22 F. Supp. 3d 929
E.D. Ark.2014Background
- Plaintiffs Scott Morgan and Chris Morgan are former employees of West Memphis Steel & Pipe, Inc.
- The Morgans signed an Employment, Non-disclosure, and Non-competition Agreement in 2009 that barred them from soliciting West Memphis Steel’s customers for two years after leaving, within 175 miles of West Memphis, Arkansas.
- The Morgans quit in January 2014 and sued for declaratory judgment that the noncompete is overly broad and unenforceable; West Memphis Steel counterclaimed for declaratory judgment that the noncompete and related clauses are valid and enforceable.
- Arkansas law favors restricting noncompetes only to protect a legitimate employer interest, with reasonableness as to scope (geography) and duration.
- The court granted the Morgans’ partial summary judgment, holding the noncompete provisions are unenforceable as written and dismissing the related declaratory-judgment claim; other issues (including nondisclosure and consideration) remain pending.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the noncompete clauses enforceable under Arkansas law as written? | Morgan argues the clauses are too broad and overbroad. | West Memphis Steel argues the clauses protect a legitimate business interest. | unenforceable; summary judgment granted to Morgans on noncompete issue. |
| Do the noncompete clauses reasonably protect the employer’s interests without unduly restraining competition? | Morgan contends the restraint exceeds what is reasonably necessary. | West Memphis Steel contends the restraint is necessary to protect customers. | unenforceable; restraints exceed reasonable necessary scope. |
Key Cases Cited
- Moore v. Midwest Distrib., Inc., 76 Ark.App. 397, 65 S.W.3d 490 (2002) (Ark. App. 2002) (outlines overbreadth of noncompete to protect only necessary interests)
- HRR Ark., Inc. v. River City Contrs., 350 Ark. 420, 87 S.W.3d 232 (2002) (Ark. 2002) (establishes framework for reasonableness of restraints)
- Import Motors, Inc. v. Luker, 268 Ark. 1045, 599 S.W.2d 398 (1980) (Ark. 1980) (noncompete reasonableness and scope considerations)
- Bendinger v. Marshalltown Trowell Co., 338 Ark. 410, 994 S.W.2d 468 (1999) (Ark. 1999) (authorities on restraint of trade and enforceability)
- Counts v. MK-Ferguson Co., 862 F.2d 1338, 1339 (8th Cir. 1988) (8th Cir. 1988) (context on evidentiary standards in summary judgment)
- Inland Oil & Transp. Co. v. United States, 600 F.2d 725, 727 (8th Cir.1979) (8th Cir. 1979) (summary judgment standard and review)