UnitedHealth Group denied restraining order over executive's departure

A federal judge has denied a temporary restraining order sought by Minnetonka-based UnitedHealth Group that would have blocked a former employee from working at a health care startup from corporate giants Amazon, Berkshire Hathaway and JPMorgan Chase.

U.S. District Judge Mark Wolf issued the ruling Friday from a court in Massachusetts, and granted a motion from former employee David William Smith to compel arbitration with Optum, the UnitedHealth Group subsidiary for health care services.

The case was widely watched for the details it might offer about the new venture, as well as the degree of concern it might show at UnitedHealth Group about the startup, which was called ABC in court filings.

On Friday, the judge issued a stay in the case, writing in his order that "if the parties agree to a resolution to their dispute, they shall promptly inform the court and this case will be dismissed."

"If and when the arbitrator issues a decision," Wolf wrote, "the party that did not prevail shall promptly report whether it or he intends to appeal the decision to this court."

The Reuters news service quoted the judge as saying that ABC does not offer products that compete with Optum, and could become a customer of the UnitedHealth Group subsidiary rather than a rival.

In a statement, a UnitedHealth Group spokesman said: "We are committed to protecting our confidential information and will aggressively do so in arbitration."

In January 2018, three of the nation's most influential CEOs pledged their companies' resources to attacking health care costs with a new company that they said wouldn't be focused on profits, but rather technology to create a high-quality and transparent system for quality health care.

On the day it was announced, the vague proposal from Jeff Bezos of Amazon, Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan Chase coincided with share prices dropping at several large health care firms including UnitedHealth Group, which runs both Optum and UnitedHealthcare, the nation's largest health insurer.

The startup, which is called Tcorp62018 LLC but known widely as ABC, subsequently hired the influential Harvard University physician and writer Atul Gawande as chief executive.

In a lawsuit filed last month, Eden Prairie-based Optum sought to block Smith from working for the startup and using or disclosing Optum trade secrets. Optum said the new venture had added two others with Optum backgrounds to its ranks, and argued the continuing success of the business depends on preserving its intellectual property.

Smith denied misappropriating any Optum confidential information, breaching his employee contract or soliciting Optum employees to work at ABC. Smith said his new job was focused on improving the health plan for the roughly 1.2 million workers and dependents who get insurance from the three founding companies.

In making his case, Smith filed an affidavit from John C. "Jack" Stoddard, who said he is the chief operating officer at ABC. Stoddard said he worked at UnitedHealth Group from 2005 to 2009, including in senior vice president positions for Optum International and Employer Solutions at Optum. He also worked at a health care consultancy called the Advisory Board before it was purchased by Optum.

Stoddard said the new company intended to "evaluate, test and scale solutions" from outside vendors that could include Optum. In a court filing earlier this month, Optum quoted from Stoddard's court testimony and said it showed how ABC refused to disclose Smith's specific duties at ABC.

"We are focused on improving the health outcomes and experience for the families and employees of the founding entities," Stoddard is quoted as saying in the Optum filing. "They're not getting the care they need, and the costs continue to rise. That is the problem we've been asked to fix."

In its initial complaint, Optum said that "Stoddard is a former, high-level UnitedHealth Group employee who has reportedly represented himself as Optum's co-creator [a fact that Optum disputes]."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck