By now, word is out that Georgia non-compete or non-solicitation agreements are easier for employers to enforce as a result of new laws passed by the state legislature that apply to all contracts entered into after May 11, 2011.
On May 6, 2013, however, the Georgia Supreme Court took the opportunity to restrict the enforcement of non-competition agreements that the parties never actually entered.
What? Run that past me again…
Michael Holton worked as the vice president and chief operating officer of Physician Oncology Services, LP (“Physician Oncology”) from August 2009 through October 2011. In November 2011, Holton accepted employment with a direct competitor of Physician Oncology. Perhaps not surprisingly, a lawsuit ensued, with Physician Oncology seeking to prevent Holton from working for this or any other competitor.
What is surprising, in addition to claims for breach of a non-competition agreement and misappropriation of trade secrets, is a claim made by Physician Oncology on an “inevitable disclosure” theory, claiming that Holton “would inevitably misappropriate, disclose, and misuse” Physician Oncology’s trade secrets and other confidential information.
The inevitable disclosure doctrine allows a plaintiff to prove a claim of trade secret misappropriation by showing that the defendant’s new employment will inevitably lead the defendant to rely on the plaintiff’s trade secrets. The danger of the inevitable disclosure doctrine, of course, is that it imposes a non-competition covenant where one otherwise does not exist. It may also extend the time of a covenant not to compete beyond the time identified by the actual non-competition covenant originally agreed between the parties as trade secrets and certain confidential information may be protected indefinitely whereas restrictive covenants usually have a time limit.
Georgia law unquestionably recognizes claims of both actual and threatened misappropriation of trade secrets, but does it recognize claims for the “inevitable disclosure” of trade secrets? The answer the Georgia Supreme Court provided is… not in all circumstances.
In Michael Holton’s case, the Court clearly established that Georgia does not allow independent claims under the inevitable disclosure doctrine that would allow a Georgia court to prevent an employee from working for another employer or from disclosing a trade secret. What the court did not address is whether the inevitable disclosure doctrine may be applied under Georgia law to support a claim for the threatened misappropriation of trade secrets.
In other words, for those seeking clarity, the good news is that the Georgia Supreme Court restricted the applicability of the inevitable disclosure doctrine in certain circumstances; the bad news is that the Georgia Supreme Court did not clearly state under what circumstances the doctrine does apply under Georgia law.
The inevitable result is that inevitable disclosure doctrine claims will likely continue to arise until the Georgia Supreme Court has the opportunity to revisit the matter and, hopefully, clear up the applicability this cause of action under Georgia law… or at least add a few more puzzle pieces to the overall picture.