Weather gurus are predicting snow, sleet, and rain for our area over the weekend. Although my kids are hoping for the white fluffy stuff, this amateur prognosticator is predicting a downpour. In keeping with this theme, the week’s biggest employment news is Robinson Cano’s $240 million deal with the Seattle Mariners (who are well accustomed to rainy skies). But our sights here at Suits by Suits are on matters a little less lucrative:
LASIK eye surgery requires a precise surgeon. If the surgery is unsuccessful, it can result in under- or over-correction, dry eyes, or infection.
LasikPlus of Texas, a Houston eye clinic, recently found out that it should have exercised similar precision when drafting its noncompete agreements. Instead, the Fourteenth Court of Appeals ruled last week that because LasikPlus failed to include required language in its noncompete agreement, one of its doctors can open a competing clinic two miles from its front door. See LasikPlus of Texas, P.C. v. Mattioli, No. 14-12-01155-CV (Tex. Ct. App. Nov. 21, 2013). We suspect there was not a dry eye in the house after that decision.
The covenant at issue in the case was part of LasikPlus’s employment agreement with Dr. Frederico Mattioli. Under the covenant, Dr. Mattioli, for the eighteen months following termination of his employment, could not open a competing clinic within 20 miles or solicit LasikPlus’s clients. Dr. Mattioli could only terminate the agreement with 120 days’ notice, or 30 days’ notice if LasikPlus was already in breach.
In October 2012, Dr. Mattioli told LasikPlus that he would be leaving within the month to start his own practice less than two miles away. LasikPlus sued Dr. Mattioli, seeking an injunction to bar him from opening the practice. The employment agreement expressly entitled LasikPlus to an injunction in these circumstances. Further, if the covenant was deemed unreasonable in scope of time or location, other language allowed the court to reform the covenant and enforce it to the degree it would be reasonable.
Yet Dr. Mattioli still succeeded in defeating LasikPlus’s request for an injunction, because the clinic left out a critical piece of the covenant.
In the case filed earlier this year in federal court in Virginia by spinal implant seller DePuy Synthes Sales, Inc. against two former employees and their current employer, DePuy’s competitor Sky Surgical, Inc., DePuy claims that Sky Surgical and the former employees conspired to breach the fiduciary duties that the former employees owed to DePuy by selling spinal implants to DePuy’s customers after they left DePuy. (DePuy also claims that Sky Surgical tortiously interfered with the former employees’ non-competes – the subject of our post on Tuesday.) We may think that quitting a company means quitting fiduciary duties, so that anything that the two former employees did after they left DePuy could not be breaching a duty to DePuy. But it’s not that simple. Not in Virginia, anyway.
Twitter’s founders are cashing in on Wall Street, and journalists are piggybacking on the news with articles like this one, which recaps 10 “surprising superstars” of the social network. No, Suits by Suits didn’t make the cut, but you can still follow us at @suitsbysuits, where we’ll bring you 140-word tweets about news related to executive-employer disputes. These are the kinds of stories we track:
Regular readers here at Suits by Suits know that we’ve continued to monitor the status of proposed changes to the law governing the enforceability of covenants not to compete in Massachusetts, from the state legislature’s proposal to restrict such covenants to six months in length to more recent pronouncements by Gov. Deval Patrick (D) that his administration would like to ban the enforcement of all such clauses, moving Massachusetts into the same space currently occupied by the state of California.
One question we get here pretty frequently regards the political and business implications of states that are moving in this direction. Certainly, it is generally regarded as an article of faith that enforcing non-competes is pro-business, and states that are considering restricting or outright banning such clauses are prioritizing fairness concerns above economic growth. (This intuition is undoubtedly reinforced by the fact that the most high-profile discussions are coming from one of the most liberal states in the union, Massachusetts.) But is this intuition correct? Many would argue that the case for and against non-competes is considerably more complex; read on.
The federal government is closed, but the Suits by Suits news continues to roll in:
Joseph Guinn’s case started with a phone call. Leigh Sargent, the president of Applied Composites Engineering (“ACE”), made the call. Randy Sutterfield, an executive at AAR Aircraft Services, Inc. (“AAR”), was on the other end of the line.
The subject of Sargent’s call was Guinn, who at the time was employed by ACE as an airline mechanic, but who had given notice that he intended to leave ACE and join AAR. Sargent told Sutterfield in no uncertain terms that “Guinn was under the terms of a non-compete agreement and that he believed that it was a violation [for] him to come work for [AAR].” Guinn v. Applied Composites Engineering, Inc. (Ind. Ct. App. Sept. 30, 2013). After some more pressure from ACE, and an (un)friendly reminder that ACE was one of AAR’s customers, AAR knuckled under and fired Guinn.
Unsatisfied with this capitulation, ACE sued both AAR and Guinn. It claimed that Guinn had breached his employment agreement by accepting the job with AAR, and that AAR had intentionally induced the breach. Guinn, now without any job at all, didn’t take this lying down. He countersued ACE for interfering with his own contractual relationship with AAR.
Here at the Suits by Suits Global Operations Center, we’re a bit bummed that our beloved Washington Nationals Baseball Club has now exhausted any chance it ever had of making the playoffs, as have the almost-local Baltimore Orioles. All is not lost, however, because now we can turn our undivided focus to our Washington football team – the one with the name that is something of a point of dispute. The football season here will be exciting, even if it is off to a rough start.
Glum as our sporting life may be, it’s a worthwhile distraction from the possibility of a government shutdown, although perhaps not as fun as our other new Washington fad: debating the merits of green eggs and ham.
In any event, news of disputes between employers and executives – and news in related areas – continues to come in over our electronic transom. Here are the highlights:
Last month, we took a look at one aspect of the lawsuit brought by former news anchor Larry Conners, who had been terminated by KMOV-TV 4 in St. Louis, Missouri after posting various political comments to his Facebook page. Specifically, we discussed the implications of the Missouri court’s denial of Conners’s motion for a Temporary Restraining Order (TRO) seeking to invalidate Conners’s non-compete clause in order to permit him to seek another TV job in St. Louis. To refresh your memory: we concluded that the court’s refusal to grant a TRO did not necessarily indicate that the clause would ultimately be held enforceable – given the heavy burden a litigant must meet in order to get a TRO – but several aspects of Missouri law seemed to weigh in favor of the clause’s enforceability. (Our full reasoning is set forth here.) We also told you that Conners would be headed back to court to argue his case on the merits.
Last week, the Virginia Supreme Court reversed a trial court’s ruling that a non-compete agreement was unenforceable on its face as a matter of law. The VSC held that the trial court should not have decided the enforceability of the agreement on a demurrer (more about what that means below) because, in Virginia, whether a non-compete is enforceable (or valid) turns on whether it is “reasonable under the particular circumstances of the case” – that is, whether it is “narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.” According to the VSC, this means that the particular circumstances of the case matter, and that the enforceability of a non-compete should not be decided “in a factual vacuum.”
As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.
Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.
John J. Connolly
Partner
Email | +1 410.949.1149
Andrew N. Goldfarb
Partner
Email | +1 202.778.1822
Sara Alpert Lawson
Partner
Email | +1 410.949.1181
Nicholas M. DiCarlo
Associate
Email | +1 202.778.1835