Use Non-Compete Agreements for Key Managers

A word of caution to Orlando breach of contract attorneys.  The case of Cargill Coporation v. Kuan, 1:2014cv02325 (Dist. Ct. Colo.) vividly illustrates why businesses should have their key managers and executives sign a non-compete and non-solicitation agreement, so they aren’t limited to a breach of contract suit if things go wrong.

Mr. Kuan worked for Cargill for 20 years, ending his tenure as the company’s “case ready” meat unit manager over the Americas.  (Case ready meat comes prepackaged so it’s simply shipped to the store and put in the meat case ready for sale).  The company became suspicious after Mr. Kuan abruptly quit and alleged that a forensic analysis of his company owned laptop showed that he downloaded hundreds of sensitive documents onto an external hard drive before he resigned.  He then accepted employment at the same position with JBS, SA, the largest food processing company in the world.

Mr. Kuan never signed a noncompete agreement so Cargill was limited to suing him for breach of contract, breach of fiduciary duty, and violations of the Uniform Trade Secrets Act.  Cargill sought an injunction prohibiting Mr. Kuan from working for JBS, SA for one year, and to recover monetary damages and attorney’s fees.

Mr. Kuan answered the complaint by alleging that the preparation of meat is common knowledge that cannot possibly constitute a trade secret, and that he simply downloaded the documents in dispute to his hard drive to avoid technical problems and planned to return the documents after he quit.  He alleged he was prevented from returning the documents as the company filed an “instant lawsuit” when he resigned, but he did return all the documents to Cargill shortly after his resignation.

Cargill’s motion seeking a one year injunction against Mr. Kuan preventing him from disclosing the alleged trade secrets was subsequently denied by the court.  Although Cargill can still seek permanent injunctive relief after trial, it’s difficult to “unring the bell” once the court has ruled against you on preliminary injunctive relief.

Now both companies are engaged in full fledged litigation when the entire dispute could have been avoided by simply having Mr. Kuan sign a non-compete agreement when he was employed with Cargill.  Such agreements typically prohibit a key manager from taking the same job with a competing business for a period of time between 2 and 5 years, depending on the particular facts and circumstances of the person’s employment.  Non-compete agreements are enforceable contracts in Florida (in fact, Florida non-compete law is very business-friendly) and in most jurisdictions in the United States.

To protect your business, ensure that key managers and executives of your company sign:

A non-compete agreement;

A non-solicitation agreement;

A confidentiality agreement; and

An assignment of invention agreement (so all inventions are assigned to the employer).

Click to read more about this non-compete and Orlando breach of contract story.

 

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