TEKsystems, Inc. v. Bolton (Maryland U.S.D.C.)

Filed: February 4, 2010
Opinion by Judge Richard D. Bennett

Held: A covenant not to compete is enforceable even where the competing former employee does not solicit his former employer's clients or use its confidential information if the scope of the restrictive covenant is limited to reasonable temporal and geographical limits, the employer is protecting legitimate business interests with the covenant, the employee has unique and specialized skills, there is no undue hardship on the employee to comply with the restriction and the public interest is served by enforcing the restrictive covenant; and the court held that it would extend the duration of the restrictive covenant for so long as the employee was in breach of it.

Facts: In 1999, the Defendant signed an employment agreement with Plaintiff, containing (among other provisions) a covenant not to compete against Plaintiff for 18 months after his employment terminated and within a 50-mile radius of his former office. Substantively, the covenant prohibited Defendant from engaging “in the business of recruiting or providing on a temporary or permanent basis technical service personnel, industrial personnel, or office support personnel” within these temporal and geographic limitations.

A separate covenant also prohibited Defendant from soliciting or competing for any persons or entities who were clients or customers of Plaintiff within the two years prior to the termination of the Defendant's employment. In 2008, the Defendant resigned from his employment with Plaintiff and, immediately thereafter, accepted a similar position in the IT-staffing business with one of Plaintiff's competitors and within the temporal and geographic limits of the covenant not to compete. None of the IT-staffing placements Defendant made for his new employer (Plaintiff's competitor) involved solicitation of or competition for Plaintiff's clients or customers. Plaintiff admitted at deposition that it was unaware of any such solicitation by Defendant.

Analysis: Under Maryland law, covenants not to compete may be enforced only against those employee who provide unique services or to prevent the future misuse of trade secrets, routes or lists of clients or solicitation of customers. Such covenants will be enforced if the restraint is confined within limits which are no wider as to area and duration than are reasonable for the protection of the business and do not impose undue hardship on the employee or disregard the interests of the public.

In reaching its decision, the court analyzed and concluded on the following:

(1) the 18-month temporal and 50 mile geographic scope of the covenant is facially reasonable and comports with similar limitation upheld by Maryland courts;

(2) the Plaintiff was protecting its legitimate business interests by enforcing the covenant because the employee was critical to the growth in revenue for the region, was key to building the personal relationships with clients in the area as required for the staffing industry, and had access to high level client contacts and confidential information;

(3) the employee at issue possessed unique and specialized skills because of his training and success in the banking industry in New York and had the most knowledge of each customer in the area;

(4) the employee would not suffer undue hardship by enforcing a covenant with the temporal and geographical restraints in this case because the employee was able to conduct business everywhere else in the world except for the area within 50 miles of New York City; and

(5) the public interest is protected by enforcing reasonable restrictive covenants against former employees of high technology and high-growth business.

In reaching its decision with respect to each factor, the court relied on Becker v. Bailey, 268 MD. 93, 299 A.2d 835 (1973); Ruhl v. F.A. Bartlett Tree Expert Co., 245 Md. 118, 225 A.2d 288 (1967); TEKsystems, Inc. v. Spotswood, 05-CV-1532-RDB, Memorandum Opinion (D. Md. June 28 2005); Intelus Corp. v. Barton, 7 F. Supp. 2d 635 (D. Md. 1998) and PADCO Advisors, Inc. v. Omdahl, 179 F. Supp. 2d 600 (D. Md. 2002).

The court granted summary judgment for Plaintiff, finding that Defendant breached the covenant by competing against Plaintiff in the IT-staffing business within the agreed temporal and geographic limits. The Plaintiff, however, would not be awarded monetary relief exceeding nominal damages because there was no proof that the Defendant solicited Plaintiff's customers or clients.

Injunctive relief against future violations of the covenant was warranted. The court held that the Plaintiff was entitled to an equitable extension of the entire 18-month period, running from the date of the court's opinion, because Defendant began violating the non-compete provision almost immediately after the termination of his employment with Plaintiff.

Practice Pointer: Plaintiff's affidavit, alleging that Defendant did, in fact, solicit Plaintiff's clients while working for his new employer, would not be considered on summary judgment. The affidavit contradicted Plaintiff's prior deposition testimony, and there was no showing that the facts asserted in the affidavit were unknown or inaccessible at the time of the deposition. Given this ruling, litigators are cautioned to prepare a Rule 30(b)(6) witness thoroughly. A party may not, on summary judgment, contradict its own Rule 30(b)(6) deposition testimony with evidence that was reasonably accessible at the time of the deposition.

The full opinion is available in PDF.

Animal Welfare Institute v. Beech Ridge Energy, LLC (Maryland U.S.D.C.)

Filed: December 8, 2009

Opinion by Judge Roger R. Titus

Held: Defendants were enjoined from constructing new wind turbines and operating a wind farm during certain months because the project would kill endangered bats in violation of the Endangered Species Act (“ESA”) and the Defendants failed to obtain an "incidental taking permit."

Facts: “This is a case about bats, wind turbines, and two federal policies, one favoring the protection of endangered species, and the other encouraging development of renewable energy resources.”

The Defendants ignored evidence that endangered bats are present in the area of the wind farm project and ignored requests by federal officials to conduct more extensive surveys as to the presence of these bats. The Defendants failed to obtain an incidental taking permit, that would have permitted the construction in spite of the risk to the wildlife.

Analysis: The ESA makes it unlawful to take any endangered species within the United States. The definition of take includes “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”

Anyone who knowingly takes an endangered species in violation of the ESA is subject to significant civil and criminal penalties. In order to provide a safe harbor from these penalties, the ESA includes an “incidental taking permit” process that allows a person or other entity to obtain a permit to lawfully take an endangered species without fear of incurring penalties.

The Court found that there is a virtual certainty that construction and operation of the wind farm will take endangered Indiana bats in violation of the ESA. The only avenue available to the Defendants to continue construction and regular operation of the wind farm is to obtain an incidental taking permit.

The full opinion is available in PDF.