Update, Inc. v. Samilow
311 F. Supp. 3d 784
E.D. Va.2018Background
- Update, Inc. (plaintiff) provides eDiscovery and legal-staffing services; Lawrence Samilow (defendant) was Chief Customer Officer with company-wide client knowledge.
- In July 2017 Samilow signed an Employee Nondisclosure and Assignment Agreement containing a 1‑year non‑solicit and 1‑year non‑compete, each limited to customers/competition within 50 miles of any Update office or customers with whom he had contact.
- Samilow left Update in January 2018, formed Samilow Harvest Group, and solicited/received work from former Update clients (Lowenstein Sandler, Porzio, Teligent).
- Update sued for breach and moved for a preliminary injunction to enjoin Samilow from soliciting Update customers and competing in violation of the agreement.
- The court held a hearing, received briefing, and assessed the four Winter preliminary‑injunction factors under Virginia law governing enforceability of restrictive covenants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of non‑compete/non‑solicit under Virginia law | Covenants are narrowly tailored by duration (1 year), geography (50 miles from Update offices), and functional scope (limited to services in defendant’s job description) and thus protect legitimate business interests | Clauses are vague/ambiguous (undefined terms, misplaced modifiers), contain an invalid "blue pencil" clause, and were signed under economic duress | Court: Covenants are enforceable on this record; language given ordinary meaning, not reasonably susceptible to defendant’s readings, and blue‑pencil clause does not invalidate the covenants |
| Likelihood that defendant breached covenants | Samilow solicited and diverted Update clients shortly after departure and provides similar services within the restricted area | Argues Update abandoned markets and therefore suffered no harm; disputes interpretation of covenant scope | Court: Evidence shows Samilow solicited Lowenstein, Porzio, Teligent and diverted business; likelihood of breach established |
| Irreparable harm from diversion of clients | Loss of customers and goodwill is actual and may be difficult to fully compensate; risk of permanent customer loss supports irreparable harm | Monetary damages could compensate lost transactions; alleged market abandonment negates harm | Court: Irreparable harm shown (present diversion and risk to future business); monetary damages inadequate |
| Balance of equities and public interest | Protecting contractual expectations and preventing misuse of confidential client relationships favors Update | Enforcement impairs defendant’s ability to earn a living; non‑competes disfavored as restraint on trade | Court: Equities and public interest favor a preliminary injunction pending resolution on the merits |
Key Cases Cited
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) (four‑factor preliminary injunction standard)
- Di Biase v. SPX Corp., 872 F.3d 224 (4th Cir. 2017) (preliminary injunction standards application)
- Richardson v. Paxton Co., 203 Va. 790 (Va. 1962) (three‑part test for enforceability of restrictive covenants)
- Assurance Data, Inc. v. Malyevac, 286 Va. 137 (Va. 2013) (employer may justify seemingly overbroad restraint by factual context)
- Simmons v. Miller, 261 Va. 561 (Va. 2001) (noncompete clauses disfavored; consider function, geography, duration)
- Advanced Marine Enterprises, Inc. v. PRC Inc., 256 Va. 106 (Va. 1998) (upholding fifty‑mile geographic restriction)
- Multi‑Channel TV Cable Co. v. Charlottesville Quality Cable Operating Co., 22 F.3d 546 (4th Cir. 1994) (loss of customers and goodwill can constitute irreparable harm)