December 17, 2013 —
When we last saw Dick and Jane, Dick had been served with a lawsuit for breach of his employment contract. We looked at the general dynamics of a Complaint and the various Courts in which a Complaint can be filed. Recall that this Complaint made the rare request for a Temporary Restraining Order and Interlocutory Injunction. In a sense, Dick’s former company was seeking an immediate Court order to shut down Dick and his company.
Temporary Restraining Orders and Interlocutory Injunctions are tough to obtain and rightfully so. These orders can have the effect of giving one party an overwhelming victory in a case without the process of a lawsuit having played out. If Dick’s former employer can shut down Dick’s new company while the case is pending, it is quite likely that before the case is ever final, Dick will be out of business anyway. By contrast, if Dick can keep operating during the case, it is possible that the damage done to his former employer is too great to even calculate.
A Temporary Restraining Order is granted on a motion, usually without the other party being present. This order is emergency in nature and lasts only 30 days. Generally, the order is entered and a full hearing is scheduled. At that hearing, the Judge can take evidence and consider the matter more fully and openly. Following that hearing, an Interlocutory Injunction can be issued to govern the parties during the case.
The threshold for an Interlocutory Injunction is quite high. The party bringing the motion must show that the damages absent the injunction would be irreparable, that it is not able to be remediated or reduced to monetary value. Further, the party must show that they are likely to prevail on the merits of the underlying suit. Finally, the party must show that on balance the entry of the injunction is fair and equitable.
In our case, Dick and his attorney must go all in for the injunction hearing. As indicated, if the injunction issues, he could be out of business before the lawsuit is ever finished. Dick should elect to attack the injunction on two fronts. First, Dick can show that the injunction is not necessary because the damage caused is not irreparable. If Dick has, in fact, violated his contract and taken business from his former employer, that amount of business should be quantifiable in dollars. Thus, although potentially damaging, the harm is not irreparable. Secondly, Dick can show that on balance, the entry of an injunction is not fair and equitable. The injunction would prohibit (without determining the validity of the covenant not to compete) a customer from freely choosing where that customer would wish to do business. Such an order is in restraint of free trade and against general public policy.
Dick should avoid the other component of an injunction argument and the former employer will likely focus all of their attention and effort in this area. As discussed in our prior blog, due to the Constitutional Amendment of 2010 on covenants not to compete, the company’s position is much stronger on the merits and they are much more likely to prevail on the merits in some fashion.
For purposes of our story, Dick and his attorney are able to prevail and keep a Judge from entering an injunction shutting down Dick’s new company. The case now proceeds into a second critical phase: discovery. Our next blog will review the various aspects of discovery including written discovery, document production and depositions. The discovery process is where most cases can be won or lost.
Until then, Dick and Jane wish everyone a very Merry Christmas, Happy Holidays and a wonderful New Year!