Non-Compete Litigation

Non-compete clauses are important tools for companies that need to protect their investments in research and development (R&D), trade secrets, brand value, business relationships, and skilled personnel. While non-compete laws vary across jurisdictions, non-compete clauses in employment agreements and other contracts are generally enforceable in most cases—provided that they are appropriately tailored to the specific business interests at hand.

Unfortunately, this does not stop individuals and organizations from breaching their contractual commitments. Non-compete breaches are commonplace, and they can present risks for substantial—and potentially irreversible—damage from unfair competition. As a result, a swift and effective approach to enforcement is essential.

We Help Companies Enforce Non-Compete Clauses In and Out of Court

At Oberheiden P.C., we help companies enforce non-compete clauses both in and out of court. In some cases, an informal and amicable approach to enforcement will be best. If an individual or organization is unaware that it has violated a non-compete, simply making the violator aware of its obligations may be enough to resolve the matter without significant financial or reputational harm.

However, in other cases, avoiding significant or reputational harm—or mitigating the harm that has already been caused—will require non-compete litigation. The restricted party may dispute the scope or enforceability of the non-compete clause, or it may simply be unwilling to comply. In this scenario, prompt legal action may be necessary to protect the company’s interests going forward.

Common Legal Issues in Non-Compete Agreements and Litigation

Commercial litigation involving disputes related to non-compete clauses can implicate a host of legal issues. Non-compete litigation can often present practical considerations as well. For companies that are facing the consequences of non-compete violations, informed and strategic decision-making is critical, and this is one of the first areas in which our lawyers can help.

Some examples of common issues in non-compete litigation include:

• Applicability of Competitive Restrictions – Many non-compete disputes involve disagreements over the applicability of the restrictive covenant at issue. For example, a former employee, franchisee, licensee, or vendor may claim that a particular type or line of business falls outside of the non-compete clause’s scope. In this scenario, the plain language of the non-compete clause will play a critical role. If the plain language is ambiguous or leaves room for interpretation, this can increase the likelihood of litigation.
• Reasonableness of Time and Geographic Scope – Generally, non-compete clauses must be reasonable in terms of both time and geographic scope in order to be enforceable. Disputes over what is “reasonable” in a particular set of circumstances frequently lead to non-compete litigation as well. Here, the common law of the relevant jurisdiction is extremely important, as different courts have taken different approaches to the “reasonableness” analysis.
• State Laws Restricting Non–Compete Enforcement – While non-compete clauses are generally enforceable in most jurisdictions, some states have enacted laws that restrict (or ban) non-compete enforcement. In some states, these laws apply in certain specific contexts, such as in the context of the employer-employee relationship or in connection with other existing agreements that have been found to involve unequal bargaining power. With this in mind, understanding the law that governs a non-compete dispute is a critical first step toward formulating an informed litigation strategy.
• “Blue Pencil” Rules in Some States – Some states have adopted “blue pencil” rules that allow judges to modify contractual provisions to make them enforceable. These “blue pencil” rules can play a critical role in non-compete litigation. If a non-compete clause is deemed unenforceable, then arguing for a favorable “blue pencil” revision could be a critical strategy for protecting the company’s interests to the fullest extent possible.
• Damages Resulting from Non–Compete Violations – When enforcing their non-compete clauses in court, companies generally have the ability to seek two types of remedies: (i) injunctive relief; and, (ii) damages. To seek damages, a company must be able to prove the losses it has incurred (and is likely to incur in the future) as a result of the non-compete violation at issue. This may require various forms of analyses and documentation; and, here too, experienced legal representation is essential.

Again, these are just examples. Non-compete disputes can involve a wide range of other issues as well; and, oftentimes, these cases will also involve confidentiality violations, non-solicitation violations, and other similar types of violations of counterparties’ contractual duties. If your company needs to enforce a non-compete, our lawyers can assess all viable claims and defenses, and we can help you make an informed and strategic decision about how to proceed based on the specific circumstances at hand.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

Potential Means of Resolving Non-Compete Disputes

As with all types of commercial disputes, there are a variety of potential avenues for resolving disputes involving the enforcement of non-compete clauses. Depending on the circumstances at hand, our lawyers may recommend one or more of the following:

• Informal Discussions – As discussed above, if the breaching party is unaware that it is in breach, then informal discussions might be enough to bring the issue to an end. When taking this approach, however, it is important to consider any losses that may have already incurred and to be careful to preserve the company’s legal options going forward.
• A Cease-and-Desist Demand – A cease-and-desist demand is a formal request to stop violating a contractual or statutory obligation. If informal discussions are not effective (or are not warranted under the circumstances), issuing a cease-and-desist demand may be a way to avoid the costs of litigation. However, issuing a cease-and-desist demand can also effectively be the first step toward pursuing litigation in some cases.
• A Request for Preliminary Injunctive Relief – If an ongoing violation of a non-compete clause is causing financial or reputational harm, seeking a preliminary injunction could be critical. In appropriate cases, state and federal courts will grant preliminary relief–or enter summary judgment–to enjoin violative (or potentially violative) conduct while the parties litigate their differences.
• Non-Compete Mediation or Arbitration – Many contracts that include non-compete clauses also include mandatory alternative dispute resolution (ADR) provisions. If your company is subject to a mandatory ADR provision, then you may need to pursue mediation or arbitration before (or potentially instead of) going to court. Statutory arbitration requirements may apply in certain circumstances as well.
• Non–Compete Litigation – Subject to any mandatory ADR requirements, companies can generally pursue litigation in state court or a United States District Court to enforce their non-compete clauses when necessary. Our lawyers are available to represent companies of all sizes in non-compete litigation, and we can provide representation on an emergency basis if necessary.

Ultimately, our focus in non-compete cases is on helping our clients protect their interests as efficiently and cost-effectively as possible. While we are more than prepared to litigate when necessary, we are also prepared to pursue alternatives to litigation that seek to achieve favorable results without the formalities and protracted timelines of going to court when warranted.

FAQs: Enforcing Non-Compete Clauses Against Employees and Others

Speak with a Non-Compete Litigation Attorney at Oberheiden P.C.

Does your company need to enforce a non-compete clause? If so, we invite you to get in touch. Please call 888-680-1745 or contact us online to schedule a complimentary consultation with a non-compete litigation attorney at Oberheiden P.C.