Some Lessons from a Million Buck Case
Almost $1 Million in damages awarded by a trial court in Tennessee in favor of an employer against a single former employee was recently upheld by a state court of appeals. The Hamilton-Ryker Group, LLC v. Keymon, No. W2008-00936-COA-R3-CV (Tenn. Ct. Appl. Jan. 28, 2010). Besides the lessons the case teaches to naughty employees who may endeavor to compete or solicit in violation of an employment agreement, and thereby damage their employers, it also provides some guidance on best litigation practices in bringing such claims, guidance for employers on how to protect confidential and "trade secret" information and even drafting practices for practitioners for agreements containing restrictive covenants.
The employer, The Hamilton-Ryker Group ("H-R"), employed Tammy Keymon for about 14 years. She had an Employment Agreement with noncompete, nonsolicitation and confidentiality provisions. In the summer of 2004, H-R reorganized jobs within the company, eliminating Keymon's particular position. Because H-R wanted to retain her, it offered Keymon a new position with the same salary and, per H-R, a decreased travel schedule. Keymon felt the new position would require more travel, and she rejected it. H-R and Keymon then agreed that she would be temporarily laid off for a ninety-day period, during which time H-R would try to find a position for her; and if not, they would discuss a possible permanent layoff.
Here's the naughty part: The ninety-day period was to begin on Monday, July 12, 2004, so Keymon's last day of work was Friday, July 9. On the morning of Saturday, July 10, Keymon called the owner of one of H-R's main clients - for whom Keymon supervised the H-R employees who worked on the client's needs and also for whom Keymon was the main point of contact - and told the client's owner that H-R had laid her off. In that phone call, Keymon and the client's owner agreed that Keymon would take over doing all the work that H-R had been doing for the client. Several hours later that same day, Keymon emailed fifty-six documents from her H-R work email address to her personal email address. The documents included the client's production schedules, a profit-loss analysis for completed projects and invoices for recent projects. On July 16, Keymon began billing H-R's client, and sixteen days after Keymon emailed the documents to her personal account, the client informed H-R that it had "decided to pursue another avenue for" its needs. Keymon eventually hired employees to assist her with the client's work, including some H-R employees who had worked on the client's work for H-R, under Keymon's direction when she worked at H-R.
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It may soon be a lot easier to enforce noncompete/nonsolicitation agreements in Georgia. Late last week the Georgia House Judiciary Committee passed a resolution to amend the Georgia Constitution to allow the General Assembly to pass laws governing competitive activities between employee and employer, distributors and manufacturers, franchisors and franchisees and others. The need to protect company investments in people drove the change, as did the confusing case law on the subject. The proposed amendment would also allow the Assembly to pass laws which would permit courts to limit the duration, scope and geographic area of such contracts. In other words, courts would be permitted to rewrite the contracts to make them reasonable.