Litigation between Competitors With Mirror Restrictive Covenants: A Formula for Prosecution

17 Pages Posted: 15 Oct 2007

Abstract

In today's competitive business environment, companies regularly use non-compete clauses to police faltering employee loyalty and to retain their competitive edge. In fact, this popular business practice is pervading all industries and levels of employment. As the use of non-competition pacts continue on an industry-wide basis, litigation often arises between competitors after one business hires the employees of the other in violation of the restrictive covenants in their employment agreements. An unexplored strategy in prosecuting such cases includes ascertaining the existence and enforcement of similar restrictions by the defendant company. This article explains how the presence of an equivalent agreement is useful in either prohibiting the challenge to the enforceability of the post-employment conditions or in upholding their validity. In particular, the following litigation tactics are analyzed when two businesses bind their employees to restraints with the same or similar terms: barring any challenge to the reasonableness of the restrictive covenants pursuant to equitable principles precluding contradictory positions or as a judicial admission, introducing the inconsistency as evidence or impeaching the credibility of the competitor through an evidentiary admission, and using the identical covenants to establish evidence of an industry standard or to otherwise support the underlying claim and damages. If successful, these techniques will radically change the law concerning the enforcement of restrictive covenants in the United States.

Keywords: contracts not to compete, restrictive employment contracts, covenants not to compete

Suggested Citation

Anenson, T. Leigh, Litigation between Competitors With Mirror Restrictive Covenants: A Formula for Prosecution. Stanford Journal of Law, Business, and Finance, Vol. 10, No. 2, 2005, Available at SSRN: https://ssrn.com/abstract=1021106

T. Leigh Anenson (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
440-336-4468 (Phone)

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