Western Medical Consultants, Inc. v. Johnson

United States District Court for the District of Oregon · 1993 · Corporations

835 F. Supp. 554 (1993)

Updated August 22, 2026

Corporationsnoncompetition agreementstrade secretsfiduciary dutyemployee competitioncovenant not to competefiduciary duty of loyaltyemployee departure

Facts

Western Medical, an Oregon corporation providing independent medical examination services, employed Shannon Johnson, who later helped investigate and market a possible Alaska expansion. Johnson signed a confidentiality agreement containing a five-year covenant not to compete within a 50-mile radius of any Western office and restrictions on use of confidential information and solicitation of employees. After concluding Western Medical was not interested in developing the Alaska market, Johnson resigned at the end of November 1990, later incorporated Medical Evaluations of Alaska, and opened its office in December 1990. Western Medical had sent Johnson to Alaska twice for research and marketing, but had not opened an Anchorage office before Johnson began operations.

Issue

Did Johnson breach her employment agreement, misappropriate Western Medical's trade secrets or proprietary information, or breach fiduciary duties by preparing to open and then opening a competing Alaska IME business after leaving Western Medical? More specifically, could Western Medical enforce its noncompetition and confidentiality provisions where it had not yet opened an Anchorage office and where the information Johnson used was publicly available or part of her general experience?

Rule

A noncompetition agreement may be valid and binding under Oregon law, but it is not breached where the employee begins competing in a location where the employer had no office within the agreement's geographic scope at the time competition commenced. Under Oregon's Uniform Trade Secrets Act, the plaintiff must prove that the information is a statutory trade secret, that reasonable measures were used to maintain secrecy, and that the defendant misappropriated it; information commonly known in the industry, readily ascertainable from public sources, or consisting only of an employee's general know-how, skill, and experience is not protected. An agent owes a fiduciary duty of loyalty and may not compete with the principal during employment, solicit customers before termination, or use confidential information in later competition, but may take preparatory steps to compete before termination and may compete after termination.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lena Ortiz worked for Cascade Review Services, a Portland company that coordinates specialty evaluations. She signed an agreement barring competition within 50 miles of any Cascade office for three years after leaving. After resigning, she opened a competing office in Boise in March. At that time, Cascade had discussed Boise expansion and sent Lena there twice to study the market, but had not yet opened any Boise office or begun operating there.

Has Lena most likely breached the noncompetition covenant?

Explanation. The majority treated validity and breach as separate questions. Even if a covenant is valid, there is no breach where the employee begins competing in a city where the employer had no office within the covenant's geographic scope when competition commenced. Mere discussion or investigation of expansion is not enough.