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Plaintiff's Noncompete Case Had Huge Holes. It (Almost) Didn't Matter.


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5/15/2017
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It's finally over.

It took just over one year, and at long last, the lawsuit brought against my client, claiming that in violation of his non-compete agreement, he stole his former employer's proprietary software and then turned around and sold that technology, which allegedly cost the company nearly $1.5 million to develop, is now officially over.

And, even though there were substantial legal hurdles that plaintiff (the former employer) had to overcome in order for their case to survive, my client was still compelled to settle the case for a confidential five-figure sum. Granted, under the circumstances of the case, this settlement figure was a tremendous win for my client; had we proceeded to trial, it likely would have cost him at least that much to defend the case (even if he won).

But, given the hurdles that the plaintiff faced, why - and how - did their case survive this long? Shouldn't it have been dismissed?

Well, yes and no.

Some of the Legal Challenges the Former Employer Faced in Proving Their Non-Compete Case

Lest you think that the problems plaintiff faced in establishing their case were "minor," I assure you they were not.

Consider the following three (3) examples (and there were more):

  • On the witness stand, one of plaintiff's principals conceded that well over 75% of the items they identified in their affidavits as being "proprietary" were, in fact, in the public domain;
  • In response to our demand that plaintiff provide documentation supporting their claim that they had expended over $1.4 million developing their proprietary software, the plaintiff admitted that they had no documentation to support that claim; and,
  • Perhaps most importantly, plaintiff conceded that my client's business model was entirely different than theirs - i.e., he wasn't directly competing with the plaintiff!

Why the Glaring Holes in Plaintiff's Case Were, to a Degree, Irrelevant

To be sure, on one level, the patent deficiencies in plaintiff's case, under different circumstances, perhaps should have spelled the end of plaintiff's case. 

But there were problems on our end too.

Here's a small sample:

  • On the witness stand, my client testified that he had purchased a license from a third-party vendor to download, modify and market his software. There was just one problem: this third-party vendor denied it, and even submitted a sworn affidavit to that effect; 
  • My client testified was forced to admit that he had started developing his new business - that was being marketed to the plaintiff's actual competitors - while still working for the plaintiff; 
  • My client lived overseas, and the expense of having him come back to testify at trial (as the court required), would have been substantial; and,
  • Most important, while the case remained pending, the Court ordered that my client abstain from pushing his new business venture in the Tri-State area (which naturally was hurting his efforts to grow his business).

One other "minor" fact warrants mention: privately, in chambers, the Court all but said to all counsel that she did not find our client credible, and therefore, despite the substantial legal challenges that plaintiff faced, she was disinclined to let our client walk away from this scot-free.

The Result

As a result, both parties reached a mid-five figure settlement - which was a win-win (or lose-lose, depending on your perspective) for both sides. The plaintiff got to walk away with some money, despite the holes in their case. My client, on the other hand, got to avoid trial costs he could ill afford, trial before a judge who was unsympathetic to his cause, and, critically, to pursue his business without any restriction (the non-compete was voided as part of the agreement).

The Takeaway

Certainly, there are a number of ways you can look at what happened here. On the one hand, from a purely legal perspective, perhaps plaintiff's case should have been summarily dismissed.

But that ignores the human component - judges and juries will often try to do what they think is right, and then reverse-engineer the result, and find legal justification for it after the fact. And, in some cases, that means a blanket, cold application of the law that may result in an "injustice," may not come to pass.



Category: Non-Compete & Employment Agreements


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