No preliminary injunction in non-compete case

A non-compete between a recruiting company and its former senior talent acquisition manager is enforceable, but the company lost its bid for a preliminary injunction because it failed to show all four necessary elements, a Fairfax Circuit judge has ruled.

Plaintiffs seeking a preliminary injunction must prove that they are likely to succeed on the merits; that they are likely to suffer irreparable harm in the absence of preliminary relief; that the balances of equities tip in their favor; and that the injunction is in the public interest.

“While the Court is convinced that [the company] is likely to succeed on the merits, it is not convinced that [the company] has sufficiently proved that it has suffered irreparable harm or that the balance of equities tip in its favor,” Judge Robert J. Smith said in denying the request for a preliminary injunction. 

The case is Zachary Piper, LLC v. Popelka (VLW 021-8-125).

Cybersecurity recruiting

Zachary Piper LLC, or ZP Group, is a recruiting company working with clients in IT, government contracts, cybersecurity and life sciences. Courtney Popelka was a senior talent acquisition manager in ZP Group’s Crysis Group. 

Because cybersecurity recruiting is a competitive field, Popelka signed a non-competition agreement, stating she would not compete with ZP Group for 12 months after her employment ended. The agreement also barred working with ZP Group’s prospective customers, defined as “any person or entity to which the Company Group has developed or made a sales presentation (or similar offering of services) during the two (2) years preceding your last date of affiliation with the Company Group and about which [employee] obtained Confidential Information through [her] affiliation with the Company Group ….”

After working with ZP Group for three years, Popelka was promoted and required to sign another 12-month non-competition agreement.

ZP Group sold Crysis to Palo Alto Network, and Palo Alto contracted with ZP Group to have Popelka lead the transition team for three months. As part of the transition, ZP Group gave Palo Alto the candidate database it used in its recruiting efforts.

ZP Group expected Palo Alto would pursue a more permanent services contract with ZP Group. Popelka, however, resigned from ZP Group and began working for Palo Alto.

ZP Group sued Popelka for breach of contract and sought a preliminary injunction to bar her from working for Palo Alto “in a manner that violates her contractual obligations” to ZP Group.

Merits

Popelka claimed the non-compete provision in the restrictive covenant agreement was unenforceable because it was ambiguous and overbroad.

A non-compete will be enforced if it is narrowly drawn to protect the employer’s legitimate business interest, is not overly burdensome on employee’s ability to earn a living, and is not against public policy. Any ambiguities will be construed in the employee’s favor, and courts must factor in the function, geographic scope and duration components of the restriction.

“In this case, the Non-Competition Clause prevents Ms. Popelka from ‘directly or indirectly, solicit[ing], diverg[ing], appropriat[ing], attempt[ing] to solicit, divert or appropriate or provid[ing] services … that are directly competitive with the services’ that [she was] engaged in providing on behalf of any Company Group entity to any Customer or Prospective Customer of the Company,’” Smith said. “Although the Non-Competition Clause has no geographic limitation, it lasts only for twelve months.” 

The judge noted that the Virginia Supreme Court found the restrictive covenant in Preferred Systems Solutions, Inc. v. GP Consulting LLC was enforceable because its duration was limited to 12 months and it was narrowly written even though there was no geographic limitation.

“In this case, the non-compete provision has no geographic scope but is limited to a narrow list of third parties — customers and prospective clients,” Smith explained. “The restrictive covenant at issue in this case, when viewed in the context of the facts of this record, meets the three-part test for the validity of such covenants.”

As such, the contract is enforceable.

Irreparable harm

ZP Group claimed a preliminary injunction was necessary because Popelka’s breach did “significant and irreparable harm” to the company’s current and future business interests.

But Smith said ZP Group “has not pointed to a single prospective customer — other than Palo Alto — where the relationship was broken due to Ms. Popelka’s leaving. There is no evidence of customers expressing dismay because Ms. Popelka left the employ of ZP Group.” 

ZP Group also handed over its candidate database to Palo Alto willingly. Popelka took no confidential information that ZP Group hadn’t already released, and the company can still use the database.

 The judge added that ZP Group had no contract with Palo Alto past the three-month agreement and there was no guarantee that ZP Group would be hired to recruit for Palo Alto full time.

Since ZP Group showed no evidence of actual damages, it “failed to meet its burden of showing that it is likely to suffer irreparable harm in the absence of preliminary relief.”

Balance of equities

Smith said it was unclear what the company would stand to lose if Popelka stayed at her job at Palo Alto. ZP Group was still using the candidate database and they hadn’t named any client they would lose if she continued to work for Palo Alto.

“On the other hand, if the preliminary injunction is granted, ‘Ms. Popelka stands to lose her job’ and ‘she’ll face a significant uncertainty in finding future employment,’” Smith wrote. “Additionally, Ms. Popelka needs her employment to be able to pay the attorney’s fees as noted in the ‘Injunctive Relief and Legal Fees’ provision in the noncompete agreement.”

As such, the balance of the equites “tip heavily” in Popelka’s favor, Smith said.

Public interest

Finally, the judge said Virginia courts have frequently found that non-compete provisions are not against public policy if they are not overbroad or overly burdensome.

“This Court has already determined that the contract is on its face enforceable, and therefore enforcing it would be in the public interest,” Smith said.