Dave’s Take

As someone who was once sued for $1 million in a ridiculous (from my point of view) non-compete suit, I fully understand the reasoning behind the somewhat paranoid behavior of issuing non-compete contracts. I understand them, but I don’t necessarily endorse them. On one hand, companies need to protect their investments in both products and personnel. On the other, slavery has been against the law with good reason since 1865 (which is how a lot of people view non-compete clauses in employment contracts). They argue that any restraint of employment is tantamount to indentured servitude. Regardless of who’s right, the number of firms using these legalized career binders is on the rise and with it, so is contract litigation.

The latest high profile case to hit the news is one involving a marketing executive from Starbucks who left for the sweeter pastures of Dunkin’ Donuts. In their suit, Starbucks alleges that former employee, Paul Twohig violated his 2004 non-compete clause by accepting a similar position with one of Starbucks’ biggest competitors. They further imply that as result of his new position, Mr. Twohig was directly or indirectly responsible for Dunkin’ Donuts increased competition with Starbucks through aggressive campaigns like the “Dunkin’ Beat Starbucks” taste-test campaign. (I guess they believe that prior to Mr. Twohigs’ arrival, no one at Dunkin’ thought to challenge the market dominance of Starbucks). Really?

As any contract lawyer will tell you, the successful enforcement of a non-compete clause depends directly upon the state in which it is filed. Starbucks is obviously aware of this reality and chose to file suit in Washington as opposed to California, where such suits have proven difficult at best to win. As I mentioned earlier, I was once sued by a previous employer in California, where thankfully, a brilliant judge dismissed it before it ever saw the light of day.

Before you may jump to the conclusion that I was a backstabbing ingrate, allow me to explain the circumstances of the suit. I held a position as Creative Director at a Los Angeles advertising/marketing agency in the 90’s. That agency specialized in direct response campaigns, moving millions of dollars in products ranging from Ginzu knives to sports and beauty merchandise via infomercials. I left their employ for a similar company in Northern California. Thirty days after my departure (which was done without any hard feelings) I was slapped with a million dollar non-compete lawsuit. At the time, my net worth was somewhere in the low four figures, so after the initial shock wore off, I laughed ‘till my sides hurt.

As the case developed, I learned the basis for the non-compete allegation was based upon my previous employer’s unreasonable belief that I used proprietary information gleaned from them for the benefit of my new company. This was confusing to me as I was unaware of any proprietary information given to me. During discovery, it was finally divulged that the info they had provided to me was how to write and produce effective television and radio campaigns. This was ludicrous, as I had been working in TV and radio for several years prior to my job with them.

Needless to say, after proving my past production experience to the court the lawsuit was thrown out. My writing and producing abilities were not company secrets. Still, it was a valuable lesson about signing any kind of a non-compete. A lawsuit started for $5,000 can end up costing the defendant $100,000 regardless of its merits. Thank goodness I was working for a firm that stood behind me and paid for my legal expenses. One can only hope Dunkin’ Donuts does the same for Mr. Twohig.