Jan 04, 2022

Enforcement of a Non-Compete

Hello, my name is Irwin Gilbert. I’m a senior partner with Conrad and Scherer. We’ve been engaged by a new client who’s being sued over a non-compete agreement. When we start a new case, our practice is to meet with a team of lawyers assigned to the case to discuss initially the strengths and weaknesses of the case. You’re going to witness such a session, with me today are team members, Jimmy Mintz and Kyle Roberts. Kyle, looking at this case from the point of view of the plaintiff who is suing our client, what were your initial thoughts?

“Well, I know that when we spoke with our client, he initially wants to move to dismiss the claims brought against him for hiring this plaintiff’s ex-employee. However, that is a factual dispute that can’t be decided on a motion to dismiss. It’s more appropriate for a motion for summary judgment so that we’ll have to wait until we get further into this case.”

“Additionally, the plaintiff could move for a temporary injunction to prevent our client from continuing to employ their ex-employee based on the breach of this covenant not to compete. As you know there has to be a legitimate business interest that this covenant not to compete protects, otherwise, it’s not worth the paper that it’s written on and could possibly be illegal. The plaintiff is alleging that they have several forms of confidential information including their financial data, profit and loss sheets, and other documentation that shows how their business is run. In addition to that, they’re claiming that the ex-employee, who our client now employs, has some of that confidential information in his possession. That would be a factual determination as to whether he actually has that information and it’s something that we seriously need to look into to figure out whether he took any of that information while he was employed or whether it’s something that he gained in the course of his employment.”

Is that type of information the kind of information that a court might view as protectable business information?

“Good question. The Florida statutes set out what is a protectable business interest and it’s not an exclusive list, but some of the things that the plaintiff is alleging are contained within the Florida statute. There’s another issue that we need to take into consideration in defending this case. That’s whether the restrictions imposed by this covenant not to compete are reasonably necessary in order to protect that business interest. That’s something that some attorneys get wrong or it’s overlooked. It’s not enough to just have confidential information and that’s what the plaintiff alleges that our client’s employee has confidential information from his time while he was employed with them, however, the restrictions in place must be reasonably necessary to prevent the use of that confidential information.”

Jim, what do you think of when I completely agree with Kyle that the motion to dismiss right now is probably a waste of time. Most of these issues are factual, and as I mentioned, the plaintiff is probably going to be trying to set an injunction hearing pretty soon. They mention an injunction in their complaint and you know my reaction to that is to bring it on. At this point in time, they have to prove they have a legitimate business interest because one of the issues in an injunction hearing is proving a likelihood of success on the merits. So far I’m not seeing that much in this complaint that’s telling me they’re going to have a reasonable chance of success on the merits. They do mention various types of confidential information, but you could pretty much cut and paste what they’ve put into this complaint from any other complaint seeking to enforce a non-compete. So far I’m not seeing a whole lot that is specific to this company in this complaint. Maybe it is there, but whenever they talk about the financial data and customer lists and all of that, I’m just not seeing anything specific that tells me that they’ve actually thought about this and that they’re not just reading off what the contract itself claims.

Is there a business interest as we know to be a legitimate business interest it really has to be an investment by the employer. That is if it’s taken it would enable unfair competition. Right now I don’t know what is in here that really fits into that definition. So I’d say we should probably go ahead and get an injunction hearing and just get to figuring out what the facts are.

Are you thinking that an injunction hearing is a way to get really fast discovery into the heart of their case?

“Yes, right now all we have is a complaint and just reading the complaint I see a list of categories of things that could be protectable information that could be a legitimate business interest. It really is not specific, it could have just been cut and pasted from the contract’s description, in fact, it looks to me like it is. I really can’t tell, for example, when it mentions customer lists, what type of customers are we talking about? Are these big chains that everyone knows about like Walmart and Target whose competitors are already doing business with our competitors and already know. If that’s the case then the customer lists they’re describing don’t really mean anything and definitely can’t justify a non-compete covenant. So that’s why I do think it is a good idea to try to speed ahead toward an injunction hearing and get some discovery. We need to figure out exactly if what they’re saying is protectable. Because my gut feeling right now is that if they really had something protectable, they would have been a little bit more specific about what that information is. I think this will be a good chance with them having the burden of proof at the injunction hearing to show the judge that there’s really nothing there.”

Jim, I wanted to ask in a contract of this type, and in a lawsuit of this type, would it matter if the employee independently decided to leave the company and compete?

“Oh, absolutely if the employee was going to leave the company anyway and was going to seek another job in the same industry before even speaking to the new employer then that would undermine any claim of tortious interference. In order to claim that the new employer interfered, the new employer has to actually do something to convince the employee to leave. If the employee was already going to leave and compete in the same industry before speaking to a new employer then there’s no claim against a new employer so we do need to get some information to figure that out. See if there are any emails out there that support the idea that the employee was going to leave anyway and speak to the employee. See what that employee has to say about their motives.”

Well, gentlemen, it seems to me that we have a plan and well let’s get started every case is unique the facts of the case and how the law will apply to those facts can vary quite a bit you should always consult with a competent attorney before making any important business decision.