Forfeiture of $2.6MM in Comp for Failing to Clean Out Home Office May Not Pass Muster

Non-Compete, Nondisclosure, Employment Agreements, Minnesota, Restrictive Covenants

In the recent case of Capistrant v. Lifetouch National School Studios, Inc., No. A16-1829, 2018 BL 263415 (July 25, 2018), the Minnesota Supreme Court had occasion to consider whether a 25+ year employee’s failure to return all of his employer’s property immediately upon termination justified the forfeiture of $2.6MM in compensation. The case reminds us once again that employment agreements will not always be enforced as drafted. Continue reading

Court Compels Arbitration of Non-Compete Claim Based on Arbitration Clause in Separate Agreement

Non-Compete, Non-Solicit, Arbitration Provision, DTSA, Illinois

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

Indiana Appellate Court Upholds Liquidated Damages in Non-Compete and Non-Recruitment Provisions

Employment Agreements, Liquidated Damages, Non-Solicit, Indiana, Non-Compete

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

Court Allows Tortious Interference Claim to Proceed Against Attorneys Alleged to Have Directed Clients to Breach Non-Compete

Non-Compete, Attorney-Client Relationship, Kentucky, Legal Malpractice, Tortious Interference

Can an attorney who allegedly counsels a client to breach a non-compete be sued by the client’s employer for tortious interference with contract? The answer may be yes, at least according to the U.S. District Court for the Western District of Kentucky, which recently refused to dismiss such claim in Pinnacle Surety Services, Inc. v. Mannion Stigger, LLP.[1] Continue reading

Don’t Let the Janitor [Rule] Sweep Away Your Non-Compete

Non-Compete, Janitor Rule, Employment Agreements, Restrictive Covenants

A recent federal decision from the Northern District of Illinois again illustrates the perils of drafting and attempting to enforce overbroad restrictive covenants. In the case of Medix Staffing Solutions, Inc. v. Dumrauf, 17-cv-6648, 2018 WL 1859039 (N.D.Ill. Apr. 17, 2018)(Ellis, J.), Medix, a pharmaceutical, biotech and medical device company, attempted to enforce a non-compete agreement against its former Director, Dumrauf, who had been responsible for its medical sales and recruiting strategies and who had left to work for a direct competitor, ProLink.  Continue reading

Can an Employer Be Bound By a Non-Compete Agreement It Did Not Know Would Be Presented To Its Employees?

Non-Compete, Employment Agreement, Grant v Johnson, Michigan

by Mark C. Vanneste

What if an employee agrees to a non-compete clause but the employer did not realize it would be presented to the employee? It sounds unlikely, but would the employer be bound by those terms? Maybe. These were the circumstances in the United States District Court for the Eastern District of Michigan’s recent Eric Grant v Johnson Electric decision. Continue reading

Restrictive Covenant Drafting: Ten Tips to Avoid the Traps

Non-Compete, Non-Solicit, Restrictive Covenants

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.

Continue reading