A core principle of successful non-compete defense is that the best defense is a good offense.
- Play Offense: Any time an employee receives a cease and desist letter for allegedly violating a non-compete agreement, or, a company receives a cease and desist letter for hiring individuals who have non-compete agreements (e.g. tortious interference), the potential defendant(s) must start thinking about offensive strategy.
- Element of Surprise: Filing non-compete lawsuits is big business for many corporate or management-side law firms. But many of these plaintiff-side non-compete lawyers have only one strategy. Their strategy is to railroad the potential defendants into an emergency hearing in state court on minimal notice and obtain a preliminary injunction (often one that is completely wrong on the law). At that point, they have leverage and can force a favorable settlement. That’s the playbook. I’ve seen it dozens of times.
- Preemptive Strike: An experienced lawyer on the defense side will do everything within the law to prevent this sort of ambush injunction hearing based on a fake emergency. But sometimes, it’s too late. Once the plaintiff files the case, many judges in the state of Florida automatically treat non-compete matters as emergencies (even with no showing of what the emergency is). That’s completely wrong on the law, but that’s where we are in 2018. Recognizing this, the best strategy is to hit first. Preemptive attack.
- The Dynamic: It’s like Mike Tyson said: Everybody has a plan until they get punched in the face. Corporate non-compete bullies are the same way. They’re big and bad until they go up against (a) someone who has the resources to fight back or (b) someone who has zero resources, but who we decide to represent pro bono and go World War III on our adversary. The point: Hit them in the mouth. Sue them first.
- Jurisdiction: Suing first can be valuable from a jurisdictional standpoint. Check the forum selection clause. If jurisdiction can be either federal or state court, the potential non-compete defendant should sue first in federal court. Especially if they are in Florida, they do not want to be trapped in state court defending a complex non-compete/tortious interference matter.
- Dec Action Plus: When you sue first, you always file an action for a declaratory judgment holding the non-compete unenforceable (either in whole or in-part / as written). But that’s not enough. For true leverage, you need more offense, i.e., other claims.
- Employment Law Claims: For the employee, those claims necessarily arise out of the employment context. Title VII or ADEA claims can be useful leverage in settlement negotiations but they are not immediate offense. The employee cannot file a discrimination lawsuit without first going through the EEOC administrative process, obtaining a right to sue letter, etc. Non-compete matters are often immediate and urgent. You can’t wait for, e.g., a Title VII claim to become available. So you have to look elsewhere: FLSA, wage and hour violations, breach of contract (particularly compensation), etc.
- Unfair Competition Claims: For the rival company (being accused of tortious interference or theft of trade secrets), you have even bigger tools in the toolkit. The most common is false advertising in violation of the Lanham Act. Many corporate-side non-compete lawyers are one-trick ponies. They sue lots of people (mostly poor and working people) on non-compete violations. That’s their bread and butter. They have no clue about the Lanham Act, antitrust, etc. So when you hit them with a false advertising claim or an antitrust claim, they’ll either (a) spend hundreds of hours trying to learn a new area of law and probably get it wrong or (b) bring in another set of lawyers from their firm to handle those issues. Not only does it increase the other side’s litigation costs, it dramatically increases their exposure (e.g. damages, attorney’s fees, threat of injunctive relief). I once got the other side to agree to corrective advertising in settling a Lanham Act false advertising claim. That’s ugly stuff and bad for one’s brand. Bottom line: Vet all of the claims on your side of the V. If there are rival companies involved, that means not only the employment law claims but also every variant of unfair competition claim.
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. He has extensive experience litigating non-compete cases. He has appeared in or on the New York Times, Bloomberg, PBS News Hour, Law360, FundFire, Inc. Magazine and more. His office can be reached at 954-332-2380.