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
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. Continue reading
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
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
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