Sarah Tishler | Beck Reed Riden LLP

7Aug2023

Russell Beck and Sarah Tishler in the Boston Bar Journal on Noncompete Regulation

August 7, 2023

boston bar journal, russell beck, Sarah Tishler Federal Noncompete Regulation, News, Noncompete agreements

Russell Beck and Sarah Tishler’s article about the FTC’s proposed nationwide rule banning non-compete agreements was recently published by the Boston Bar Journal.

The article, titled “The FTC New Proposed Rule on Non-Competes,” explores the arguments for and against adopting the FTC’s proposed nationwide ban on noncompetes. The article is presented in a point / counterpoint format, with Russell and Sarah’s article providing the perspective against the proposed rule, and Spencer Thompson and Patricia Washienko of Washienko Law Group, LLC, writing in support of the proposed rule.

For context, the FTC’s proposed rule provides:

“It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”

Moreover, the proposed rule sets forth a proposed “functional test” for defining what qualifies as a non-compete. That test would consider a contractual term to be

“a de facto non-compete clause because it has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.”

s Russell and Sarah explore in the article, this statutory language and accompanying test is so broad that virtually any restrictive covenant – including nondisclosure agreements, nonsolicitation agreements, and no-service agreements – could be rendered invalid. The proposed rule carries with it numerous unintended and detrimental consequences, does not further the FTC’s stated goals, and deprives the states of the ability to tailor noncompete legislation to the economic and labor practicalities of their workforce.

Russell and Sarah explain that the

the Proposed Rule would bring to a screeching halt the state-level activity on non-competes, depriving the states of their function as the laboratories of democracy (to paraphrase Justice Brandeis). In the last decade alone, nearly two-thirds of U.S. states have made changes to their laws on non-competes. State legislatures are able to tinker with the specific policies that work best for their unique economic environments; a policy that may work well in Boston may not be the right fit for Bangor.

The Boston Bar Journal is a peer-reviewed, online publication of the Boston Bar Association. It presents timely information, analysis, and opinions to more than 10,000 lawyers in nearly every practice area. The Boston Bar Journal is governed by a volunteer Board of Editors dedicated to publishing outstanding articles that reflect their authors’ independent thought.

For up-to-the-minute analysis of legal issues concerning noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.

eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Russell Beck’s work in this area is well recognized, and includes:

Over thirty years of experience working on trade secret, noncompete, and unfair competition matters
Assisting the Obama White House as part of a small working group to develop President Obama’s Noncompete Call to Action
Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (6th ed., MCLE, Inc. 2021), used by other lawyers to help them with their noncompete matters
Authoring the book Trade Secrets Law for the Massachusetts Practitioner (1st ed. MCLE 2019), covering trade secrets nationally, with a focus on Massachusetts law
Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law
Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
Founding and administering the award-winning blog, Fair Competition Law
Establishing and administering the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 1,660 and 870 members, respectively, around the world
Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2020 Chambers USA Guide, which stated that Russell Beck is “an expert in the field of trade secret and restrictive covenant law,” and is also noted for his “ability to adjust and come up with successful solutions.” Chambers noted that Russell “basically wrote the new Massachusetts statute on noncompetes” and that “he’s an expert in employee mobility and nonrestrictive covenants.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

21Jul2023

Sarah Tishler Featured in Law360 on Noncompete Choice-of-Law and Venue Rules

July 21, 2023

Steve RIden

Beck Reed Riden, Law360, noncompete, noncompete agreements, Sarah Tishler News, Noncompete agreements

Sarah Tishler’s article about the challenges presented by choice-of-law and venue provisions in noncompete statutes was published by Law360 under the title, “Minn. Noncompete Ban May Add To Nat’l Venue Choice Tangle.”

The article, reprinted in full below, follows Minnesota’s outright ban on noncompete agreements and focuses on the choice-of-law and venue provision designed to protect Minnesota-based employees.

s of July 1, employee noncompete agreements are no longer valid in the state of Minnesota.

While the law does not apply retroactively to existing employee noncompetes, as of its effective date, Minnesota has joined just three other states — California, North Dakota and Oklahoma — in banning noncompetes entirely.[1]

The outright ban on noncompetes has made headlines for good reason. But also contained in the statute is a significant choice-of-law and venue provision designed to be as protective as possible for Minnesota-based employees.

Subsection 3 of the statute provides that an employer “must not require an employee who primarily resides and works in Minnesota” to agree to a contract — not just noncompetes — that would

require the employee to adjudicate out of Minnesota a claim arising in Minnesota; or
deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota.

Any contractual provision violating the foregoing is “voidable at any time by the employee,” and if such a provision is rendered void, the dispute “shall be adjudicated in Minnesota and Minnesota law shall govern the dispute.”

The subsection also explicitly provides that in addition to injunctive relief and any other remedies, “a court may award an employee who is enforcing rights under this section reasonable attorney fees.”

With this provision, Minnesota joins at least California, Colorado, Louisiana and Washington in providing explicit statutory choice-of-law and venue rules for state resident employees.[2]

With the passage of this law, Minnesota will consider any noncompete agreement signed after July 1 to be voidable by the employee if the agreement requires the employee to adjudicate a dispute outside of Minnesota or deprives the employee of “the substantive protection of Minnesota law,” i.e., the new ban against noncompetes. The Minnesota law goes further than some other states, however, by providing in the statute itself reasonable attorney fees for any employee enforcing rights under that section.

he clear intent of the statute is to prevent employers from avoiding the new ban against noncompetes by inserting another state’s law and venue into contractual choice-of-law and venue provisions. Nonetheless, this type of statutory protection has received entirely mixed treatment in the courts when judges are confronted with the inevitable — and messy — question of whether state or federal law governs the validity, and enforcement, of forum selection clauses in diversity cases.

Of course, that fact pattern is precisely how the question presents itself in the first place.

To offer one example: An employee from Massachusetts, California or Minnesota signs an employment agreement with a company containing a forum selection clause choosing New Jersey. That employee quits and begins working for a competitor in direct violation of the employment agreement. Where will the parties be ordered to litigate?

In Depuy Synthes Sales, Inc. v. Howmedica Osteonics Corp. in March 2022, the U.S. Court of Appeals for the Ninth Circuit said that, in this exact scenario, state law decides the validity of a forum selection clause and choice-of-law and venue clause, and therefore the noncompete clause was void under California Labor Code, Section 925.[3]

In contrast, in Howmedica Osteonics Corp. v. Howard in 2020, the U.S. District Court for the District of New Jersey had come to the polar opposite conclusion under the same forum selection clause in the same employment contract, rejecting arguments that Section 925 invalidated it.[4]

The lack of uniformity persists in other jurisdictions that have considered the same issue.[5] In the related areas of venue transfer and forum non conveniens, similar issues appear.

While some jurisdictions consider the existence of a state forum selection statute to be evidence of the state’s strong public policy, other jurisdictions merely shrug. In support of the former, in AG Resource Holdings LLC v. Terral, the Delaware Chancery Court held in 2021:

The Louisiana [forum selection] laws cited above are clear pronouncements by the Louisiana legislature regarding its public policy on matters of employment and competition. Under the circumstances, Louisiana’s interests must be respected and enforced.[6]

On the other end of the spectrum, in Hilb Group of New England LLC v. LePage, the U.S. District Court for the Eastern District of Virginia in May 2022 wrote:

No Massachusetts court has held that the [Massachusetts Noncompetition Agreement Act, which mandates that all cases involving Massachusetts residents must take place in Massachusetts] manifests the state’s strong public policy. Thus, the enforcement of the Agreement’s forum selection clause would not go against a strong public policy of Massachusetts.[7]

A clear path out of this jumble of precedent appears unlikely. In late 2022, the U.S. Supreme Court denied certiorari in the Howmedica case from the Ninth Circuit, leaving the circuits to go their own way.

As more states seek to ensure that their residents are indeed protected by the state laws that pass their legislatures, employers operating in multiple states and employers with remote work forces must proceed with caution and stay abreast of the rapid changes to state laws.

Otherwise, the law chosen in a given noncompete or employment agreement may not be the law eventually applied by a court — sometimes with dramatic results.

Sarah Tishler is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.

Footnotes:

Stay tuned for what New York Gov. Kathy Hochul will do with Bill No. S3100A, the bill passed by the New York State Senate and Assembly that would ban all noncompetes.
See, e.g., Massachusetts Noncompetition Agreement Act, M.G.L. 149 § 24L(e)-(f):
1. No choice of law provision that would have the effect of avoiding the requirements of this section will be enforceable if the employee is, and has been for at least 30 days immediately preceding his or her cessation of employment, a resident of or employed in Massachusetts at the time of his or her termination of employment.
2. All civil actions relating to employee noncompetition agreements subject to this section shall be brought in the county where the employee resides or, if mutually agreed upon by the employer and employee, in Suffolk county; provided that, in any such action brought in Suffolk county, the superior court or the business litigation session of the superior court shall have exclusive jurisdiction.
Depuy Synthes Sales, Inc. v. Howmedica Osteonics Corp., 28 F.4th 956 (9th Cir. 2022).
Howmedica Osteonics Corp. v. Howard, 2020 WL 1102494, at *3 (D.N.J. Jan. 17, 2020), report and recommendation adopted, 2020 WL 1082601, at *1 (D.N.J. Mar. 5, 2020).
See, e.g., Terral v. AG Res. Holdings LLC, 54,156 (La. App. 2 Cir. 3/9/22), 335 So. 3d 1009, 1016-17 (invalidating Delaware choice-of-law provision in favor of Louisiana statute); Zeppelin Systems USA Inc. v. Pyrolyx USA Indiana LLC, 2020 WL 1082774, at *4 (S.D.N.Y. Mar. 5, 2020) (upholding validity of forum-selection clause under federal law, despite an Indiana law that would render the clause invalid); NuMSP LLC v. St. Etienne, 462 F. Supp. 3d 330, 345 (S.D.N.Y. May 22, 2020) (“in determining whether a forum selection provision is invalid, the Court focuses on the public policy of the forum state, not some other state”).
AG Resource Holdings LLC v. Terral, No. CV 2020-0850-JRS, 2021 WL 486831, at *5 (Del. Ch. Feb. 10, 2021).
Hilb Group of New England LLC v. LePage, No. 3:21-cv-757, 2022 WL 1538583, at *4 (E.D. Va. May 16, 2022).

7Jun2023

The Legal 500 Honors Russell Beck, Nicole Corvini Daly and Sarah Tishler

June 7, 2023

Steve RIden

Legal 500, nicole daly, russell beck, Sarah Tishler News, Noncompete agreements, Trade Secret

The Legal 500 United States 2023 named Russell Beck as a Hall Of Fame lawyer for trade secrets attorneys in the U.S. Nicole Corvini Daly was named a Next Generation Partner, and Sarah Tishler was recognized as a Rising Star.

According to the The Legal 500, its “Hall of Fame highlights individuals who have received constant praise from their clients for continued excellence. The Hall of Fame highlights, to clients, the law firm partners who are at the pinnacle of the profession.”

Russell Beck, Nicole Corvini Daly, and Sarah Tishler are the only attorneys from a small firm included on this list of national experts.

According to one testimonial from The Legal 500, “Russell Beck and his team are incredibly effective, efficient and they get results.”

Another testimonial notes that “Nicole Daly is talented, on departing employee matters, Heather Krauss and Sara Tishler. They all provide extremely user-friendly advice.”

In addition, Beck Reed Riden LLP was recommended in the category of “Trade secrets (litigation and non-contentious matters).”

The following is the independent editorial write up from The Legal 500 on the firm’s ranking:

The ‘incredibly effective’ Boston-based boutique Beck Reed Riden LLP, known for its ‘well-informed counseling and tenacious litigation’ is headed by Russell Beck, who is described as ‘one of, if not the most prominent thought leader in this area’. The firm focuses its practice on trade secret and non-compete work for its market-spanning client list, including such well-known companies as Staples, Inc. It has a particular specialism in counseling and litigating on misappropriation cases involving employee hire and departures. Co-founder of the firm and notable litigator Stephen Riden is a name to note, as is the ‘talented’ Nicole Daly. Senior counsel Sarah Tishler, who specialises in trade secrets, restrictive covenants, and employee mobility work joined the team in August 2022 from Williams Simons & Landis PLC.

The Legal 500 US provides impartial, third-party opinions on leading lawyers and law firms across the country. The Legal 500 relies upon a sophisticated methodology to determine which firms and attorneys are included in its list.

29Mar2023

Supreme Court Declines To Resolve Circuit Split On Forum Selection Clauses

March 29, 2023

rbeck@beckreed.com

business litigation, Forum Selection Clause, Sarah Tishler, US Supreme Court News, Noncompete agreements

Late last year, the Supreme Court denied certiorari in Howmedica Osteonics Corp. v. DePuy Synthes Sales, Inc., which was brought to the Supreme Court for review from an opinion of the Ninth Circuit Court of Appeals. 28 F.4th 956 (9th Cir. 2022). At the heart of Howmedica (as explained in a previous article, here) was the classic Erie law school hypothetical – does federal or state law control in federal court when deciding if a party’s contractual forum selection clause preempts a state statutory forum selection mandate?

o briefly summarize the Howmedica case: A former sales representative for Howmedica had an employment agreement containing a New Jersey forum selection and choice of law provision, as well as noncompete and nonsolicitation clauses. He ultimately resigned and went to work for a competitor. When Howmedica attempted to enforce the restrictive covenants, the former employee asserted that the forum selection and choice of law clauses were void under California Labor Code § 925, because he was a California resident.

The former employee filed a declaratory judgment action in the Central District of California, asking the court to declare those provisions void. Howmedica moved to transfer venue to the District of New Jersey under 28 U.S.C. § 1404(a). The district court denied the motion, holding that state, not federal, law governed the validity of a forum selection clause in a contract, and that the forum selection clause was therefore invalid and unenforceable. The Ninth Circuit agreed, and held that § 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988), “do not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause.” Howmedica then petitioned the Supreme Court for certiorari review.

y applying state law to decide the validity of a forum selection clause, the Ninth Circuit joined the Seventh Circuit in the minority on this issue. See, e.g., Jackson v. Payday Fin., LLC, 764 F.3d 765, 774 (7^th Cir. 2014). The Second, Third,[1] Fourth, Fifth, Sixth, Tenth, Eleventh, and D.C. Circuits have all gone the other way—they hold that federal law as pronounced in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), applies to determine the validity and enforceability of forum selection clauses.

Despite the circuit split, the Supreme Court denied Howmedica’s petition for certiorari on December 12, 2022. This means that in practical terms, significant uncertainty remains with respect to how contractual forum selection clauses will be treated in the face of the increasing number of state statutes that mandate a given forum for particular subjects, such as employment restrictive covenants.

But, the case law is also far from uniform on a multitude of subsidiary issues. For example, courts have come to opposite conclusions on whether a given state’s statutory forum selection mandate (such as in the Massachusetts Noncompetition Agreement Act (“MNAA”)) in and of itself demonstrates that state’s clear public policy for the purposes of deciding a motion for transfer. In Hilb Grp. of New England, LLC v. LePage, for example, the Eastern District of Virginia held that “no Massachusetts court has held that the Massachusetts Noncompete Agreement Act [which mandates that all cases involving Massachusetts residents must take place in Massachusetts] manifests the state’s strong public policy. Thus, the enforcement of the Agreement’s forum selection clause would not go against a strong public policy of Massachusetts.” No. 3:21-cv-757, 2022 WL 1538583, at *4 (E.D. Va. May 16,2022).

n contrast, the Delaware Chancery Court came to the opposite conclusion regarding whether a statute demonstrates a state’s public policy. In AG Res. Holdings, LLC v. Terral, the Delaware Chancery Court held that “[t]he Louisiana [forum selection] laws cited above are clear pronouncements by the Louisiana legislature regarding its public policy on matters of employment and competition. Under the circumstances, Louisiana’s interests must be respected and enforced.” No. CV 2020-0850-JRS, 2021 WL 486831, at *5 (Del. Ch. Feb. 10, 2021). Idaho provides another example. Idaho Code § 29-110(1) states that it is against Idaho public policy for a contract to restrict a party’s ability to enforce its rights in Idaho courts. Idaho courts have interpreted this statute as evidence of the state’s “strong public policy” against forum selection clauses that mandate proceedings outside of Idaho. See, e.g., Off-Spec Sols., LLC v. Transportation Invs., LLC, 168 Idaho 734, 739, 487 P.3d 326, 331 (2021); see also Gemini Technologies, Inc. v. Smith & Wesson, Corp., 931 F.3d 911, at 915-17 (9th Cir. 2020).

This thorny issue will continue to cause uncertainty for employers operating in multiple states, as well as employers whose workforce is spread out across more than one state. Without clear guidance from the Supreme Court, practitioners must continue to be sensitive to the ever-changing landscape of state laws and the judicial decisions interpreting those laws, in order to understand where a case may eventually be heard, and what laws may apply to the dispute.

Sarah Tishler is the author of this article. Sarah is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.

[1] By way of example of the disparate outcomes in different jurisdictions, analyzing the very same forum selection clause, in the very same employment contract at issue, the District of New Jersey upheld the forum selection clause, and rejected arguments that California Labor Code § 925 invalidated it. Howmedica Osteonics Corp. v. Howard, 2020 WL 1102494, at *3 (D.N.J. Jan. 17, 2020), report and recommendation adopted, 2020 WL 1082601, at *1 (D.N.J. Mar. 5, 2020). Same facts—opposite outcome.

18Oct2022

Forum Selection Clauses Head To The Supreme Court

October 18, 2022

Steve RIden

business litigation, Forum Selection Clause, Sarah Tishler, US Supreme Court News, Noncompete agreements

Essential to the drafting of any robust employment agreement, and indeed, nearly all modern contracts, is a forum selection clause that governs that agreement. Forum selection clauses are thought to provide the parties to a contract with certainty about where any disputes arising from that contract will be heard; they are presumed to avoid congesting the courts with disputes over venue, so the parties may head to the merits of a case. In general, unless there are obvious defects with a contract’s validity, courts will honor the agreement on venue that the parties reached and memorialized in the contract.

ut what happens when a state passes a law that expressly bans contractual forum selection clauses that would remove a case from that state’s jurisdiction? This type of law is becoming increasingly common among states that view non-compete clauses and other restrictive covenants with suspicion (or outright hostility).

For example, Massachusetts’ Noncompetition Agreement Act provides that “[a]ll civil actions relating to employee noncompetition agreements subject to this section shall be brought in the county where the employee resides or, if mutually agreed upon by the employer and employee, in Suffolk county . . .” Mass. General Laws c.149 § 24L(f).

California is another example. California Labor Code Section 925 provides: “An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would …:[¶] (1) Require the employee to adjudicate outside of California a claim arising in California.” (§ 925, subd. (a).) “Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.” (§ 925, subd. (b).)

A classic Erie law school exam hypothetical presents itself: in the event that an employee is a California resident, and signs an employment agreement with a company that contains a forum selection clause choosing New Jersey, where will the parties be ordered to litigate if the company sues the (now former) employee when he quits and starts working for a competitor, in direct violation of his employment agreement?

his is the exact scenario before the Supreme Court in Howmedica Osteonics Corp. v. DePuy Synthes Sales, Inc., on certiorari from an opinion of the Ninth Circuit Court of Appeals. 28 F.4th 956 (9th Cir. 2022). In that case, Jonathan Waber was a sales representative for Howmedica, and signed a standard employment agreement with the company, containing a New Jersey forum selection and choice of law provision, as well as non-compete and non-solicitation clauses that prevented former employees from competing, soliciting, and servicing for one year after their departure. Mr. Waber ultimately resigned from Howmedica, and accepted a position with DePuy Synthes Sales. When Howmedica attempted to enforce the restrictive covenants against Mr. Waber, his attorney responded by asserting that the forum selection and choice of law clauses were void under California Labor Code § 925. Communication between the parties broke down, and litigation ensued.

After Mr. Waber filed a declaratory judgment action in the Central District of California, asking the court to declare those provisions void, the petitioner moved to transfer venue to the District of New Jersey under 28 U.S.C. § 1404(a). The district court denied the motion, holding that state, not federal, law governed the validity of a forum selection clause in a contract. Deeming the forum selection clause invalid, and therefore unenforceable, the court assigned no weight to the forum selection clause when evaluating the transfer factors. The Ninth Circuit affirmed, holding that § 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988) “do not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause.”

In so doing, the Ninth Circuit joined the Seventh Circuit in the minority view that state law, not federal judge-made law, controls the validity of a forum selection clause in a case sitting in diversity in federal court. The Second, Third, Fourth, Fifth, Sixth, Tenth, Eleventh, and D.C. Circuits have all gone the other way—they hold that the issue is procedural, rather than substantive, and that federal law as pronounced in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) is properly applied to determine the validity, as well as the enforceability, of forum selection clauses.

The circuit split on this important issue is clear, as are the implications for its resolution. To take one example of the disparate outcomes in different jurisdictions, analyzing the very same forum selection clause, in the very same employment contract at issue, the District of New Jersey upheld the forum selection clause, and rejected arguments that California Labor Code § 925 invalidated it. Howmedica Osteonics Corp. v. Howard, 2020 WL 1102494, at *3 (D.N.J. Jan. 17, 2020), report and recommendation adopted, 2020 WL 1082601, at *1 (D.N.J. Mar. 5, 2020). Same facts—opposite outcome.

The Supreme Court has yet to announce whether it will grant certiorari for this case. While Howmedica may not spark the same headline news as other cases before the Supreme Court this term, it is definitely one to watch for practitioners in the labor and employment space.