Xoran Holdings LLC et al v. David Luick et al

Filing 158

ORDER Granting 58 Motion for Summary Judgment. Signed by District Judge Denise Page Hood. (BGar)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
XORAN HOLDINGS LLC, and
XORAN TECHNOLOGIES LLC,
Plaintiffs,
Case No. 16-13703
HON. DENISE PAGE HOOD

v.
DAVID LUICK and TUNGSTEN
MEDICAL NETWORK, LLC,

Defendants.
_______________________________________/
ORDER GRANTING DEFENDANTS’ MOTION
FOR PARTIAL SUMMARY JUDGMENT [#58]
I.

INTRODUCTION
Plaintiffs filed this action seeking an order enjoining Defendants from using and

disclosing Plaintiffs’ trade secrets and confidential and proprietary information and
competing against Plaintiffs. Plaintiffs assert Defendant David Luick (“Luick”) has
violated express contractual obligations he made pursuant to an employment
agreement (“Employment Agreement”) he executed as an employee of Plaintiff Xoran
Technologies LLC (“Xoran”). Defendants counter that Plaintiffs have not identified
any particular piece of information entitled to trade secret protection, nor have
Plaintiffs demonstrated actual or threatened misappropriation of any trade secrets.

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II.

BACKGROUND
From September 2011 through May 2016, Luick was employed by Xoran

Technologies LLC as Director of Sales (he began his employment in 2007 as Project
Manager). Xoran is a research and development company based in Ann Arbor,
Michigan, that has developed, patented and marketed a line of small, specialized CT
scanners and related products for the United States and international markets,
particularly low-dose radiation, cone-beam based CT scanners for use in office and
operating rooms. Dkt. No. 1, ¶¶10-11. As Director of Sales, Luick was required to
sign the Employment Agreement as a condition of his employment, which he did on
or about September 18, 2011. Dkt. No. 1, Ex. 1. The Employment Agreement signed
by Luick sets forth the following relevant provisions:
RECITALS
*****
B.
Xoran possesses Confidential Information (hereinafter
defined in Paragraph 6) that is a valuable and unique assets of Xoran. In
connection with Employee’s employment, Employee holds, or will hold,
a position that will provide Employee with access to and knowledge of
Confidential Information of Xoran and of clients and customers of
Xoran.
*****

6.
Non-Disclosure of Information. Employee acknowledges that
much, if not all, of the material and information related to the products,
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technology, software and hardware, techniques, and othr business affairs
of Xoran and its affiliates, including without limitation, and and all Work
Product (as defined in Paragraph 5.1 of this Agreement), discovered or
created pursuant to this Agreement, and the business affairs and
information of Xoran and its customers and clients (including but not
limited to, any business plans, practices and procedures, pricing
information, sales figures, profit or loss figures, information relating to
clients, suppliers, sources of supply and customer lists, customer
identity, pricing information, and business development plans), which
have or will come into Employee’s possession or knowledge in
connection with Employee’s performance under this Agreement, consists
of confidential and proprietary data of Xoran and its affiliates
(collectively, “Confidential Information”). . . . Employee further agrees
not to make use of Confidential Information for Employee’s own benefit,
either during the term of Employee’s employment with Xoran of [sic]
after the termination of such employment. In the event of any breach of
this confidentiality obligation by Employee, Employee acknowledges
that Xoran would have no adequate remedy at law because the harm
caused by such a breach would not be easily measured and compensated
for in the form of damages. Accordingly, Employee hereby waives
his/her right to contest any equitable relief sought by Xoran, other than
Employee’s right to contest the question of whether a breach has
occurred. Employee hereby waives the requirement of any bond being
posted as security for such equitable relief.
*****
8.1
Term of Non-Competition. The “Term of NonCompetition” means the period beginning on the date of this Agreement
and continuing for a period of twelve (12) consecutive, full calendar
months following the termination of Employee’s employment for any
reason.
8.2

Prohibited Activities.
*****
8.2.2 During the Term of Non-Competition, Employee will not
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provide directly or indirectly, individually or as a principal, officer,
director, employee, shareholder (other than a holder of fewer than 5% of
the outstanding shares of a publicly-traded company), consultant,
partner, joint venturer, agent, equity owner or in any other capacity
whatsoever, a “Competing Service” to any entity regardless of whether
it is a sole proprietorship or a corporation, partnership, business
association, or other entity. The term “Competing Service” includes, but
is not limited to, the design, development, sale, marketing, or distribution
of the same or similar products and/or services that are provided by
Xoran and its affiliates. If any portion of this Paragraph 8.2.2 is deemed
unenforceable by a court of law or arbitrator, the parties’ agreement
restricting Employee’s ability to provide Competing Services shall be
enforced to the fullest extent allowed by applicable law.
8.2.3 During the Term of Non-Competition, Employee will not,
directly or indirectly, individually or on behalf of or in connection with
any other person, entity or organization: (a) cause, encourage, direct,
solicit, induce or attempt to induce any person who is or has been
employed or retained by Xoran to leave the employ or services of Xoran,
or in any way interfere with the relationship between Xoran and any
employee or consultant thereof; and/or (b) call on, solicit, have contact
with, or service any customer, prospective customer, consultant, strategic
partner, funding source, or other business relation of Xoran in order to
(i) solicit business of the type provided by Xoran, (ii) induce or attempt
to induce such person or entity to cease doing business with, or reduce
the amount of business conducted with, Xoran, or (iii) in any way to
interfere with the relationship between any such person or entity and
Xoran.
8.3 Remedies. In addition to exercising any remedies for a breach of
this Paragraph 8 available to Xoran at law or in equity, if during any
calendar month within the Term of Non-Competition, Employee is not
in compliance with the terms of this Paragraph 8, Xoran shall be entitled
to seek compliance by Employee with the terms of this Paragraph 8 for
an additional number of full, calendar months equal to the number of
calendar months during which such noncompliance occurred. The
“Term of Non-Competition” shall also include this additional period.

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*****
11.10 Survival. Employee hereby acknowledges that the rights and
obligations of Employee and Xoran under all subparagraphs of
Paragraphs 5, 6, 7, 8, 9, and 11 of this Agreement shall survive the
termination of this Agreement. Employee acknowledges and agrees that:
. . . (iv) Xoran will be entitled to enforce this Agreement through a
temporary restraining order, an injunction and/or other equitable
remedies in the event of a breach, in addition to any other remedies
available to Xoran (including, without limitation, monetary damages),
without the requirement for posting a bond or security for such
injunctive relief; and (v) injunctive relief will not deprive Employee of
an ability to earn a living because he/she is qualified for many positions
which do not otherwise necessitate the breach of any provision of this
Agreement.
Id.
In May 2016, Luick resigned. The parties dispute whether he resigned
voluntarily or involuntarily, as Defendants contend that Luick was fired, a termination
that Defendants claim was the result of Luick reporting misconduct by Xoran’s Chief
Executive Officer, Miodrag Rakic, to Xoran’s Human Resources administrator.
Xoran later discovered that Plaintiff had filed incorporation papers for a new entity,
Tungsten Medical Network, LLC (“Tungsten”), that Luick operated out of his home.
Dkt. No. 1, Ex. 2. When Xoran learned that Defendants might be using Confidential
Information (as defined in Section 6 of the Employment Agreement) to compete with
Xoran, Xoran tried to address the issue with Luick without resorting to litigation,
including sending a letter from counsel reminding him of his obligations. Dkt. No. 11,

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Ex. 3. Luick assured Xoran personnel that he was not using Confidential Information
or competing with Xoran.
In September 2016, Xoran’s President, Dr. David Sarment, saw Defendant
Luick talking with representatives from Xoran’s largest competitor at an industry
conference. When Dr. Sarment approached Luick, Luick indicated that he was not
competing with Xoran. Dkt. No. 11, Ex. 4 at ¶ 5. Luick stated that he had looked into
other positions, but none of those options could “meet his salary expectations.” Id. at
¶ 7.
On October 18, 2016, Plaintiffs filed a Complaint with the following five
counts: (1) Misappropriation of Trade Secrets under the Defend Trade Secrets Act, 18
U.S.C. § 1836 (“DTSA”); (2) Injunctive Relief; (3) Misappropriation of Trade Secrets
under the Michigan Uniform Trade Secrets Act, M.C.L. 445.1901 et seq.; (4) Breach
of Contract (Luick only); and (5) Tortious Interference with a Contractual
Relationship. Defendants filed an answer to the Complaint and Counterclaim on
November 1, 2016. On November 1, 2016, Defendants filed a Counterclaim for
wrongful termination against Plaintiffs.
Shortly after filing this action, Plaintiffs filed a Motion for Temporary
Restraining Order and an Emergency Motion for Preliminary Injunction against
Defendants. At the time Plaintiffs’ filed their motion for temporary restraining order,

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Tungsten’s website indicated that it is “experienced with these brands” and displayed
the names “Xoran,” “Morita,” and “Carestream,” a competitor of Xoran’s. Carestream
is the same competitor that Dr. Sarment had seen Luick speaking with at the
conference. Contrary to Plaintiffs’ statements, there did not appear to be any other
reference to Carestream on Tungsten’s website (and not anything that stated Tungsten
had a relationship with Carestream). Xoran also believed that Defendants were using
a claimed (but nonexistent) business relationship with Xoran to get access to Xoran’s
customers and then attempt to steer those customers away from Xoran by providing
false information about Xoran’s business. Dkt. No. 11, Ex. 3 at ¶¶ 18-21.
Prior to the scheduled hearing, the parties entered into a Stipulated Order on
November 4, 2016 (“Stipulated Order”). Dkt. No. 14. The Stipulated Order provided,
in part, as follows:
WHEREAS, The Employment Agreement contained certain
non-compete provisions which are at issue in the current litigation, and
which restricted Defendant Luick from certain activities Xoran for a
period of 12 months from the date of termination (“non-compete
period”); and
*****

IT IS HEREBY ORDERED AS FOLLOWS:
1. Defendants will not use any work product derived in whole or in part
from work product Luick or any other Xoran employee produced while
working at Xoran unless otherwise publicly available.
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2. With respect to this Order, Xoran Customer is defined as any specific
location that currently has a Xoran product and/or limited or
comprehensive service contract for the Xoran MiniCat, xCAT,
XoranConnect, VetCAT, or CBCT Service Contract, or prospective
customers that Luick was personally engaged in active sales discussions
at the time of his termination.
3. Until the completion of the “non-compete period”, Defendants will
not (1) directly or indirectly initiate contact with any Xoran Customer;
(2) offer to sell a competing product or service to any Xoran Customer,
or assist or advise in any such transaction; (3) hold himself out as an
agent of Xoran to any person; (4) take a position as an agent or executive
of any Xoran competitor company, including but not limited to
Carestream and Morita, in transactions involving Xoran Customers.
4. Defendants will not advertise a business affiliation with Xoran.
5. Defendants will not use, sell or otherwise disclose information about
Xoran’s product and service pricing that Luick learned while employed
at Xoran, unless it is otherwise publicly available.
*****
Dkt. No. 14.
On November 18, 2016, Defendants filed a Motion to Dismiss Plaintiffs’
Complaint for Lack of Subject Matter Jurisdiction, which was denied. Plaintiffs filed
a Motion to Dismiss Count II of Defendants’ Counterclaim, which was granted.
Plaintiffs filed an Amended Motion for Order to Show Cause Why Defendant Should
Not be Held in Contempt (“Motion for Order to Show Cause”), which was denied.
In the Motion for Order to Show Cause, Plaintiffs asserted that Defendants ignored

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the Stipulated Order by: (1) continuing to contact Xoran Customers (Charleston ENT
and Southwest Allergy); (2) continuing to solicit Xoran Customers and market
competitive products; (3) continuing to utilize Xoran product and service pricing in
order to compete with Xoran; and (4) continuing to utilize Xoran work product. The
Court found no violation regarding Charleston ENT. The Court concluded that
Defendants appeared to be in violation of at least the intent of the Stipulated Order,
but the Court held that “without more, . . . the Motion for Order to Show Cause Why
Defendants Should Not be Held in Contempt is denied.”
In the present Motion for Partial Summary Judgment, Defendants argue that
Plaintiffs should be precluded from seeking to, pursuant to Section 8.3 of the
Employment Agreement (the “Option Provision”) or for equitable reasons: (a) extend
the twelve-month period of non-competition beyond May 6, 2017; or (b) add on any
additional period of non-competition.
III.

ANALYSIS

A.

Novation
Defendants first argue that the Stipulated Order novated the Employment

Agreement, such that the “non-compete period” or “12 months from the date of
termination” of David Luick is the period of non-competition upon which the parties
have agreed. The Court is not persuaded.
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A novation is the substitution of a new obligation for an old one, which is
extinguished. Archambo v. Lawyers Title Ins. Corp., 646 N.W.2d 170 (2002). A
novation simply requires “(1) parties capable of contracting; (2) a valid obligation to
be displaced; (3) consent of all parties to the substitution based upon sufficient
consideration; and (4) the extinction of the old obligation and the creation of a valid
new one.” In re Dissolution of Yeager Bridge & Culvert Co., 150 Mich.App. 386, 410
(1986).
Section 11.7 of the Employment Agreement provides that, “Amendments to any
section of this Agreement shall not be effective unless agreed to in writing signed by
the parties.” As Plaintiffs argue, the Stipulated Order did not provide that the parties
were amending the Employment Agreement. To the contrary, the Stipulated Order
expressly states that “the parties have agreed to resolve Plaintiffs’ requests for an
injunction, only[.]” [Dkt. No. 14, PgID 397 at ¶ 6]
Accordingly, the Court concludes that the Stipulated Order did not novate the
Employment Agreement in its entirety or any part of it, including Section 8.

B.

Waiver of Right to Extend or Add to Non-Compete Period
“A party may waive any contractual rights . . .” and waiver “may be express or

implied.” Nexteer Auto. Corp. v. Mando Am. Corp., 314 Mich.App. 391, 395 (2017).

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While an express waiver requires “an affirmative expression of assent,” id. at 395
(citation omitted), an implied waiver requires (1) “a failure to timely assert a right .
. . [, 2] coupled with an inconsistent course of conduct[,]” and (3) “prejudice resulting
from the inconsistent acts.” Id. at 397 (internal quotations and citations omitted).
Defendants contend that Plaintiffs: (a) expressly waived of the Option Provision when
they executed the Stipulated Order; or (b) in the alternative, Plaintiffs’ waiver was
implied.
1.

Express Waiver

For the same reasons the Stipulated Order did not constitute a novation, the
Stipulated Order did not operate as an express waiver of the Option Provision. The
Stipulated Order does not reference any amendment of the Employment Agreement
or any part of Section 8 of the Employment Agreement. Even if Defendants are
correct that Plaintiffs “failed to invoke [the Option Provision] or otherwise include its
language or recite any option to extend, even though [Plaintiffs] were certainly aware
of their own allegations that Defendants were competing in violation of the
[Employment] Agreement,” this does not constitute an express waiver. See Quality
Prods. and Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362, 365 (2003) (“Mere
silence generally cannot constitute waiver”). An express waiver would require
language that “show[s] an intent to plainly relinquish” the Option Provision. Nexteer,

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314 Mich.App. at 396. There is no such language in the Stipulated Order.
2.

Implied Waiver

Defendants argue that Plaintiffs have failed to “seasonably” assert their right
to the Option Provision in any of their filings. As Plaintiffs note, the Court is to assess
whether the right has been asserted “timely,” not “seasonably.” The Court finds that
Plaintiffs have not timely asserted the right to the Option Provision.
It is undisputed that Plaintiffs first indicated that they would assert their rights
pursuant to Section 8.3 on March 22, 2018, when Plaintiffs’ counsel communicated
to Defendants’ counsel that Plaintiffs would seek a new twelve-month non-compete
period based on Defendants’ violations of the original twelve-month non-compete
period. Plaintiffs’ counsel raised the issue with the Court a week later, on March 29,
2018, at a status conference before the Court. Until responding to Defendants’
Motion for Partial Summary Judgment, Plaintiffs did not assert the right to the Option
Provision in writing.
A review of Plaintiffs’ filings reveals that, prior to filing their response brief,
neither Section 8.3 of the Employment Agreement nor any other indication that
Plaintiffs could seek to extend or add time to the non-compete period was mentioned
in any of Plaintiffs’ filings with the Court. Specifically, the Complaint, the Motion
for Temporary Restraining Order, the Emergency Motion for Preliminary Injunction,

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and the Motion for Order to Show Cause do not mention Section 8.3 or extending the
Term of Non-Competition. The Court notes that Plaintiffs still have not moved the
Court to extend (or add to) the Term of Non-Competition, even though the original
twelve-month non-compete period expired over 15 months ago – and they orally
asserted the right to a new non-compete period more than four months ago.
The Court finds inapposite the cases cited by Plaintiffs to support their desire
that equitable tolling be awarded in this case. See, e.g., Thermatool Corp. v. Borzym,
227 Mich. App. 366, 375 (1998) (an extension of non-compete period is permissible
in “cases where a party has flouted the terms of the noncompetition agreement”);
Superior Consultant Co., Inc. v. Bailey, Case No. 00-CV-73439, 2000 WL 1279161,
at *12 (E.D. Mich. Aug. 22, 2000) (Steeh, J.) (citing Thermatool, 227 Mich.App. at
375) (“A court may, in appropriate circumstances, extend injunctive relief beyond the
term of a non-competition agreement where a party has ‘flouted the terms’ of the
agreement,” but the court declined to extend the non-compete period after finding that
the plaintiff made no showing of a breach of the agreement); Telma Retarder, Inc. v.
Balish, Case No. 2:17-CV-11378, 2017 WL 3276468, at *5 (E.D. Mich. Aug. 2, 2017)
(Murphy, J.) (citing Superior Consultant, 2000 WL 1279161, at *12) (“Since
[defendant’s] conduct constituted a ‘flouting’ of the agreement, the Court will ‘extend
injunctive relief beyond the term of [his] non-competition agreement.’”).
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In Thermatool, the court held that an extension was not warranted where the
“plaintiffs have alleged a single breach of the noncompetition agreement.”
Thermatool, 227 Mich. App. at 377. The court recognized that extensions of noncompete periods had been awarded when “the breach has consisted of continuous and
systematic activity in violation of the agreement.” Id. at 378. The Court also notes
that: (1) the Thermatool court was deciding the issue of whether the non-compete
period should be extended after the plaintiffs specifically “requested a preliminary
injunction extending the noncompetition agreement for a period equal to the time that
[defendant] violated the agreement,” id. at 371; and (2) the Thermatool plaintiffs filed
the preliminary injunction motion on the heels of filing their complaint, such that the
hearing was held within three weeks – and the trial court’s ruling was made within
five weeks – of the complaint being filed. Id. at 371-72.
In Superior Consultant, the plaintiff filed its complaint and a motion for
preliminary injunction on May 12, 2000, as well as a motion for temporary restraining
order on May 15, 2000. The plaintiff’s complaint alleged that the defendant former
employee was competing with the plaintiff in violation of his employment agreement
prohibiting him from competing with the plaintiff for six months from the date of his
resignation, which was February 28, 2000. Superior Consultant, 2000 WL 1279161,
at *1-2. In part, the motions for injunctive relief sought to prohibit the defendant

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former employee from competing against the plaintiff, and in the motion for
preliminary injunction, the plaintiff asked the court to enjoin the defendant former
employee from competing for six months. Id. at **1-2. The motion for temporary
restraining order was granted on May 25, 2000, a hearing on the motion for
preliminary injunction was held on July 6, 2000, and a ruling on the motion for
preliminary injunction was issued on August 22, 2000. Id. at **1-2.
In Telma Retarder, the plaintiff filed its complaint and a motion for preliminary
injunction on April 28, 2017, seeking to enjoin the individual former employee
defendant from competing in violation of his employment agreement, including
beyond the term of the non-competition agreement. See Case No. 17-11378, Dkt. No.
2, PgID 48-49 (the plaintiff’s motion for preliminary injunction). The former
employee defendant had resigned on May 1, 2016 and was subject to a 12-month noncompete, which he violated when he went to work for the plaintiff’s direct competitor
and “to expand its share of the U.S. market” in the retarder industry. at *5. A hearing
was held on June 13, 2017, and the Court’s order was issued on August 2, 2017.
In each of those cases cited by Plaintiffs, the plaintiff(s) took prompt action to
challenge the alleged wrongful competition by a former employee. As set forth above,
each of those courts was presented with one or more motions for injunctive relief that:
(a) sought an extension of the applicable non-compete period; (b) at the time of or

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shortly after the complaint was filed and prior to the expiration of the non-compete
period provided for in the underlying agreement; (c) such that the trial court
determined whether the non-compete period would be extended during the original
non-compete period or shortly after its expiration. See Thermatool (hearing held
during non-compete period and ruling issued six weeks after the non-compete period
expired); Superior Consulting (hearing held and ruling issued during the non-compete
period); Telma Retarder (hearing held six weeks after non-compete period expired
and ruling issued three months after the period expired).1
In the present case, Plaintiffs have failed to take prompt – or any action – to
extend the Term of Non-Competition. Even though Section 8.3 of the Employment
Agreement expressly provides that the Term of Non-Competition could be extended
if Luick violated the Term of Non-Competition, Plaintiffs did not request – and still
has not moved for – an extension of the Term of Non-Competition in any filing made

1

Plaintiffs separately cited Certified Restoration Dry Cleaning Network, LLC v. Tenke
Corp., 2008 WL 2218427 (E.D. Mich. May 27, 2008), for the proposition that tolling of the noncompete period is an option where a non-competition provision allegedly is being violated. In
that case, like the other cases cited by Plaintiffs, the plaintiff filed a motion for preliminary
injunction promptly after the complaint was filed. After the trial court denied the preliminary
injunction, the issue was appealed and the Sixth Circuit remanded the case with instructions to
issue the requested preliminary injunction, which the trial court did. The parties then filed crossmotions for partial summary judgment approximately 15 months into the applicable 24-month
non-compete provision, with the plaintiffs requesting in its motion for partial summary judgment
that the court extend the non-compete period based on the defendants’ violation of the noncompete provision over that 15-month period. Similar to the other cases cited by Plaintiffs, the
issue of whether to extend the non-compete period was presented to the Tenke court for
consideration during the non-compete period set forth in the agreement.
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in this case. Plaintiffs also did not raise the issue to the Court until a status conference
held on March 29, 2018, nearly a year (more than 10 months) after the Term of NonCompetition expired.
As Defendants have noted, Plaintiffs have known or should have known since
December 5, 2016 (the date Plaintiffs filed the Motion for Order to Show Cause) that
Defendants intended to begin competing with Plaintiffs in May 2017. Some of
Defendants’ conduct about which Plaintiffs have suggested constituted wrongful
competition by Defendants (specifically, the emails sent by Luick to Southwest
Allergy that Tungsten would not offer any services until May 2017) unambiguously
evidences that Defendants intended to provide services that competed with Xoran,
starting in May 2017. Defendants’ representations and Plaintiffs’ response brief
reflect that Defendants began competing in May 2017. Plaintiffs have not disputed
that they did not even raise with Defendants the issue of adding to the non-compete
period until March 22, 2017, over 10 months after the conduct about which they
complain began. As of the date of this Order, more than 15 months have elapsed since
the agreed upon 12-month Term of Non-Competition expired, and Plaintiffs have not
taken action to challenge the allegedly competitive behavior.
The Court finds Plaintiffs’ inaction significant because the Term of NonCompetition can only be extended if Plaintiffs take action. As Section 8.3 of the

17

Employment Agreement states, “ if during any calendar month within the Term of
Non-Competition, Employee is not in compliance, Plaintiffs shall be entitled to seek
compliance by [Luick] with the terms of this Paragraph 8 for additional number of full
calendar months equal to the number of calendar months during which such
noncompliance occurred.” As discussed above, Plaintiffs have not sought compliance
by Defendants since December 2017 and have never asked the Court to extend the
Term of Non-Competition.
For the foregoing reasons, the Court holds that there was an implied waiver by
Plaintiffs of their rights to seek an extension of the Term of Non-Competition
pursuant to Section 8.3 of the Employment Agreement (or in equity). The Court finds
that Plaintiffs “fail[ed] to timely assert a right” under the Employment Agreement,
specifically the right to seek an extension of the Term of Non-Competition pursuant
to Section 8.3. Nexteer, 314 Mich.App. at 397. The Court concludes that Plaintiffs
failure to seek an extension of the Term of Non-Competition – or even mention such
an extension as a form of relief Plaintiffs were seeking in any pleading prior to their
response to the instant Motion – demonstrates “an inconsistent course of conduct.” Id.
Even if Plaintiffs were, at times, negotiating with Defendants to resolve this matter,
Plaintiffs have not asserted that, after May 7, 2017 and prior to March 22, 2017,
Plaintiffs: (a) expressed to Defendants that Plaintiffs were opposed to Defendants

18

operating their business in competition with Plaintiffs after May 7, 2017; or (b)
believed that Defendants were in violation of the non-compete in the Employment
Agreement when Defendants began operating their business in competition with
Plaintiffs after May 7, 2017.
The Court agrees with Defendants that allowing Plaintiffs to seek to extend the
Term of Non-Competition at this junction would cause Defendants “prejudice
resulting from the inconsistent acts.” Defendants began conducting their business in
competition with Plaintiffs – at the latest – in May 2017. Defendants operated their
business openly for more than 10 months before Plaintiffs suggested that they could,
and would, ask the Court to impose additional months to the Term of NonCompetition. Defendants also represent that they have actively been seeking to grow
their business. As Defendants argue, by commencing their business and operating it
for the last 15 months, if Plaintiffs are now permitted to seek additional months where
Defendants are barred from competing with Plaintiffs, Defendants have only increased
their liability by competing with Plaintiffs for those 15 months and will suffer great
losses if they have to shut down their operations for an additional period.
Had Plaintiffs asserted their rights pursuant to Section 8.3, Plaintiffs may have
prevented Defendants from commencing their operations in May 2017 – or at least put
Defendants on notice that Defendants were commencing their operations at the risk

19

of being shut down. Instead, if Plaintiffs are allowed to pursue a Court order adding
to the Term of Non-Competition at this time, Defendants would be suffering that
unforeseeable consequence simply because Plaintiffs failed to timely assert their
rights. That is different from any competition Defendants undertook during the Term
of Non-Competition that expired on May 6, 2017, which Defendants should have
foreseen would result in Plaintiffs seeking relief from the Court pursuant to Section
8. The Court finds that Defendants would be unfairly prejudiced if Plaintiffs could
add a new period of non-competition at this point.
Accordingly, the Court concludes that the Term of Non-Competition set forth
in the Employment Agreement was in effect from May 7, 2016 to May 6, 2017, and
the Term of Non-Competition will not be extended, nor will any new non-compete
period be added. Defendants’ Motion for Partial Summary Judgment is granted.

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IV.

CONCLUSION
Accordingly,
IT IS ORDERED that Defendants’ Motion for Partial Summary Judgment [Dkt.

No. 58] is GRANTED.
IT IS ORDERED.

Dated: February 15, 2019

s/Denise Page Hood
DENISE PAGE HOOD
CHIEF JUDGE, U.S. DISTRICT COURT

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