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May 16, 2023
6th Circuit Upholds Noncompete Based on Preliminary Injunction’s ‘Flexible Language’

by John T. Below

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A recent decision from the U.S. 6th Circuit Court of Appeals (which covers employers in Kentucky, Michigan, Ohio, and Tennessee) upholding a noncompete agreement with a former employee highlights the need for legal counsel to craft preliminary injunction language that reflects the unique facts of the employee and their new position with the competitor.

Facts

In 2013 and again in 2022, Jafar Abbas entered into noncompete, nonsolicitation, and confidentiality agreements with Stryker Employment Company, LLC, a spinal implant company. Under the Stryker agreement, he was prohibited from rendering services for “any Conflicting Organization in which the services [he] may provide could enhance the use or marketability of a Conflicting Product or Service by application of Confidential Information which [he] had access to during [his] employment” for one year after leaving Stryker.

The agreement defines a “Conflicting Organization” as “any person or organization which is engaged in or about to become engaged in research on, consulting regarding, or development, production, marketing, or selling of a Conflicting Product or Service.”

It defines “Conflicting Product or Service” as “any product, process, technology, machine, invention or service of any person or organization other than Stryker in existence or under development, which is similar to, resembles, competes with or is intended to resemble or compete with a product, process, technology, machine, invention or service upon which” Abbas worked or was knowledgeable about during the last two years of his time with Stryker.

In May 2022, Abbas resigned from Stryker to begin working in a sales role with Alphatec Spine, Inc., a Stryker competitor in the spinal surgery implant industry. In June 2022, Striker filed a lawsuit to prohibit him from working for Alphatec. It also alleged Alphatec was raiding its top sales personnel.

Courts’ Decisions

The U.S. District Court for the Western District of Michigan granted a preliminary injunction prohibiting Abbas from working or rendering services in any capacity for Alphatec. The district court found he worked for Stryker in both finance and sales and that he had persistent and unfettered access to its sensitive customer, sales, and financial information. The court also found the Alphatec projects on which he planned to work were similar to the work he performed at Stryker. He appealed.

On February 16, 2023, the 6th Circuit affirmed the preliminary injunction. The issue on appeal was whether the scope of the preliminary injunction (prohibiting Abbas from working in any capacity for Alphatec) was too broad. Abbas’ argument that the injunction’s noncompete clause was overly broad failed for at least three reasons, the most important of which was the district court’s issuance of a preliminary injunction that explicitly encouraged him to work with both companies to create an agreement that wouldn’t violate the Stryker agreement.

The court also said it would entertain a later request to vacate the preliminary injunction if Alphatec created a new position that Stryker found unacceptable. In other words, the district court crafted a preliminary injunction to preserve the status quo, and it reserved the possibility of considering whether other prospective jobs Abbas might be offered are consistent with the terms of the Stryker agreement.

Secondly, the district court selected the language in the injunction knowing Abbas often worked well beyond the scope of his official position while at Stryker. Thus, the court, in its discretion, used broad language to maintain the status quo.

Third, the injunction enforced only the Stryker agreement—no more, no less. The court rejected Abbas’s argument that the injunction amounted to an industry-wide ban because that didn’t align with the district court’s flexible language approach to preserving the status quo and because the preliminary injunction was, again, consistent with the agreement.

The 6th Circuit also added, “The district court correctly observed that the public interest lies in enforcing contracts,” and “the balance of equities tips in Stryker’s favor because they simply seek to enforce their contractual rights.” Stryker Employment Co., LLC v. Abbas, No. 22-1563 (6th Cir., 2023).

Takeaway

The key takeaway from the Abbas case is just as important as knowing the limits of enforceability of the noncompete agreement at issue: Legal counsel must focus on crafting and proposing preliminary injunction language that reflects the specific and unique facts of the employee and the new position with the competitor.

John T. Below is an attorney with Bodman PLC in Troy, Michigan, where his practice is concentrated in resolving employment, complex financial services and general commercial disputes. John’s primary area of litigation and dispute resolution expertise is state and federal litigation of employment law matters. You can reach him at jbelow@bodmanlaw.com.

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