An employee who leaves a company to work for a competitor can run into a hornet’s nest of legal problems. The latest example of this classic fact pattern involves William Georgelis, a sales manager for building material manufacturer CPG International LLC. After more than 10 years at the company, Georgelis pursued an opportunity at CPG’s competitor Snavely Forest Products. In his job transition, Georgelis did some things that were potentially problematic:
- He gave a presentation for Snavely executives showing CPG slides with the CPG logos removed—without CPG’s permission.
- In the days leading up to the presentation, he accessed a disproportionately large number of accounts from CPG’s Salesforce database in regions where CPG and Snavely compete.
- He copied more than 100 CPG documents onto a flash drive and plugged it into a Snavely computer on the day of his presentation.
Compounding Georgelis’s problems, he signed a non-compete with CPG effective for two years after termination. After he left to work for Snavely, CPG promptly sued him in the District Court for the Middle District of Pennsylvania for breach of the non-compete, trade secret misappropriation, and unfair competition.
The court found that, under Ohio law (and relying on the inevitable disclosure doctrine to support the element of irreparable harm), Georgelis violated the non-compete and entered a one-year permanent injunction preventing him from selling products that compete with CPG’s within same mid-Atlantic territory in which he had worked. The court’s rationale in defining the scope of the injunction is quite informative:
- Geographic Scope: The court found the geographic scope of the injunction reasonable since Georgelis had access to and developed confidential sales strategies, and cultivated relationships with customers in the mid-Atlantic territory, an area where Snavely does compete with CPG for customers.
- Market Definition: Georgelis could still work in the building material industry in the region, and he can even continue working for Snavely as long as he is selling products that do not compete with CPG.
- Duration: Two years is too long to bar Georgelis from competing, since one year would give CPG enough time to shore up customer relationships that had been managed by Georgelis without unreasonably burdening his ability to make a living.
The court then found that CPG did not establish trade secret misappropriation, since there was no evidence that confidential CPG files were misused or provided to Snavely. Furthermore, the slides that Georgelis plagiarized and presented to Snavely were routinely displayed in public and are not trade secrets. The court also found that Georgelis did not act with malice; he was just trying to benefit himself and his family. The court disposed of the unfair competition claim on similar grounds.
Georgelis emerged from the litigation relatively unscathed, but his tale presents yet another lesson that one has handle a former employer’s confidential information with great care, and there are many ways to go wrong. And though non-compete agreements can be enforceable depending on the circumstances (and the jurisdiction), court will usually give them a reasonable scope so as not to overburden the affected individual’s livelihood.