Court: Injunction Denied in Statewide Non-Compete

Case: Wings, LLC v. Capitol Leather, LLC, 88 Va. Cir. 83 (Fairfax 2014)

Wings, LLC, a company in Gainesville, Virginia, provides vinyl, fabric, and leather repair services. Most of their customers are auto dealerships and collision centers that hire Wings to repair car interiors.

Wings employed technicians to service customers in defined geographic territories. Wings has customers in the metropolitan Washington, D.C., area, including Northern Virginia, southern Maryland, West Virginia, and D.C.

In this case, Wings sued two former technicians who left the company to join a competitor. The technicians had worked for Wings first as independent contractors and later as employees. They had signed non-compete agreements that read:

Employee…for a twenty-four (24) month period immediate[ly] following termination of Employee’s employment…will not be directly employed in a position that is the same, or substantially the same, as an employment position held by Employee with Employer…with a business engaged in providing material, labor, or services that compete…[with those] provided by Employer…within any state of the United States or country outside the United States in which…Employer has conducted or conducts business… .”

Wings sought a court order (i.e., an injunction) prohibiting the technicians from working for a competitor or servicing any of its customers. They produced evidence that the technicians were competing for customers.

The court denied Wings’ request for an injunction. Under Virginia law, a non-compete must be reasonably limited in duration, function, and geographic scope.

Here, the geographic scope (any state in the United States where Wings does business) was considered overbroad. Applied literally, the technicians would be prohibited from repairing car interiors in Abingdon, Virginia, more than 300 miles from where Wings conducted business in the Washington, D.C. area. Such an overly broad geographic restriction unduly restricted the ability of the technicians to earn a living, and the Court denied Wings’s request to prohibit them from working outside a reasonable geographic scope.

Bottom Line: Courts are reluctant to enforce non-competes that cover an entire state, when the company itself only does business in a small corner of the state. The outcome of a non-compete dispute often depends on the industry, jurisdiction, terms of the contract, and other factors.