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Restrictive Covenants: A Multi-State Survey Of Judicial Decisions From January 2003 Through January 2004TABLE OF CONTENTSA. Interpretation of Restrictive Covenants 1. "Employment" Means Employment Under the Contract, Not Tenure at Employer 3. Employee's "Resignation" Must Be Voluntary, Unconditional and Ambiguous B. Scope of Employer's Legitimate Interests 1. Protectability of Employer's Relationship With Its Customers a. Is An Existing Employee-Customer Relationship Required? b. Employer's Interest Is Protectable Even Where Employee Had Pre-Existing Relationships With Customers c. Restrictive Covenant Is Overbroad Where It Prohibits Not Only Solicitation But Also Mere Acceptance C. Geographic Limitations 1. When Is Geographic "Blanketing" Allowed? D. Reformation — The "Blue Pencil" Doctrine 2. Courts in Illinois Take a Hard Line on the Blue Pencil Doctrine K. Statutory Construction L. State-By-State Index of Cases A. Interpretation of Restrictive Covenants 1. "Employment" Means Employment Under the Contract, Not Tenure at Employer In Marwaha v. Woodridge Clinic, S.C., the Appellate Court of Illinois addressed whether the word "employment" in a restrictive covenant referred to the employee's employment under his employment contract, which had expired, or the employee's tenure at the employer. 339 Ill.App.3d 291, 790 N.E.2d 274 (Ill. App. June 2, 2003). In June of 1993, the physician-employee had signed an employment contract that lasted until July of 1996, at which time the contract ended and the employee became employed at-will. The physician continued to work for the employer until his termination in November of 2001. The restrictive covenant in the employee's initial contract provided that, "upon termination of the Doctor's employment," he would not compete with the employer within a 10 mile radius for 2 years, and it expressly stated that the covenant would survive the termination of the employment contract. The Court rejected the employer's argument that the word "employment" in the covenant was intended to refer to the employee's general employment, rather than his employment under the contract. It first reasoned that the word "employ" was used ambiguously in two other parts of the contract, thus, the ambiguity was construed against the employer. It next countered the employer's argument that the survival clause indicated that the covenant should be triggered at the end of the physician's tenure with the employer, finding that the "more reasonable interpretation" of this clause "is that the parties simply meant to clarify that the noncompete provision, although triggered at or prior to the termination of the employment agreement, would continue to be effective for its two-year term even if that term extended beyond the term of the employment agreement." 339 Ill.App.3d at 294, 790 N.E.2d at 977. Although the foregoing reasoning is sound, the Illinois Court also based its decision on one other rationale. The Court "observe[d] that it would be strange for parties to an employment contract to provide for a noncompete provision to exist in perpetuity. Such a provision would govern the terms of other not-yet-existent employment contracts between the same parties." Id. However, it seems reasonable that the parties may have intended the restrictive covenant in the expired employment contract to remain binding, at least where they did not enter a later contract. By contrast, if the parties had executed a subsequent employment contract that omitted a restrictive covenant, the parties' intentions would have been plain, and the legal principles clear, that the initial covenant did not survive the later contract. The Supreme Court of Nevada drew a distinct line by holding that an employee's failure to disclose a co-worker's expressed intentions to compete with the employer does not violate a restrictive covenant. White Cap Indus., Inc. v. Ruppert, 67 P.3d 318 (Nev. April 28, 2003). The employee (Ruppert) was the owner and operator of the employer (White Cap) from 1974 until he sold his stock to a third party in 1998. The sales agreement contained a restrictive covenant, and the former owner remained employed as the district sales manager. Shortly after the sale, the local branch manager informed Ruppert that he was interested in starting a competing business. Ruppert did not relay this information to the employer, and the local branch manager later resigned and started a business in competition with White Cap. The restrictive covenant prohibited Ruppert from "directly or indirectly, assist[ing] or encourag[ing]" any other person to compete with White Cap, and the company argued that the employee violated this provision "because his silence assisted and encouraged" the local branch manager "in carrying out his plans to compete." 67 P.3d at 319. The Court disagreed, finding that the "plain language of the non-competition agreement does not state that Ruppert has an affirmative duty to inform White Cap of the competitive intentions of other employees." Id. "Rather, the non-competition agreement reads as a list of prohibitions directing Ruppert not to 'engage' in competition with White Cap or 'assist,' 'encourage' or 'induce' others to compete with White Cap. Nothing in the agreement suggests that mere non-action would result in a breach." 3. Employee's Resignation Must Be Voluntary, Unconditional and Ambiguous The restrictive covenant at issue in Leach v. Ford Motor Co. was triggered only if the employee voluntarily terminated his employment. 2004 WL 102874 (E.D. Mich. Jan. 16, 2004). The employee was Ford's Chief Operating Officer in Europe. When he sensed a "changing tide" and a "feeling against" him, the employee met with his superiors to discuss the termination of his employment. Ford claimed that the employee resigned during that meeting, thereby invoking the restrictive covenant. The employee responded that he had only discussed with his supervisors a potential termination that would be mutually agreeable to both parties. The Court sided with the employee, recognizing that "[a] resignation must be voluntary, unconditional, and unambiguous." 2004 WL 102874, * 6. "Loose and ambiguous language will not be regarded as sufficient to prove the resignation of a corporate officer, at least where the subsequent acts and declaration of the officer are inconsistent with any such contention." Id. The most significant facts leading the Court to its conclusion were (1) the employee continued to fulfill his job duties after the meeting, some of which involved highly sensitive information, (2) after the meeting, Ford's general counsel wrote a letter to the employee advising him of the enforceability of the restrictive covenant "if you resign," and (3) it was illogical to the Court that the employee would resign, because he had received an offer to become the Chief Executive Officer of Fiat, but the offer was contingent on a release by Ford from the restrictive covenant. In Joliet Med. Group, Inc. v. Ensminger, the Appellate Court of Illinois drew an unusual distinction between the terms "medical practice" and "practicing medicine," holding that the former refers to the physician-employee's physical location and serves as the measuring stick for a geographic limitation in a covenant not to compete, whereas the later refers to the acts that a physician takes in the course of performing medical duties and will not violate the covenant if the acts occur within the restricted geographic area. 337 Ill.App.3d 1076, 787 N.E.2d 879 (Ill. App. April 4, 2003). The restrictive covenant in this case precluded the physician from engaging in a "medical practice" within 2 miles of the employer's principal office for 3 years. After the employee resigned, he opened two offices outside the 2-mile zone, but maintained his staff privileges at a hospital located in the restricted territory. The Court rejected the employer's argument that the admission and treatment of patients at the hospital constituted "medical practice" by the employee. It found that "[t]he practice of medicine occurs whenever doctors perform an activity for which they must be licensed … including the writing of prescriptions, treating diseases or diagnosing patients." 337 Ill. App. 3d at 1078, 787 N.E.2d at 881. "In contrast, a 'medical practice' simply stated, is the physician's business. It includes physical assets and goodwill that can be liquidated, such as offices, patient files, furniture, medical equipment, instruments, professional books, fixtures, and buildings." Id. While the Court recognized that doctors certainly practice medicine at hospitals and other places, "the physical location at which a doctor practices medicine does not automatically qualify it as a medical practice." Thus, "if physicians made house calls to visit patients, they would be practicing medicine at patients' homes, but their medical practice does not include the patients' homes." 337 Ill.App.3d at 1079, 787 N.E.2d at 881. This decision drew a dissent, which recognized that even if one accepts the majority's view of a medical practice—covering only physical assets such as offices, patient files, furniture, medical equipment, instruments, professional books, fixtures, and buildings—a hospital fit well within that definition. 337 Ill.App.3d at 1080, 787 N.E.2d at 882 (Slater, J. dissenting). In addition, the Illinois Court's construction of the term "medical practice" will serve to frustrate the legitimate expectations and protectable interests of employers. For example, a physician could inappropriately capitalize on the goodwill that the employer developed with its patients by opening an office outside of the restricted area, then arranging to perform medical exams and other services for all of his former patients at their homes and/or in the same hospital that the physician and patients previously used. Although there may be some acts of practicing medicine that most would agree do not fall within the definition of "medical practice," such as providing unanticipated emergency care within the restricted area or corresponding with patients that reside in that area (e.g., via e-mail), it seems counterintuitive to exclude from this definition intentional and pre-arranged activities, such as maintaining staff privileges at hospitals within the restricted area or making house calls to patients who reside in that area. The Court of Appeals of Ohio strictly construed the term "competing" in a restrictive covenant to require the employer to establish that the former employee was attempting to sell competing products to customers with whom the employer already was doing business or was seeking to do business. Single Source Packaging, LLC v. Cain, 2003 WL 22064129 (Ohio App. Sept. 5, 2003). The employer (Single Source) was engaged in the manufacture and sale of packaging materials, and the employee (Cain) was its Vice President and a one-third owner. As a condition of purchasing his membership interests, Cain agreed to refrain from both (1) soliciting the company's customers and (2) engaging in any business that "competes" with the company. After resigning, Cain formed a business to sell packaging materials, and did so in the same territory that he had sold the same types of products for Single Source. The Court rejected Single Source's claim that Cain violated the non-competition clause, reasoning that "[t]he covenant not to compete … did not prohibit Cain from engaging in a particular business in a particular area; it prohibited Cain from 'competing' with Single Source." 2003 WL 22064129, * 6. In the Court's view, an employee "would have to be attempting to sell to persons with whom [the employer] either: (1) was doing business; or (2) was seeking to do business, in order to be competing with [the employer], when 'competing' is given an appropriately strict construction" under Ohio law. Id. While there is no doubt that restrictive covenants should be strictly construed, the Ohio Court more than just strictly construe this covenant; it actually eliminated the non-competition clause altogether. Specifically, the Court superimposed the contractual requirements of the employee's non-solicitation provision upon the non-competition clause—by requiring that the employer show that the employee was soliciting existing or prospective customers to satisfy the non-competition clause—thereby excising from the agreement the employer's distinct contractual right to prevent the employee from engaging in competitive activities within a defined geographic territory for an established period of time. The prohibition against "aiding" competitors did not prevent an employee from preparing to do so during the term of the restrictive covenant, where the former employee did not actually solicit or make sales to competitors during that period. Viad Corp. v. Cordial, 2004 WL 61021 (W.D. Pa. Jan. 14, 2004). The plaintiff was an "exhibit house" providing services to companies participating in trade shows and conventions, such as exhibit designs, construction, transportation, installation and storage. The defendants were both high level employees and shareholders of the plaintiff, who signed covenants restricting them from engaging in business in competition with employer, and aiding others to compete. The defendants resigned and formed a company to manufacture and sell software to be used by competing exhibit houses. During the term of the restrictive covenant, the defendants engaged in "preparatory steps" by incorporating their company, issuing press releases, conducting marketing research, issuing a white paper, and conducting a webcast for potential customers. 2004 WL 61021, * 11. They did not, however, make any sales, have any orders, generate any revenue, or have a product on the market; and there was no evidence that the defendants had actually aided any competitors during the term of the restrictive covenant or that any such aid was forthcoming during that period. Under these circumstances, the Court recognized that "it is a close question," but nonetheless held that "mere preparations by Defendants to potentially aid competitors … do not rise to the level of a breach of their restrictive covenants." Id. at * 12. B. Scope of Employer's Legitimate Interests 1. Protectability of Employer's Relationship With Its Customers a. Is An Existing Employee-Customer Relationship Required? Courts universally hold that restrictive covenants are enforceable where necessary and reasonably tailored to protect employers' relationships with their customers. There has been a historic split of authority, however, about whether the employer must show that the employee had an existing relationship with a given customer to restrict him from soliciting that customer. That split continues, often resulting in decisions that are difficult to distinguish. For example, Courts in Illinois refuse to enforce restrictive covenants to the extent they are not limited to customers with whom the employee had contacts. See Kempner Mobil Elec., Inc. v. Southwestern Bell Mobile Sys., LLC, 2003 WL 1057929 (N.D. Ill. March 10, 2003); Unisource Worldwide, Inc. v. Carrara, 244 F. Supp. 2d 977 (C.D. Ill. Feb. 19, 2003). As stated in Unisource, "Courts are hesitant to enforce prohibitions against employees servicing not only customers with whom they had direct contact, but also customers they never solicited or had contact with while employed by plaintiff." 244 F. Supp. 2d at 983. See Kempner, 2003 WL 1057929, * 23 (Court refused to enforce covenant to extent it prohibited the former agent from engaging in competition and soliciting customers for cellular telephone services who the agent had not previously enrolled for such services on behalf of the plaintiff). The Court of Appeals of Wisconsin reached a similar conclusion in Overhead Materials Handling, Inc. v. Potratz, refusing to enforce a restrictive covenant where it included customers "unknown" to the employee through his job responsibilities. 2003 WL 22852227, ¶ 9 (Wis. App. Dec. 3, 2003). While the Court recognized that "a covenant need not use the employee's actual customer contacts as the limitation, … the covenant here fails to give any specific limitation in making compliance knowingly possible." Id. See also Hose Specialty & Supply Mgt. Co., Inc. v. Guccione, 2003 WL 23028425, * 10 (La. App. Dec. 30, 2003) (Court enforced a covenant that was not expressly limited to customers with whom the employee had contact, but only to the extent it encompassed such customers, and ordered the plaintiff to disclose those customers to the employee because, "[w]ithout knowing who those customers are, he will be unable to determine whether customers of his new employer are also on [his former employer's] list.") By contrast, Courts in New Jersey, Minnesota, Mississippi and Georgia all enforce covenants preventing employees from competing and soliciting all customers in a restricted geographic area, even though the employees may not have had contacts with all such customers while working for the former employer. See Community Hosp. Group Inc., 365 N.J. Super. 84, 100, 838 A.2d 472, 481 (N.J. App. Dec. 29, 2003) (Court enforced covenant as to all potential neurological surgery patients within a 30-mile radius of plaintiff-hospital because the restriction was necessary for the hospital to obtain a sufficient variety of patients to support its education goals); Metro Networks Communications, Ltd. Partn. v. Zavoknick, 2003 WL 22959680, * 5 (D. Minn. Dec. 12, 2003) (Court enforced covenant as to all potential customers in the Minneapolis-St. Paul area where former employee was selling the same product for a competitor in that area); Tom James Co. v. Hudgins, 261 F. Supp. 2d 636, 643 (S.D. Miss. March 27, 2003) (Court enforced covenant where geographic limitation was "the sales territory in which the salesperson calls on, solicits, or deals with customers"; covenant enforced as to existing customers, as well as "new and unknown customers," because "these provisions are valid as they are reasonable as to the duration of restrictions and geographic scope."); Hicks v. Doors By Mike, Inc., 579 S.E.2d 833, 836 (Ga. App. March 19, 2003) (Court enforced covenant with respect to all potential residential gutter customers within a 50-mile radius of the plaintiff because "customer contacts in the gutter business are important" and "the typical customer is a repeat customer.") b. Employer's Interest Is Protectable Even Where Employee Had Pre-Existing Relationships With Customers While Courts often refuse to enforce restrictive covenants as to customers with whom employees had relationships prior to their employment, an Alabama Court enforced a covenant despite the fact that the defendant showed such pre-existing relationships. Keystone Automotive Indus., Inc. v. Stevens, 854 So.2d 113 (Ala.Civ.App. Jan. 17, 2003). The Court reasoned that, even though the defendant "initially met and established relationships with [certain] customers [previously], … he was provided the means to nurture, maintain, and further develop those relationships during the approximately four years he was employed" with the plaintiff. Id. at 116. In addition, the plaintiff showed that it "gained new customers" while it employed the defendant and that the defendant "sold different products" than he had previously sold, thus, the defendant "likely made new contacts" while working for the plaintiff and "formed stronger relationships with those customers that he already knew." Id. c. Restrictive Covenant Is Overbroad Where It Prohibits Not Only Solicitation But Also Mere Acceptance Georgia Courts continue to hold that non-solicitation agreements are unenforceable to the extent they prohibit employees from passively accepting unsolicited business. See Waldeck v. Curtis 1000, Inc., 261 Ga.App. 590, 583 S.W.2d 266 (Ga. App. June 11, 2003); Pregler v. C&Z, Inc., 259 Ga.App. 149, 575 S.E.2d 915 (Ga. App. Jan. 9, 2003). "While a prohibition involving some affirmative act on the part of the former employee, such as solicitation, diversion, or contact of clients, may be reasonable, a covenant prohibiting a former employee from merely accepting business, without any solicitation, is not reasonable." Waldeck, 261 Ga.App. at 592, 583 S.W.2d at 268 (emphasis in original). This "rule applies even where the no-acceptance covenant is purportedly limited to the former employee's customers." Id., 261 Ga.App. at 593, 583 S.W.2d at 269. "This is an unreasonable restraint because in addition to overprotecting [the employer's] interest, it unreasonably impacts on [the employee] and on the public's ability to choose the professional services it prefers." Pregler, 259 Ga.App. at 150, 575 S.E.2d at 916. A Florida Court raised the possibility that an employer could loose its right to protect its interest in maintaining certain of its customer relationships where the employee leaves with all of those customers and the employer no longer has the ability to service them. See Wolf v. James G. Barrie, P.A., 858 So.2d 1083 (Fla. App. Nov. 7, 2003). The employer was a veterinary practice operating a division that performed veterinary ophthalmology. The employee was the sole ophthalmologist for the employer, and had signed a restrictive covenant agreeing not to engage in veterinary ophthalmology for 5 years within certain Florida counties surrounding the employer. The practice sold the assets of the ophthalmology division to a third party. Shortly after doing so, the defendant resigned and started a competing veterinary ophthalmology practice within the restricted territory, causing the purchaser to rescind the transaction. The Court rejected the employer's attempt to enforce the covenant because the employer no longer had any legitimate interest in protecting it non-existent relationships with potential veterinary ophthalmology patients. Florida statutory law "requires that the employer must be engaged in the business that the covenant seeks to protect." 858 So.2d at 1085. The reason for this requirement is that, "[i]f the employer is not in a like business, it has no legitimate interest in protecting against competition in that business." Id. While the holding in Wolf may be somewhat limited to its facts, the principle that Wolf stands for is potentially applicable to many situations in which an employee leaves, taking with him all of a certain type of customer, and the employer is unable to provide goods or services to the customers within a reasonable period of time. While the result is harsh, the employer has lost its protectable interest in maintaining its relationships with the customer, because it cannot sustain the relationship for a reason other than the employee's competition, and the customers have an interest in obtaining the goods or services that the employer can no longer provide. Courts have started to recognize over the past several years that employers rarely can enforce restrictive covenants against clerical and administrative employees, because they typically do not have access to confidential information and cannot capitalize on the employer's goodwill with its customers. This trend continues, with Pennsylvania, Indiana and New York Courts refusing to enforce covenants where the employee involved was a clerical or administrative worker. See Zimmerman v. Unemployment Compensation Bd. of Review, 836 A.2d 1074, 1081-82 (Pa.Cmwth.Ct. Nov. 26, 2003) ("There is no legitimate business interest served by preventing a clerical employee from doing the same type of work for a competitor."); The Osler Institute, Inc. v. Forde, 333 F.3d 832, 838 (7th Cir. June 26, 2003) (Court refused to enforce the covenant in part because the employee's responsibilities "involved only administrative and marketing tasks"); AM Medica Communications Group v. Kilgallen, 261 F. Supp. 2d 258, 259 and 264 (S.D.N.Y. April 29, 2003) (Court refused to enforce covenant where the defendant's responsibilities "first as an assistant and later as a meeting planner" can "hardly be characterized as 'special or unique.'"), aff'd, 2003 WL 22965519 (2d Cir. Dec. 17, 2003). Although physicians have a valid interest in consolidating into a group to counter-balance the negotiating power that insurance companies possess, that interest does not support the enforcement of covenants executed by members of the group. See Busch v. Premier Integrated Medical Assocs., Ltd., 2003 WL 22060392 (Ohio App. Sept. 5, 2003). The employer was a large, multi-speciality group organized for leverage when negotiating with insurance companies for reimbursement. The two defendants, like all other physicians in the group, signed restrictive covenants agreeing not to practice medicine within the counties surrounding the practice for 1 year. The defendants resigned from the practice and immediately started a competing business in the restricted area. While the Court noted that the practice's "organizational goals are … valid and legitimate," it nonetheless refused to enforce the covenant because the practice's "desire to maintain its larger size simply isn't sufficient justification for the anti-competitive effects of its covenant." 2003 WL 22060392, * 4. The "covenant not to compete does no more than eliminate or limit ordinary competition," which is impermissible. Id. C. Geographic Limitations 1. When Is Geographic "Blanketing" Allowed? Geographic "blanketing" occurs where a covenant establishes restricted territories around several facilities, creating a "blanket" or a nearly contiguous geographic zone in which competition is restricted. While blanketing can serve to protect the legitimate interests of the employer, it also can impose an undue hardship on the employee by locking the employee out from an entire region, and it can restrict customers' reasonable access to good and services. The Supreme Court of Alabama invalidated a blanket restriction in King v. Head Start Family Hair Salon, Inc., 2004 WL 68617 (Ala. Jan. 16, 2004). The plaintiff owned a chain of hair salons, where the defendant started as a stylist and later became a manager. The defendant signed a restrictive covenant at the start of her employment, agreeing not to compete within 2 miles of any salon. At that time, the plaintiff operated 15 salons in the two relevant counties. By the end of the defendant's employment, the plaintiff was operating 30 salons in the two counties, "making it virtually impossible for [defendant] to find employment in the hair-care industry at a facility that [did] not violate the terms of the noncompetition agreement." 2004 WL 68617, * 2. The defendant resigned and joined a competing business in the same shopping center as the salon she had managed, claiming that the covenant was an improper "blanket prohibition on practicing her trade." Id. The Court agreed and refused to enforce the covenant, reasoning as follows: "Notwithstanding any protectable interest [plaintiff] may have, the noncompetition agreement cannot so burden [defendant] that it would result in her impoverishment." Id. at * 3. The Court of Appeals of Kansas similarly refused to enforce a blanket restriction imposed on a physician in Bruce D. Graham, M.D., P.A. v. Cirocco, 69 P.3d 194 (Kan. App. May 9, 2003). The covenant restricted the defendant from opening an office within 25 miles of the hospitals listed in the covenant and from providing services at the hospitals, which "froze him out of metropolitan Kansas City." 69 P.3d at 199. "[G]iven the population density in that area and the fact the covenant would reestablish [plaintiff's] monopoly on the Kansas side of the state line," the Court reasoned that "this aspect of the covenant goes beyond what is permissible and attempts to protect [plaintiff] from ordinary competition." Id. The Court also reasoned that the covenant could not be enforced because it "threatens the public's welfare." Id. at 200. By contrast, in Supinski v. Omni Healthcare, P.A., a Florida appellate court enforced a blanket restriction against a physician where the practice showed that the restriction protected its interests and was not oppressive to the employee. 853 So.2d 526 (Fla. App. Aug. 29, 2003). The covenant prohibited the employee from opening a business within 10 miles of the practice's 3 offices. The defendant opened an office within the restricted area, but more than 10 miles from the location he had worked for the practice, ensuring that 40% of the patients of his new business followed him from the former employer. The Court rejected the employee's argument that the blanket restriction was unenforceable, reasoning as follows: "This argument might have some merit if the various offices were widespread. The fact is, however, that the various … facilities are all located primarily in a confined area of southern Brevard County, and that [defendant] is free to work in the north part of the county or in any other county. That the distance is measured from more than one office is, thus, largely irrelevant." 853 So.2d at 531. The Court took an unusual step to enforce a restrictive covenant in Nobles-Hamilton v. Thompson, by reading the term "competing" impliedly to include both geographic and customer limitations. 2003 WL 203252 (Ala.Civ.App. Jan. 31, 2003). The plaintiff owned and operated a health food store, and employed the defendant subject to a covenant restricting her from engaging in a "competing" business for 3 years. The covenant contained no geographic or customer limitation. The defendant resigned to start a health food store in close proximity to the plaintiff, and sought to avoid the covenant by arguing that it was overbroad because it contained neither a geographic nor customer restriction. The Court rejected the argument, recognizing that "'competing' is somewhat ambiguous," and "could be construed so as to include a geographical component." Id. at * 3. Thus, the Court held that it was permissible to construe the covenant to "prevent [defendant] from operating a competing health-food store in an area in which she would be soliciting customers from [plaintiff]—an area that, based on the evidence, exceeded the five-mile radius the trial court placed in the injunction." Id. D. Reformation — The "Blue Pencil" Doctrine The Court took a conservative approach to the "blue pencil" doctrine in Product Action Intern'l, Inc. v. Mero, by refusing to reform an overbroad restrictive covenant even though the parties and court agreed that an enforceable provision could have been drafted preventing the employee from engaging in the challenged conduct. 277 F. Supp. 2d 919 (D. Ind. Aug. 5, 2003). The plaintiff (PAI) employed the defendant (Mero) as a regional sales manager at its facility in Michigan. Mero's restrictive covenant prohibited him, for a period of 2 years, from engaging in the following activities: (1) soliciting any of PAI's customers, (2) engaging in any competitive business within 100 miles of any of PAI's worldwide facilities, and (3) working for any company that PAI competed against within one year before Mero's employment terminated. Mero resigned and went to work for one of PAI's direct competitors, located approximately 20 miles away from the facility where he had worked for PAI in Michigan. PAI sought to enforce the covenant against Mero, but the Court found all three clauses overbroad. The third restriction failed because it contained no geographic limitation; the second failed because the geographic restriction was unreasonable; and the third because it was not limited to customers that Mero had contact with while employed by PAI. The parties agreed, however, "that it would have been possible for PAI to write an enforceable covenant that prohibited Mero from doing what he is doing—competing against PAI in his old geographic territory and for some of his old PAI customers." 277 F. Supp. 2d at 925. But, as the Court stated, "[t]he fact that such an agreement might have been written and enforced does not mean, however, that the parties' agreement as written may be enforced." Id. "Apart from the 'blue pencil' doctrine …, if the agreement as drafted is unreasonably broad, it cannot be enforced in part on the theory that the parties could have agreed to some more reasonable terms." Id. The Court applied the reformation law of Indiana, which adopts the "strict" version of the blue pencil doctrine permitting a court only to strike out overbroad language. Examining the covenant, the Court was unable to render it reasonable by simply striking out language. PAI therefore urged a deviation from the strict rule, relying on the following savings provision in the covenant: "If the scope of any stated restriction is too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law and the court making such determination shall have the power to modify this Agreement in order for it to conform with applicable law." Id. at 922. PAI invited the Court to invoke this power to reform the covenant to prohibit Mero only from competing against PAI in his former territory and for the customers he served for PAI. The Court declined the invitation, reasoning as follows: "Like the parties, the court is confident that such a prohibition would have been reasonable—if the parties had drafted the contract that way. … PAI's proposal is contrary to Indiana law, which leaves to the parties the task of writing an agreement. Carrying out PAI's proposal would require the court to add terms that the parties never agreed to. That is exactly what Indiana courts have repeatedly said they would not do." Id. The Court recognized that a split of authority existed with respect the "strict" versus "liberal" blue pencil doctrine, and noted that both the Restatement (Second) of Contracts and Professor Williston urged adoption of the liberal rule. However, policy considerations favored the strict rule, such as the following: (1) courts are placed in the uncomfortable position of writing contracts for parties under the liberal rule; (2) an employee is entitled to know from the start of employment the scope of the actual restrictions, even if some of those restrictions are unenforceable while others enforceable; (3) overbroad covenants impose a chilling effect on employee mobility; and (4) when an employee does seek to avoid an overbroad covenant, courts should not be asked to "do for the employer what it should have done in the first place—write a reasonable covenant." Id. "Under Indiana law, there is a consequence for such overreaching. The consequence is that the covenant cannot be enforced at all." Id. 2. Courts in Illinois Take a Hard Line on the Blue Pencil Doctrine Unlike neighboring Indiana, Illinois follows the liberal blue pencil rule, allowing courts "to modify … unreasonable terms of an agreement in order to make it reasonable." Joy v. Hay Group, Inc., 2003 WL 22118930, * 10 (N.D. Ill. Sept. 11, 2003). Two federal Courts in Illinois, however, recently took a hard line with respect to this rule, recognizing that policy weighs against dramatic reformations of restrictive covenants. In determining whether to reform a covenant, the Court first examines the fairness of the initial restraint. "A court should refuse to modify an unreasonable restrictive covenant where the degree of unreasonableness renders it unfair." Pactiv Corp. v. Menasha Corp., 261 F. Supp. 2d 1009, 1015 (N.D. Ill. May 9, 2003) (emphasis in original). Moreover, "courts generally try to stay away from rewriting agreements or making drastic modifications." Joy, 2003 WL 22118930, * 10. "If, in order to make the terms of the agreement reasonable, a court would essentially have to draft a new agreement, that court would probably decline to do so." Id. "The idea behind declining to rewrite unreasonable and unfair agreements is that courts would like to encourage employers to more narrowly draft their covenants." Id. The "court should consider, importantly, that the modification could have the potential effect of discouraging the narrow and precise draftsmanship which would be reflected in written agreements." Pactiv, 261 F. Supp. 2d at 1016. A federal Court in Maryland recently recognized a split of authority as to whether that State follows the "strict" or "liberal" blue pencil rule. See Deutsche Post Global Mail, Ltd. v. Conrad, 292 F. Supp. 2d 748 (D. Md. Nov. 14, 2003). Although Maryland's highest Court has not addressed the blue pencil doctrine, some intermediate appellate courts have done so, holding that "such editing [is] limited to removing the offending language without supplementing or rearranging the remaining language." 292 F. Supp. 2d at 754. However, one intermediate appellate court has adopted the liberal rule. See Holloway v. Faw, Casson & Co., 78 Md. App. 205, 235, 552 A.2d 1311, 1326 (1989), rev'd in part on other grounds, 319 Md. 324, 571 A.2d 510 (1990). The federal Court chose to follow the majority of intermediate appellate courts, reasoning that no Maryland court had applied the liberal rule since Holloway, and the Maryland Court of Appeals expressly declined to address whether to adopt the strict or liberal approach when it addressed the Holloway case. See Deutsche, 292 F. Supp. 2d at 757. An employer faces a real danger of liability for wrongful termination where it discharges an employee for refusing to sign a restrictive covenant that is potentially unenforceable, as demonstrated by decisions from Courts in New Jersey and California. See Maw v. Advanced Clinical Communications, Inc., 359 N.J. Super. 420, 820 A.2d 105 (N.J. App. April 16, 2003); Walia v. Aetna, Inc., 93 Cal.App.4th 1213, 113 Cal.Rptr.2d 737 (Cal. App. Nov. 21, 2001), appeal dismissed, 132 Cal.Rptr.2d 712, 66 P.3d 717 (Cal. March 26, 2003) (dismissing the appeal of a jury verdict in plaintiff's favor for over $1,250,000). In Maw, the defendant (ACCI) provided marketing and educational services for the pharmaceuticals and healthcare industries. The plaintiff (Maw) was a graphic designer for ACCI, as a result of which she became exposed to ACCI's scientific and medical information. After Maw had worked for ACCI for over 3 years, ACCI decided to require all managers above a certain level to sign an employment agreement containing restrictive covenants. The agreement provided to Maw prohibited her, inter alia , from working for a company that does business with ACCI's customers for a period of 2 years after her termination. The covenant contained no geographic or customer-based limitation. After reviewing the agreement with her counsel, Maw requested certain modifications, including limiting the duration of the covenant, but ACCI refused. ACCI terminated Maw as a result of her refusal to sign the employment agreement, and Maw brought suit claiming that she was wrongfully terminated under New Jersey common law and the Conscientious Employee Protection Act (CEPA). The appellate court reversed the trial court's dismissal of these claims, reasoning that "New Jersey's strong prohibition against restraints on trade, and against unduly burdening employees by restricting their right to engage in their chosen field of employment, establish the public policy necessary to support a CEPA and [wrong termination] cause of action." 359 N.J. Super. at 437, 820 A.2d at 116. The appellate court also rejected the trial court's rationale that the reasonableness of a restrictive covenant cannot be determined until an employee signs it, leaves employment, and goes to work for another employer. The Court stated that there is "no reason to require an employee with a reasonable belief that a noncompete clause violates public policy to have to wait until she leaves her employment to have her rights adjudicated." 359 N.J. Super. at 438. "Upon signing the Agreement, plaintiff would be burdened with the Agreement's restrictions should she decide to seek another job. She would have to limit her job search. For two years, she could not accept a job from any of defendant's competitors or customers. And where could she look for a job in her field? The Agreement has no geographic limitation. Alternatively, she could ignore the restrictive covenant, and wait for defendant to sue her." Id. "Neither choice fosters New Jersey's public policy of prohibiting restraints of trade and encouraging competition. We see no purpose to require an employee to sign what may be a legally unenforceable noncompete clause, under the threat of discharge, and then wait to litigate the agreement should the employer seek to enforce it at a later date." Id. The issue in Maw therefore came down to whether the restrictive covenant that ACCI provided to Maw was unenforceable. The Court first recognized that, under New Jersey law, an employer has a legitimate interest in obtaining a covenant from an employee who has access to confidential information. The Court found, however, that "plaintiff has neither access to trade secrets nor other confidential, proprietary information; or, to the extent she has, she does not understand it; and her access is no different from those employees not required to sign the Agreement." 359 N.J. Super. at 436, 820 A.2d at 115. Under these circumstances, the defendant did "not have a proprietary interest vis-à-vis plaintiff which is worthy of judicial protection—the noncompete covenant, as it applies to plaintiff, does not protect defendant's legitimate business interests." Id. The Court also concluded that the covenant unduly burdened Maw, because it contained no geographic limitation, and therefore "would prevent plaintiff from engaging in a similar type of employment anywhere in the world." 359 N.J. Super. at 437. In light of the decisions in Maw and Walia, an employer faces real danger if it terminates an employee for refusing to sign a covenant that is not well tailored to the employee's particular circumstances—i.e., it faces a claim for wrongful termination. Moreover, defending oneself in this context is very different than seeking to enforce a restrictive covenant, where the employer can choose forego enforcement of overbroad language or ask the Court to reform that language under the blue pencil doctrine. In the wrongful termination context, the employer must establish the enforceability of each provision of the covenant, otherwise the employee's decision to refuse to sign it was justified and supports a viable wrongful termination claim. Employment lawyers are familiar with burden shifting paradigms, so why not create one in the restrictive covenant context? The Supreme Court of Alabama did exactly that with respect to its rules for determining whether sufficient irreparable harm exists to support the enforcement of a covenant. See Ormco Corp. v. Johns, 2003 WL 2007816 (Ala. May 2, 2003). The Court recognized that "there is frequently a close nexus between the threat of irreparable injury to an employer and a violation of a noncompetition agreement by a former employee, especially when that former employee is a salesperson who is planning to sell in the same geographic area he or she covered for the former employer." 2003 WL 2007816, * 3. "Typically, the noncompetition agreements seek to protect and preserve important interests, such as customer relationships … and confidential business information. * * * By their very nature, those interests, when damaged through competition … are not always easily repaired." Id. But the Court also recognized "that there are situations where those interests, while they might be held by the employer, are not primarily tied to the particular former employee salesperson sought to be enjoined." Id., *4. For example, "with regard to customer relationships and goodwill, the customer may not make its purchasing decisions based on a personal relationship with the former employee salesperson, but rather based on the quality or particular characteristics of, and personal preference for, the employer's products. This … may be determined by, among other things, the level of the customer's knowledge and expertise with regard to the products being sold, and the extent to which the customer, if at all, trusts the salesperson to make actual purchasing decisions for the customer." Id. With respect to confidential information, the information "might not be known by the employee salesperson, … [or] the employee may know of certain business information, but that information is not truly confidential because it is legally attainable by the employer's competitors …." Id. In light of these considerations, the Court was "persuaded that the best approach … is the approach taken by Minnesota courts, which recognize a rebuttable presumption of irreparable injury in cases where a former salesperson is actively competing with his former employer in the same geographic area in violation of a noncompetition agreement." Id. (emphasis in original). "Under this approach, when seeking a preliminary injunction to enforce a noncompetition agreement against a former employee salesperson, the employer, to make use of the inference, must make a prima facie showing (1) that a valid noncompetition agreement exists, (2) that the employer has a protectible interest, and (3) that the former employee salesperson is actively competing with his or her former employer in the same geographic area in violation of the noncompetition agreement." Id. at *6. If the employer meets this test, "the employee can rebut this inference by producing evidence that the competition of the employee will not irreparably injure the employer," using the types of evidence discussed above. Id. "If the trial court is satisfied that the employee has produced evidence sufficient to rebut the inference that continued competition during the course of the litigation will result in irreparable injury to the employer, the burden shifts back to the employer to produce sufficient evidence (beyond that necessary for the prima facie showing described above) of irreparable injury." Id. at * 7. The public policy and statutory law of several States, such as California, prohibit the enforcement of restrictive covenants in the employment context except in limited circumstances; and certain States, such as Georgia, restrict the enforcement of covenants more severely than their neighboring States. This raises difficult conflict of law issues, particularly where an employer deliberately includes a choice of law provision in the employment agreements and covenants that its employees sign for the specific purpose of avoiding the application of the restrictive policy and law of foreign States in which some of its employees may reside. A federal Court in Connecticut faced this situation in United Rentals, Inc. v. Pruett, 2003 WL 22937682 (D. Conn. Dec. 10, 2003). The plaintiff (United Rentals) was a Delaware corporation headquartered in Connecticut with offices nationwide, engaging in rental and sales of industrial and construction equipment. The defendant (Pruett) was a salesperson for United Rentals, then the branch manager of its Juan Capistrano, California office. Shortly after being promoted, Pruett signed an employment agreement containing a restrictive covenant, in which he agreed to refrain from competing against United Rentals and soliciting its customers. The agreement contained a choice of law provision, stating as follows: "This Agreement shall in all respects be governed and construed according to the laws of the State of Connecticut without regard to its conflicts of laws principles." 2003 WL 22937682, *2. Six months after signing the agreement, Pruett left to work for United Rental's direct competitor in the area. When United Rentals sued in Connecticut, Pruett sought to transfer the case to California. In the course of analyzing whether such a transfer would be appropriate, the Court acknowledged the conflict between Connecticut and California law: "Connecticut is receptive to reasonable restrictions on employees' freedom, while California strongly disfavors any such restriction." Id. at * 9. In light of this fact, and "[b]ecause the most significant contacts in this case are in California, [Connecticut's choice of law] supports the application of California law." Id. Thus, the employer's express attempt to choose Connecticut law for the covenant, notwithstanding any choice of law principle, was frustrated by the strong conflict that exists in this area. The Eleventh Circuit faced a similar conflict issue with respect to Georgia law in Keener v. Convergys Corp., 342 F.3d 1264 (11th Cir. Aug. 21, 2003). In Keener, the U.S. District Court had found the restrictive covenant overbroad because, without a geographic limit, it prohibited the employee from working for any competitor worldwide; therefore, the lower court enjoined the employer from enforcing the covenant in any court whatsoever. The conflict arose in this case because Georgia did not permit the Court to reform the overbroad language in the covenant, whereas Ohio (where the employer resides) recognized the blue pencil doctrine and would have permitted a Court to modify the covenant to render it enforceable. The Court held that "the district court abused its discretion because it did not tailor the injunction to include Georgia only." 342 F.3d at 1269. It reasoned as follows: "Georgia of course is entitled to enforce its public policy interests within its boundaries and, in the circumstances that litigation over [a restrictive covenant] is initiated in Georgia, it may employ that public policy to override a contracted choice of law provision. However, Georgia cannot in effect apply its public policy decision nationwide—the public policy of Georgia is not that everywhere. To permit a nationwide injunction would in effect interfere both with parties' ability to contract and their ability to enforce appropriately derived expectations." Id. Accord Jenkins Brick Co. v. Bremer, 321 F.3d 1366, 1372 (11th Cir. Feb. 21, 2003) (finding that Georgia court was the only proper venue for the action, and that Alabama court was not a proper venue, thus Georgia law, not Alabama law, applied to determine the enforceability of the covenant; under Georgia law, the covenant was unenforceable and would not be reformed to make it enforceable, whereas Alabama law would have modified the covenant to render it enforceable). Courts in North Carolina and Illinois reached different and somewhat inconsistent results when addressing restrictive covenants that prohibited an employee, after termination, from soliciting his or her former co-workers. See Jeffrey R. Kennedy. D.D.S., P.A. v. Kennedy, 584 S.E.2d 328 (N.C. App. Aug. 19, 2003), writ dismissed, 357 N.C. 658, 590 S.E.2d 268 (N.C. Dec. 4, 2003); Pactiv Corp. v. Menasha Corp., 261 F. Supp. 2d 1009 (N.D. Ill. May 9, 2003); Unisource Worldwide, Inc. v. Carrara, 244 F. Supp. 2d 977 (C.D. Ill. Feb. 19, 2003). In Kennedy, the plaintiff was a dental practice. The defendant had started the practice in the 1960's, hired his nephew to take over in the 1980's, and sold the practice to his nephew in the 1990's. The defendant remained employed subject to a restrictive covenant prohibiting him, inter alia, from soliciting the employees or employing them in a competing dental business. The practice sought to enforce the covenant when the defendant started a dental business within the restricted territory and successfully solicited several of its employees for the new business. The Court recognized that, like other restrictive covenants, the employer must have a legitimate interest to enforce a covenant not to solicit employees, such as protection of customer goodwill. In this case, "[t]he evidence demonstrate[d] that plaintiff's employees, many of whom had been employed in plaintiff's practice for several years, were a valuable part of the assets owned by plaintiff, that the employees had developed personal relationships with plaintiff's patients, that the employees were an integral part of a patient's experience with plaintiff, and that [defendant's] solicitation of those employees to join his new practice resulted in plaintiff loosing patients to [defendant's] practice." 584 S.E.2d at 335. The Court therefore concluded that the plaintiff had "demonstrated the likelihood of its success in showing it was entitled to [enforce its] contract with [defendant] to protect its interest in maintaining the goodwill and relationships that its staff had fostered with the practice's patients over time." Id. Courts in Illinois reached distinctly different, and somewhat irreconcilable, results when addressing similar covenants. Although the Supreme Court of Illinois has not decided whether a non-solicitation of employees is enforceable, the intermediate appellate court enforced such a covenant in Arpac Corp. v. Murray, 226 Ill. App. 3d 65, 589 N.E.2d 640 (Ill. App. 1992). However, in Unisource, the federal Court concluded that Arpac "represents a misapplication of Illinois law." 244 F. Supp. 2d at 983. The Court reached that conclusion reasoning that the only two legitimate interests that can support a restrictive covenant under Illinois law—the protection of "near permanent" customer relationships and confidential information—do not support such a restrictive covenant. Id. By contrast, in Pactiv (decided after Unisource), the Court implicitly recognized that an employer had a legitimate interest in prohibiting solicitation of its employees, but found that a restriction on the solicitation of "all management-level employees worldwide" was overbroad because the party bound by the covenant did not have contact with or access to all such employees. 261 F. Supp. 2d at 1015-16. Although the facts of Pactiv and Unisource differ somewhat from each other, these two decisions are at odds with each other, and render the state of the law in Illinois uncertain with respect to covenants not to solicit employees. An employee's mere announcement to customers of his intention to leave the employer violates the employee's non-solicitation agreement, according to Merrill Lynch, Pierce, Fenner & Smith, Inc. v. McClafferty, 287 F. Supp. 2d 1244 (D. Hawaii Sept. 26, 2003) and Pacific Aerospace & Elec., Inc. v. Taylor, 2003 WL 23100805 (E.D. Wash. Oct. 10, 2003). In Merrill Lynch, the covenant prohibited the employee from initiating any contact or communication for the purpose of soliciting Merrill Lynch customers. After leaving, the employee customers what he called "wedding style announcements," informing them of his new employment with Smith Barney. The Court found that, "[e]ven assuming … that such announcements were a matter of professional courtesy, … such communications, if directed toward and based on client lists obtained while [the employee] was at Merrill Lynch, violate the covenants." 287 F. Supp. 2d at 1248. In Pacific Aerospace, the employee's restrictive covenant prohibited him from having "any contact, directly or indirectly, with any customer of the company." 2003 WL 23100805, p. 5. On the day the employee left, he contacted one of the company's most significant customers to inform it that he had left and was going to start his own business. The Court concluded that even this announcement "violated the non-solicitation provision" of the covenant. Id., p. 12. The danger in requesting a TRO or preliminary injunction where a restrictive covenant is subject to arbitration is that the Court may, in the brief period of time it has jurisdiction, render a final decision on the enforceability of the restriction, even where the covenant expressly states that its interpretation is reserved solely for the arbitrators. See Bellsouth Corp. v. Forsee, 2004 WL 170145 (Ga. App. Jan. 29, 2004). The plaintiffs (Bellsouth and Cingular) sought to enforce a non-competition agreement against the defendant (Forsee), who was a Vice President for Bellsouth and the Chairman for Cingular, preventing him from becoming CEO for Sprint. Bellsouth and Cingular initially obtained a TRO enforcing the non-compete, but the trial court later vacated it. "Finding evidence that the geographic area for which Forsee was responsible differed substantially from the 'territory' defined in the agreement—and finding no evidence that Forsee had any direct responsibility over, or worked or supervised activities in, those regions—the superior court found the territorial restrictions overly broad and unenforceable." Id. at * 5. Bellsouth and Cingular then sought to compel arbitration of the dispute over enforcement of the covenant, invoking the arbitration provision in Forsee's employment agreement. The trial court refused to compel arbitration of the non-compete on the basis that it already determined that the covenant was unenforceable. Bellsouth and Cingular argued on appeal that they had only sought a TRO to preserve the status quo pending arbitration; that they had told the trial court during the TRO hearing about the arbitration proceeding they were initiating at that time; and that they did not consent to any consolidation of the TRO hearing with any hearing on the merits, and the trial court did not conduct any consolidated hearing under applicable state law. The Court of Appeals of Georgia rejected these argument, reasoning as follows: "In determining whether to issue the TRO, the court initially was authorized to make a preliminary determination as to the enforceability of the non-competition covenant in considering the likelihood of [Bellsouth's and Cingular's] success on the merits. Once the non-competition covenant was shown to be unenforceable on its face, [the trial court was] authorized … to enter a definitive ruling as to its unenforceability. Certainly at that point, the severability clause authorized the court to remove the invalid covenant from the arbitrator's consideration." Id. at * 6. K. Statutory Construction Louisiana statutory law expressly limits the circumstances in which a restrictive covenant can be enforced in the employment context. See La.R.S. 23:921(C). In 2001, the Supreme Court of Louisiana interpreted the statute to permit enforcement of such covenants only where the employee himself competes directly against the employer, not where the employee becomes associated with a competitor. See SWAT 24 Shrevport Bossier, Inc. v. Bond, 808 So.2d 294 (La. 2001). Notwithstanding the awkward interpretation of statute and unusual result, Louisiana's lower courts were bound to follow SWAT and did so, thereby invalidating several restrictive covenants. See e.g. Sola Communications, Inc. v. Bailey, 861 So.2d 822 (La. App. Dec. 10, 2003); Boswell v. Iem, 859 So.2d 944 (La. App. Oct. 31, 2003); Creative Risk Controls, Inc. v. Brechtel, 847 So.2d 20 (La. App. April 29, 2003), writ denied, 855 So.2d 353 (La. Oct. 10, 2003); Richard Berry & Assoc., Inc. v. Bryant, 854 So.2d 1263 (La. App. April 29, 2003). In 2003, Louisiana's legislature amended the statute to add a provision permitting the enforcement of covenants where the employee becomes associated with a competitor. See 2003 La. Acts No. 428 §1. However, this statute has not been applied retroactively, Sola, 861 So.2d at 828, therefore covenants drafted prior to its enactment will continue to be subject to SWAT. Under Texas statutory law, to be enforceable, a restrictive covenant must be "ancillary" to an otherwise enforceable contract. See Tex. Bus. & Com. Code Ann. §15.50(a). An at-will employment relationship is not sufficient to support such a covenant. C.S.C.S., Inc. v. Carter, 2003 WL 22383709, * 4 (Tex. App. Oct. 20, 2003). Thus, Texas employers typically couple a restrictive covenant with a confidentiality agreement. In doing so, the determination of whether the covenant is ancillary to the confidentiality agreement is dependent upon "the moment the agreement is made; the issue is whether, at the time the agreement is made, there exists other mutually binding promises to which the covenant not to compete is ancillary or part and parcel." Sheshunoff Mgt. Servs., L.P. v. Johnson, 2003 WL 22249788, * 6 (Tex. App. Oct. 2, 2003). Some Courts construe this timing requirement very strictly. See C.S.C.S., 2003 WL 22383709, * 5 (agreement stating that employer "may reveal" confidential information to employee is insufficient); Sheshunoff, 2003 WL 22249788, * 6 ("The fact that [the employer] gave new confidential information and training to [the employee] some time after entering into the agreement will not suffice.") Tom James of Dallas, Inc. v. Cobb, 109 S.W.3d 877, 887 (Tex. App. July 11, 2003) (agreement stating that employee "has received" confidential information is insufficient). Other courts do not construe the timing requirement so strictly. See Beasley v. Hub City Texas, L.P., 2003 WL 22254692, * 2 (Tex. App. Sept. 29, 2003) (agreement stating that employee "will be" granted access to confidential information is sufficient where employee later was provided with such information); Guy Carpenter & Co., Inc. v. Provenzale, 334 F.3d 459, 466 (5th Cir. June 17, 2003) (refusing to read the timing requirement strictly because doing so "pin[s] the enforceability of non-solicitation agreements on whether an employer discloses confidential information at the time the employee signs an employment contract, [which] is not what [Tex. Bus. & Com. Code Ann.] §15.50 intends or requires.") Unfortunately, these disparate readings of the timing requirement are leading to factually indistinguishable results, and confusing Texas' statutory law governing restrictive covenants. Under Florida statutory law, an employer has a legitimate interest in protecting its "[s]ubstantial relationship with specific prospective or existing customers, patient, or clients." Florida Statutes § 542.35(1)(b)(3). In Unv. of Florida, Bd. of Trustees v. Sanal, the employer urged the Court to interpret "specific prospective" customers to include all people residing within a given geographic area. 837 So.2d 512, 515 (Fla. App. Jan. 29, 2003). The Court rejected this construction, holding that "to qualify as a 'legitimate business interest' pursuant to § 542.35(1)(b)(3), a 'relationship' with a 'prospective patient' must be, in addition to 'substantial,' one with a particular, identifiable individual." Id. at 516. Under Oregon statutory law, a restrictive covenant is unenforceable unless it meets one of three conditions: it must be (1) "entered into upon the initial employment of the employee with the employer," Or. Rev. Stat. § 653.295(1)(a); (2) "entered into upon the subsequent bona fide advancement of the employee with the employer," Or. Rev. Stat. § 653.295(1)(b); or (3) a "bonus restriction agreement," Or. Rev. Stat. § 653.295(4). The Ninth Circuit interpreted what each condition means in Miller v. Kroger Co., 82 Fed. Appx. 557 (9th Cir. Nov. 25, 2003). It found that "initial employment" in the first condition "refer[s] to the first few days an employee begins to serve his or her employer." Id. at 559. With respect to the second condition, "a 'subsequent bona fide advancement' means a genuine promotion in rank after employment." Id. at 560. Finally, a bonus restriction agreement "must be of the same kind as a profit sharing," and therefore "must be tied to the company's profits or some other measure of performance, so that that the employee and the company share in the positive results." Id. at 560. L. State-By-State Index of Cases The following is comprehensive State-by-State index of judicial decision in which Courts addressed the enforceability of a restrictive covenant. Alabama: King v. Head Start Family Hair Salon, Inc., 2004 WL 68617 (Ala. Jan. 16, 2004); Ormco Corp. v. Johns, 2003 WL 2007816 (Ala. May 2, 2003); Nobles-Hamilton v. Thompson, 2003 WL 203252 (Ala.Civ. App. Jan. 31, 2003); Keystone Automotive Indus., Inc. v. Stevens, 854 So.2d 113 (Ala.Civ.App. Jan. 17, 2003). Arkansas: Statco Wireless, LLC v. Southwestern Bell Wireless, LLC, 80 Ark.App. 284, 95 S.W.2d 13 (Ark. App. Jan. 15, 2003). California: Thompson v. Impaxx, Inc., 113 Cal.App.4th 1425, 7 Cal.Rptr.3d 427 (Cal.App. Dec. 8, 2003); Walia v. Aetna, Inc., 93 Cal.App.4th 1213, 113 Cal.Rptr.2d 737 (Cal.App. Nov. 21, 2001), appeal dismissed, 132 Cal.Rptr.2d 712, 66 P.3d 717 (Cal. March 26, 2003). Colorado: Harvey Barnett, Inc. v. Shidler, 338 F.3d 1125 (10th Cir. Aug. 6, 2003); Energex Enterprises, Inc. v. Anthony Doors, Inc., 250 F.Supp.2d 1278 (D.Colo. March 6, 2003). Connecticut: United Rentals, Inc. v. Pruett, 2003 WL 22937682 (D.Conn. Dec. 10, 2003). Florida: Advantage Digital Sys., Inc. v. Digital Imaging Servs., Inc., 2003 WL 2284954 (Fla.App. Dec. 3, 2003); Wolf v. James G. Barrie, P.A., 858 So.2d 1083 (Fla.App. Nov. 7, 2003); Supinski v. Omni Healthcare, P.A., 853 So.2d 526 (Fla.App. Aug. 29, 2003); Unv. of Florida, Bd. of Trustees v. Sanal, 837 So.2d 512 (Fla.App. Jan. 29, 2003). Georgia: Bellsouth Corp. v. Forsee, 2004 WL 170145 (Ga.App. Jan. 29, 2004); Keener v. Convergys Corp., 342 F.3d 1264 (11th Cir. Aug. 21, 2003); Waldeck v. Curtis 1000, Inc., 261 Ga.App. 590, 583 S.W.2d 266 (Ga.App. June 11, 2003); Hicks v. Doors By Mike, Inc., 579 S.E.2d 833 (Ga.App. March 19, 2003); Jenkins Brick Co. v. Bremer, 321 F.3d 1366 (11th Cir. Feb. 21, 2003); Pregler v. C&Z, Inc., 259 Ga.App. 149, 575 S.E.2d 915 (Ga.App. Jan. 9, 2003). Hawaii: Merrill Lynch, Pierce, Fenner & Smith, Inc. v. McClafferty, 287 F.Supp.2d 1244 (D. Hawaii Sept. 26, 2003). Illinois: Joy v. Hay Group, Inc., 2003 WL 22118930 (N.D.Ill. Sept. 11, 2003); Smith v. Burkitt, 342 Ill.App.3d 365, 795 N.E.2d 385 (Ill.App. Aug. 5, 2003); Hanchett Paper Co. v. Melchiorre, 341 Ill.App.3d 345, 792 N.E.2d 395 (Ill.App. June 27, 2003); Health Professionals, Ltd. v. Johnson, 339 Ill.App.3d 1021, 791 N.E.2d 1179 (Ill.App. June 4, 2003), appeal denied, 205 Ill.2d 581 (Ill. Oct. 7, 2003); Marwaha v. Woodridge Clinic, S.C., 339 Ill.App.3d 291, 790 N.E.2d 274 (Ill.App. June 2, 2003); Pactiv Corp. v. Menasha Corp., 261 F. Supp. 2d 1009 (N.D.Ill. May 9, 2003); Joliet Medical Group, Inc. v. Ensminger, 337 Ill.App.3d 1076, 787 N.E.2d 879 (Ill.App. April 4, 2003); Kempner Mobil Elec., Inc. v. Southwestern Bell Mobile Sys., LLC, 2003 WL 1057929 (N.D.Ill. March 10, 2003); Unisource Worldwide, Inc. v. Carrara, 244 F. Supp. 2d 977 (C.D.Ill. Feb. 19, 2003). Indiana: Oxford Financial Group, Ltd. v. Evans, 795 N.E.2d 1135 (Ind.App. Sept. 19, 2003); Pathfinder Communications Corp. v. Macy, 795 N.E.2d 1103 (Ind.App. Sept. 17, 2003); Product Action Intern'l, Inc. v. Mero, 277 F. Supp. 2d 919 (D.Ind. Aug. 5, 2003); The Osler Institute, Inc. v. Forde, 333 F.3d 832 (7th Cir. June 26, 2003); Vukovich v. Coleman, 789 N.E.2d 520 (Ind.App. June 5, 2003). Iowa: AMPC, Inc. v. Meyer, 669 N.W.2d 262 (Iowa App. June 25, 2003). Kansas: Bruce D. Graham, M.D., P.A. v. Cirocco, 69 P.3d 194 (Kan.App. May 9, 2003). Louisiana: Hose Specialty & Supply Mgt. Co., Inc. v. Guccione, 2003 WL 23028425 (La.App. Dec. 30, 2003); Sola Communications, Inc. v. Bailey, 861 So.2d 822 (La.App. Dec. 10, 2003); Boswell v. Iem, 859 So.2d 944 (La.App. Oct. 31, 2003); Creative Risk Controls, Inc. v. Brechtel, 847 So.2d 20 (La.App. April 29, 2003), writ denied, 855 So.2d 353 (La. Oct. 10, 2003); Richard Berry & Assoc., Inc. v. Bryant, 854 So.2d 1263 (La.App. April 29, 2003). Maryland: Deutsche Post Global Mail, Ltd. v. Conrad, 292 F.Supp.2d 748 (D.Md. Nov. 14, 2003). Massachusetts: Legal Sea Foods, Inc. v. Calise, 2003 WL 21991588 (S.D.N.Y. Aug. 20, 2003). Michigan: Leach v. Ford Motor Co., 2004 WL 102874 (E.D.Mich. Jan. 16, 2004). Minnesota: Metro Networks Communications, Ltd. Partnership v. Zavoknick, 2003 WL 22959680 (D.Minn. Dec. 12, 2003). Mississippi: Tom James Co. v. Hudgins, 261 F. Supp. 2d 636 (S.D.Miss. March 27, 2003). Nevada: White Cap Indus., Inc. v. Ruppert, 67 P.3d 318 (Nev. April 28, 2003). New Jersey: Community Hosp. Group Inc., 365 N.J. Super. 84, 838 A.2d 472 (N.J.App. Dec. 29, 2003); Maw v. Advanced Clinical Comm., Inc., 359 N.J. Super. 420, 820 A.2d 105 (N.J.App. April 16, 2003). New York: Lucente v. Intern'l Business Machines Corp., 262 F.Supp.2d 109 (S.D.N.Y. May 2, 2003); AM Medica Communications Group v. Kilgallen, 261 F.Supp.2d 258 (S.D.N.Y. April 29, 2003), aff'd, 2003 WL 22965519 (2d Cir. Dec. 17, 2003); IKON Office Solutions, Inc. v. Leichtnam, 2003 WL 251954 (W.D.N.Y. Jan. 3. 2003). North Carolina: Jeffrey R. Kennedy. D.D.S., P.A. v. Kennedy, 584 S.E.2d 328 (N.C.App. Aug. 19, 2003), writ dismissed, 357 N.C. 658, 590 S.E.2d 268 (N.C. Dec. 4, 2003). North Dakota: Pruco Securities Corp. v. Montgomery, 264 F.Supp.2d 862 (D.N.D. May 22, 2003). Ohio: Single Source Packaging, LLC v. Cain, 2003 WL 22064129 (Ohio App. Sept. 5, 2003); Busch v. Premier Integrated Medical Assocs., Ltd., 2003 WL 22060392 (Ohio App. Sept. 5, 2003). Oregon: Miller v. Kroger Co., 82 Fed. Appx. 557 (9th Cir. Nov. 25, 2003). Pennsylvania: Viad Corp. v. Cordial, 2004 WL 61021 (W.D.Pa. Jan. 14, 2004); Zimmerman v. Unemployment Compensation Bd. of Review, 836 A.2d 1074 (Pa.Cmwth.Ct. Nov. 26, 2003). South Carolina: Rockford Mfg, Ltd. v. Bennet, 2003 WL 22957033 (D.S.C. May 28, 2003). Texas: C.S.C.S., Inc. v. Carter, 2003 WL 22383709 (Tex.App. Oct. 20, 2003); Sheshunoff Mgt. Servs., L.P. v. Johnson, 2003 WL 22249788 (Tex.App. Oct. 2, 2003); Beasley v. Hub City Texas, L.P., 2003 WL 22254692 (Tex.App. Sept. 29, 2003); Tom James, Inc. v. Cobb, 109 S.W.3d 877 (Tex.App. July 11, 2003); Guy Carpenter & Co., Inc. v. Provenzale, 334 F.3d 459 (5th Cir. June 17, 2003); Strickland v. Medtronics, Inc., 97 S.W.3d 835 (Tex.App. Jan. 29, 2003). Vermont: Johnston v. Wilkins, 830 A.2d 695 (Vt. June 13, 2003). Washington: Pacific Aerospace & Elec., Inc. v. Taylor, 2003 WL 23100805 (E.D.Wash. Oct. 10, 2003). Wisconsin: Overhead Materials Handling, Inc. v. Potratz, 2003 WL 22852227 (Wis.App. Dec. 3, 2003); Carrick v. Aquent, Inc., 294 F.Supp.2d 1012 (E.D.Wis. Dec. 2, 2003); H&R Block, Inc. v. Vorpahl, 255 F.Supp.2d 930 (E.D.Wis. March 14, 2003). |
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