Call it a trend. A number of recent cases from across the country suggest that courts are pushing back against overzealous attempts to enforce non-compete agreements against salespeople. One of the latest examples comes out of the Illinois.
In September 2010, Rodger Reaume began working in sales for Fisher/Unitech, a major reseller of computer animated design software and specialized printing equipment. As a condition of his employment, Reaume signed an employment agreement. That agreement contained both certain non-disclosure provisions and non-compete provisions. The non-compete provision restricted Reaume from directly or indirectly engaging in any business competitive with Fisher, anywhere within a 200 mile radius of any Fisher “office or territory” for a period of two years following his separation from the company.
Throughout most of his time with the company, Reaume focused on selling high-end 3-D printers made by a company called Stratasys, Inc. Stratasys is a market leader in 3-D printing technology, particularly with respect to equipment that can be used in direct digital manufacturing. In other words, these are printers that can make actual end-use parts, or, production-grade printers. For several years, Fisher was one of roughly ten top-level resellers authorized by Stratasys to sell its highest grade printers. Fisher was also the only authorized reseller in a large territory consisting of several Midwestern states.
During this same general timeframe, there was another company in the mix called CATI. CATI was a major reseller for a company called Objet, Ltd., which also manufacturer 3-D printing equipment. In short, we had Fisher as a major reseller of Stratasys products and CATI as a major reseller of Objet products, both with certain exclusive territories for those respective manufacturers. Then, in January 2013, worlds collided. Stratasys, Inc. merged Objet, creating a new company, Stratasys, Ltd. Following the merger, both Fisher and CATI began selling Stratasys and Objet products. The companies became direct competitors and neither had exclusivity arrangements with Stratasys, Ltd. In the aftermath of the merger, CATI was searching for ways to improve its market position with respect to selling Stratasys products. After all, CATI had absolutely no experience as a Stratasys reseller. It is pretty easy to guess where this is headed.
In February 2013, CATI began recruiting Reaume to strengthen its Stratasys sales division. In late February, Reaume agreed to join CATI. At that point, Reaume immediately undertook efforts to ensure that he would hit the ground running at his new company. Reaume emailed himself documents, transferred documents to a flash drive and even emailed documents directly to the president of his new company. On March 7, he resigned from Fisher and immediately began working for CATI.
Based on this sets of facts, one might have expected a resounding victory for Fisher. After all, there is evidence that Reaume misappropriated company information then went to work for a direct competitor. In many non-compete cases, this alone would be treated as dispositive. The court sees that there has been some type of unfair or unethical conduct on the part of the employee and, in response, allows the non-compete agreement to be enforced as written (even if the agreement goes beyond the bounds of what is reasonable). Non-compete cases are hardly a science. In most cases, a court can craft a reasonable argument for any number of outcomes: enforcement as written, modification or even a finding that the agreement is simply unenforceable. This lends itself to a sort of rough justice.
In this case, Reaume misappropriated certain company documents and materials. As expected, the court granted a preliminary injunction both requiring Reaume to return any materials in his possession and holding him to the terms of his non-disclosure agreement. Then things got interesting. Although the court ruled with Fisher on the non-disclosure issue, the court rejected Fisher’s argument for enforcement of the non-compete agreement.
Fisher pressed for enforcement of the non-compete agreement, arguing that Reaume had gained extensive knowledge about sales techniques and best practices that he could use in his new position at CATI. In rejecting this argument, the court held that much of Fisher’s claimed confidential information was “the very definition of general knowledge and experience that cannot be protected with non-compete restrictions.” The court took Fisher to task for dressing up its briefs with repeated references to best practices, intangible knowledge and knowledge of specialized sales techniques but never explaining what any of that meant. And at the preliminary injunction hearing, even Fisher’s own witnesses admitted that Reaume learned how to sell through on-the-job experience and that Reaume could have learned the same sales skills working for any major Stratasys dealer. In fact, much of what Fisher claimed to be its own proprietary information was built upon materials provided by the manufacturer.
The court then touched briefly upon the extreme scope of the non-compete agreement. As written, the agreement barred Reaume from working for any competitor in any capacity whatsoever. In terms of geographic scope, the restrictions prohibited Reaume from working within a 200-mile radius of any Fisher ‘office or territory.” This cut off a large swath of the country, including the Midwest, Mid-Atlantic and Northeast. Fisher urged the court to narrow the non-compete agreement, but the court found it unnecessary to reach the issue of modification:
Having concluded that Fisher/Unitech failed to establish that it has a legitimate business interest in imposing restrictions on Reaume’s activities beyond those directed specifically at the protection of confidential information, the court need not consider modifying the non-compete provision as to its geographic scope or its covered activities. Without a protectable interest at stake beyond what has been addressed by the agreed injunction, there is no justification for any non-compete provision.
The decision is worth a read, especially for anyone who defends non-compete cases in Illinois, or who represents sales people in non-compete litigation. The case is Fisher/Unitech, Inc. v. Computer Aided Tech., Inc., 2013 WL 1446425 (N.D. Ill. Apr. 9, 2013).
Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida. He focuses his practice on cases involving non-compete disputes, antitrust and business torts. He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.