A recent case from the U.S. Court of Appeals for the Tenth Circuit, First American Title Insurance v. Northwest Title Insurance Agency, no. 17-4086, illustrates nicely the complicated issues faced in noncompete litigation, and the risks a good agreement can prevent. Although the case arose in the U.S. District Court for the District of Utah, the issues confronted and legal principles cited arise frequently under Pennsylvania law.

The individual defendants were employed by First American Title Insurance Co., and had signed various restrictive covenants of one year in duration. All individual defendants were subject to a code of ethics and employee handbook that required employees to use office equipment for company business only, and barred outside activity competing with First American. First American Title Co. acquired the stock of First American Title Insurance Co. pursuant to a stock purchase agreement. Defendant Mike Smith created defendant Northwest Title Insurance Co., and then quit his job with First American. The day after Smith resigned defendants Kristi Carrell and Jeff Williams resigned and all individual defendants took positions at Northwest Title Insurance Co., along with 25 other employees over the next two weeks. Litigation ensued, and the defendants suffered a large jury award at trial.

  • File petitions for preliminary injunction early, and make sure to have a tolling provision in the agreement.