2016 Ohio 3285
Ohio Ct. App.2016Background
- AK Steel and ArcelorMittal are competing steel manufacturers; Keith Howell was AK Steel’s Senior Vice President of Operations with 18 years’ service and access to confidential strategic, pricing, and operational information.
- Howell signed an Executive Officer Severance Agreement that provided severance pay in exchange for a worldwide noncompete prohibiting employment with a competing steel manufacturer for one year after termination.
- Howell resigned June 12, 2015 to accept a COO position with ArcelorMittal; AK Steel sued Howell and ArcelorMittal seeking to enforce the noncompete and obtained a TRO; a three-day evidentiary hearing on a preliminary injunction followed.
- The trial court found AK Steel likely to succeed on the merits but concluded the one-year restriction was unduly burdensome and modified the noncompete to six months before granting preliminary injunctive relief.
- AK Steel appealed the modification; the appellate court reviewed the Raimonde reasonableness factors (protect employer, undue hardship to employee, public harm) and the preliminary injunction standards.
- The appellate court reversed the trial court, holding the record supported a one-year restriction given Howell’s access to time-sensitive confidential pricing/contract information and his substantial alternative resources (retirement, signing bonus), so one year was not an undue hardship.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred by reducing Howell’s one-year noncompete to six months when granting preliminary injunctive relief | AK Steel: one-year worldwide restriction is reasonable and necessary to protect confidential, time-sensitive business information; AK Steel likely to succeed on merits | Howell/ArcelorMittal: one-year restriction imposes undue hardship and is broader than necessary; six months is reasonable | Reversed: appellate court held the trial court abused its discretion in modifying the covenant; one-year restriction was reasonable and not unduly burdensome |
Key Cases Cited
- Raimonde v. Van Vlerah, 42 Ohio St.2d 21 (1975) (establishes three-part reasonableness test for noncompete covenants)
- Wall v. Firelands Radiology, Inc., 106 Ohio App.3d 313 (1995) (court must find more than mere hardship to declare covenant an undue hardship)
- Robert W. Clark, M.D., Inc. v. Mt. Carmel Health, 124 Ohio App.3d 308 (1997) (cautions courts against rewriting contracts and stresses strict application of Raimonde)
- Freeman Indus. Prods., L.L.C. v. Armor Metal Grp. Acquisitions, Inc., 193 Ohio App.3d 438 (2011) (standard of review: appellate court will not disturb grant of preliminary injunction absent abuse of discretion)