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Non-Compete Contracts and Declaratory Judgement in Virginia

Non-Compete Contracts and Declaratory Judgement in Virginia

Virginia employees have a right to ask a court to declare that their non-compete contract is overbroad and unenforceable.

In order to invalidate a non-compete contract, the employee can preemptively file a legal action for “declaratory relief.” A declaratory judgment action can be filed in state or federal court. The parties will exchange discovery, and then the court will hold a hearing. In the end, the court will declare whether the non-compete agreement is valid or invalid as a matter of law.

If you are considering leaving your employer to start a competing company, then a declaratory judgment action might be a legal option to avoid compliance with an otherwise overbroad contract.

Here’s how the Fairfax Circuit Court recently handled a request for declaratory relief in a non-compete case.

In 2010, three IBM employees were terminated. All had worked in IBM’s Herndon, Virginia, office. One of the employees, Robin Tomlin, filed a complaint seeking, among other relief, a declaration that her non-compete contract was invalid.

IBM moved to dismiss the complaint, arguing that Ms. Tomlin lacked standing to bring a declaratory judgment action.

Under Virginia’a Declaratory Judgment Act, there must be an actual controversy existing between the parties before a petition for declaratory relief may be heard. Va. Code Section 8.01-184. The controversy must be “justiciable, that is, where specific adverse claims, based on present rather than future or speculative facts, are ripe for judicial adjustment.” City of Fairfax v. Shanklin, 205 Va. 227, 229 (1964).

IBM argued that there was no actual controversy over the non-compete between the company and Ms. Tomlin because she was not yet working for a competitor, nor had she requested a release fro the non-compete.

The Fairfax Circuit Court agreed. Ms. Tomlin likely met one of the elements; the claim was justiciable, in that the Fairfax Circuit Court was empowered to judge whether the non-compete was overbroad as a matter of law – and release Ms. Tomlin from complying with the non-compete. But she did not allege sufficient facts to show an actual controversy.

The Court cited a prior decision in the Fairfax Circuit Court where an employee’s stated desire to practice in the area restricted by the non-compete agreement was enough to create an actual controversy. Graves v. Ciraden, Inc., 65 Va. Cir. 127 (Fairfax 2004) (denying a company’s motion to dismiss a declaratory judgment action seeking to invalidate a non-compete). In Graves, the employee specifically pleaded that he wishes to terminate his relationship with his employer and to compete within the restricted area.

In Ms. Tomlin’s case, however, she had not pleaded a desire to engage in activities in violation of the non-compete agreement. Her allegations were non-specific. She alleged in her complaint that her “current and ongoing efforts…to conduct her trade and profession, including within the Commonwealth of Virginia, are in conflict with the stated limitations of the non-compete agreement.” But she did not say whether she intended to violate the non-compete, or if she presented a request to IBM to release her from the non-compete.

Accordingly, the Fairfax Circuit Court granted the defendant’s motion to dismiss the count for declaratory judgment relief. The plaintiff must show that there is an actual controversy, i.e. dispute, over the non-compete in order to bring a declaratory judgment action to invalidate the contract.

Key Takeaways for Non-Compete Cases

Virginia employees can ask a court to invalidate their non-compete agreements. But it is important to carefully draft the complaint and allege enough facts to show that there is a justiciable and actual controversy. 

Download: Robin Tomlin et. al v. International Business Machines Corp. et al. (Fairfax 2012)

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