Parties to non-competition litigation often wonder: how much information will the parties exchange (called “discovery”) prior to trial of the claims or defenses? UPDATE: on April 23, 2024, the Federal Trade Commission (FTC) banned all noncompete agreement enforcement in the US, subject to review through the courts, however. Click here for more.
Common Example
Let’s say your former employer sues you for violating a work restriction agreement (allegedly). Does this mean the employer can take the depositions of all your family, friends, and co-workers at your new job, to evaluate whether the parties had truly violated any part of the agreement?
The answer: it depends.
The Type of Relief Request Matters
If the Plaintiff seeks an emergency injunction — meaning, an immediate cessation of competition by the defendant-employee — the court will schedule a hearing fairly quickly: within a month or two. This severely limits the scope of discovery and will make it nearly impossible for extensive discovery (meaning there will be almost no depositions) ahead of the hearing. If, however, the request is for a “permanent” injunction (or for the length of the non-compete), there will be more time for investigation.
Plus, if the work restriction agreement is enforceable, the employee will owe the employer a period of non-competition per the agreement; this period starts after litigation and discovery conclude. So, for example, if the restriction is for three years and the Plaintiff wins in court — the Defendant will owe the Plaintiff a full-three-years of non-competition starting when litigation concludes. This allows for significant discovery to take place, but the question is, how much is “too much”?
Can they take the depositions of all your family, friends, and co-workers at the new job?
Allowed Discovery
Let’s start with what discovery that courts always allow.
Every judge will allow the parties to exchange written requests and possibly record each other’s depositions to get key background information. Was there a “meeting of the minds” and consideration for the non-compete? Did the defendant-employer’s conduct and employment for a new employer truly amounted to “competition”? The parties can also ask: how important is the restrictive clause to protect the employer’s business interest, as weighed against the employee’s need to earn a living working elsewhere?
But what about depositions of non-parties: family friends, co-workers on the key questions or on collateral matters?
The Liberal Standard of Discovery in PA State Court Has Limits
The Pennsylvania state rule is extremely broad. 231 Pa. Code § 4003.1 provides:
Scope of Discovery Generally.
[With few exceptions] … a party may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party
In fact, the per Pa. Rule of Civil Procedure 4003.1(b), a party may ask about things not admissible in court. “It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.” 231 Pa. Code § 4003.1.
But here’s the catch.
The State Court Judge Reigns Supreme — There’s No Jury
A claim to enforce a noncompete agreement is decided — from start to finish — by a judge, not a jury. This is because a claim for non-compete enforcement involves an injunction, which only a judge (not a jury) can order, relating back to merry ol’ England.
Thus, in a noncompete case, the judge controls everything: from the timing of trial, to the deadlines to respond to discovery, and also the scope of allowable discovery. Therefore, the judge assigned to your case will determine whether, for example, the Plaintiff-(former employer) can ask the defendant’s (former employee’s) friends if the Defendant ever admitted to them to violating the non-compete. Most likely, the judge’s experience will guide her from allowing such an unnecessary “fishing expedition,.
Remember: the judge in a work restriction case decides whether the non-compete will be enforced. So she’ll know upfront what evidence she actually needs to decide the case; she can thus exclude discovery into the rest, as having little true value.
Know Thy Judge
Fortunately, many judges — including the Honorable Christine Ward in Allegheny County — post online their own special “standard operating procedures.” For example, although not required by PA’s Rules of Civil Procedures, Judge Ward requires attorneys to confer, prior to presenting a motion to compel the production of evidence in discovery. In other words, your lawyer may say to the other lawyer: hey, before we bother the judge, are you really going to withhold the evidence? Or, you want to ask that? Do you think this judge will allow it? Come on, already!
Special Rule in Federal Court Regarding Discovery Work Restriction Cases
In federal court, the same concepts (above) apply, meaning, the judge controls everything about the case, start to finish. Only, in federal court, there’s a special limit on discovery. The court’s look at something called “proportionality.” In other words, even if the information requested is relevant, is the size — or intrusive nature of the request — proportionate to the case? Thus, unlike in state court, federal court has a higher bar for discovery. It’s not enough that the requested information appears “reasonably calculated to lead to the discovery of admissible evidence.”
The District Court in the Eastern District of Pennsylvania reminds us that proportionality is a critical factor. In First Niagara Risk Mgmt. v. Folino, 2016 U.S. Dist. LEXIS 106094 (E.D. Pa. Aug. 11, 2016 involved the purported violation of a non-compete agreement. There, the plaintiff moved the Court to compel a discovery request. There, the court held:
[T]he recent amendment to Fed. R. Civ. P. 26 requires courts to consider the following factors when defining the scope of discovery: (1) the importance of the issues at stake, (2) the amount in controversy, (3) the parties’ relative access to information, (4) the parties’ resources, (5) the importance of discovery in resolving the issues, and (6) whether the burden or expense of discovery outweighs its likely benefits.
In First Niagara Risk Mgmt. (above) the federal court decided that the gravity of the case justified the voluminous request for various texts and emails spanning 23 topic areas.
However, every case is different. You should discuss any such matter with a qualified attorney handling a restrictive clause case in state court and/or federal court.
Let’s Get Started!
Contact a Pittsburgh lawyer for more information about any work restriction agreement dispute or litigation today!
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