We have written here before about the importance of differences in state laws in the enforcement of noncompete agreements . A Miami court’s decision last week in a dispute between language education companies Rosetta Stone and Open English highlights this difference, as well as strategic points all companies should consider in their noncompete programs.
Nicole Wilson was employed by Open English in Florida. She signed an agreement including an agreement not to compete for 6 months after her employment with Open English and not to disclose Open English’s confidential information. The agreement specified that any disputes over the agreement be litigated in Florida. After Wilson went to work for Rosetta Stone in California, in February 2013 Open English filed a lawsuit against Wilson and Rosetta Stone in Miami, asking the court to stop Wilson from competing and from disclosing Open English’s confidential information. The defendants subsequently filed their own lawsuit in California against Open English, asking the California court to declare that the agreement was not enforceable under California law. The Florida court has now declined to dismiss the first case on the grounds that it should be litigated in California because of the almost certain unenforceability of the noncompete provisions in California. While there may well be more chapters to be written in this particular dispute, the Florida court’s decision not to dismiss the case highlights three important principles of noncompete enforcement of which all companies seeking to protect their business assets should take note. First, a strong choice of forum clause is critical. The Florida court’s decision gives great weight to the parties’ prior agreement to litigating disputes in Florida, citing Florida case law dictating that it do so. Such deference to choice of a forum is common, and deference to those provisions is generally greater than it is to choice of law (i.e. which state’s law applies, regardless of where the matter is litigated) clauses. Second, in concluding that there was no compelling reason the dispute should be heard in California, the court wrote, “In any event, agreements not to use or disclose a company’s trade secrets while employed and after employment, which is at the crux of this case, are enforceable in both Florida and California.” It is true that trade secret misappropriation is, with some state-by-state variation of course, almost universally prohibited across the states – almost the exact opposite of noncompete law. Strong trade secret language in Wilson’s agreement and in the complaint filed with the court allowed the Florida court to make this seemingly pivotal statement in its conclusion, rather than focusing solely on the almost certain different treatment the two states’ courts would give the plaintiff’s attempt in the complaint to stop Wilson from competing. Finally, the decision underscores the fact that there is usually a benefit to getting to the courthouse first in multi-state noncompete disputes. The Florida court noted that the California case, on which the defendants relied in part as a reason the Florida case should defer, was filed after the Florida case. There are too many moving parts (as in any dispute like this) to say that the fact that Open English won the “race to the courthouse” was determinative, experience tells us that it is often critical. Whether the fact that the system encourages this is good public policy is debatable, but it is clearly the case and companies need to consider this in their decision-making. We will keep an eye on this dispute to see if there are further decisions – from either coast – with takeaways for employers generally.RELATED ARTICLES
Six Statements That May Mean Your Business Will Keep an Employment Lawyer Busy
June 1, 2017 | Employment Lessons, Currents - Employment Law
Illinois Cracks Down on Non-competes for Low-Wage Workers
September 7, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
State Noncompete Statutes, Your Company, and the Economy: One Perspective
February 29, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
Massachusetts and the Impending Death of Noncompetes Part II: De Facto Enforcement of Noncompetes
February 15, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
Groundhog Day: Declaring the Impending Death of Massachusetts Noncompetes
February 8, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
Six Statements That May Mean Your Business Will Keep an Employment Lawyer Busy
June 1, 2017 | Employment Lessons, Currents - Employment Law
Illinois Cracks Down on Non-competes for Low-Wage Workers
September 7, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
State Noncompete Statutes, Your Company, and the Economy: One Perspective
February 29, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
Massachusetts and the Impending Death of Noncompetes Part II: De Facto Enforcement of Noncompetes
February 15, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
Groundhog Day: Declaring the Impending Death of Massachusetts Noncompetes
February 8, 2016 | Non-competes and Trade Secrets, Currents - Employment Law
Pennsylvania Supreme Court “Considers” Noncompetes: Mere Continued Employment Not Enough
November 19, 2015 | Non-competes and Trade Secrets, Currents - Employment Law
Noncompete Roundup – Florida
November 7, 2015 | Non-competes and Trade Secrets, Currents - Employment Law
Noncompete Roundup – Oklahoma
November 6, 2015 | Non-competes and Trade Secrets, Currents - Employment Law
Noncompetes In Mexico
October 13, 2015 | Non-competes and Trade Secrets, Currents - Employment Law
Think Before You Shoot on Noncompete: Why The Threatening Letter May Not Be Your First Move
October 12, 2015 | Non-competes and Trade Secrets, Currents - Employment Law
An Annual Ritual: Massachusetts Noncompete Legislation
July 1, 2015 | High Stakes Employment Issues, Non-competes and Trade Secrets, Currents - Employment Law
Did California Just Fire No-Employment Provisions From Settlement Agreements?
April 13, 2015 | Non-competes and Trade Secrets, Currents - Employment Law
Some HR Numbers That Should Be Zero In Your Organization
February 16, 2015 | Letter of the Law, Currents - Employment Law
Five Things to Know About Trade Secrets
December 22, 2014 | Letter of the Law, Currents - Employment Law
Five Distinctive Things About Ohio and Employment Law
November 10, 2014 | Letter of the Law, Currents - Employment Law
Beware of the court of public opinion
October 28, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Confidentiality & Nondisclosure Agreements Are No Substitute For Noncompetes
October 27, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Opinions About Noncompetes: Actual Supporting Data Not Required
June 23, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
It’s Back: Proposal to Ban Massachusetts Noncompetes (and Related Economic Theories)
April 14, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Employers, You All Have Secrets: New Report Might Help You Protect Them
April 6, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Have You Double-Checked The Language Of Your Non-Compete Lately? If Not, You Need To...
March 26, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Behind “Obnoxious” Headlines, A Good Noncompete Strategy Reminder
March 18, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
There Were No Mice Available? Testing Noncompetes and Motivation in Settings That Don’t Sound Much Like Employment
February 17, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Split Decision: Top 5 Noncompete Stories Lean Slightly in Favor of Enforcement
February 3, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Different Strokes for Different Folks (or Red, Blue, and Purple-Pencil America): How The 50 States Differ On Revising Non-Competes
January 3, 2014 | Non-competes and Trade Secrets, Currents - Employment Law
Coast to Coast Noncompete Part 2: Still Going in 3 Courts in 2 States
December 23, 2013 | Non-competes and Trade Secrets, Currents - Employment Law
December Is Noncompete Month in the General Media
December 16, 2013 | Non-competes and Trade Secrets, Currents - Employment Law
Governor Would Like Massachusetts to Join California As a Non-Noncompete State
September 16, 2013 | Non-competes and Trade Secrets, Currents - Employment Law
State Lines May Not Be When It Comes to Noncompetes
September 3, 2013 | Non-competes and Trade Secrets, Currents - Employment Law
Do You Have Restrictive Covenants In Texas? If So, Be Careful What You Ask For
August 30, 2013 | Non-competes and Trade Secrets, Currents - Employment Law
Ohio Supreme Court Reverses Self on Noncompete in Merger Situation
October 11, 2012 | Non-competes and Trade Secrets, Currents - Employment Law
RELATED PRACTICE AREAS
Subscribe
Do you want to receive more valuable insights directly in your inbox? Visit our subscription center and let us know what you're interested in learning more about.
View Subscription Center