ContractsProf Blog

Arkansas court refuses to enforce overbroad non-compete

Sometimes it can seem so tempting to draft the broadest possible non-competition provision, but a recent case out of the Western District of Arkansas, Foster Cable Services v. Deville, Case No. 1:18-cv-1049, reminds us of why that can be dangerous.

In the case, Deville, a former employee, had signed a contract that classified "all information" given to Deville by the plaintiff as a trade secret and/or confidential, with no time or geographical limitations. Deville left the plaintiff's employment and the plaintiff sued that Deville had breached his employment agreement because he had disclosed confidential information to his new employer. 

The court agreed with Deville's contention that the agreement he signed was unenforceable. The contract prohibited Deville from disclosing any information he learned while employed by the plaintiff, forever. The court found this unreasonable. Covenants not to compete should be reasonably drawn to protect genuine confidential information, whereas this agreement was broad enough to cover all experience and knowledge that Deville gained during his employment, forever. Therefore, the court refused to enforce it as an unreasonable restraint on trade.  

Call for Papers: Obligations X - Private Law Inside and Out

From our friends at Harvard Law:

The Tenth Biennial Conference on the Law of Obligations will be held at Harvard Law School from July 14–17, 2020. The conference will be co-hosted by Harvard Law School and Melbourne Law School, and will be co-convened by John Goldberg, Andrew Robertson and Henry Smith. The biennial Obligations Conferences bring together scholars and practising lawyers from across and beyond the common law world to discuss current issues in private law. Obligations X will be the first conference in the Obligations series to be held in the United States.

The conference theme is intended to provoke discussion about the inside and outside of private law. The conference will focus on the contrast between ‘internalist’ and ‘externalist’ perspectives on the law in this field. It will also consider the boundaries and relationships between private law and morality, private law and economic efficiency, and private law and other policy goals. A central aspiration of this iteration of Obligations is to give private law scholars working in different intellectual traditions an opportunity to identify previously underappreciated overlaps and synergies, and thereby help to break down methodological barriers to an improved understanding of the field.

Both established and early-career legal scholars are invited to submit proposals to present papers addressing the conference theme, either at a general level or in relation to any aspect of the law of obligations broadly conceived – contract, property (including intellectual property), torts, unfair competition, and unjust enrichment, as well as equity and other topics within or closely related to private law. Papers exploring relevant issues from a civil law perspective are also welcome. Anyone wishing to offer a paper should submit a working title and an abstract (of no more than 500 words) by email to [email protected] August 15, 2019. Papers will be selected on the basis of quality, originality, engagement with the conference theme and fit with other papers being presented at the conference. Those proposing papers will be notified by October 1, 2019 whether their papers have been accepted. A waiting list may be established, depending on the level of interest. Late submissions will be considered for inclusion in the waiting list.

Speakers will be asked to submit fully written draft papers by June 15, 2020 for distribution to conference participants via a password-protected website. It is expected that a small number of selected papers closely focused on the conference theme will be published in an edited collection following the conference.

Presenters whose offers of papers are accepted will be expected to meet their own travel and accommodation costs and pay a discounted registration fee. A small number of travel grants are available to support the attendance of scholars travelling from countries that have been underrepresented at previous Obligations conferences. Those wishing to apply for a travel grant should include a short statement with their paper proposals indicating that they wish to be considered for a travel grant, setting out an indicative budget and detailing all available sources of institutional financial support.

Again, make sure you keep good records of notifying your employees of your arbitration clause

I just blogged about a case in which failure to keep proper records meant there wasn't enough proof of agreement to the arbitration clause, and here's another one out of Texas, Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV. Stagg tried to compel arbitration, but the employee denied ever receiving notice of the clause or the agreement it was contained in. There was no signature on that particular agreement and none of Stagg's records indicated that it had ever been provided to the employee, even though the records indicated many other documents had been provided to him. Once again: make sure you keep good records. 

Be careful in drafting your NDA while negotiations are ongoing, if you want it to also cover information exchanged after those negotiations end

Among other disputes in this recent case out of Idaho, Dickinson Frozen Foods, Inc. v. J.R. Simplot Co., Docket No. 45580, is a dispute over whether or not a nondisclosure agreement between the parties was violated. There was no dispute that the information in question was confidential. The only dispute was whether it was covered by the NDA. The court ruled that it was not, because the NDA had been drafted while the parties were in the process of negotiating their business relationship with each other. For that reason, it covered information disclosed "in connection with a proposed business relationship," and that the information was only to be used for "discussions relating to a possible vendor relationship." Once the parties had finished negotiating their relationship, it was no longer "proposed" or "possible"; it was fact. Therefore, there needed to be another NDA to cover information exchanged during the fact of the business relationship (of which the information in dispute was some).  

A purported class of influencers sufficiently alleges contract interference

There's a lot of really interesting things at stake in this recent case out of the Northern District of California, Batra v. POPSUGAR, Inc., Case No. 18-cv-03752-HSG, including a contract angle. The case concerns an alleged class of influencers suing POPSUGAR for altering their postings in various ways. In addition to copyright and publicity right violations, the purported class alleges contract interference, because influencers can enter into contracts to receive a cut of the revenue generated by the links on their sites, but POPSUGAR's alleged alterations stripped the monetized links from the postings. Therefore, the class alleged that POPSUGAR was interfering with their contracts with the website linked to. The court found that the class's allegations on this count (and every other count in the complaint) were sufficient to survive a motion to dismiss. 

I'm fascinated by this case and can't wait to see where it goes, especially as we get further into the class action allegations. (But probably it'll settle before we get to the good stuff.)

Keeping records on when and how your employees sign their arbitration agreements could be helpful if there's ever a dispute over them

I just blogged about an arbitration case, and here's another one out of California, Garcia v. Tropicale Foods, Inc., E069024. In the last case I blogged about, arbitration was compelled, but in this one, the court reaches a different conclusion, finding that the employer Tropicale failed to prove that Garcia signed the arbitration agreement. The case serves as a lesson to employers hoping to enforce arbitration agreements against their employees: They need to be able to offer information about the circumstances of the employee signing the agreement. Garcia maintained that she never signed the agreement, and in response Tropicale offered a declaration of an employee saying that Garcia did sign the agreement. But that bare declaration wasn't enough, according to the court. It did not offer any sense of the timing or circumstances of the signature, which were important in this case, since the date on the agreement looked like September 2015, but Garcia had been terminated in August 2015. Therefore, the court did not compel arbitration.

An arbitration clause that allows you to pursue injunctive relief in the court system still requires arbitration of the underlying claims

A recent case out of the District of Oregon, Sixel, LLC v. Penning, No. 6:17-cv-01846-AA, has a fairly typical fight over whether or not a claim needs to be arbitrated, but in this case it's the employer who doesn't want to arbitrate and the employees who are fighting to enforce the arbitration clause. 

The case involves allegations of trade secret theft, and Sixel relies on the fact that the arbitration clause permits it to pursue injunctive relief in the court. However, the employees maintain that that is limited to the pursuit of relief and does not allow the litigation of the underlying claim in court. The court sides with the employees, finding that the exception to the arbitration clause is explicitly in its plain language only in terms of remedies, not any cause of action. The court therefore finds that Sixel can seek injunctive relief in court and pursue the underlying claims in arbitration. The claims in question fall squarely under the arbitration clause, and given the law's preference for enforcing arbitration provisions, the court chooses to enforce the provision.