Articles Posted in Non-Compete Agreement / Covenant Not to Compete

An employee of a wine-making company was sued by his former employer for starting a competing business while he was still serving as the company’s president. The company also alleged that he misused his position as president to sell the same wine under the company’s brand and the brand of his new company, while assigning lower prices to the wine from his new brand, thereby siphoning sales away from the winemaker. After a trial, a jury found in favor of the company but awarded it no damages. The company appealed, arguing that the jury’s verdict was inconsistent with its findings regarding liability. The appellate panel disagreed, finding that the jury could reasonably have concluded that though the ex-employee was liable, his actions did not cause the company any significant financial harm. The panel upheld the verdict and the judgment of the district court.

Gerald Forsythe formed Indeck-Paso Robles, LLC for the purpose of creating and managing a wine-grape vineyard. In 2006, Indeck purchased Shimmin Canyon Vineyard in Paso Robles, California. Forsythe later established Continental Vineyard LLC, as a wholly-owned subsidiary of Indeck, for the purpose of operating Shimmin Canyon. Forsythe appointed himself chairman and CEO and named Randy Dzierzawski president. Dzierzawski was in charge of all of Continental’s day-to-day operations.

Though the two originally intended for Continental to only operate as a grape-growing enterprise, they eventually decided that they wished to branch out into winemaking. Continental then hired Chris Cameron, and experienced vintner, as Director of Winemaking. In 2010, Cameron and Dzierzawski, on behalf of Continental, met with Mark Esterman, a wine buyer for the Meijer grocery store chain to discuss developing custom wine for the store. Dzierzawski brought the opportunity to Forsythe, but Forsythe declined to pursue it, finding it to be a money loser. Continue reading ›

We previously wrote about ex-Google engineer Anthony Levandowski, the former head of Google’s self-driving division, who was charged criminally for misappropriation of trade secrets prior to his departure from Google. Levandowski ultimately pleaded guilty to stealing a confidential document related to Google’s self-driving technology. Levandowski’s attorneys had requested that he be let off without any prison time, arguing that a year of home confinement, a fine, restitution, and community service would be sufficient punishment for his crime. The federal government had asked for a prison sentence of twenty-seven months. The judge chose not to accept either proposed sentence and instead handed down an 18-month prison sentence to Levandowski.

In handing down his sentence, US District Judge William Alsup said that a sentence without imprisonment would give “a green light to every future brilliant engineer to steal trade secrets.” Levandowski was originally charged with 33 counts of stealing trade secrets in connection with Levandowski’s downloading thousands of documents to his personal laptop before leaving Google to work on his own self-driving startup, Otto, which was later acquired by Uber in August 2016 for a reported $680 million. As part of his plea deal, Levandowski admitted to stealing one document called “Chauffeur TL weekly updates,” which tracked the progress of Google’s “Project Chauffeur” that later became Google’s self-driving division, Waymo. According to reports, Judge Alsup described the stolen document as a “competitor’s game plan” and called Levandowski’s theft the “biggest trade secret crime I have ever seen.” In exchange for pleading guilty to this one charge, the government agreed to drop the other charges against Levandowski. Continue reading ›

Layoffs have become commonplace in the COVID-19 era as employers are forced to trim staff levels amid shelter-in-place orders. Many of these employers intend to rehire their former employees when the economy picks back up. Employers should be aware, however, of the impact, these gaps in employment can have on the enforceability of non-compete agreements and other restrictive covenants the employer and employee may have previously entered into.

The U.S. Circuit Court of Appeals for the First Circuit recently considered a similar situation and ultimately held that the employer could not enforce a non-compete agreement against a former employee that had been fired and then rehired. The legal saga started when Novo Nordisk, a pharmaceutical company, sought entry of a temporary restraining order and preliminary injunction against Thomas Russomano, one of its former employees, seeking to enforce the terms of a confidentiality and non-compete agreement that Russomano signed when he began his employment with Novo Nordisk. The District Court denied Novo Nordisk’s motion because it found that Novo Nordisk failed to show a likelihood of success on the merits, a necessary requirement to obtain injunctive relief.

Russomano began his employment with Novo Nordisk in January 2016. As a condition of his employment, he signed confidentiality and non-compete agreement which prohibited him from working for a competitor during his employment and for a period of twelve months following the end of his employment. In October 2016, Novo Nordisk informed Russomano that his position was being eliminated, and he was terminated in mid-November. After an approximately three-week period, the company rehired Russomano to another position. Russomano signed second confidentiality and non-compete upon being rehired. Continue reading ›

When workers get sued by their employer for breaching their employment contract, it’s fairly common for the workers to argue that the contract was invalid, but it’s less common for them to claim their signature on the contract was forged. That’s what Eric M. Frieman said when USI Insurance Services, LLC, sued him for allegedly stealing clients away from Wells Fargo to work with his new employer, RCM&D Self-Insured Services Inc., otherwise known as SISCO.

Frieman started working for Wells Fargo Insurance Services USA Inc. in 2008 as an employee benefits producer. In 2010, he signed an employment contract with Wells Fargo that included clauses that forbade him from working for a competitor and/or soliciting clients from Wells Fargo to switch to his new employer.

But when Frieman left Wells Fargo in 2016 to go work for RCM&D, he allegedly actively solicited 18 clients he had served while working at Wells Fargo and invited them to switch over to RCM&D, which they did. USI purchased Wells Fargo in 2017 and they are named as the main plaintiffs in the non-compete lawsuit against Frieman.

Rather than denying that the employment contract he signed with Wells Fargo is valid, Frieman claimed that he had never signed the document and that his signature had been forged. He insisted he only has one signature and that the signature above his name on his employment contract with Wells Fargo does not match his signature. Continue reading ›

E-commerce and tech behemoth, Amazon, has filed a lawsuit against the former vice president of marketing for its Amazon Web Services division, Brian Hall, alleging that his new role at Google Cloud violates the terms of his non-compete agreement. In its complaint, Amazon alleges that Hall’s employment with Google threatens to cause irreparable harm and risks exposing valuable competitive information to one of its biggest rivals. Amazon seeks both money damages and injunctive relief, requesting that the court enjoin Hall from working for Google for the remainder of the 18-month non-compete period set forth in the agreement.

This lawsuit is the latest in a series of lawsuits filed by Amazon to enforce non-compete clauses in employment contracts. In 2017, Amazon sued another former vice president who left Amazon Web Services to take a job with a Seattle-area software company but dropped the suit shortly after filing it. In 2019, Amazon filed a similar suit against a former Amazon Web Services sales executive after he too left the company to take a job with Google Cloud. A judge ultimately agreed to partially limit certain aspects of that employee’s role at Google but did strike down certain portions of the restrictive covenant as “unreasonable” and took Amazon to task for taking a one-size-fits-all approach to its non-compete agreement. This latest lawsuit comes after Washington state enacted a new law last year that severely restricted the use of non-compete agreements within the state. We previously wrote about that new law here. Continue reading ›

As we previously discussed here, the Virginia legislature was considering a bill earlier this year that would limit the use of non-compete agreements with certain categories of employees. Earlier this month, Virginia’s governor signed a series of new employment laws including one that bans using covenants not to compete with “low-wage” employees. The law takes effect July 1, 2020, but does not apply retroactively.

The new law provides that “[n]o employer shall enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee.” It defines a “covenant not to compete” as “a covenant or agreement, including a provision of a contract of employment, between an employer and employee that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer.” Importantly, the statute clarifies that non-compete agreements “shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.” Continue reading ›

Earlier this month McDonald’s announced suddenly that the board had voted to terminate CEO Steve Easterbrook due to a consensual relationship with another McDonald’s employee. The day after firing Easterbrook, McDonald’s outlined the terms of Easterbrook’s severance package in a filing with the Securities Exchange Commission. Easterbrook will receive 26 weeks of salary as severance, totaling at least $675,000 before benefits. In addition, he will be eligible for a prorated bonus if McDonald’s hits its performance targets for 2019.

The severance agreement also includes several restrictive covenants including a strict non-compete provision prohibiting Easterbrook from working for any fast-food competitor and at least two convenience store chains for the next two years. The agreement provides that:

“You acknowledge and agree that, in performing services for McDonald’s, you were placed in a position of trust with McDonald’s and that, because of the nature of the services provided by you to McDonald’s, Confidential Information will become engrained in you, so much so that you would inevitably or inadvertently disclose such information in the event you were to provide similar services to a competitor of McDonald’s.

“As such, you agree and covenant that for a period of two (2) years following your Termination Date: (a) you shall not either directly or indirectly, alone or in conjunction with any other party or entity, perform any services, work or consulting for one (1) or more Competitive Companies (as defined below) anywhere in the world; and (b) you shall not perform or provide, or assist any third party in performing or providing, Competitive Services anywhere in the world, whether directly or indirectly, as an employer, officer, director, owner, employee, partner or otherwise, of any person, entity, business, or enterprise.” Continue reading ›

To combat the increasing restrictions in non-compete agreements, legislators throughout the United States have been passing laws to limit what restrictions employers can put in their non-compete agreements with their workers, or even whether they can use non-compete agreements at all. California has refused to recognize any non-compete agreements, and other states have followed suit. A federal law limiting or banning non-compete agreements does not exist, though bills on the issue have been proposed.

The latest tactic used by employers to get around the restrictions placed on non-compete agreements has been something called “garden leave”. Garden leave is when an employee gives notice of the termination of their employment with that business and spends some or all of their notice period away from the office, but remains on the company’s payroll. Continue reading ›

In a series of partial summary judgment opinions, the Delaware Chancery Court threw out all non-competition and non-solicitation claims against Alphatec Holdings, Inc., a medical device company, and its chairman and Chief Executive Officer Patrick Miles in a lawsuit filed by Miles’s former employer, NuVasive, Inc. The suit claimed that Miles violated the non-compete and non-solicitation provisions of his employment agreement when he left to work for rival Alphatec in October 2017.

Miles had worked at NuVasive since 2001 and entered an employment contract in September 2016 which included post-employment restrictions against working for a competitor or soliciting NuVasive employees or customers. In October 2017, Miles resigned from NuVasive and accepted a position as the chairman of Alphatec the following day. NuVasive filed suit a week later, claiming that Miles’s departure was part of a year-long scheme that included discouraging NuVasive from acquiring the smaller Alphatec. Continue reading ›

A U.S. District Court judge in Rhode Island recently granted CVS Pharmacy, Inc. a  preliminary injunction to block an executive who ran its Caremark Retail Network from working for Amazon’s online pharmacy PillPack, finding that the move would likely violate the executive’s non-compete agreement.

John Lavin worked as a senior executive for CVS for 27 years, most recently as senior vice president for provider network services at CVS Caremark, a pharmacy benefits manager (PBM). In this role, Lavin negotiated with retail pharmacies on behalf of CVS Caremark. In May 2017, Lavin entered an agreement which contained a covenant not to compete among other restrictive covenants in exchange for restricted stock units worth $157,000, according to the Court’s opinion. Lavin’s non-compete agreement prohibited him from working for a competitor for 18 months after leaving CVS.

A year after entering the agreement, Lavin allegedly began discussions with PillPack about leaving CVS for a position at Pillpack and even interviewed with executives from both PillPack and Amazon. After interviewing, Lavin was ultimately offered the position of director of third-party networks and contracting, reporting directly to PillPack’s CEO. Shortly thereafter, Lavin resigned from CVS and started employment with PillPack. Continue reading ›

Contact Information