Non-Compete Law Blog

In Meschino v. Frazier Industrial Co., Civil No. 15-10327-RGS, 2015 WL 7295463 (D. Mass. Nov. 18, 2015), Judge Stearns held that an employment agreement superseded an earlier employment agreement and a separate earlier confidentiality and non-compete agreement. A 2005 employment agreement provided that the employee would be required to execute a separate confidentiality and non-compete agreement. The employee executed both agreements in 2005. Notably, the separate confidentiality and non-compete agreement was not expressly incorporated into the 2005 employment agreement, and the employment agreement did not contain an integration clause indicating that it was the final and complete agreement regarding the terms of employment.

Judge Janet L. Sanders of the Superior Court’s Business Litigation Session has continued the trend of Massachusetts courts refusing to recognize the inevitable disclosure doctrine.

In The Gillette Company v. Craig Provost et al, Civ. Action No. 15-0149 (Mass. Sup. Dec. 22, 2015), Gillette moved for a preliminary injunction to prevent its former counsel and ShaveLogic’s current general counsel, Chester Cekala, from providing any legal advice regarding Gillette’s patents, not only with respect to patent validity but also on infringement and scope. Although Cekala’s non-compete agreement with Gillette had long expired, Gillette contended that Cekala’s legal advice inevitably disclosed Gillette’s trade secrets to its competitor given his experience with the company.

In American Well Corporation v. Obourn, Civil No. 15-12265-LTS, 2015 WL 7737328 (D. Mass. Dec. 1, 2015), Judge Sorokin of the United States District Court for the District of Massachusetts upheld a non-compete entered into seven months after the employee’s start date. The Court explained that as to whether continued employment constitutes sufficient consideration for a non-compete:

“[T]he SJC has squarely addressed this question. Decades ago, it held that a non-competition agreement signed during employment was not void for lack of consideration because it contained a promise by the plaintiff thereafter to employ the defendant and by the defendant to work for the plaintiff.”

A recent decision from a Wisconsin state court serves as a cautionary tale for employers that do not routinely impose or enforce non-compete restrictions consistent with the employee’s role and potential to harm the business.

In Kohl’s Department Stores Inc. v. Janet Schalk, 2015CV001465 (Wis. Cir. Ct. Aug. 11, 2015), Judge Robert Mawdsley denied Kohl’s request for an injunction preventing its Chief Information Officer, Janet Schalk, from joining Hudson’s Bay Company partly on the grounds that Schalk’s non-compete was overly restrictive in light of Schalk’s role in comparison with the non-competes of other employees.  Kohl’s, relying upon its non-compete contract with Schalk barring her from working in a similar position with a competitive retailer for one year, argued that Schalk should be barred from joining Hudson’s Bay, a Canadian department store company, because Schalk “has the playbook, the crown jewels, our entire strategy in her hands.” Schalk argued that the non-compete was too broad and that Hudson’s Bay was not a competitor given its high-end retailing–featuring Saks Fifth Avenue and Lord & Taylor–compared to Kohl’s mid-tier status. Schalk also contended that Kohl’s overstated her role and knowledge of the company’s strategy.

The Pennsylvania Supreme Court recently held in Socko v. Mid-Atlantic Systems of CPA, Inc. that a non-compete is enforceable only if a current employee receives new consideration beyond continued employment. The Court held that this is the case even if a non-compete provides that the parties “intend to be legally bound,” which typically obviates the need for consideration under the Pennsylvania Uniform Written Obligations Act (UWOA). After considering the historical background regarding non-competes and general principles of statutory construction, the Court concluded that “a construction of the UWOA which would vitiate the need for new and valuable consideration when entering into an agreement containing a restrictive covenant after the initiation of employment would be unreasonable.”

A recent decision from the Business Litigation Session of the Massachusetts Superior Court has broad implications for non-compete cases involving arbitration clauses. In TIBCO Software, Inc. v. Zephyr Health, Inc. and Kevin Willoe, the court denied an employer’s motion for a temporary restraining order enforcing a non-compete, finding the employer’s own arbitration provision required it to pursue its restrictive covenant claims before the American Arbitration Association (AAA) in California.