IT contractor wins noncompete case

A Fairfax judge has awarded $172,395 to an information technology company whose former subcontractor went to work for a competitor days after leaving the plaintiff company.

The plaintiff, Preferred Systems Solutions Inc., had a contract with the federal government for information technology work. PSS entered into a subcontract with GP Consulting LLC in October 2003 for consulting services on SAP business management software for the Defense Logistics Agency’s enterprise resource planning.

Sreenath Gajulapalli is the sole member and manager of GP Consulting, according to an opinion by Fairfax Judge Terence Ney in Preferred Systems Solutions Inc. v. GP Consulting LLC (VLW 011-8-159).

The subcontract’s covenant-not-to-compete barred GP from contracting with Accenture LLP, a competitor of PSS, or DLA to work on the agency’s efforts to modernize its business systems. The term of the noncompete was 12 months.

Four days after terminating the contract in February 2010, GP began working for Accenture performing the same duties that it had previously performed for PSS, according to the opinion.

“The covenant not-to-compete provision is very narrowly drawn,” Ney wrote. “It prevented GP from working for only two specific companies, namely Accenture and DLA. It proscribed this competition for only a specific period, namely one year. It was also specific as to what type of work was to be prohibited.”

Ney cited testimony that there were between four and five hundred SAP programmer jobs within the metropolitan Washington area when GP went to work for Accenture. The testimony showed there was no undue burden or restraint on GP, he said.

Gajulapalli testified under cross-examination that he “went to work for Accenture on the same DLA project, at the same desk, at the same computer, and on the same problems,” Ney wrote.

The court denied an injunction barring GP from violating the covenant for 12 months from the date of his judgment. PSS could have asked for an injunction immediately after the violation, but did not, Ney said. More than a year has passed and the award of damages had protected PSS’s legitimate business interest.

Bernard E. Goodman, the Vienna attorney who represented PSS, said GP argued the covenant did not apply because the company went to work on a different procurement program after the one with PSS ended.

Goodman acknowledged the tasks in the new program were different and had different goals, but he said the work involved the same or similar services.

GP’s attorney Milton C. Johns of Manassas, did not respond to a request for comment. Goodman said a request for reconsideration is pending.