Case 1:21-cv-11526-WGY Document 1 Filed 09/16/21 Page 1 of 8
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MASSACHUSETTS
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`CVS PHARMACY, INC., and SURESH
`YARLAGADDA,
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`Civil Action No. 21-11526
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`Defendant.
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`Plaintiffs,
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`v.
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`CAPITAL RX, INC.,
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`COMPLAINT
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`Plaintiffs CVS Pharmacy, Inc. (“CVS”), and Dr. Suresh Yarlagadda (“Dr. Yarlagadda”),
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`for their Complaint against Capital Rx, Inc. (“Capital Rx” or “Defendant”), allege as follows:
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`NATURE OF THE ACTION
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`1.
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`This is an action for declaratory relief and for damages based on Capital Rx’s
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`tortious interference with the relationship between CVS and Dr. Yarlagadda. Capital Rx has
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`threatened imminent litigation against CVS, claiming that CVS wrongfully hired Dr. Yarlagadda,
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`a former Capital Rx employee. Capital Rx claims that Dr. Yarlagadda cannot work for CVS
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`because of a noncompetition clause (the “Noncompete Agreement”) buried in a document Dr.
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`Yarlagadda signed upon entering into employment with Capital Rx.
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`2.
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`Dr. Yarlagadda is a resident of Massachusetts, who was employed by Capital Rx
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`in Massachusetts. He signed the Noncompete Agreement in Massachusetts in or around May
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`2021, when he began working for Capital Rx.
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`3.
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`The Noncompete Agreement is unenforceable under the Massachusetts
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`Noncompetition Agreement Act, G.L. c. 149, § 24L. CVS has explained this to Capital Rx, but
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`Capital Rx has continued to threaten suit against CVS.
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`4.
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`Until the Noncompete Agreement is ruled unenforceable, CVS will continue to
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`face this threat of litigation.
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`5.
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`CVS and Dr. Yarlagadda have been damaged by Capital Rx’s threats, which
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`forced CVS to postpone Dr. Yarlagadda’s employment and expend resources on responding to
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`Capital Rx.
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`THE PARTIES
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`6.
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`CVS Pharmacy, Inc. is a corporation formed under the laws of Rhode Island. Its
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`principal place of business is at One CVS Drive, Woonsocket, Rhode Island, 02895.
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`7.
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`Capital Rx, Inc. is a corporation formed under the laws of Delaware. Its principal
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`place of business is at 228 Park Avenue South, Suite 87234, New York, New York, 10003.
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`8.
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`Dr. Yarlagadda is, and at all times relevant to this action has been, a resident of
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`Sharon, Massachusetts.
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`JURISDICTION AND VENUE
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`9.
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`This Court has personal jurisdiction over Capital Rx pursuant to G.L. c. 223A, §
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`3(a) because it transacted business in the Commonwealth of Massachusetts including by
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`employing Dr. Yarlagadda and other individuals in Massachusetts.
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`10.
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`This Court has jurisdiction over the subject matter of this action pursuant to 28
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`U.S.C. § 1332 because there is diversity of citizenship between the parties to this action and the
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`matter in controversy exceeds $75,000.
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`11.
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`Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) because a
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`substantial part of the events giving rise to CVS’s claims occurred in this District.
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`FACTS
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`12.
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`Dr. Yarlagadda was employed by Capital Rx, a start-up located in New York,
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`New York, from on or about May 3, 2021 to on or about July 28, 2021.
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`13.
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`Dr. Yarlagadda is a resident of Sharon, Massachusetts. During the entirety of his
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`employment with Capital Rx, he worked from his Sharon home. Dr. Yarlagadda has never been
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`to Capital Rx’s New York office.
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`14. When he was hired by Capital Rx, Dr. Yarlagadda received an offer letter (the
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`“Offer Letter”). The Offer Letter was dated April 8, 2021 and set Dr. Yarlagadda’s start date as
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`May 3, 2021. The Offer Letter acknowledged that Dr. Yarlagadda would be working for Capital
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`Rx from his home in Massachusetts.
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`15.
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`Nothing in the Offer Letter contemplated that Dr. Yarlagadda would ever work in
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`New York. Nor did the Offer Letter contain any noncompetition provisions.
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`16.
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`On May 2, 2021, the day before Dr. Yarlagadda’s employment with Capital Rx
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`was scheduled to begin, Capital Rx sent Dr. Yarlagadda an Employee Non-Disclosure and
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`Invention Assignment Agreement (“NDIAA”). Dr. Yarlagadda signed the NDIAA on May 2,
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`2021, the day he received it. Buried within this 11-page document was a single paragraph titled
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`“Non-Solicitation; Non-Compete”. The portion of the paragraph constituting the Noncompete
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`Agreement reads in its entirety as follows:
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`I further agree that during the term of my employment with the Company and for
`a period of six (6) months after the termination of my employment with the
`Company, I will not assist in, engage in or otherwise take a position or benefit
`from any business competitive with the Company, whether directly or indirectly,
`and whether as an owner, sole proprietor, founder, shareholder, member, partner,
`joint venture, officer, director, consultant, advisor, independent contractor, agent,
`employee, or otherwise, in the locations where the Company markets its services
`and products, and where I performed services and or communcaited [sic] with,
`directly, or indirefctly [sic] the Company’s clients, or suppliers. In addition, I
`may own, as a passive investor, publicly-traded securities of any business
`competitive with that of the Company so long as such securities do not, in the
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`aggregate, constitute more than three percent (3%) of any class of outstanding
`securities of such corporations. For the purposes of this Agreement, a “business
`competitive with that of the Company” shall mean one that provides technology
`or services related to pharmacy benefits or pharmacy data services, excluding an
`operating business delivering medical insurance or medical health plans.
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`17.
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`The NDIAA purports to apply New York law to any disputes arising out of the
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`NDIAA.
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`18.
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`Dr. Yarlagadda was unaware that the NDIAA contained any noncompetition
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`provisions.
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`19.
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`On or around July 28, 2021, Dr. Yarlagadda resigned his employment with
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`Capital Rx. He received an employment offer from CVS. Dr. Yarlagadda was scheduled to
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`begin work with CVS on August 9, 2021.
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`20.
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`Before Dr. Yarlagadda began work with CVS, Capital Rx sent a letter to CVS and
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`to Dr. Yarlagadda asserting that Dr. Yarlagadda was barred from working for CVS by the
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`Noncompete Agreement. Capital Rx stated that it “intended to hold [Dr. Yarlagadda] to the
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`obligations set forth above” and threatened to “take any and all actions necessary to protect its
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`rights.”
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`21.
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`CVS delayed Dr. Yarlagadda’s start date while it investigated Capital Rx’s
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`assertions. During this time, CVS was deprived of Dr. Yarlagadda’s services, and Dr.
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`Yarlagadda was deprived of the salary he would have received had he started work on his initial
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`start date.
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`22.
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`CVS informed Capital Rx on August 24, 2021 that the Noncompete Agreement
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`was invalid and unenforceable under the Massachusetts Noncompetition Agreement Act.
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`23.
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`Capital Rx, however, has continued to threaten litigation against CVS and Dr.
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`Yarlagadda. In a letter dated September 8, 2021, Capital Rx stated that CVS’s employment of
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`Dr. Yarlagadda “gives rise to a claim for tortious interference” against CVS. Capital Rx
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`“demand[ed] that CVS cease and desist” and “refrain from employing” Dr. Yarlagadda until
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`January 28, 2022. Capital Rx threatened that if CVS did not do so, “Capital Rx will take all
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`necessary steps to protect its rights.”
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`FIRST CLAIM FOR RELIEF
`Declaratory Judgment (Both Plaintiffs)
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`24.
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`CVS and Dr. Yarlagadda re-allege and incorporate by reference paragraphs 1
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`through 23 of this Complaint.
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`25.
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`An actual and justiciable controversy exists between CVS and Capital Rx, and
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`between Dr. Yarlagadda and Capital Rx, regarding the enforceability of Dr. Yarlagadda’s
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`Noncompete Agreement in a manner that would preclude him from working for CVS.
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`26.
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`Capital Rx wrongly asserts that the Noncompete Agreement is enforceable and is
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`threatening to bring a lawsuit against CVS unless CVS refrains from employing Dr. Yarlagadda
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`until January 28, 2022.
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`27.
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`The validity of the Noncompete Agreement is governed by the Massachusetts
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`Noncompetition Agreement Act pursuant to G.L. c. 149, § 24L(e).
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`28.
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`The Noncompete Agreement is unenforceable under the Massachusetts
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`Noncompetition Agreement Act for several reasons.
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`29.
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`For example, the Massachusetts Noncompetition Agreement Act requires that a
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`noncompete agreement be provided to an employee by the earlier of (a) the offer of employment
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`or (b) 10 days before the commencement of employment. G.L. c. 149, 24L(b)(i). The
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`Noncompete Agreement was given by Capital Rx to Dr. Yarlagadda nearly a month after his
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`offer of employment and only one day before his commencement of employment.
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`30.
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`For another example, the Massachusetts Noncompetition Agreement Act requires
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`that a noncompete agreement be “supported by a garden leave clause or other mutually-agreed
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`upon consideration” providing for compensation during the time period the employee is
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`restricted from working for a competitor. G.L. c. 149, § 24L(b)(vii). The Noncompete
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`Agreement contains no such clause.
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`31.
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`The Massachusetts Noncompetition Agreement Act forbids evasion of its
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`requirements through a contractual choice of law provision. The provision of the Noncompete
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`Agreement purporting to apply New York law is invalid and void.
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`32.
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`33.
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`The Noncompete Agreement is otherwise unenforceable and unreasonable.
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`Unless this Court finds that the Noncompete Agreement is invalid and
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`unenforceable, CVS will continue to suffer injury from the threat of litigation and the possibility
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`of being deprived of Dr. Yarlagadda’s services until January 28, 2022.
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`34.
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`Unless this Court finds that the Noncompete Agreement is invalid and
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`unenforceable, Dr. Yarlagadda will continued to suffer injury from the threat of litigation and the
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`possibility of being deprived of his salary from CVS until January 28, 2022.
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`SECOND CLAIM FOR RELIEF
`Tortious Interference with Contractual Relations (Both Plaintiffs)
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`35.
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`CVS and Dr. Yarlagadda re-allege and incorporate by reference paragraphs 1
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`through 34 of this Complaint.
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`36.
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`37.
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`38.
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`A contractual relationship existed between CVS and Dr. Yarlagadda.
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`Capital Rx knew of this contractual relationship.
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`Capital Rx intentionally interfered with this contractual relationship through
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`improper means—specifically, by threatening litigation against CVS and Dr. Yarlagadda on the
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`basis of the Noncompete Agreement, which it knew to be unenforceable under Massachusetts
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`law.
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`6
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`39.
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`Because of Capital Rx’s actions, CVS suffered damages through the loss of Dr.
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`Yarlagadda’s services during the time that his employment with CVS was postponed.
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`40.
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`Because of Capital Rx’s actions, Dr. Yarlagadda suffered damages through the
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`loss of his salary during the time that his employment with CVS was postponed.
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`THIRD CLAIM FOR RELIEF
`Unfair and Deceptive Trade Practices Under G.L. c. 93A, §§ 2(a), 11 (CVS)
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`41.
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`CVS re-alleges and incorporate by reference paragraphs 1 through 40 of this
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`Complaint.
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`42.
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`43.
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`Capital Rx is an entity engaged in trade or commerce.
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`Capital Rx engaged in unfair and deceptive trade practices by seeking to interfere
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`with the contractual relationship between CVS and Dr. Yarlagadda, based on the Noncompete
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`Agreement, which it knew to be unenforceable under Massachusetts law.
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`44.
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`Because of Capital Rx’s actions, CVS suffered damages through the loss of Dr.
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`Yarlagadda’s services during the time that his employment with CVS was postponed.
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`WHEREFORE, CVS and Dr. Yarlagadda respectfully request judgment as follows:
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`Enter judgment in their favor on all claims for relief;
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`Declare that the Noncompete Agreement is invalid and unenforceable;
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`Award CVS and Dr. Yarlagadda actual damages in an amount to be determined at
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`Award CVS treble damages pursuant to G.L. c. 93A, § 11;
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`Award CVS and Dr. Yarlagadda attorneys’ fees, costs, and expenses in this
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`1.
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`2.
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`3.
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`4.
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`5.
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`trial;
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`action; and
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`6.
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`Grant such other and further relief as is just and proper.
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`7
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`DEMAND FOR JURY TRIAL
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`Pursuant to Fed. R. Civ. P. 38, Plaintiffs hereby demand a jury trial on all claims so
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`triable.
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`Dated: September 16, 2021
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`FOLEY HOAG LLP
`
`/s/ James S. Fullmer
`James W. Bucking (BBO #558800)
` jwb@foleyhoag.com
`James S. Fullmer (BBO #696682)
`jfullmer@foleyhoag.com
`155 Seaport Boulevard
`Boston, MA 02210
`Tel: (617) 832-1000; Fax (617) 832-7000
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`Attorneys for Plaintiffs CVS Pharmacy, Inc. and
`Suresh Yarlagadda
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`8
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