After working for nearly three decades at CVS Pharmacy, Inc., including in senior-level jobs, John Lavin accepted a new position at a company called PillPack LLC, a direct competitor of CVS. PillPack is an online retail pharmacy founded in 2013 and wholly owned by Amazon.
At four points during his employment as a senior vice president, CVS required Lavin to sign a restrictive covenant agreement (“RCA”). Each RCA contained non-competition, non-solicitation, and nondisclosure covenants. The RCAs defined competitors of CVS but contained no geographic limitations. Each time Lavin signed a RCA, he was awarded CVS stock.
CVS Obtains A Preliminary Injunction Enforcing The Non-Compete
CVS sued Lavin and moved for a preliminary injunction, which was granted. Continue reading
The Indiana Supreme Court has reaffirmed its narrow interpretation of the “blue pencil” doctrine, holding that courts may not add terms to an overbroad non-solicitation or non-competition provision to make it reasonable even if the contract has a reformation clause.
As the court puts it: “This doctrine … is really just an eraser.” Continue reading
A federal court, in a non-competition setting, had to untangle the relationship between three separate agreements. One contained an arbitration provision but the others did not. Ultimately, the court determined that some parties had to arbitrate some claims but that others did not have to arbitrate. Continue reading
by Ariane M. Janz
Liquidated damages provisions are supposed to simplify non-compete cases, but disputes over the enforceability of such provisions can have the opposite effect, complicating the matter and adding uncertainty. If a court determines that the liquidated damages are grossly disproportionate to the employer’s actual loss, the court may refuse to enforce the liquidated damages provision as an impermissible penalty. Continue reading
Tip 1: Choose your choice of law wisely and FIRST.
- The law you choose to apply to a restrictive covenant is regularly outcome determinative in enforcement proceedings (e.g. Illinois’ rule on at-will employment as consideration, North Carolina’s rule on blue-penciling, Louisiana’s law on geographic scope, Florida’s statute on presumptive validity, etc.)
- And there are sometimes three or four states from which to pick:
- where the employer or seller is located (state of incorporation or principal place of business)
- where the employee or purchaser is located
- where the place of performance is located.
- So take the opportunity to pick the law that is most likely to do what your client already presumes will be done: your restrictive covenants will be enforced.
- Relatively speaking, Delaware –often the default state of incorporation– is a solid and defensible choice.
Sometimes a party to a contract gets greedy. As an example, sometimes a party seeks an onerous non-competition provision in a contract. Will a court enforce it? Will the court modify the agreement if it is too broad in some respect? Let’s see how this played out in a real case. Continue reading
by Chase M. Hundman
In The Manitowoc Company, Inc. v. Lanning, the Supreme Court of Wisconsin ruled that a non-solicitation of employees provision contained within an employment agreement was unreasonable and unenforceable under Wisconsin statute as overly broad. Continue reading