Skip to main content

An Expansive Noncompete Gets Revised By the Court: Remember, Employers, a Noncompete That is Too Restrictive Will Not Always Hold Up


BMC Software, Inc. v. Mahoney - United States District Court, District of Minnesota


Facts:  Christopher Mahoney ("Mahoney") worked for BMC Software ("BMC") and held different positions while there, eventually becoming regional sales manager in the United States.  While at BMC, Mahoney signed an employment agreement and a confidentiality agreement (which included a nondisclosure and noncompete provision).  One of the provisions in the confidentiality agreement at issue in this case was a noncompete covenant that prohibited Mahoney from soliciting or selling any products that competed with BMC and also prohibited from working anywhere in the United States in a position that would be competitive with BMC.  The agreement further stated that Texas law would govern its provisions.  Mahoney subsequently signed the agreement in November 2012.

In mid 2015, Mahoney eventually left to work for BMC's biggest competitor as a global sales manager.  BMC subsequently sued Mahoney and alleged he breached the noncompete provision of his agreement.  BMC asked the Court for a preliminary injunction to prevent Mahoney from working at the new company anywhere in the United States for a period of one year. 

Holding:  At the outset, the Court applied Texas law to the analysis of the noncompete.  In looking at the facts of the case, the Court noted that under Texas law, "a reasonable area for purposes of a covenant not to compete is considered to be the territory in which the employee worked."  Mahoney's position at BMC involved being in charge of accounts in four to six Midwestern states.  However, in his position at the new company, he was to apparently lead the company's business efforts globally.  Based upon the territory of his former position at BMC and the territory in which his new position would encompass, the Court narrowed the noncompete to only a few states in which Mahoney had been in charge of customer accounts while at BMC. 

Judgment:  The United States District Court held that BMC's motion for a preliminary injunction be granted and that Mahoney be prohibited from working for his new company only in any capactity related to BMC's Midwestern customer accounts only, rather than be prohibited from working for hte new company anywhere in the United States.

The Takeaway:  Based upon the Court's reliance of Texas law here, I think this was the right call.  It is important to note that the specifics of Texas law limit the territory in which noncompetes can restrict an employee from working when they leave a company.  While BMC would have preferred that Mahoney not be able to compete with them anywhere in the United States for a year after he left, the fact that his work with customers at BMC did not span the entire country was problematic.  Had he been closely working with BMC customers in all 50 states, I think this noncompete probably would have held up in court.  However, the fact that his work with a few BMC customers was confined to such a small part of the country is what ultimately doomed the enforceability of the entire agreement.  

Lesson learned employers:  Just because you put it in writing and the employee agrees to it does not necessarily mean it is enforceable!

Majority Opinion Judge:  Judge Magnuson

Date:  June 9, 2015

Opinion:  http://law.justia.com/cases/federal/district-courts/minnesota/mndce/0:2015cv02583/149276/23/

Comments

Post a Comment

Popular posts from this blog

NLRB: Discussion Among Employees About Tip Pooling is Protected Concerted Activity

  This Advice Memorandum from the National Labor Relations Board’s Associate General Counsel, Jayme Sophir, addressed whether employees which discussed and complained about tip pooling at work constituted protected concerted activity. In relevant part, an employer in New York operated a chain of steakhouses.  While tip pooling was in place at these steakhouses, some of the employees objected to it on the grounds that it was not transparent and improperly divided tips among the workers.  Employees were told not to complain or talk to each other about the tip pool and were told that doing so would endanger their jobs.  Despite the employer later attempting to provide some clarity as to how the tips were being divided, rancor still existed among some employees.  At one point, the employees were told by a general manager that some employees that had been talking about the tip pool were “cleared out” and the employer would continue to do so. In the Advice Memorandum,...
Post a Comment
Read more

San Diego Rolls Back Vaccine Mandate For City Workers

Last Tuesday, the San Diego City Council voted to do away with the vaccine mandate for city employees. The city’s vaccine mandate that was in place required city workers to get the coronavirus vaccine or risk termination.  Perhaps to this surprise of no one, the city’s policy came under fire with 14 employees being terminated and over 100 other employees resigning.  With the coronavirus subsiding, including in Southern California, the San Diego City Council took action. Now, bear in mind, the repeal of the vaccine mandate does not take place immediately. With that being said, the mandate will be repealed March 8th.  I suppose the question now is, what other cities or regions follow San Diego’s lead? For additional information:   https://www.sandiegouniontribune.com/news/politics/story/2023-01-24/san-diego-repeals-controversial-covid-19-vaccine-mandate-citing-drop-in-cases-hospitalizations
Post a Comment
Read more

NLRB: Former Employee Cannot Be Barred From Work Premises After Filing Wage Suit

MEI-GSR Holdings, LLC - NLRB Facts :  MEI-GSR Holdings, LLC d/b/a Grand Sierra Resort & Casino ("GSR") operated a facility that included a hotel, casino, restaurant, clubs, bars, and a pool which were all open to the general public.  Tiffany Sargent ("Sargent") was briefly employed by GSR as a "beverage supervisor" in December of 2012.  After her employment ended, Sargent continued to socialize at one of the clubs.  GSR had a long standing practice of allowing former employees to patronize its facility and did not prohibit Sargent from doing so.  In June of 2013, Sargent and another employee filed a class and collective action against GSR for alleged unpaid wages, in violation of the Fair Labor Standards Act and Nevada law.  In July of 2014, GSR denied Sargent access to an event at one of the clubs.  GSR followed up with a letter and stated that with the on-going litigation (from the wage suit), it decided to bar Sargent from the premises. ...
1 comment
Read more