Nanomech, Inc. v. Arunya Suresh

No. 13-3671
February 6, 2015
Federal Court
8th Circuit
United States Court of Appeals for the Eighth Circuit

On February 6, the 8th Circuit released an opinion finding that a Global Noncompete Agreement was overbroad, and therefore unenforceable. Arunya Suresh began working at NanoMech in 2010, agreeing to the noncompete which was for two years following termination with or without cause, and would have prevented Suresh from working or consulting with any business that competes with NanoMech. The agreement did not state a geographic limitation, and so was presumably enforceable anywhere in the world.

Suresh left NanoMech in May 2012, stating she was going to pursue her doctorate degree. However, NanoMech discovered she had actually accepted a position as a chemist at competitor BASF. At the district court level, NanoMech was unsuccessful in obtaining an injunction against Suresh, and ultimately the 8th Circuit Court upheld the decision.

This sort of global noncompete is frowned upon by most courts, and will often not stand up to the three-part test used in Arkansas (but fairly typical elsewhere), that looks at 1) whether the employer has a valid interest to protect, 2) whether the geographical restriction is overly broad, and 3) whether the time limit imposed is reasonable. In this case, the court ruled the combination of the broad restriction on the things Suresh could not do, considered together with the complete lack of geographic limitation, renders the noncompete overbroad and unenforceable. In the court's words, the lack of geographic limitation was particularly oppressive because the agreement "prohibits her from working in any capacity for any business that competes with the company."

This decision is interesting since Arkansas affords trade secrets particularly strong protection. In fact, Arkansas has previously upheld certain global noncompetes, but as the court pointed out, the restrictions in those cases were far more narrowly tailored as to the prohibited conduct. In both cases discussed, the employees simply couldn't solicit clients with whom they had contact with while employed by their respective former employers. It was this very narrow limitation on what conduct they could not do do that the courts found to justify a lack of geographic limitation in the noncompete agreements.

Colloton
NanoMech
Arunya Suresh
Common Law (Restatement)