Saturday, March 3, 2018
Completing the trilogy of non-compete cases this week, here's one out of the District of Maryland: Premier Rides, Inc. v. Stepanian, Civil Action No. MJG-17-3443. The industry this time is amusement park rides. The defendant is a structural engineer who worked for the plaintiff, mainly on roller coasters. He signed an employment agreement that contained a non-competition provision. When he decided that he wanted to resign his employment, he asked to be released from the non-competition provision. The plaintiff refused to release him. Subsequently, the defendant sought jobs that were non-competitive in nature, while apparently turning down a couple of employment offers from the plaintiff's competitors. He did, however, keep in touch with the plaintiff's customers, including interviewing for a job with at least one of them, before eventually accepting employment with DreamCraft. In his capacity at DreamCraft, the defendant worked on a project for one of the plaintiff's competitors and attended meetings with many of the plaintiff's customers. The plaintiff sued for breach of the non-compete.
The defendant first tried to argue that the agreement did not have adequate consideration, but the court noted that Maryland law is clear that "continued employment of an at-will employee" is sufficient consideration for a non-compete, as long as there is no other evidence of bad faith. The defendant continued to work for the plaintiff for three years after signing the agreement, receiving raises and bonuses throughout that time. So the court found that there was adequate consideration to enforce the non-compete.
The court also concluded that the non-compete had a valid corporate interest in that it prevented the defendant from exploiting the customer contacts he made while working for the plaintiff for the benefit of one of the plaintiff's competitors. The defendant, however, argued that the provision was not narrowly tailored to that interest. The time restriction of twelve months is routinely upheld in Maryland so the court focused on the fact that the non-compete was not limited in scope geographically. The court found that the plaintiff's market was global in scope, so the lack of geographic limitation was permissible.
The court did, though, find that the non-compete prohibited more activity than necessary. The defendant was an engineer, not a salesman, so the plaintiff's concerns about the defendant's customer relationships seemed misplaced. The defendant necessarily had to meet the plaintiff's customers to perform his job, but the plaintiff admitted that this kind of personal relationship was not important for the customers, who made their purchasing decisions based on price and "impact"of the amusement park ride. The agreement in separate provisions prohibited the defendant from soliciting the plaintiff's customers on behalf of his new employer and from disclosing the plaintiff's confidential information. The plaintiff did not allege the defendant had violated these provisions; rather, the plaintiff focused on just the fact of the defendant's employment by DreamCraft being enough to violate the agreement. But since the plaintiff's non-compete interests had been solicitation of customers or disclosure of trade secrets, to the court it was telling that neither of those was at issue in this case.
Accordingly, the court found the non-compete overbroad and unenforceable. It noted that it could rewrite the non-compete to be enforceable but it didn't know enough to edit it effectively at the moment.