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Liquidated Damages, A Permanent Injunction, and Attorneys’ Fees Awarded For Violating Non-Disclosure/Non-Compete Agreement And Preliminary Injunction

Posted in Non-Compete Enforceability, Practice & Procedure, Restrictive Covenants, Trade Secrets

In a well-written recent opinion concerning violation of both a confidentiality/non-compete agreement and a preliminary injunction, a federal judge explained in detail why she was awarding liquidated damages, entering a permanent injunction, and assessing legal fees.

Summary of the Case

Two financial planners, one an individual and the other a corporation, negotiated a merger of their businesses.  Before being provided with details concerning the corporation’s methodologies and strategies, the individual executed confidentiality and non-competition covenants.  When the merger negotiations collapsed, the financial planners went their separate ways.  However, the corporation subsequently sued the individual for breach of the covenants.  A preliminary injunction was entered against her which,  after a trial, she was found to have violated.  The court entered an order of contempt, issued a permanent injunction, and awarded the corporation liquidated damages and attorneys’ fees.  Retiree, Inc. v. Anspach, No. 12-2079-JAR (D. Kan., 7/2/14) (Robinson, J.).

Merger Negotiations

Diana Anspach and Retiree, Inc. each had financial planning practices.  Both financial planners were accomplished in the business, although their approaches were different.  They entered into merger negotiations in the course of which she signed the covenants.  They included a $250,000 per violation liquidated damages clause.  Retiree disclosed to her its algorithms, formulas, and software trade secrets developed over the course of several years in a collaboration with engineers and mathematicians.  After the merger negotiations failed, she enhanced her planning tools in a manner that seemed, in part, to mimic some of those furnished to her in confidence by Retiree.

The Lawsuit

In a complaint filed against Anspach, Retiree alleged that she was violating the covenants by (a) using Retiree’s confidential information in competition with Retiree, and (b) disclosing that information in a book and on her website.  Retiree demanded liquidated damages, preliminary and permanent injunctions, and an award of fees.  

Preliminary and Permanent Injunctions

Following a hearing, Judge Robinson granted Retiree’s motion for a preliminary injunction against disclosure and competition.  Subsequently, after conducting a bench trial, the judge found that Anspach had violated the preliminary injunction, held her in contempt of court, and issued a permanent injunction. Anspach argued that the liquidated damages clause was unreasonable.  Judge Robinson disagreed, determined that Retiree’s damages were irreparable and incalculable, and awarded Retiree $500,000 in liquidated damages.  Further, the court set the matter for a hearing to determine the amount of attorneys’ fees to be awarded to Retiree. 

Takeaways

Retiree succeeded in obtaining an award of liquidated damages, entry of a permanent injunction, and a finding of contempt of court, by making a focused presentation of evidence and argument addressed to an attentive and articulate jurist.  Judge Robinson’s opinion contains an excellent discussion of the circumstances, in litigation concerning an alleged breach of confidentiality and non-competition covenants, which may warrant the relief she awarded.  If you seek a similar judgment, or are opposing an adversary’s effort to obtain such relief, this opinion should be studied in great detail.