03/12/2013 05:02:47 PM EST
Fisher & Phillips: Non-Compete and Trade Secret Review for February 2013
by Michael R. Greco
February 2013 was an active month in the world of
non-competes and trade secrets, and if we read the tea leaves, it looks like
things are only going to get busier. Before I recap some of February's
highlights and direct you to some of the best resources out there on the web,
let's briefly discuss one reason I think non-compete issues are likely to be
pushed to the forefront over the coming months and year -- Warren Buffet.
Warren Buffet? That's right, Warren Buffet, and people like him.
It was widely
reported in February that Warren Buffet's Berkshire Hathaway teamed up
with 3G Capital Management to acquire H.J. Heinz. Buffett said Berkshire
is contributing "something between" $12 and $13 billion to the deal.
Of greater interest, however, Buffet said that Berkshire is sitting on
another $47 billion in cash and he joked, "I'm ready for another elephant.
Please, if you see any walking by, just call me." What does this
have to do with non-competes and trade secrets? A lot. Over the
past few years with all of the economic and political uncertainty, a lot of
private equity has built up and remained on the sidelines, but like Warren
Buffet's $47 billion, that cash is sitting there waiting for the right elephant
to walk by. But private equity investors aren't foolish. After
investment committees decide to pursue a target acquisition candidate and deal
professionals succesfully submit an offer to the seller, it is time to get the
lawyers involed in the due diligence phase. Due diligence includes more than
just validating management's stated operational and financial figures. Due
diligence is the point at which it is critical to determine who has a
non-compete and who does not. Just as important, the agreements need to
be examined to ensure they are appropriately tailored to protect the target
company's legitimate interests, and to ensure they will remain enforceable
after the acquisition. If key employees lack restrictive covenants, due
diligence is the time to address the issues. Then, of course, someday, if
and/or when employees leave, litigation becomes a distinct possibility. In short,
and acquisitions precipitate non-compete and trade secret contracting and
litigation. Without a doubt, the month of February told us this
issue is going to be hot well into the 2010's.
What else did we learn in February? Let's look
around the web.
selection clauses were a hot button issue in February. We saw that
they may be enforced even if they require employees to fly over 8,000
miles just to appear in Court. Robert Milligan does a great
job dissecting an opinion from the U.S. Eastern District of
Missouri and credibly wonders what one has to prove in Missouri in order
to demonstrate that a forum selection clause satisfies the judicially
required "gravely incovenient" standard to invalidate such a
Pollard reminded us that the race
to the courthouse does not always work in California when a forum
selection clause suggests that the lawsuit should proceed elsewhere, even
if the new employer was not a party to the contract containing the forum
Obama Administration announced its five point initiative, "Strategy
on Mitigating the Theft of U.S. Trade Secrets," to combat the threat
imposed by international trade secret misappropriation. Care to know
what it says, what's good about it, and what's not? John Marsh does
a great job laying it out in his bog, The
Trade Secret Litigator.
to know what's happening with pending non-compete legislation? Check
out what Kenneth Vanko has to say about Michigan's
we are talking about statutes, Russell Beck can fill you in on the status
of things in Massachusetts
where the legislature is making another run at non-compete
legislation this term.
Finally, for those of you who have taken my advice to pay
a visit to the blogs written by John Marsh, Russell Beck and Kenneth Vanko, I'm
sure you share my opinion they are top notch. If you enjoy them as much
as I do, consider listening to one of their podcasts.
Michael R. Greco is a partner in the Employee
Defection & Trade Secrets Practice Group at Fisher & Phillips
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