On August 10, 2022, Colorado’s new statute further restricting non-competition and non-solicitation provisions becomes effective. The new law, which passed earlier this year, continues Colorado’s trend toward increased scrutiny of post-employment restrictions and adds Colorado to the growing list of states that restrict the use of out-of-state choice of law and forum provisions in agreements that contain such restrictions. Continue Reading Colorado Poised to Further Restrict Post-Employment Restrictions
No Fees for Failure to Show “Bad Faith” in Prosecution of Trade Secrets Claim
In June 2022, a federal judge sitting in the Southern District of New York issued an order denying defendants Lionbridge Technologies, Inc. (“Lionbridge”) and its parent company HIG Middle Market, LLC (“HIG”) attorneys’ fees and costs related to their assertion that plaintiff Transperfect Global, LLC (“Transperfect”) brought a misappropriation of trade secrets claim under the Defend Trade Secrets Act (“DTSA”) in bad faith. The 2019 lawsuit was filed roughly 15 months after completion of a bidding war for the sale of Transperfect in a Delaware court-supervised auction. One of the participants in the auction was HIG, which had acquired Lionbridge—a competitor of Transperfect—in February 2017. In its suit, Transperfect alleged that HIG engaged in “fake bidding” during the auction so that it could access trade secrets in the form of confidential pricing data and customer lists and improperly share them with Lionbridge to poach two of Transperfect’s biggest clients. Continue Reading No Fees for Failure to Show “Bad Faith” in Prosecution of Trade Secrets Claim
New Jersey Introduces Proposed Legislation Limiting Use and Enforceability of Non-Compete and Non-Solicitation Agreements
On May 2, 2022, the New Jersey Legislature introduced Bill A3715, adding to the growing number of states seeking to curtail the use of non-compete and non-solicitation agreements by employers. While passage of the bill is uncertain, A3715, if enacted in its current form, would make New Jersey one of the most inhospitable forums for employers seeking to enforce such agreements. Among a number of sweeping changes, including outright banning the use of post-employment restrictive covenants against a broad range of workers and otherwise limiting their duration to a maximum of 12 months, the proposed law further requires employers to pay 100 percent of the separated employee’s wages and benefits during the duration of the restricted period.
Key features of the bill include: Continue Reading New Jersey Introduces Proposed Legislation Limiting Use and Enforceability of Non-Compete and Non-Solicitation Agreements
Aesthetician’s Proactive Suit Puts a Wrinkle in Spa’s Attempts to Mar Her Reputation
A Superior Court in Massachusetts has allowed an aesthetician’s lawsuit to proceed against her former employer after it sought to enforce her allegedly void restrictive covenant.
After being terminated by defendant Vanity Lab, the plaintiff and aesthetician Tori Macaroco established her own business providing aesthetician services. Macaroco then received a cease-and-desist letter from a New York law firm, citing the contract she signed as a Vanity Lab employee that contained various restrictive covenants preventing her from “solicit[ing] any employees or patients/customers of Vanity Lab, attempt[ing] to persuade any customer, patient, or employee from leaving Vanity Lab’s services, or reveal[ing] any of Vanity Lab’s confidential information.” The letter also stated that Macaroco was prohibited from practicing as an aesthetician for one year following the end of her employment with Vanity Lab. The letter further advised Macaroco that Vanity Lab would take legal action to enforce its rights in the event of a breach of her contract. Continue Reading Aesthetician’s Proactive Suit Puts a Wrinkle in Spa’s Attempts to Mar Her Reputation
Washington, DC’s Non-Compete Bill Revised Again
The ongoing saga of Washington, DC’s expansive non-compete bill appears to be nearing its end, as the DC Council recently scaled back the originally passed “D.C. Ban on Non-Compete Act of 2020.” While the amended law still imposes significant restrictions on non-compete agreements for employees living or working primarily in DC, the most recent revisions are a step away from the near-total ban on non-competes that the Council originally passed. The new provisions go into effect on October 1, 2022, barring an unlikely veto from Congress or further revisions from the DC Council. Continue Reading Washington, DC’s Non-Compete Bill Revised Again
FTC Further Scrutinizes Use of Non-Competes in Merger Transactions
The Federal Trade Commission (FTC) recently set its sights squarely on non-compete agreements in merger transactions, making them ripe for further scrutiny. In a Consent Order issued June 14, 2022, the FTC ordered GPM Investments LLC and its parent company ARKO Corp. to roll back provisions it deemed “anticompetitive” in GPM’s May 2021 acquisition of 60 Express Stop retail fuel stations from Corrigan Oil Company. Under the FTC’s order, ARKO and GPM agreed to limit the non-compete agreement that it imposed on Corrigan, and return five retail fuel stations in several local Michigan markets. This decision comes on the heels of a June 10th statement by the FTC’s Chair Lina M. Khan, joined by Commissioners Rebecca Kelly Slaughter and Alvaro M. Bedoya, warning businesses that contract terms in merger agreements that potentially impede fair competition would be highly scrutinized. Continue Reading FTC Further Scrutinizes Use of Non-Competes in Merger Transactions
Merely Receiving Confidential Information Isn’t Enough: Georgia Court Dismisses Tortious Interference with Contract Claim in Trade Secret Case
It’s a fact pattern that repeatedly arises in trade secret cases: a company hires someone who has a confidentiality agreement with their former employer. Just before (or shortly after) being hired, the individual emails confidential information from their former employer to individuals at their new job. The former employer files suit against the individual, but also asserts a claim for tortious interference with contractual relations against the new employer. Continue Reading Merely Receiving Confidential Information Isn’t Enough: Georgia Court Dismisses Tortious Interference with Contract Claim in Trade Secret Case
Massachusetts’ “Provincial” Forum Selection Requirement May Not Trump Reasonable Foreign Forum Selection Clause
Nearly five years ago, the Massachusetts Noncompetition Agreement Act (“MNAA”, also sometimes abbreviated as the “MNCA”) went into effect. That statute ushered in new requirements for non-competes in the Bay State (including not only residents of Massachusetts, but also those who are merely employed in Massachusetts). Among the MNAA’s requirements is a forum selection provision that purports to require civil suits related to non-competes to be brought exclusively in the county in which the employee resides, or if both parties agree, in Suffolk county in Massachusetts.
Despite being in effect for nearly a half-decade, there have been relatively few published cases interpreting the MNAA (see here and here for a synopsis of a couple of those cases). Recently, however, a federal judge in Virginia weighed in on the statute’s forum requirement, determining that a suit against a Massachusetts employee could proceed in federal court in the Eastern District of Virginia, rather than be dismissed and re-filed in Massachusetts. Continue Reading Massachusetts’ “Provincial” Forum Selection Requirement May Not Trump Reasonable Foreign Forum Selection Clause
New York Appellate Court Reverses Lower Court’s Denial of Preliminary Injunction and Enjoins Former Employee from Working with Rival Sports Management Agency
On March 8, 2022, Excel Sports Management, LLC commenced an action in the Supreme Court of New York, Commercial Division, alleging that its former Vice President of Basketball Partnerships, Eric Eways, resigned his employment in favor of employment with Klutch Sports Group, LLC, in violation of a restrictive covenant in his employment agreement. The non-compete, governed by New York law, prohibited Eways from working for Klutch and other specifically-named competitors for eight months post-separation. Continue Reading New York Appellate Court Reverses Lower Court’s Denial of Preliminary Injunction and Enjoins Former Employee from Working with Rival Sports Management Agency
Texas Supreme Court Confirms that HouseCanary Must Fly Toward a $201 Million Judgment or a Retrial
On June 17, 2022, the Texas Supreme Court affirmed a lower appellate court’s decision, (which we previously wrote about here), which nixed the plaintiff’s $740 million trade secret win at trial and required the plaintiff to either accept a $201 million breach of contract win (which the defendant decried as “jackpot justice”) or go back to trial on all claims.
Briefly, real estate startup HouseCanary brought suit against Title Source, Inc., now known as Amrock, alleging misappropriation of trade secrets under the Texas Uniform Trade Secrets Act (TUTSA), fraud, and breach of contract. At trial, the jury awarded HouseCanary $740 million on its TUTSA and fraud claims and $201 million on its breach of contract claim. HouseCanary could elect to recover one or the other, and it elected to recover the $740 million. On appeal, the lower appellate court reversed the trial court decision regarding TUTSA and fraud based on deficiencies in the jury charge. The appellate court then found that the TUTSA, fraud, and breach of contract claims were inseparable, leaving HouseCanary with two options: to retry all of its claims or recover only the $201 million awarded on the breach of contract claim. Continue Reading Texas Supreme Court Confirms that HouseCanary Must Fly Toward a $201 Million Judgment or a Retrial