The more non-compete matters I review and litigate the more certain I am that geographically based non-competition covenants should be per se unenforceable. What is the logic of preventing an employee from selling widgets in Greenville County just because he has sold widgets to certain customers located in Greenville County? (There is none.) How are such non-competes ever reasonable in a post-employment covenant? (They are not.) Isn’t such a non-compete always broader than it needs to be to protect the former employer’s legitimate interest? (Yes.) Continue reading
In Bimbo Sues the Muffin Man, I briefly discussed the inevitable disclosure case filed by Bimbo Bakeries against a former manager, who had ran one of its English muffins facilities. To prevent disclosure of its trade secrets, Bimbo asked a judge to keep the former manager from working for a competitor, even though the manager had never signed a non-compete. In a follow-up post, Judge Sides with Bimbo, I provided a link to Judge Barclay’s 37-page opinion in Bimbo Bakeries USA Inc. v. Botticella, which granted the preliminary injunction. Botticella appealed to the 3rd Circuit Court of Appeals, which just issued an opinion upholding the preliminary injunction. Continue reading
A quick follow-up on the last post (Inevitable Disclosure: Bimbo Sues Muffin Man): “In his 37-page opinion in Bimbo Bakeries USA Inc. v. Botticella, U.S. District Judge R. Barclay Surrick granted a preliminary injunction, ruling that Chris Botticella, a former senior vice president at Bimbo, cannot start to work for Hostess Inc. because his extensive knowledge of Bimbo’s trade secrets makes it substantially likely, if not inevitable, that he would disclose Bimbo’s secrets to Hostess.” Read the rest on Law.com.
And here is a copy of the District Court’s Findings of Fact and Conclusions of Law upon which the court granted injunctive relief. (I plan to comment further when time permits.)
Here’s an article about an inevitable disclosure case recently filed in federal court in Pennsylvania. Bimbo Bakeries sued a former manager at one of its english muffins facilities, saying “he is one of fewer than 10 people in the world who know how to make the muffins with the special ‘nooks and crannies.'” To prevent disclosure of its trade secrets, Bimbo asked a judge to keep the former manager from working for a competitor. Although, he had not even signed a noncompete. Read the rest of the article on Law.com.
In doing my research on the Pepsico, Inc. v. Redmond case (discussed below) I came across a great blog, Trading Secrets. One entry of particular interest was whether customer pricing is a trade secret. Trading Secrets has a discussion of the case, Southwest Stainless, LP v. Sappington, 582 F.3d 1176 (10th Cir. 2009), which begins:
In Southwest Stainless, the U.S. Court of Appeals for the Tenth Circuit held that although pricing generally may be protectable, a court needs look at the specific pricing at issue in the case to determine whether the company protected that pricing. Ultimately, the Court in Southwest Stainless held that sharing pricing with a customer, without restriction, removes any claim of confidentiality that may have existed.
Conceptually, there is something disturbing about creating a rule out of thin air that an employer loading its information onto my hard drive means that the employer owns my hard drive. Why not the other way around? And of course, the hard drive in this case is really someone’s brain. The inevitable disclosure meme has not reached pandemic levels just yet but it threatens to take your brain from you. (See previous post for introduction.) However, to understand how the common law has evolved to the point that it is a question as to who owns your brain, it is important to understand the environment in which inevitable disclosure first appeared. The first case to rely on the inevitable disclosure doctrine was PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir.1995), which is discussed below. Continue reading
The history of non-competes reveals a long standing hostility to agreements that prohibit competition and freedom, which for hundreds of years resulted in zero-tolerance for non-compete agreements. When the common law finally evolved to permit limited enforcement of restrictive covenants, it is not surprising that a competing freedom, the “freedom of contract,” was the justification. Sometimes coined “liberty of contract”, this principle recognizes the freedom of people to enter into agreements with others and to have those agreements enforced.
That was then…. Continue reading
A recurring issue for those seeking my advice is whether information known by a former employee is a “trade secret.” Many times the information at issue is a client list or simply the identify of clients and/or customers. The South Carolina Supreme Court considered this issue in the case of Atwood Agency v. Black, 374 S.C. 68, 646 S.E.2d 882 (S.C. 2007).
E-discovery is the new trend in litigation; it is here to stay. Every lawsuit involves discovery, where lawyers get to ask questions and obtain documents that are relevant or might be relevant to the claims in the case. Now, because many documents exist in electronic form on computer hard drives, electronic files are also subjects for discovery. Parties are required to conduct searches of their computers for information, and in some cases, a party may be required to produce their hard drive so the opposing party can conduct its own search. And these searches can turn up deleted information. Continue reading
In Carolina Chemical Equipment Company v. Muckenfuss 322 S.C. 289, 471 S.E.2d 721 (S.C. Ct. App. 1996), the South Carolina Court of Appeals held that when a broad trade secret provision “basically has the effect of a covenant to to compete, [the Court] must subject it to the same scrutiny as a covenant not to compete.” Although the South Carolina legislature attempted to limit the holding of Muckenfuss the following year, the case remains important for several reasons: It began the difficult task of culling “trade secrets” from general business information as well as because it did so in the defense of an employee’s right to work.