Employment agreements

A direct competitor to an information technology reseller filed a complaint requesting that the court declare all the reseller’s noncompete agreements with its employees invalid, nationwide. The competitor wanted the freedom to pilfer all the reseller’s employees at will.

Only California and two other states do not allow noncompete agreements, but a California case holds that in some circumstances, California’s interest in promoting competition and employee mobility may justify invalidating noncompete agreements between non–California employers and employees. The competitor focused on this case and its reasoning to support its claim.

Rather than engage in expensive litigation or argue what the competitor wanted to argue, Mr. Hudock demonstrated in an early motion to dismiss how the competitor had no standing to assert declaratory relief claims against the reseller because:

• the competitor was not a party to or beneficiary of the noncompete agreements,
• the reseller had not initiated or threatened litigation, and
• no former reseller employee was employed by the competitor.

Mr. Hudock also neutralized the California case by demonstrating that federal procedural law applied, and therefore the California case was irrelevant.

Based on Mr. Hudock’s arguments, the court dismissed the competitor’s declaratory relief claims, and the competitor’s tactic failed.