Duress As A Defense To Non-Compete Enforcement

In Michigan, duress will invalidate a non-compete agreement, but it is found only where the illegal act of the employer deprives the employee of the free will to choose to enter into the non-compete agreement. Duress will not be found where an employee entered into the agreement with full knowledge of all of the facts and with ample time for investigation, consultation, consideration, and reflection. Courts have stated that duress is not present where an employee had ample time to consult with an attorney and refuse to sign the agreement

Million Dollar Verdict in Michigan for Violation of Non-Compete Agreement

As Reported in the Macomb Daily Newspaper (Mt. Clemens, MI)

Retired auto dealer awarded $3 million on violation of non-compete by his daughter.

This case demonstrates the presumption of validity of non-compete agreements in Michigan and that juries are willing to enforce and have potential to generate large verdicts.

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Companies Must Do More To Define and Protect Their Trade Secrets

GLOBAL WATER GROUP, INC., Appellant v. Robert ATCHLEY and Aspen Water, Inc., Appellee. (The Trade Secrets Vault)

Court of Appeals of Texas, Dallas. GLOBAL WATER GROUP, INC., Appellant, v. Robert ATCHLEY and Aspen Water, Inc., Appellee. No. 05-06-00709-CV. Jan. 9, 2008.
Rehearing Overruled Feb. 14, 2008.

Background: Water purification corporation filed lawsuit against its former president and his competing water purification company, asserting claims for misappropriation of trade secrets and breach of shareholder agreement. Following a jury verdict in favor of plaintiff, defendants filed motion for judgment notwithstanding the verdict (JNOV). The 116th Judicial District Court, Dallas County, Robert Frost, J., granted motion. Plaintiff appealed.

Holdings: The Court of Appeals, O'Neill , J., held that:
(1) plaintiff's formula of compound used in "mixed media pod" during absorption step of water purification process was not a trade secret;
(2) sequence of process used by plaintiff in its water purification system was not a trade secret; and
(3) corporation's former president did not breach shareholder agreement.

Technorati Tags: trade secret, fiduciary, shareholder

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Jury Finds Company Trade Secrets Enforceable: $17 Million in Punitive Damages Against Ex-Employees and New Employer

Trade Secret Jury Verdict : Innovative Technologies Corp. v. James Silcott et al. (The Trade Secrets Vault)

The jury awarded $6,475,855.44 in compensatory damages and $17 million in punitive damages in this massive trade secret theft verdict.

The jury found that the salaries of Innovative Technologies employees and its mapping strategies were trade secrets, or that Advanced Management Technologies and Kenton Trace Technologies misappropriated the plaintiff's trade secrets. Jurors found that the plaintiff suffered actual loss proximately caused by the defendants' misappropriation of its trade secrets or that the defendants were unjustly enriched by its misappropriation of the plaintiff's trade secrets.

They found that Advanced Management Technologies acted with purpose to procure contract breaches or terminate the business relationships the plaintiff had with its employees, and that there was no justification for Advanced Management Technologies' conduct. The jury found that Advanced Management Technologies' tortious interference with the plaintiff's business relationship and contracts with its employees was the proximate cause of the damages it suffered. Jurors found that Advanced Management Technologies engaged in a civil conspiracy with the individual defendants or the plaintiff's employees to cause it harm, which was a proximate cause of the plaintiff's damages.

The competing firm, Advanced Management Technology Inc. of Arlington, Va., was ordered to pay virtually all of the damages, Dyer said, having been found guilty of tortious inference with business relationships, civil conspiracy, and theft of trade secrets for acting in collusion with the former employees of Innovative Technologies.

Technorati Tags: trade secret, non-compete, jury, punitive damages

Severance Contracts: Executive Buy-Outs At General Motors

Here are some links which provide information on the GM severance plan offer first reported in March, 2006:

• CNN:  GM offers workers up to $140K to leave.  Click here.
• Delphi, GM Offers Get Mixed Reception Forbes
• GM Offers Early Retirement Plan for Hourly Workers Voice of America
• List of Seveance Contract Forms

Executive buy-out, severance and compensation issues are becoming more important as our economy heads towards recession and more companies are looking to downsize.  Our attorneys can help your company design and negotiate a severance plan for your executives, managers and employees. Contact us today.

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Executive Severance Contracts: GM offers workers up to $140K to leave

Executive Level Severance Contracts Offered To GM Workers.

GM is offering money to its workers in order to entice those employees to voluntarily terminate employment (ie retire).  Severance / retirement packages are reportedly available to 113,000 workers.  GM also reportedly reached a deal with Delphi workers to avoid a labor dispute.

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Non-Compete Contract Basics: The Employer Perspective

A non-compete contract is an agreement signed by an employee or contractor where he/she agrees that they will not engage in certain employment within a certain geographic area for a certain period of time after they quit or are fired. A non-solicitation contract is an agreement signed by an employee or contractor where he/she agrees that they will not contact and/or solicit an employer's customers and/or remaining employees for a certain period of time after they quit or are fired.

This article will address non-compete and non-solicitation agreements from the employers point of view.

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What Every Employee Should Know About Non-Compete, Non-Solicitation Contracts

A non-compete and trade secret protection contract is an agreement signed by an employee where he or she agrees that they will not engage in certain employment within a certain geographic area for a certain period of time after they quit or are fired. Likewise, a non-solicitation contract binds the employee not to contact the employer’s customers or remaining employees under the same conditions.

These restrictive contracts have become more prevalent in Michigan, especially in the technology sector where companies believe they have legitimate business interests that need to be protected.

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Non-Compete Agreements: A Primer on non-compete, non-solicitation and trade secret protection

Companies need to protect their trade secrets, confidential information and intangible property.  Non-compete, non-solicitation and trade secret contracts are important devices which can help increase company protection against misappropriation of trade secrets.  In general:

1. the broader the non-compete clause, the less enforceable it is;
2. the more an employee has access to confidential information or trade secrets, the more enforceable it is;
3. additional compensation paid for a non-compete clause makes a non-compete  more enforceable (although no additional compensation may be necessary at all).

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Michigan Sales Representatives Commission Act

The Michigan Sales Representatives Commission Act ("SRCA"), MCLA 600.2961, provides protection for independent sales representatives from manufacturers or suppliers who improperly refuse to pay commissions for goods sold.  The SRCA requires that commissions be paid to sales representatives on a timely basis. The terms of the contract between the principal and the sales representative will determine when a commission becomes due. However, if the contract does not state when the commissions are due, the past practices between the parties will control. If there are no past practices between the parties, the custom and use prevalent in the state for that business controls.

If a sales representative's contract is terminated, all commissions that are due at the time of the termination must be paid within 45 days after the date of termination. If commissions become due after the termination date of the contract, they must be paid within 45 days after the date in which they became due. The requirements of the SRCA cannot be waived by contract.

Under SRCA, a manufacturer or supplier who fails to comply with the law for timely payment of commissions is responsible for actual damages for failure to pay the commissions and, if the manufacturer or supplier is found to have "intentionally" failed to pay the commissions when due, the sales representative is also entitled to two times the amount of the commission or $100,000, whichever is less. If the sales representative files a lawsuit pursuant to the SRCA, the court is also required to award the prevailing party reasonable attorneys’ fees and court costs.

Up to this point, it has been unclear what the word "intentional" in the Act means; i.e., whether it requires an act of bad faith or simply means the withholding of a commission on any basis other than inadvertent error or accident. Recently a Sixth Circuit Court of Appeals decision has requested the Michigan Supreme Court to define the term "intentional" in the statute. Should the Michigan Supreme Court decide that the word intentional does not require a showing of bad faith, the SRCA will continue to be a significant danger to those manufacturers and suppliers who wish to withhold commissions from a salesperson, even if they do it in good faith. Until the Michigan Supreme Court rules on this question, manufacturers and suppliers should operate with caution as they may be liable for the double damages even if they withhold commissions based on a good faith disagreement with the sales representative.

At a minimum, though, manufacturers should make sure that the contract with their sales representatives explicitly sets forth when and under what circumstances a commission is going to be paid. If a part of a commission is disputed but a part is not, the undisputed part should be paid. Should a decision be made to not pay a commission, manufacturers and suppliers should fully document their reasons for withholding it. This will allow them to more easily make the argument that the commissions were not owed to the sales representative if the sales representative later files suit for those commissions. If there are significant dollars involved, it may be wise for the parties to a commission dispute to consult legal counsel early in the dispute process.

Michigan Statute Re Enforcability of Non-Compete Contracts

It is the public policy of Michigan as embodied by statute to enforce reasonable non-competition provisions in employment contracts.  According to Michigan law, non-compete agreement is enforceable provided it is reasonable with respect to duration, geographical area, and line of business it seeks to limit. Employer's legitimate business interest that will justify restrictive covenant in employment contract must be something greater than mere competition, since prohibition on all competition is in restraint of trade; to be reasonable, restrictive covenant must protect against employee gaining some unfair advantage in competition with his employer but not prohibit employee's future use of general knowledge or skill.
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M.C.L.A. 445.774a   (Michigan Compiled Laws Annotated )

Chapter 445. Trade and Commerce:   Michigan Antitrust Reform Act (Refs & Annos)

445.774a. Agreements not to compete; application

Sec. 4a. (1) An employer may obtain from an employee an agreement or covenant which protects an employer's reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

(2) This section shall apply to covenants and agreements which are entered into after March 29, 1985.
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If you have a question concerning this statute or its applicaiton to you or your business, you should contact an attorney. 

Michigan Non-Compete, Confidentiality and Non-Solicitation Contracts

We live in a highly competitive world where highly paid executives and business persons  gain access to corporate trade information and knowledge, customer lists and other proprietary information.  Unlike prior times, these executives and other employees are highly mobile, moving between companies and jobs, even between competitors. Michigan courts and the Michigan legislature ave recently tried to deal with the realities of our 21rst century marketplace in dealing with the enforceability of non-compete agreements.

In Michigan, the validity of non-compete agreements is governed by section 4a of the Michigan Antitrust Reform Act, a statute passed by the Legislature in 1987, as well as the many cases interpreting that statute. Together, the statute and the case law set forth the parameters defining those agreements that are enforceable and those that are not.  The statute seeks to strike a compromise between the protection of an employer’s competitive business interests and an employee’s right to earn a living. As such, courts interpreting non-compete agreements focus their analysis in four areas:

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Non-Compete Litigation & Negotiation

We are a Michigan Law Firm Specializing In Non-Compete Contracts, Trade Secret Law, Customer List Litigation.

Since the year 2000 alone, our lawyers have handled complex cases involving millions of dollars in alleged damages, taking several cases to trial on behalf of national and international corporations.  Our attorneys have advised employees, managers, owners and employers  in the negotiation of non-competition contracts and helped companies protect their valuable intellectual and intangible property rights. In many instances, immediate injunctive relief is both appropriate and necessary to stop unlawful behavior before customers are lost or the unlawful behavior irreparably harms company interests.

Traverse Legal's lawyers pride themselves on advanced litigation techniques which are both cost-effective and budget oriented.  When it comes to technology, there are very few firms that can match our capabilities.

If you have an issue involving non-compete contracts, trade secret theft, customer list theft or breach of fiduciary duties by corporate mangers, officers or owners, our lawyers can provide you the legal advice you need to fully protect your rights.