To TRO or Not to TRO? An Employer’s Enforcement Perspective of
Non-Compete Agreements by Paul A. Fenn
Paul A. Fenn (Conti Fenn & Lawrence LLC) is a litigator whose primary area of practice focuses on business and commercial disputes in state and federal courts, as well as before the American Arbitration Association and other alternative dispute resolution forums. Since 2000, Mr. Fenn has served on the Board of Ethics for Baltimore City. Mr. Fenn received his BS from Purdue University, with distinc- tion, and received his JD from the University of Maryland, with honors.
Virtually every business that requires
its employees to execute a non-compete agreement as a condition of employ- ment, or otherwise, will one day face a situation where it will have to determine whether to seek to enforce the terms of the agreement against a former employee. Although the Maryland Rules lay out the general framework for such enforcement, it is not as straightforward as it may seem at first glance. For example, questions such as— Should we seek to enforce the agreement that we have? Should we seek a temporary restraining order under the particular facts of the case? Must we file a bond before the court tells us what amount to file? Do we need to state an underlying cause of action before seeking injunctive relief?—all likely will arise dur- ing this process, and the answers are not as black and white as many think, but they are certain to affect the outcome. This article seeks to describe the ap-
proaches that I have found in my practice to produce the most effective and efficient results for employers seeking to enforce rights under non-compete agreements
against former employees. I have inten- tionally limited my analysis to pre-suit issues and the first potential stage of liti- gation—the temporary restraining order (“TRO”) stage. My experience has been that this stage of litigation, if implicated, tends to make or break the entire case. I note that the drafting of non-compete agreements may be the most important factor in determining whether a non-com- pete agreement will be enforced at all, but that this article assumes that the drafting is complete (for better or for worse), and the employer is at the pre-filing stage of litigation.
Determining the Enforceability of a Non-Compete
Although Maryland is generally known
as a “blue pencil” state, where courts are al- lowed to modify non-compete agreements to eliminate unenforceable provisions, and leave enforceable portions, courts will not employ this right when agreements are so broad to prevent any type of competition. See, e.g., Deutsche Post Global Mail, Ltd.
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You Book The v. Conrad, 116 Fed. Appx. 435 (4th Cir.
2004) (unpublished opinion), aff ’g 292 F. Supp.2d 748 (D. Md. 2004). Thus, if the agreement at issue appears overly broad on its face, serious thought should be given to whether to proceed with litigation in the first place against a former employee whom the employer believes is violating the agreement. There simply is no need for an employer to incur significant legal expenses and costs in litigation where the agreement is not likely to be enforced. In any event, the decision of whether to
proceed with litigation against a former employee under a non-compete agree- ment may become more of a business decision than a legal one. For instance, even though the agreement may appear to be overly broad, the employer may have this same agreement signed by several hundred (or even thousand) employees. These circumstances and an employer’s desire to test the enforceability of this agreement may drive the decision to liti- gate. Moreover, facts such as the particular employee’s access to the former employer’s trade secret information and exposure to the inner, confidential workings of the company may practically dictate the decision to litigate. These types of facts also may weigh in favor or enforceability of the subject agreement, notwithstanding the breadth of the agreement. The bottom line is that at this stage of
the analysis, attorneys and their clients should work closely together to determine the desired business results that are in the best interest of the client. Although we attorneys do not like to admit it, some- times a good legal decision is not a good business decision. Accordingly, attorneys and their clients should jointly determine whether the facts of each individual case weigh in favor of litigation or not, keep- ing in mind the guideposts of recent precedent and the desired business result. Once the decision to litigate is made, however, as set forth below, I have found that a conservative and “black-letter law” approach is most effective.
Winter 2007
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