Ohio Court Rejects Use of Inevitable Disclosure Where No Non-Compete Present

Posted: Wednesday, December 31, 2008

By: David M. Kight

Topic: Inevitable Disclosure

The Ohio Court of Appeals has overturned an injunction entered against a former employee of a gardening products company finding that the former employer had failed to establish proof of any improper conduct and did not have a non-compete agreement.  In addition, the Court rejected the employer's attempt to use the doctrine of inevitable disclosure as a basis for the injunction.  Hydrofarm, Inc. v. Orendorff, 2008-Ohio-6819 (Dec. 23, 2008)

The plaintiff, Hydrofarm, did not have an employment agreement with Orendorff.  When Orendorff left the company in November, 2005, he executed a separation agreement in which he agreed not to disclose confidential information.  Eighteen months later, Orendorff was hired by a competitor, Sunlight.  Sunlight was a direct competitor and Orendorff was working in a position substanstially similar to his position with Hydrofarm.

Hydrofarm sued Orendorff alleging breach of contract, unfair competition, and other tort claims.  Hydrofarm sought damages and injunctive relief.  Orendorff counterclaimed alleging tortious interference with a business relationship and other tort claims.  Hydrofarm sought a temporary restraining order and preliminary injunction requiring Orendorff to work for his new employer.  After a one week temporary restraining order, the court set the matter for an evidentiary hearing on the motion for preliminary injunction.  Court issued a preliminary injunction for six months preventing Orendorff from being employed by Sunlight or any competitor and directing Orendorff not to disclose confidential information or trade secrets.  Orendorff appealed.

On appeal, the issue before the court was whether or not in the absence of a non-compete agreement, a former employee could be enjoined from working for a competitor under the doctrine of inevitable disclosure.  The doctrine of inevitable disclosure provides that an employee with specialized knowledge who commences knowledge with a competitor may constitute a sufficient basis for harm to grant a temporary restraining order or preliminary injunction.  Typically, this has been used to address conduct taking place while a non-compete agreement is still in place.  This case, however, dealt with the use of this doctrine where there was no non-compete in place.

Ultimately, the Court reversed the trial court and threw out the injunction. In doing so, the court ruled that there was no non-compete agreement, and Orendorff did not have timely, sensitive strategic or technical information that posed a serious threat to Hydrofarm.

Note:  If you chose not to have a non-compete agreement and chose not to have a separation agreement which addresses competitive behavior, you will have a very tough road ahead if you want to stop a former employee from working for a competitor.