A private medical transport service was recently unsuccessful in persuading the U.S. District Court for the Northern Mariana Islands to enter a preliminary injunction prohibiting two ex-employees from competing with and soliciting customers of their former employer. The judge cited Section 188 of the Restatement of Contracts (Second) as authority for denying injunctive relief where the potential harm to the public and the defendants outweighed the likely benefits to the plaintiff. Further, according to the court, the names on the plaintiff’s customer list are not trade secrets. The relevant community is small, and so the names of people likely to need medical transport services are readily determinable. August Healthcare Group, LLC v. Manglona, Case No. 1:12-CVI-00008 (D. Northern Mariana Islands, Oct. 12, 2012).
The plaintiff does business as St. Michael’s Medical Response. Until recently, it provided the only non-public ambulance and medical transportation service in Saipan. All of St. Michael’s workers, including defendants Takai and Pelisamen, signed a “Confidentiality and Non-Disclosure Statement” which contained a confidentiality provision but not a non-competition clause. In addition, Pelisamen signed a “Non-Competition Agreement” (whether Takai signed one was in dispute). Shortly after they signed the Statement and Pelisamen signed the Agreement, Takai and Pelisamen were terminated. Both went to work for Priority Care, a start-up competitor. According to St. Michael’s, before they left its employ the two individuals memorized the names of its customers who they then solicited for Priority Care.
The court observed that because of their specialized skills and the fact that there are no other private ambulance services in Saipan, an injunction would result in “an extreme financial burden” to Takai and Pelisamen. “Furthermore, the public will be harmed if enjoining Takai and Pelisamen from working for Priority Care reduces Priority Care’s ability to serve its customers to the point of removing St. Michael’s only competitor from competition.” Finally, St. Michaels conceded that only three customers had been lost to Priority Care, and so St. Michael’s could calculate its damages.
Pelisamen also challenged the enforceability of the non-compete agreement on the ground that he received nothing of value in exchange for his signature. The court decided to save “the issue of consideration for another day.”
Although this case is pending in a federal court in which few of us practice, the recent opinion contains valuable lessons for all litigants and their lawyers. First, a judge is unlikely to grant an anti-competitive injunction unless the equities weigh heavily in favor of the party seeking injunctive relief. Second, courts scrutinize claims that there is no adequate remedy at law. Third, a party’s credibility with the court may be weakened by filing a motion which is minimally supportable. Consequently, parties filing motions that over-reach risk not only denial of the motion but also jeopardy to their chances for ultimate success in the litigation.