Courts are reluctant to enforce non-competition agreements because they are restraints on trade and one’s ability to earn a living. To be enforceable, a non-competition or non-solicitation agreement must be reasonable in geographic scope, time, and reasonably tailored to protect the employer’s legitimate business interests. A federal court in Nevada recently ruled that Accelerated Care Plus Corp. (ACP), a medical equipment leasing business, had such a reasonable agreement in place with two former sales and training managers, Emile Roumen and Joseph Pannell. The court granted a temporary restraining order stopping the two former employees from engaging in competitive activities with their new employer – and one of ACP’s former clients – Diversicare Management Services.
ACP leases medical equipment and provides associated training to nursing facilities throughout the U.S. Diversicare operates approximately 40 nursing facilities and, for several years, leased equipment from ACP. As part of its contracts with ACP, Diversicare also obtained training-related services and material. As upper level managers at ACP, Roumen and Pannell were instrumental in developing, implementing, and marketing those training services and materials to Diversicare and other ACP clients. Both managers signed restrictive covenants with ACP in which they agreed for a one-year period not to compete with ACP, solicit ACP employees, or induce any ACP client to cease doing business with ACP.
In June 2011, both Roumen and Pannell quit ACP and took jobs as vice presidents at Diversicare. Soon thereafter, Diversicare terminated its contracts with ACP. ACP also discovered that on Rouman’s way out, he had downloaded all of ACP’s written materials, presumably to use in his new job. ACP sued both Roumen and Pannell, and their new employer, for breach of contract, misappropriation of trade secrets, and other related claims, and sought a temporary restraining order to keep Rouman and Pannell from violating their non-competition agreements.
The court issued the TRO, finding that ACP’s non-competition agreement was enforceable. The one-year period was reasonable, and the lack of any geographic restriction was appropriate given that ACP operates throughout the country. The court found ACP had suffered irreparable harm when it lost Diversicare’s substantial business after Roumen and Pannell left and when Roumen absconded with ACP’s proprietary materials. According to the court, the harm caused by the disclosure of ACP’s confidential information outweighed any harm to Roumen and Pannell if they were precluded from competing with ACP for a year. Roumen and Pannell were free to work for Diversicare, so long as they do not engage in job responsibilities related to goods or services that are the same or similar to the goods and services produced by ACP and do not disclose ACP’s confidential information. Accelerated Care Plus Corp. v. Diversicare Mgmt. Servs. Co., Case No. :3:11-cv-00585 (D. Nev. Aug. 22, 2011).