Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Update, Inc. v. Samilow

United States District Court, E.D. Virginia, Alexandria Division

May 17, 2018

UPDATE, INC., Plaintiff,
v.
LAWRENCE SAMILOW Defendant.

          MEMORANDUM OPINION

          T. S. ELLIS, III UNITED STATES DISTRICT JUDGE.

         In this action for breach of contract, plaintiff, Update, Inc., alleges that its former employee, defendant Lawrence Samilow, breached the non-compete and non-solicitation clauses in his employment agreement. Plaintiff seeks a preliminary injunction pursuant to the non-solicitation and non-compete clauses of its contract with defendant, enjoining defendant from continuing to solicit its customers and to enforce the terms of the non-compete clause.

         I.

         Plaintiff, a Delaware corporation with its principal place of business in New York, provides eDiscovery and legal staffing services throughout the United States.

         Defendant, a New Jersey citizen, began working at plaintiff in 1995, and eventually, in 2016, was promoted to Chief Customer Officer, the company's top sales executive position. In that role, defendant was responsible for developing new sales opportunities and managing client relationships. Defendant was directly responsible for customer service for a number of New York and New Jersey clients. Defendant was also responsible for supervision of national sales, and therefore had access to client information across the country.

         Approximately a year after defendant was promoted to Chief Customer Officer, plaintiff offered defendant a new compensation plan. In connection with the plan, defendant entered into an “Employee Nondisclosure and Assignment Agreement” (the Agreement) dated July 12, 2017. The Agreement contains a non-solicitation clause, which provides:

I acknowledge that information about [plaintiff's] customers and customer prospects is confidential competitive information and constitutes a valuable trade secret. Accordingly, I agree that during the term of this agreement and for a period of one (1) year after my employment ends, I will not, either directly or indirectly, separately or in association with others, solicit or encourage others to solicit any of [plaintiff's] customers or customer prospects located within fifty (50) miles of any office, branch office, or production facility of the [plaintiff] or with whom I had any contact during the term of my employment for the purpose of diverting or taking away business from [plaintiff].

         Agreement at § 12(a).

         In addition to the non-solicitation clause, the Agreement also contains a non-compete clause which states:

I agree that during the term of my employment with Company, and for one (1) year after my employment ends for any reason, I will not directly or indirectly compete with Company by providing to another person or entity in competition with Company (defined below) the same or similar services as those that I provided to the Company during the term of my employment with Company. For purposes of this agreement, a person or entity is in competition with the Company if it provides legal staffing, managed review, legal consulting, information governance, electronic data discovery and litigation support services within fifty (50) miles of any office, branch office, or production facility of the Company, with the exception of any person or entity listed below as a “Prior Relationship”.
This covenant not to compete is limited to the types of activities and services included within my Job Description described in my offer letter.

Agreement at § 13.

         On January 10, 2018, defendant resigned his employment at plaintiff.[1] At approximately the same time as his resignation, Driven, Inc. had acquired Update, Inc., and defendant proposed to Driven moving all legal staffing and eDiscovery clients defendant had been servicing to defendant's soon to be formed consulting practice. That proposal was rejected.

         On January 11, 2018 defendant contacted a law firm, Lowenstein Sandler LLP, a client with which defendant had worked during his employment, to solicit business. In January, defendant also formed Samilow Harvest Group LLC, a new company headquartered in Roseland, New Jersey, within 50 miles of plaintiff's New York headquarters. Samilow Harvest Group's website states that it provides eDiscovery services similar to those provided by plaintiff.

         Currently, defendant is providing services similar to those provided at plaintiff to two of plaintiff's clients: (i) Porzio, Bromberg & Newman, P.C. (Porzio), and (ii) Teligent, Inc. (Teligent). With respect to Porzio, defendant is providing legal staffing services similar to those provided by plaintiff in the past. And with respect to Teligent, defendant is alleged to have diverted a large project from plaintiff, and Teligent has informed plaintiff that it transferred its engagement to another vendor.[2]

         On April 20, 2018 plaintiff filed its verified complaint alleging that defendant was in breach of his Agreement (i) by soliciting plaintiff's customers Porzio, Teligent, and Lowenstein Sandler, and (ii) by engaging in similar services he provided to plaintiff within a 50-mile radius of plaintiff's New York headquarters. Plaintiff moved for a preliminary injunction the same day. An initial hearing on the motion for a preliminary injunction was held on Friday, May 11, 2018. Defendant filed a response brief before that hearing, making a number of arguments in opposition to the motion for a preliminary injunction, but at the May 11 hearing, his newly retained counsel made a number of new arguments. Following an additional round of briefing and argument, the matter is now ripe for disposition.

         II.

         The standard for the issuance of a preliminary injunction is too well-settled to require extended discussion. A party seeking a preliminary injunction must demonstrate “that [it] is likely to succeed on the merits, that [it] is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in [its] favor, and that an injunction is in the public interest.” Di Biase v. SPX Corp., 872 F.3d 224, 230 (4th Cir. 2017) (quoting Winter v. Natural Resource Defense Council, Inc., 555 U.S. 7, 20 (2008)).

         With respect to likelihood of success on the merits, the Fourth Circuit has made clear that although the movant need not show a certainty of success, the movant must make a “clear showing” of likelihood of success on the merits. Pashby v. Delia, 709 F.3d 307, 320 (4th Cir. 2013). Analysis of each of these factors discloses that plaintiff has made the required showing for a preliminary injunction.

         A.

         To begin with, plaintiff has made the requisite clear showing of likely success on the merits. The central issue with respect to likelihood of success on the merits is whether the non-solicitation and non-compete clauses of the Agreement are enforceable or unenforceable under Virginia Law.[3] In Virginia, non-compete clauses are disfavored restraints on trade. See Simmons v. Miller, 544 S.E.2d 666, 678 (Va. 2001). Given this disfavored status, non-compete clauses “have been upheld only when employees are prohibited from competing directly with the former employer or through employment with a direct competitor.” Omniplex World Servs. Corp. v. U.S. Investigations Servs. Inc., 618 S.E.2d 340, 342 (Va .2005).

         Consistent with these principles, the Supreme Court of Virginia has established a three-part test for determining the enforceability of non-solicitation and non-compete clauses. This test “requires that the employer show that the clause (i) is narrowly drawn to protect the employer's legitimate business interest; (ii) is not unduly burdensome on the employee's ability to earn a living; and (iii) is not against sound public policy.” Lanmark Technology, Inc. v. Canales, 454 F.Supp.2d 524, 528 (E.D. Va. 2006) (citing Richardson v. Paxton Co., 127 S.E.2d 113, 117 (Va. 1962)).[4] Analysis of these factors requires courts to consider “the restriction in terms of function, geographic scope, and duration.” Simmons, 544 S.E.2d at 678.

         Importantly, courts employing this three-part test must take the non-compete as written; courts have no authority under Virginia law to “‘blue pencil' or otherwise rewrite the contract” to eliminate illegal overbreadth. Pais v. Automation Products, 36 Va. Cir. 230, 239 (1995). Thus, where a non-compete clause is ambiguous, susceptible to two or more differing interpretations, one of which is overbroad and unenforceable, the entire clause fails even though it may be reasonable as applied to the specific circumstances. Id. at 57-58. Still, the Supreme Court of Virginia has made clear that “restraints on competition are neither enforceable nor unenforceable in a factual vacuum” and as such “[a]n employer may prove a seemingly overbroad restraint to be reasonable under the particular circumstances of ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.