Case: Hair Club for Men, LLC v. Ehson, No. 1:16-cv-236 (E.D. Va, District Court for Eastern VA, May 6, 2016)
Issues: Preliminary Injunction for Breach of Contract, Violation of Non-Compete & Non-Solicitation Clauses, Misappropriation of Trade Secrets and Confidential Information, Wrongful Interference with Contract, Tortious Interference with Contractual Relations, and Unjust Enrichment.
Court Holding: The Court denied plaintiff’s request for an injunction to prevent defendants’ from engaging in hair replacement services because it found that the plaintiff is unlikely to succeed on the merits of its claims against the defendant.
Case Summary: From 2011 to 2014, Ehson (defendant) was employed by Hair Club for Men (plaintiff). At the outset of her employment, she signed a non-compete and confidentiality agreement. In 2014, Ehson opened her own spa that treated individuals for hair loss. Plaintiff claimed breach of contract and sought injunctive relief.
Legal Standard: In order to obtain an injunction, a plaintiff must establish that “ he is likely to succeed on the merits,  that he is likely to suffer irreparable harm in the absence of preliminary relief,  that the balance of equities tips in his favor, and  that an injunction is in the public interest.” Since the Court denied the injunction on the grounds that Plaintiff would unlikely prevail on the merits of its claim and is unlikely to demonstrate irreparable harm. The court declined to address the third and fourth factors.
- Likelihood of Success of Claim: The Plaintiffs presented the following five claims against Ehson:
(1) Breach of Contract:
(a) Non-compete: Defendant claimed that the non-compete was overly restrictive. In order for a non-compete to be enforceable, the “employer must show that the “restraint  is no greater than necessary to protect a legitimate business interest,  is not unduly harsh or oppressive in curtailing an employee’s ability to earn a livelihood, and  is reasonable in light of sound public policy.” Since the disputed contract prevented Ehson from “engag[ing] in the business of hair replacement, on [her] own account or becom[ing] interest[ed] in such business…in any relation or capacity whatsoever,” the Court refrained from enforcing the non-compete because several aspects of the clause, including the definition of “business” and types of future positions Ehson was allowed to hold, were overly broad and vague.
(b) Non-solicitation clause: The court held that Plaintiff’s non-solicitation clause was also overbroad. Some Virginia courts have upheld non-solicitation contracts that limit the restriction to those “clients who were contacted, solicited, or served by [the employee] while he was employed by [the employer],” but this Court held that the provision was overly broad because it required Ehson to “know all of the customers that have been invoiced by Hair Club, at any Hair Club location, in the two years prior to her departure.”
(2) Misappropriation of Trade Secrets & Confidential Information: To establish trade secret misappropriation, a plaintiff must prove both that a trade secret (1) exists and (2) that the defendant misappropriated it. To constitute a trade secret, the following factors must be met: “(1) independent economic value; (2) not known or readily ascertainable by proper means; and (3) subject to reasonable efforts to maintain secrecy.” Plaintiff’s allege that the following were protected trade secrets:
(a) Pricing Information: A price list can be a trade secret when it is “qualitatively different from a standard price list” and is “not even made available to customers,” but Plaintiff’s did not make the argument that its price list fell under this description.
(b) Marketing Information: The claim was deemed unlikely to succeed because Plaintiff’s did not provide information on how it endeavored to keep its marketing strategies secret or how it believed Ehson misappropriated its marketing strategies.
(c) Client Information: Ehson claimed that since she obtained the client’s contact information “directly from the clients themselves,” she did not misappropriate the client list. The Court found Ehson’s claim persuasive and held that this constituted an “independent development of a contact list.”
(d) Technique: Plaintiff argued that its hair replacement techniques were unique. In response, Ehson argued that Plaintiff’s techniques were found on outlets like YouTube. The Court did not accept the Plaintiff’s argument.
(3) Wrongful Interference with Contract & Prospective Business Advantage: In order to prevail, the plaintiff most demonstrate: “(1) the existence of a business relationship or expectancy, with a probability of future economic benefit to plaintiff (2) defendant’s knowledge of the relationship… (3) a reasonable certainty that absent defendant’s intentional misconduct, plaintiff would have continued in the relationship… and (4) damage[s].” The Court held that the Plaintiff had may be able to prevail on this claim. The Court reasoned that a central aspect to Plaintiff’s business is building and maintaining its client base. The Court further reasoned that it is “probable that Hair Club’s clients would have continued to patronize Hair Club for maintenance services and thus continued to provide economic benefit.”
(4) Tortious Interference with Contractual Relations: In order to esblish that there was interference with a contractual relationship, there must be “existence of a valid contractual relationship or business expectancy.” Since the Court doubted whether Ehson’s and Plaintiff’s non-compete and non-solicitation contract was enforceable, it held that it was unlikely that Plaintiff prevail on this claim.
(5) Unjust Enrichment: The Court was unpersuaded that Ehson was unjustly enriched by Plaintiff’s for two reasons: (1) Plaintiff did not argue that it conferred a benefit on the defendant and (2) under Virginia law there shall be no contractual relationship for an unjust enrichment claim to succeed. In this case., the parties had a contractual relationship.
- Likelihood Plaintiffs Will Suffer Irreparable Harm: The Court held that the injuries were not irreparable because monetary damages would adequately compensate the Plaintiff for the type of harm alleged.
For additional information about this case or other employment law matters, please contact Merritt Green at firstname.lastname@example.org or (703)556-6505. Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.