The Northern District of Ohio recently refused to grant a Temporary Restraining Order (TRO) or Preliminary Injunction against an employee for allegedly violating a non-compete because the court said the agreement was written in the disjunctive. Alloy Bellows & Precision Welding Inc., v. Cole, Case no. 1:15CV494 (N.D. Ohio, April 22, 2016).
The claim was brought by Ohio corporation Alloy Bellows that manufactures “bellows assemblies,” which are highly specialized components of machines used in aerospace, heavy equipment, medical, nuclear, petrochemical, power generation (gas turbine) and semiconductors. Its former business development manager, Defendant Jason Cole, took a job with one of Alloy Bellows’ top competitor, Senior Flexonics. It was undisputed that his position with Senior Flexonics was “virtually identical” to the one he had with Alloy Bellows.
The Company sued Mr. Cole, arguing he violated his non-compete, which he signed when he was employed with Alloy Bellows. Although there was some issue in the case regarding whether the non-compete agreement was properly executed, the Court found that even if it had been, Alloy Bellows still could not prove a likelihood of success on the merits given the terms of the agreement.
Specifically, the non-compete read:
“Either during your working relationship with Alloy Bellows, or for a period of two(2) years after your working relationship and/or severance period ends with Alloy Bellows, you agree and accept that you shall not, (I) directly or indirectly engage in any business that completes (sic) with Alloy Bellows in any way in North America….”
(emphasis added). Focusing on the words “either” and “or” the court found that the language was “disjunctive.” That is, a plain reading of the agreement meant that Mr. Cole was prohibited from competing with Alloy Bellows either while he worked for them or after he stopped working for them, but not both. Because there was no allegation he competed with Alloy Bellows while he worked for them, it could be argued that he did not violate the express terms even if he competed with Alloy Bellows after he left its employ.
The court found the intent of the parties to be critical and that, although a different interpretation was possible, this was a question of fact that could not be determined during the TRO and preliminary injunction stages. Therefore Alloy Bellows could not show by clear and convincing evidence a substantial likelihood of success on the merits.
Although it is impossible to believe that the parties really intended to permit — under any circumstances — for Mr. Cole to be able to compete against Alloy Bellows after his employment terminated, the express terms of the non-compete gave the court the leeway to deny preliminary injunctive relief. Simply put, this case underscores the importance to employers of having experienced legal counsel draft a clear and concise non-compete agreement that does what the employer intends it to do. Otherwise, employers may find themselves in the same position as Alloy Bellows — facing a lengthy and expensive pretrial schedule while a key employee continues to work for their competitor.