courier business, had legitimate interest in enforcing two-year restrictive covenant against former president, who indisputably had "complete knowledge of [*12][employer's] proprietary information, including its business strategies, logistics, and costs"); Delaware Exp. Shuttle, Inc. v. Older, 2002 WL 31458243 (Del. Ch. Ct. Oct 23, 2002) (enforcing restrictive covenant against former sales and marketing manager of bus services provider who took customer list from employer's database). Consequently, Plaintiffs have not borne their burden of demonstrating a likelihood of success on the merits, required as an evidentiary matter under New York law. See TMP Worldwide, 269 AD2d at 332; H. Meer, 269 AD2d at 664; Business Networks, 265 AD2d at 194-95.

Consequently, I find that no preliminary injunction enforcing the non-competition covenant is warranted based on Defendant's alleged use of confidential and trade secret information about WebMD's "content strategies" and its "business and future strategic plans" at About.com's Health Channel. Relationships with Medical Professionals, Members of Academic Communities (Customer Goodwill)

As an alternative basis for enforcing the non-compete, Plaintiffs contend that, while at WebMD and at WebMD's expense, Martin developed relationships with members of the medical, health, and academic communities, and that Martin may capitalize on this goodwill at About.com if she solicits content from independent contractors or other such "external sources." (Forte Supp'l Aff. ¶¶ 9.) In addition, Plaintiffs contend that Martin was "directly involved in sales and marketing initiatives," by making presentations to WebMD customers and sponsors and participating in customer and prospective customer meetings and presentations. (Forte Supp'l Aff. ¶ 7.) Plaintiffs have argued that enforcement of the restrictive covenants is also necessary to protect their investment in and relationships with employees and independent contractors.

Delaware courts recognize that an employer has a legitimate interest in "the goodwill created by its sales representatives and other employees, which is vulnerable to misappropriation if the employer's former employees are allowed to solicit its customers shortly after changing jobs." Research & Trading Corp., 1992 WL 345465, at **12-13 (the employer, a manufacturer of safety devices, had a legitimate interest in enforcing a non-compete enjoining three former senior officers from dealing with its key customers on behalf of a competitor for a year after separation from employment); see also All Pro Maids, Inc. v. Layton, 2004 WL 1878784, *5 (Del. Ch. Ct. Aug 09, 2004), aff'd, 880 A.2d 1047 (Del. 2005) (employer had legitimate interest in protecting goodwill, confidentiality, and established contracts from competitive use by former office manager, where "the evidence demonstrate[d] the importance of personal contacts to the success of [the] company" and that its former employee essentially prepared the contracts and "knew all the clients").

Here, however, Plaintiffs have not identified any of these "external sources" of health information, their customers, or their sponsors. Plaintiffs have not otherwise adduced specific evidence that Martin is likely to draw upon the same relationships in her new position at About.com. Plaintiffs have not produced any evidence that these sources, customers, or sponsors were confidential or unknown to Martin in her career in health journalism prior to her employment at WebMD. See H. Meer, 269 AD2d at 663-64 (vacating preliminary injunction as to alleged taking of confidential customer information, where plaintiff had not "put forth sufficient evidentiary proof" that "its customers are not known in the trade and are discoverable only by extraordinary efforts"). Indeed, Plaintiffs' counsel conceded at oral argument that there was no showing that any of [*13]WebMD's external sources have been solicited or contacted by Martin since she left WebMD. (Hear'g Trans. at 81.) In the absence of more specific evidence pointing to a likelihood that Plaintiffs will succeed on the merits of their claim, I cannot issue a preliminary injunction enforcing the non-competition covenant.

Non-Solicitation Covenant

The non-solicitation covenant bars, inter alia, solicitation of "any employee or independent contractor," or of "any existing or prospective client, or customer of the Company who I serviced, or otherwise developed a relationship with, as a result of my employment with the Company." (2001 Agt. ¶ 3(a).)

Defendant does not oppose enforcement of the ban on solicitation of WebMD's employees; Martin has affirmed that she is "willing to agree that [she] will not help recruit any WebMD personnel for one year." (Martin Aff. ¶ 28(k).) Because there is no dispute as to this issue, I will grant Plaintiffs' motion for a preliminary injunction enforcing the one-year non-solicitation covenant as to WebMD's employees.

With regard to the ban on solicitation of WebMD's independent contractors: There has been no showing that Martin has solicited, contacted, recruited or hired Plaintiffs' external sources or independent contractors or is likely to do so in the next year. (Hear'g Trans. at 81.) Therefore, I cannot enter a preliminary injunction enforcing the non-solicitation covenant. See Titus & Donnelly, Inc. v. Poto, 205 AD2d 475, 475 (1st Dept. 1994) (upholding denial of plaintiff's application for preliminary injunction enjoining former employee from soliciting plaintiff's employees or former customers, where "plaintiff failed to proffer any competent evidence, other than unsubstantiated allegations, of active solicitation [by defendants] sufficient to demonstrate a clear right to the relief sought").

In conclusion, I cannot find that Plaintiffs are likely to succeed on the merits of their claim that Martin has violated or is about to violate the non-solicitation covenant in her new position at About.com's Health Channel. Consequently, I deny Plaintiffs' request for a preliminary injunction enforcing the non-solicitation covenant.

Confidentiality and Nondisclosure Covenant

Plaintiffs also seek an injunction enjoining the disclosure, use, modification, or adaptation of any of Plaintiffs' trade secrets or confidential or proprietary business information. The stock option agreements forbid the disclosure of Plaintiffs' confidential information insofar as it falls under the definition of "Trade Secret and Proprietary Information." (2001 Agt. ¶ 1(a), (b).)

Martin contends that the provisions relating to confidentiality in the stock option agreements bear no relationship with her work responsibilities at WebMD, because she was not exposed to any of WebMD's "Trade Secret and Proprietary Information," as defined in those agreements. (Martin Aff. ¶ 4.) Specifically, Defendant avers that she had no access to or knowledge of "specifications, manuals, software in various stages of development," (2001 Agt. at 3, ¶ 1(a)(a)); "customer and prospect lists, and details of agreements and communications with customers and prospects," id. ¶ 1(a)(b); "sales plans and projections, product pricing information, acquisition, expansion, marketing, financial and other business information and existing and future products and business plans of the Company," id. ¶ 1(a)(c); "sales proposals, demonstrations systems, sales material," id. ¶ 1(a)(d); "research and development," id. ¶ 1(a)(e); "computer programs," id. ¶ 1(a)(f); the "identity of specialized consultants and contractors and Trade Secret and Proprietary Information developed by [*14]them for the Company," id. ¶ 1(a)(h); "purchasing, operating and other cost data," id. ¶ 1(a)(i); or "special customer needs, cost and pricing data," id. ¶ 1(a)(j).[FN10] (Martin Aff. ¶ 28.)

Moreover, Martin avers, and it is undisputed, that her "sources of supply," assuming that term refers to sources of stories, were neither exclusive or confidential, that Martin never used confidential sources, and never agreed to publish content on an exclusive basis. (Martin Aff. ¶¶ 3, 10, 28.) Martin also avers, and it is uncontested, that any story ideas that might have been pending when she left WebMD would long since have been published, because the process of developing, reporting, and writing story ideas lasted no more than three weeks. (Martin Aff. ¶ 21.)

The 2001 Agreement also provides that "Trade Secret and Proprietary Information shall not include such information that I can demonstrate... was known by me prior to, and not as a result of, my employment or anticipated employment with the Company." (2001 Agt. ¶ 1(a)(i).) I reject Plaintiffs' allegation that Martin gained most or all of her experience in print and Internet content development at WebMD, because I find that the evidence adequately shows that Martin had acquired many years' expertise in the field of medical journalism expertise by the time she came to WebMD. (Forte Aff. Ex. D.)

Moreover, as discussed above, Plaintiffs' conclusory affidavit statements and heavily redacted emails do not constitute the strong and detailed showing that is required to support their burden of demonstrating a likelihood of success on the merits of their contention that Martin had knowledge of WebMD's confidential information. See David D. Siegel, NY Practice, at 499 (3d ed., West 1999).

Based on the evidentiary record, I conclude that Plaintiffs have not shown a likelihood of success in their claim that the confidentiality and nondisclosure covenant is enforceable.

Because I find that Plaintiffs have not met their burden of demonstrating a likelihood of success on the merits, I do not need to address whether they have shown a danger of irreparable injury or assess the balance of equities.

Accordingly, for the foregoing reasons, it is

ORDERED that Plaintiffs' motion for a preliminary injunction is GRANTED in part and DENIED in part; and it is further

ORDERED that Defendant is preliminarily enjoined from recruiting, hiring, or engaging Plaintiffs' employees or otherwise interfering with Plaintiffs' employment relationships for a period of one year after the end of her employment at WebMD; and it is further

ORDERED that Plaintiffs' motion for a preliminary injunction is in all other respects DENIED; and it is further

ORDERED that the parties shall appear for a preliminary conference in Part 60 on July 26, 2006, at 10:30 a.m.

Dated: July 11, 2006ENTER:

_________________________ [*15]

J.S.C. Footnotes

Footnote 1:Unless it is important to delineate a specific Plaintiff, all Plaintiffs will be referred to as "WebMD" in this opinion.

Footnote 2:Plaintiffs have not sought a temporary restraining order.

Footnote 3:The 2004 stock option agreement does not appear to contain such a covenant.

Footnote 4:There has been no contention in this case that the covenants do not meet general contract law requirements.

Footnote 5:New York law is not significantly different. See BDO Seidman v. Hirshberg, 93 NY2d 382, 388-89 (1999) (for a noncompetition covenant to be enforceable, the restriction must be no greater than is required for the protection of the legitimate interests of the employer, the duration and territorial area involved must be reasonable, the burden imposed on the employee must not be unreasonable, and the general public must not be harmed).

Footnote 6:New York law is similar. See Reed, Roberts Associates, Inc. v. Strauman, 40 NY2d 303, 308 (1976) (a restrictive covenant will be enforced only to the extent necessary to protect the employer's legitimate interest in avoiding unfair competition or loss of good will as the result of the employee's use or disclosure of trade secrets or confidential customer information, or because of the unique or extraordinary nature of the employee's services).

Footnote 7:Along those lines, Plaintiffs' counsel stated at oral argument: MS. CASSILLY: We have given your Honor quite a bit of information relating to the types of trade secret information she was exposed to, and that is referenced in Miss Forte's affidavit, if you look at the attached e-mails to which I was referencing. [sic] (Hear'g Trans. at 21.)

Footnote 8:When questioned at oral argument, Plaintiffs' counsel took the position that further specificity was not required: THE COURT: Don't you have to demonstrate what the actual secrets are in terms of the confidentiality that you are seeking to preclude the disclosure of, rather than just general statements that she was attending meetings, and because of that she had to have had undisputedly gained the information? MS. CASSILLY: Respectfully, your Honor, I think the answer is, no. But beyond responding to that question, I believe that we have done so. (Hear'g Trans. at 19-20.) When I continued to question Plaintiffs' reliance on the redacted emails, Plaintiffs' counsel maintained her position that no further evidence was required: THE COURT: Is it your position, and I that the Delaware law does not require the demonstration or showing of what the confidential representation that because she was high-level management, there is an affidavit that said you gave her confidential information, that that's sufficient for me to ground a preliminary injunction? Is that your position? MS. CASSILLY: Your Honor, if you review the Delaware cases, you will see that the same type of information that we have introduced in this proceeding is the type of information upon which Delaware courts have granted injunctive relief. THE COURT: My question is a specific one. Is it your position that Delaware does not require a judge, before he or she issues an injunction, not to know what the actual nature of that information is? MS. CASSILLY: I think, your Honor, respectfully, that there would be a distinction there between informing the Court of the nature of the confidential information which we believe we have done in this instance, and actually sharing the secret information. For example, we have demonstrated to your Honor that she has confidential information regarding new products which are coming on line in the latter part of 2006 and she knows what the strategy is for changes in the web site, and that she knows what the strategy is as well as the budget is in the allocation of resources for changes in the direction of the company. That informs the Court of the nature of the confidential information, that she has that sort of information. ... Clearly, under Delaware law sufficient grounds have been adduced to establish the need and the propriety of a preliminary injunction. (Hear'g Trans. at 23-26.) When I further questioned Plaintiffs' counsel as to the sufficiency of the evidence, the following exchange also took place: THE COURT: Does Delaware... law [] permit the issuance of a preliminary injunction where the confidential information is simply described in conclusory terms? MS. CASSILLY: Again, your Honor, respectfully, we think we have gone far beyond merely THE COURT: You've given me redacted e-mails; you've told me she attended meetings where they discussed programs in the future and 2007 program changes; but that's really conclusory. That's not really that's a conclusion, that's really a fairly general statement or is it not? MS. CASSILLY: Your Honor, I believe the Delaware cases would reflect that it was sufficient for the nature of the confidential information to be part of the record. (Hear'g Trans. at 39.)

Footnote 9:When I suggested to Plaintiffs' counsel that she offer to let the Court view the unredacted documents in camera, she insisted that it was unnecessary. THE COURT: Isn't there a mechanism, if you have information that you believe is relevant, but you don't want to disclose in public filing, to have submitted it to me under seal so I will see something other than just redacted upon redacted document? MS. CASSILLY: Your Honor, yes, we could make a motion for purposes of presenting something under seal. We have some additional documents. We could do that for an in-camera inspection. We would be willing to do so. But I believe what is already on file with the Court reflects very specifically the trade secret information she was privy to. (Hear'g Trans. at 23-24.) After I questioned Plaintiffs further as to whether they had satisfied their evidentiary burden of proof, Plaintiffs' counsel offered to let the Court view "some" of the unredacted documents in camera. (Trans. at 40.) In light of the belated nature of the invitation during oral argument on the preliminary injunction motion, combined with the fact that Defendant had had no previous opportunity to review the unredacted documents, and the parties' agreement that I could decided this matter based on the evidence and submissions before me, I will decide the motion based solely on the evidence and submission before me.

Footnote 10:With regard to the provision in ¶ 1(a)(k) of the 2001 Agreement about "employee information," the only dispute is about recruiting or hiring WebMD's independent contractors. As discussed above, a preliminary injunction is not warranted with respect to this issue.