Tuesday, March 10, 2009

In Non-Compete Dispute, Preliminary Injunction Denied Based on Ease of Calculating Damages (Timberline Drilling v. American Drilling)

When trying to obtain emergency injunctive relief in a non-compete dispute, employers face three main hurdles:

(a) showing the employee's conduct constitutes an actual violation of the covenant;
(b) demonstrating the covenant is reasonable; and
(c) articulating why monetary damages are insufficient to make the employer whole.

The lion's share of non-compete cases involve (a) or (b). In many states, once an employer shows a likelihood of success on the merits of a non-compete claim, it is presumed that damages would be inadequate. The rationale among jurisdictions which adopt this rule is fairly uniform: the loss of a customer relationship and associated goodwill is at least partially intangible and at some point damages become too speculative.

In Timberline Drilling v. American Drilling, the federal district court in Idaho found that the employer had established a likely breach of the non-compete agreement. However, it denied injunctive relief on the ground the employer could establish damages and therefore had an adequate remedy at law for trial.

The cases like Timberline Drilling are rather sparse, but in the vast majority of them, the customers appear to have made a decision to leave the ex-employer and begin a new relationship with the party in violation of the non-compete. Many times, the employee will raise a refusal-to-deal defense - a defense the Idaho court declined to adopt - and argue that an injunction would provide the plaintiff with no real relief.

In those cases where the employee is in the preliminary stages of violating a non-compete, a preliminary injunction is more likely to be granted.


Court: United States District Court for the District of Idaho
Opinion Date: 3/2/09
Cite: Timberline Drilling, Inc. v. American Drilling Corp., LLC, 2009 U.S. Dist. LEXIS 16323 (D. Idaho Mar. 2, 2009)
Favors: Employee
Law: Idaho

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