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Donati Law, PLLC Celebrates Big Win in Non-Compete Appeals Case

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Donati Law, PLLC recently celebrated a big courtroom victory in an appeals case involving an employer who sued an ex-employee for violations of a non-compete agreement. Our client, John J. Davis, was an employee of Johnstone Group, Inc. (JGI) in 1998 as a real estate appraiser. When he started, he had no experience in the industry, but worked with JGI’s owner to become a Tennessee licensed Certified General Real Estate Appraiser. As a condition of his employment, he signed a non-compete agreement that contained provisions for non-competition and reimbursement of training costs. He then completed 180 hours of classroom training (paid for out of his own pocket) and another 3,000 hours of practical experience. In 2005, he was asked to sign a new employment agreement with a non-competition clause, but which did not contain any language about reimbursement of training costs.

In April of 2015, Mr. Davis submitted notice of his intent to leave JGI to work for a competing appraisal group. JGI responded by sending Mr. Davis and his prospective new employer notice that should he begin working for the competitor, he would be in direct violation of the agreement he signed in 2005. Mr. Davis filed a lawsuit asking the court to declare the non-competition provision unenforceable on the grounds that JGI did not have a legitimate business interest that is properly protectable by a non-compete provision, and that JGI did not provide him with any training that went above and beyond industry standards and which would give him an unfair advantage over them. Furthermore, he argued that he had not been given access to any trade secrets or confidential information justifying the non-compete requirement.

JGI filed a counter-complaint claiming that everything that they had taught Mr. Davis was proprietary knowledge unique to JGI. They also claimed that because of the office’s small size, Mr. Davis had essentially become the face of the business, a claim which Mr. Davis denied. The trial court entered an order in favor of Mr. Davis and denied JGI’s cross-complaint for damages and injunctive relief.

JGI appealed the case to the Court of Appeals of Tennessee at Jackson asking for clarification of the following issues:

  • Is the type of training Mr. Davis received worthy of protection by a non-compete agreement?
  • Must an employer’s training be unique to the industry in order to qualify as a legitimate business interest?
  • Is the not-to-compete agreement enforceable?
  • Did the appellee’s move to another business cause irreparable harm to the appellant?

The appeals court concluded that there was no evidence that JGI’s method of appraising properties was unique or secret, or that it would give Mr. Davis any sort of advantage at other firms. They also found that Mr. Davis did not have any special relationships with prior customers or that he had a customer list that he serviced exclusively; i.e. nothing that would indicate that he would have some competitive advantage should he leave JGI. Therefore, the court affirmed the trial court’s order and declined to issue injunctive relief to JGI. This decision is significant because the court determined that there were no special facts present over and above ordinary competition or any legitimate protectable business interests to warrant enforcement of the non-competition agreement.

This case was a huge win for our firm and for our client. Donati Law, PLLC has handled numerous non-compete cases, including those involving unreasonable agreements and non-enforceable agreements which do not contain protectable business interests. If you need assistance with your non-compete case, please contact our firm to schedule a consultation.

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