Two of the more high-profile non-compete disputes in the last couple of years have not worked out well for employees challenging their restrictive covenants. The cases involving Matt Baldwin's departure from IMG Worldwide and Mark Papermaster's defection from IBM to Apple have resulted in both employees losing their new jobs, though neither termination resulted from a court order.
The Papermaster case was one of the more significant non-compete decisions to come down in the last several years. Papermaster left IBM to join Apple and head-up its iPhone 4 hardware division. The release of the iPhone 4 has been controversial given myriad problems with its antenna technology. Papermaster appears to be the fall-guy for problems with the iPhone 4 release, and there are reports that he never quite fit into the culture at Apple or was able to navigate around Steve Jobs' hands-on management style. Though the litigation between IBM and Papermaster appeared to have had a satisfactory resolution for the executive (a settlement was reached after a preliminary injunction order), his new employment - over which the parties no doubt spent hundreds of thousands of dollars fighting - never flourished.
The Baldwin case is of more recent vintage. That dispute involved an ex-employee's transfer from the IMG Coaches' Division in Cleveland to Creative Artists Agency in Los Angeles. The suit garnered some attention because of CAA's aggressive efforts to lure sports talent away from IMG, and due to the heavy losses IMG has suffered in recent years from sports client defections. From a legal perspective, the case was interesting in that Baldwin filed a strike suit after moving from Minnesota to California, which has a very strong public policy against enforcement of non-compete contracts.
As it turns out, Baldwin's planned migration to CAA didn't work out very well either. The central problem appears to have involved Baldwin's misappropriation of confidential IMG information via, yes you guessed it, a USB memory stick. Following the commencement of litigation both by Baldwin in California and by IMG in Ohio, CAA fired Baldwin - apparently for misappropriating IMG's information.
Parties often never consider impact of litigation can have on an employee's ability to perform to an anticipated level in their new position. The costs of litigation, unforeseen facts (such as misuse of data), client dissatisfaction, distraction, and adverse publicity can ruin a new employment relationship regardless of whether a judge tells an employee he can't engage in certain conduct. Decisions to compete are frequently made on an expedited basis, and this fact alone naturally results in poor decision-making.
Papermaster's resignation from Apple likely resulted from him simply being the wrong fit at the company, and that relationship might have ended sooner than expected whether a suit had been filed or not. But Baldwin's problems were compounded by a poorly planned transition and, in all likelihood, a new employer who disapproved of what Baldwin did on his way out the door at IBM.
There is simply no substitute for extensive advance planning when making a decision to compete. Employees who challenge non-compete agreements ought to consider not just whether they can win a suit, but also whether they can be successful in their new position.
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