Wednesday, June 1, 2011

Expedited Discovery In Non-Compete Cases Is Not Guaranteed

By now, most of my readers know that non-compete disputes often arise very quickly. The preferred - and in most cases - only true remedy is injunctive relief preventing certain competitive activity from occurring.

Employers seeking to enforce non-compete agreements by way of injunctive relief almost always seek expedited discovery. In emergency injunction proceedings, expedited discovery frequently is necessary for an employer to be able to prove its case at the time of hearing. Remember that in many non-compete disputes, an employer knows only a fraction of what competitive activity has occurred, or which is about to occur.

Expedited discovery is just what it sounds like: production of documents and deposition testimony on a truncated schedule, sometimes in a matter of days - not weeks. This is a marked, even drastic, departure from a typical discovery schedule. In non-injunction cases where damages are sought, discovery can take the better part of a year. In complex litigation, it often exceeds two years.

But there is no guarantee a court will even order expedited discovery. To be sure, an employer must establish why it needs such discovery and why courts should depart from the typical (and lengthy) discovery protocol. In the federal system, courts use one of two standards for evaluating a request to expedite discovery.

The first standard is the minority rule and is called the "preliminary injunction" standard. Specifically, the party seeking expedited discovery has to show that irreparable injury would result without resort to a quick discovery process. It also must show some likelihood of success on the merits, which typically is accomplished through a detailed initial complaint and injunction moving papers. Finally, an employer will need to show that the burden to the responding employee in producing information is outweighed by the harm to the requesting party from not obtaining such discovery.

Parties who state convincing cases for expedited discovery, in fact, often establish in their moving papers as much of the case as they ultimately can prove on their own. It is not uncommon to see detailed affidavits from likely witnesses, along with supporting business documents like e-mails or customer contracts. A prepared employer will tell the court it has done what it can and needs expedited discovery to fill in the gaps, which it cannot be expected to know from firsthand knowledge.

The second standard is more prevalent and is generally known as the "good cause" standard. A court will evaluate whether an employer has demonstrated good cause to depart from the normal discovery schedule. The test is certainly more flexible. Under either test, however, an employer (or enforcing party) needs to demonstrate some specific reason why expedited discovery is sought. In non-compete cases, this reason often is evidence that an employee is soliciting or servicing a specific group of customers or using sensitive business information unfairly.

There are two pitfalls I often see when parties move for expedited discovery.

First, employers often do not narrowly tailor their discovery requests to the issues likely to be at issue during an injunction hearing. If the discovery proposed to be served is too broad, a court almost certainly will deny expedited discovery - or in some cases, indicate which requests for information need to be answered on an expedited basis.

Second, employers sometimes don't make a specific showing of an emergency at all. Vague complaints that sweep too broadly or do not identify for the court why injunctive relief should issue often doom expedited discovery motions. For employers seeking to obtain expedited discovery, it's critical to introduce affidavits early on in the case to demonstrate some likelihood of actually getting injunctive relief.

If a judge sees the potential for a fishing expedition, with only vague conclusory allegations, he or she will deny a request for early, expedited discovery. No judge wants to be burdened with repeated emergency motions for a case that is crawling out of the gate.

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