Preliminary injunction for breaching non-compete?
Zachary Piper LLC v. Popelka (Fairfax Nov. 17, 2021)
A company hires an employee. The employment agreement has a non-compete clause, which states:
The agreement defines “Prospective Customer” as any “person or entity to which the Company has developed or made a sales presentation” over the past two years and “about which [the employee has] obtained Confidential Information through [her] affiliation with the Company.”
When the employee leaves and goes to work for a prospective customer of the company, the company sues the former employee for breach of contract. The company also asks the court to issue a preliminary injunction prohibiting her from working for her new employer. Should that request be granted?
Injunction, in most cases, simply means a court order directing that someone not do something. A preliminary injunction is a temporary order, designed to protect someone from suffering irreparable injury before the court has a chance to decide the case.
To obtain a preliminary injunction, a plaintiff must prove: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm unless it receives the injunction; (3) the equities tip in its favor (essentially, issuing it will do more good for the plaintiff than harm to the defendant); and (4) the preliminary injunction is in the public interest.
Here, the court concludes the company is likely to succeed on the merits because the non-compete clause is appropriately tailored. It is restricted to “services or products that are directly competitive with the services or products that [she was] engaged in providing on behalf of [the] Company.” (Emphasis added.)
Moreover, the “prospective client” definition is limited to those:(1) to whom the company made a sales pitch to in the past two years; and (2) about whom the employee obtained confidential information because of her work with the company. And the former employee can work for prospective clients as long as it’s not “directly competitive with the services” she provided at the company.
Nevertheless, the company is likely to succeed on the merits of the non-compete clause, the court refuses to issue a preliminary injunction because the company has not proven it is likely to suffer irreparable harm. Among other things, the company has not pointed to a single existing or prospective customer (aside from the former employee’s new employer) where the relationship was affected by her departure. Moreover, the company has offered no evidence of actual damages to the company. Therefore, the company has not carried its burden.
The case can proceed. But while it does, the former employee can continue to work for her new employer.