Systems and Software
Defendant Randy Barnes appeals the superior court's order enjoining
him from working for Utility
Solutions, Inc. or any
other direct competitor of his former employer,
plaintiff Systems & Software, Inc., for a six-month period
pursuant to the noncompetition agreement that he signed when he
began working for plaintiff.
He argues that the trial court should not have enforced the agreement
(1) plaintiff did not have a legitimate protectable interest;
(2) the agreement contains unnecessary restrictions and
imposes an undue hardship on
(3) in any event, he did not violate
the agreement; and
(4) even if he did, plaintiff should be
estopped from enforcing it.
Plaintiff is engaged in the software specific for utilitiy provider
organization and management.
Pl hired the Df as an at-will employee to become a regional
vice-president of sales.
The Df had to sign a noncompetition agreement that prohibited
him-during his employment and for six months thereafter from
becoming associated with any business that competes with
The Df voluntarily left his position.
Started a partnership with his wife called Spirit Technologies
Spirit Technologies services utilities software nationwide just like
Requested injunction relief that sought enforcement of the parties
Df - Appealed
188 Ancillary Restraints on Competition
A restrictive covenant is unreasonably in restraint of trade if
(1) the restraint is greater than is needed to protect the
promisee's legitimate interest, or
(2) the promisee's need is outweighed by the
hardship to the promisor and
the likely injury to the public.
Courts will proceed with caution when asked to enforce covenants
against competitive employment because such restraints run
counter to public policy favoring the right of individuals to
engage in the commercial activity of their choice.
Enforcing Noncompetition Agreements when
Courts will enforce such agreements
unless the agreement is found to be
contrary to public policy,
unnecessary for protection of the employer,
or unnecessarily restrictive of the rights of the employee, with due
regard being given to the subject matter of the contract and the
circumstances and conditions under which it is to be performed.
Df Arg does not safeguard a legitimate interest of the
Because it was not needed to protect trade secrets or confidential
This argument fails because it is based on a
faulty premise-that noncompetition agreements may be
enforced to protect only trade secrets or confidential customer
Most jurisdictions do not limit the scope of
noncompetition agreements to trade secrets or
confidential customer information, which are often protected by
other law even in the absence of such agreements.
Restatement (Third) of Employment Law 6.05
Expressly states that noncompetition agreements
may protect legitimate
employer interests such as customer
employee-specific goodwill that are "significantly
broader" than proprietary information such as trade
secrets and confidential customer information.
cmt. b ("[Section] 6.05 sometimes allows an employer contractually to
prevent all competition by a former
employee, even competition that
does not make use of the
employer's proprietary information.").
Trial Court findings
The trial court found that plaintiff had a legitimate protectable
interest, and the evidence supports the court's finding.
The trial court found that during his employment with plaintiff,
defendant had acquired inside
knowledge about the strengths and weaknesses of
plaintiff's products-knowledge that he could use to compete
As the court pointed out, both plaintiff and United Solutions,
defendant's only client,
served a small market of customers;
Even the loss of single contract could deprive plaintiff of revenue for
We find no basis for overturning the trial court's conclusion that
plaintiff had a legitimate protectable interest.
Df Arg Agreement is more restrictive than necessary to protect
Less drastic solutions were available to the trial court to fashion a
more reasonable restraint on his employment.
The court could have simply prohibited him from soliciting plaintiff's
current customers, or
Prohibited him from dealing with non cooperative utilities,
Df Arg - imposing a hardship that far outweighs any potential
harm to plaintiff
According to defendant, a complete ban on competition is not only
unduly restrictive, but it effectively prevents him from working
in his field of expertise for six months, thereby imposing a
hardship that far outweighs any potential harm to plaintiff.
Defendant now claims hardship based on nothing more than a bald
We find no error in the court's decision.
Type of non-compete covenant.
Restatement (Second) of Contracts 188 cmt. g, employers "may seek to
protect the good will of the business with [either] a
general covenant not to
compete or with a specific
prohibition on contact with customers.
Determining the restraint
The reasonableness of the restrictions
will vary by industry
and will depend highly on the
nature of the interest
justifying the restrictive covenant.
Generally, courts will uphold a contractual ban on an employee's
if it would be difficult for an employer to determine when an
employee is soliciting its customers.
The Df was hired to a regional vice-president of sales
He had access to existing customers, information concerning the
strengths and weaknesses, the individual needs of the customers,
and the prices paid by those customers.
The Df acquired knowledge of plaintiff's software designs, customer
base, marketing strategy, business practices, and other
sensitive information revealing the strengths and weaknesses of
plaintiff's software products.
It would be extremely difficult to
monitor the whether the Df was using the goodwill and
knowledge he acquired while working for plaintiff to gain a
competitive edge against plaintiff.
The evidence supports the court's findings and conclusions.
Df Arg He has not competed with the Pl
There is evidence to the contrary.
Utility Solutions directly competed with the Pl.
In a trade show, the Df represented himself as Utilities solution
Df Arg False Representation of signing the non-compete
He accepted employment with plaintiff and signed the agreement based on
plaintiff's false representations that (1) its software products
were suitable for cooperative electric and gas utilities; and
(2) it would not seek to enforce the covenant not to compete
unless defendant went to work for a major competitor of
We find no merit to defendant's argument
The court found that plaintiff did not mislead defendant about the
capability of its products.