Case: RLM Commc’ns, Inc., v. Tuschen, No. 14-2351 BL 244020, 41 IER cases 971 (4th Cir. July 28, 2016)
Issue: Non-Compete Agreement Determined to be Unenforceable Because Overly Broad
Court Holding: In litigation between two competing government contractors, Fourth Circuit affirmed district court’s summary judgment against plaintiff. Former Employee and her new employer did NOT violate non-compete agreement or other obligations because, in part, non-compete was overly-broad and, as such, unenforceable.
Employment Counsel: Employer’s MUST make sure that its non-compete / non-solicitation agreements are narrowly written to protect the legitimate interest of the business. If not, they will not be enforceable.
Case Summary: The plaintiff, RLM Communications, Inc. (“RLM”) is a government contractor that specializes in cyber security, information technology, and information assurance. The defendant, Amy Tuschen (“Tuschen”), worked for RLM for six years managing an information-assurance contract with the U.S. Government. She resigned about a year before this contract was due to expire and joined a competitor, eScience and Technology Solutions (“eScience”). Prior to departing, Tuschen copied several files related to the contract that she managed onto a CD, which she allegedly provided to her successor at RLM. Initially, RLM did not object to Tuschen’s resignation and new job. However, when RLM learned that eScience planned to bid against RLM on a government contract similar to the one Tuschen had managed at RLM, RLM filed lawsuit against Tuschen and eScience.
RLM’s filed a suit in North Carolina that included multiple claims against Tuschen and eScience, including breach of Tuschen’s non-compete and confidentiality agreements, misappropriation of trade secrets, conversion, tortious interference with contractual relations and unfair and deceptive trade practices, and civil conspiracy. The district court granted summary judgment on all claims to Tuschen and eScience. RLM filed an appeal. The appeals court upheld the district court’s decision based on the following analysis:
- Non-compete. The court concluded that Tuschen did not violate her noncompete agreement. It found that the agreement itself was overly broad and therefore invalid because it prohibited direct and indirect participation in similar businesses. In relevant part, Tuschen’s noncompete prohibited her from “directly or indirectly” participating in a business similar to RLM and located in the same geographical area. Specifically, the non-compete provided:
While I, the Employee, am employed by Employer, or for 1 years/months afterward, I will not directly or indirectly participate in a business that is similar to a business now or later operated by Employer in the same geographical area. This includes participating in my own business or as a co-owner, director, officer, consultant, independent contractor, employee, or agent of another business.
The court concluded that this language created a “restriction on Tuschen’s future employment that is largely unmoored from RLM’s legitimate business interests,” and could be read as preventing Tuschen not only from working with a competitor in a similar position to the one she held at RLM, but also from doing any other job, such as mowing lawns, working as a realtor, etc., for any business that provided similar services. As such, it was unenforceable.
- Confidentiality Agreement. RLM claimed that Tuschen breached her confidentiality agreement when she copied confidential files onto a CD without permission. The court, however, noted that this action would only constitute a breach if it was outside the scope of her professional duties. Tuschen testified that she only copied files in order to give them to her successor and so ease his transition into the job. RLM could offer no contradicting evidence to her testimony. Therefore, the court affirmed summary judgment as to this claim because RLM failed to provide sufficient evidence that Tuschen breached her confidentiality agreement by both copying information without permission and for reasons other than the furtherance of her professional duties to RLM.
- Misappropriation-of-trade-secrets. RLM claimed that Tuschen created a copy of the CD to share confidential information with eScience. The court reasoned that multiple interpretations of North Carolina’s misappropriation statute can “produce a rule sufficient to resolve the case: “When an employer brings a misappropriation claim against an employee, admitting that the employee had authorized access to its trade secrets at all relevant times, the employer must raise an inference of actual acquisition or use of trade secrets to survive summary judgment.” Applying this rule, the court rejected RLM’s misappropriation-of-trade-secrets claim because RLM authorized Tuschen to have access to its trade secrets, and it did not establish that she ever accessed them without proper authorization. Moreover, the court dismissed RLM’s claim that an “unexplained leap in technical capacity” permited an inference of misappropriation in this case because the only evidence of such a leap was eScience’s unsuccessful bid for the government contract.
- Tortious Interference with Contractual Relations: Citing Peoples Sec. Life Ins. Co. v. Hooks, the court concluded that summary judgment was appropriate on RLM’s tortious interference claim because “competition in business constitutes justifiable interference in another’s business relations” and in the present case, there was no evidence that eScience was motivated by malice or anything other than normal competition in its dealings with Tuschen. 322 N.C. 216 (N.C. 667).
- Other Claims: The court affirmed summary judgment on RLM’s conversion claim using its misappropriation-of-trade secrets analysis. Similarly, it dismissed RLM’s remaining claims of unfair and deceptive trade practices and civil conspiracy, reasoning that those claims relied on analysis that the court had already found meritless.
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.