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Analysis

Judge Allows Ex-Optum Exec to Work for Amazon Healthcare Venture

By Steven Porter  
   February 25, 2019

A closely watched trade-secrets dispute in a federal courtroom ended with the judge rejection Optum's request for a temporary restraining order, sending the parties to arbitration.

The federal judge overseeing a lawsuit brought by UnitedHealth Group's Optum Inc. against a former executive who left the company for a high-level job with Amazon's healthcare initiative said late Friday that he will allow the executive to work for the new venture.

Optum had asked the judge for a temporary restraining order to block David Smith from contributing to the venture's work, arguing that Smith would be taking Optum trade secrets to a competitor. Smith, meanwhile, had asked the judge to send the parties into closed-door arbitration.

After hearings on Friday, U.S. District Judge Mark Wolf rejected Optum's request and allowed Smith's, putting court proceedings on hold until the arbitration process is complete.

"If the parties agree to a resolution to their dispute, they shall promptly inform the court and this case will be dismissed," Wolf wrote.

"If and when the arbitrator issues a decision, the party that did not prevail shall promptly report whether it or he intends to appeal the decision to this court," he added. "If it or he does not, this case will be dismissed."

A spokesperson for Optum told HealthLeaders in a statement Monday that the company will not back down from its challenge.

"We are committed to protecting our confidential information and will aggressively do so in arbitration," the Optum spokesperson said.

An attorney for Smith declined to comment.

Since it was filed last month, the lawsuit has been closely watched for clues about Amazon's joint venture with Berkshire Hathaway and JPMorgan Chase, a much-hyped initiative described as "ABC" in court filings. The case highlights a sense of unease among some major incumbents in the healthcare industry as aspiring disruptors scope out one or more entry points.

Smith and his two ABC-funded legal teams argued the matter is a "purely private dispute," but the parent companies for The Boston Globe and The Wall Street Journal persuaded Wolf to unseal testimony that had previously been withheld from the public. The unsealed testimony revealed that ABC aims to "make health insurance intelligible," as Kate Sheridan reported last week for Stat, a healthcare-focused standalone site produced by the Globe.

Related: Amazon-Backed Initiative Hires Chief Technology Officer, Seeks Tech Talent

Related: 'Purely Private Dispute'? Amazon-Bound Exec Escalates Optum Trade Secrets Suit

Related: What's a 'Competitor'? Optum Sues VP Who Left for Amazon-Backed Initiative

The testimony from ABC Chief Operating Officer Jack Stoddard revealed the venture is asking if it can "reinvent what insurance looks like in terms of benefit design," as the Journal's Jon Kamp and Anna Wilde Mathews reported. While the venture is scrutinizing pharmacy costs, Stoddard said there are no plans to compete with pharmacy-benefit managers, the Journal reported.

In denying Optum's motion, Wolf said the company had failed to establish that Smith was likely to violate a noncompete agreement, noting that the Amazon-backed venture doesn't currently offer any products that compete with Optum's business and could become a customer of Optum rather than a competitor, as Reuters' Nate Raymond reported.

The venture, led by CEO Atul Gawande, has been hiring with a focus on technology and data analytics.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

Photo credit: Editorial credit: Sundry Photography / Shutterstock.com


KEY TAKEAWAYS

Court proceedings are on hold as the dispute heads into arbitration, as the ex-Optum executive had requested.

Optum said it will 'aggressively' protect its trade secrets in the arbitration proceeding.

The judge noted that Amazon's healthcare venture could become a customer of Optum rather than a competitor.


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