ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, June 1, 2018

Why do employers sue employees who leave to work for companies that don't compete against them?

A recent case out of the Eastern District of Pennsylvania, Catalyst Outdoor Advertising, LLC v. Douglas, Civil Action No. 18-1470, declined to enforce a non-compete against the defendant Douglas, who had gone to work for an outdoor advertising firm that covered Manhattan and the Bronx. Catalyst, meanwhile, worked out of the Philadelphia area. The non-compete in question had no geographic limitations, which the court took issue with, noting it "covers the entire world." Catalyst asked the court to define reasonable geographic limits for the non-compete but the court declined to do so, stating, "[D]efining the boundaries is not our job." Additionally, because Catalyst operated in Southeastern Pennsylvania (with one billboard along the New Jersey Turnpike) and Douglas's new employer operated only within New York City, the court found that the two companies were not in competition with each other. 

The court also found that Douglas had no confidential information belonging to Catalyst and that there was no evidence the information she knew from working at Catalyst would be beneficial in the entirely new territory of New York City. Therefore, the court concluded there was no likelihood of irreparable harm. 

This is one of those cases that, from a pragmatic standpoint, makes little sense to me. Why would Catalyst pursue a court case against an employee going to work for a company not in its geographic area? The court's irreparable harm analysis seems right to me, that the employee here didn't have any specialized knowledge that could hurt Catalyst, given it didn't compete against the new employer. So, in that case, why is this case worth the money spent by Catalyst to bring it? Even if Catalyst had been successful, what was Catalyst's concrete gain? Is it just that companies don't want any employees to leave ever? Given the breadth of the non-compete in the first place, Catalyst might just be overprotective. Or is there some fact about this case left out of the opinion that makes it make more sense? Is Catalyst contemplating expansion down the road into New York City and is worried this employee might somehow make their plans less successful? This case is in the preliminary injunction stage, so maybe there is information that could arise later that would make it look more likely that Catalyst would succeed on the merits. It seems like Catalyst would have presented that information to the court at this point, though. 

https://lawprofessors.typepad.com/contractsprof_blog/2018/06/why-do-employers-sue-employees-who-leave-to-work-for-companies-that-dont-compete-against-them-.html

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