Friday, May 7, 2010

IMG Dispute Over Employee Poaching Likely to Raise Cross-Jurisdictional Fight

Very interesting article today in the Wall Street Journal concerning IMG Worldwide's non-compete claim against agent Matthew Baldwin, who jumped ship to Hollywood talent firm CAA.

As the article notes, IMG has non-compete agreements with agents prohibiting them from soliciting clients. In the IMG-Baldwin dispute, the clients are high profile coaches and star athletes. IMG has lost a number of star clients, such as Derek Jeter and Tony Gonzalez, in recent years.

CAA's playbook appears to rely on California's long-standing public policy against employee non-compete agreements to lure talent away from heavy hitters like IMG. The WSJ article indicates that the outcome of a case between IMG and Baldwin, a junior agent making less than $100,000 per year, could establish the template for how to avoid non-compete restrictions.

As the article notes, Baldwin left IMG with almost no notice, moved to California (where CAA is based), established residence there and immediately sued in California court seeking to declare his legal rights to work in that state. Presumably, he also has sought a temporary restraining order to prohibit IMG from enforcing the non-compete agreement.

In reality, though, these cases involving cross-jurisdictional fights have been filtering through the courts for years, especially when there is some California connection. The most high-profile case involves David Donatelli's departure from EMC to work at Hewlett Packard. In that case, Donatelli and EMC both filed suits - Donatelli in California where HP is based (similar, no doubt, to Baldwin's complaint), and EMC in Massachusetts.

IMG, though, has strong precedent on its side, and it would be well-advised to rely on the Massachusetts court's holding in Donatelli which not only restrained Donatelli from working for HP in certain capacities but also declined to stay its own proceeding in deference to Donatelli's first-filed case.

Assuming IMG follows EMC's lead from the Donatelli case and files suit in Minnesota (where Baldwin worked) or Ohio (where IMG is based), either jurisdiction could decline to stay the IMG suit on the grounds that it has a compelling interest in upholding its own policy regarding non-compete agreements. Both Minnesota and Ohio are relatively neutral to employer-friendly regarding enforcement. Given Baldwin's overnight establishment of California residence, a Minnesota or Ohio court may decide that California's interest in the suit is not so compelling to stay its own legal proceedings.

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