Non-Solicitation Agreements

On May 6, 2020, the U.S. District Court for the District of Maine denied plaintiff Alcom’s request for a temporary restraining order (“TRO”), which sought to enjoin a competitor’s alleged misappropriation of trade secrets. The court denied the request for a TRO, holding that Alcom’s speculation about the potential harm it would suffer absent the TRO was not enough to show a likelihood of irreparable harm, as required to obtain a TRO. The case serves as a reminder that when proving irreparable harm, courts require more than just speculation.

In 2015, Alcom (a trailer manufacturer) hired Mr. Temple (defendant) as a sales representative for its horse and livestock trailers. As the sole salesperson in North America for the Frontier line of trailers, Mr. Temple gained significant responsibilities including developing and maintaining sales leads, as well as growing Alcom’s customer base for those trailers. Mr. Temple signed various agreements as conditions to his employment, including (i) confidentiality agreement, (ii) non-disclosure agreement, (iii) non-compete agreement, and (iv) a non-solicitation agreement. Alcom required Mr. Temple to sign the agreements as a precondition for accessing highly valuable and confidential company information relating to customer incentive program details, sales and marketing information, and unique insights into the needs and operational requirements of the trailer dealers he solicited.
Continue Reading Under Alcom v. Temple, Speculative Harm Does Not Meet the Irreparable Harm Requirement

In the First Circuit, restrictive covenants are governed predominately by statute (with the exception of Puerto Rico, which governs such agreements through common law). Within the last year, Maine, Rhode Island, and New Hampshire have amended their restrictive-covenant statutes to prohibit employers from requiring lower-wage earners to sign noncompete agreements. A recently proposed amendment to Massachusetts law, if passed, would render all noncompetition agreements void and unenforceable effective January 1, 2021. These efforts reflect increasing hostility towards, and increased scrutiny of, restrictive covenants in the First Circuit.

Continue Reading Restrictive Covenants in the First Circuit

As in other states, the enforceability of restrictive covenants or non-compete clauses in the Sixth Circuit turns primarily on the reasonableness of the restriction’s geographic and temporal scope. Michigan has enacted a statute explaining when non-competes may be enforced. In Kentucky, Ohio and Tennessee, enforcement is determined entirely by common law. In Ohio and Tennessee, courts will consider the public interest in addition to the interests of the parties involved.

Continue Reading Restrictive Covenants in the Sixth Circuit

After a week-long trial in June, a jury in the Southern District of Texas awarded digital marketing firm Six Dimensions, Inc. (Dimensions) $287,000 for its breach of contract claim against its former employee, Lynn Brading. However, the jury rejected Dimensions’ $50 million lawsuit against its competitor, Perficient Inc. (Perficient) for stealing its trade secrets.
Continue Reading Employee Wrongdoing Does Not Guarantee Favorable Trade Secrets Verdict

States within the Fourth Circuit vary in their enforcement of restrictive covenants. Virginia, Maryland, and South Carolina govern the use of restrictive covenants through common law while North Carolina governs through statute. Despite the variations in governing authority, many of the factors used in these states will be familiar, given the widely accepted “reasonableness” standard

As in most states, the enforceability of restrictive covenants or non-compete clauses in the Fifth Circuit turns primarily on the reasonableness of the restriction’s geographic and temporal scope. Louisiana and Texas have enacted statutes explaining when non-competes may be enforced. But in Mississippi, enforcement is determined entirely by common law, and courts will consider the

A federal district court in San Jose recently ruled, in WeRide Corp., et al. v. Kun Huang, et al., that employee non-solicitation agreements are “void” under California Business & Professions Code section 16600 because such agreements are an invalid restraint on employment. This is the second federal court opinion this year that has barred

In the Third Circuit, common law generally governs the use of restrictive covenants. States in this Circuit employ a reasonability standard to determine whether a restrictive covenant is enforceable. In New Jersey, even if a covenant is found to be reasonable, it may be limited in its application by: geographical area, period of enforceability or

States within the Seventh Circuit employ the reasonability standard used in many other circuits to determine whether a restrictive covenant is enforceable. Two of these states, Illinois and Indiana, apply a common law framework but largely disfavor such covenants as a restraint on trade. Wisconsin’s restrictive covenant statute focuses on the reasonableness of the agreement

Each of the states within the Eleventh Circuit governs the use of restrictive covenants through statutes. Generally, both Florida and Alabama permit the use of restrictive covenants where the restrictive covenant is “reasonably necessary” to protect a legitimate business interest, but the legitimate business interest requirement is applied differently in both jurisdictions. Alabama law prohibits