Court: Injunction Denied in Statewide Non-Compete

Case: Wings, LLC v. Capitol Leather, LLC, Case No. CL-2014-9 (Fairfax March 6, 2014)

Wings, LLC, a company in Gainesville, Virginia, provides vinyl, fabric, and leather repair services. Most of their customers are auto dealerships and collision center who 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 are independent contractors, and later, as employees. They had signed a non-compete, which read:

Employee…for a twenty-four (24) month period immediate 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 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 (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) is likely overbroad. Applied literally, the technicians would be prohibited from repairing car interiors in Abingdon, Virginia, more than 150 miles from Wings’s nearest customer in the Washington, D.C., area. Such an overly broad geographic restriction unduly restricts the ability of the technicians to earn a living, and therefore, Wings’s request was denied.

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. However, every contract is different. The outcome of a non-compete dispute often depends on the industry, jurisdiction, terms of the contract, and other factors.

 

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