Court of Appeals Affirms Denial of Sigma-Aldrich's Request for Injunctive Relief Against Former Employee

ABSTRACT: St. Louis life science company's non-compete clause is ruled overbroad in scope, and information for which protection was sought was not truly "trade secret".

The Court of Appeals for the Eastern District of Missouri affirmed a St. Louis County judge’s denial of Sigma-Aldrich Corporation’s (“Sigma”) request for injunctive relief against a former employee who had accepted a position at one of Sigma’s competitors, Alfa Aesar (“Alfa”). The request sought to enforce a non-compete provision between Sigma and the former employee. 

As discussed in a previous blog post, the Missouri Supreme Court has twice discussed in detail the principles governing the enforceability of non-compete agreements, first in Healthcare Servs. Of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610 (Mo. banc 2006); then in Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 842 (Mo. banc. 2012). In Missouri, such agreements are enforceable if they are able to effectively strike a balance between the former employee’s freedom to compete, and the former employer’s right to utilize non-compete agreements to protect itself from unfair competition by misuse of its trade secrets or misuse of the employee’s customer contacts developed at the former employer’s expense. Accordingly, for a non-compete agreement to be enforceable, it must be narrowly tailored geographically and temporally, and must seek to protect legitimate employer interests beyond “mere competition” by a former employee. A non-compete agreement will not rise above protecting against “mere competition” if it does not protect the employer’s trade secrets or customer lists. 

Here, Sigma conceded that the agreement did not specify a geographic territory, but argued that it should nonetheless be enforceable because it restricted the former employee from working for companies that sell products that complete with Sigma research products, and only in locations where Sigma “markets or sells” its products. Thus, Sigma argued that it struck a balance because the agreement only targeted companies that could exploit Sigma’s trade secrets, albeit on a global basis. The Appeals Court rejected Sigma’s argument, however, for although its failure to include a geographic limitation did not in and of itself render the agreement unenforceable, it nonetheless was so because it also failed to include a limitation on the class with whom contact was limited. Thus, the court held that because the agreement attempted to ban Sigma employees from working for any of its competitors globally in any capacity, it was an unlawful restraint on the former employee’s right to compete.

Sigma also argued that because the former employee possessed Sigma’s confidential information, his role at Alfa would involve more than “mere competition” with Sigma, because Alfa sells products that compete with products about which he had confidential information. The confidential information that Sigma stated it possessed related to, among other things, his work on the “user experience” on sigmaaldrich.com, and the implementation of “Science Place,” an online, “Amazon-like” marketplace for selling thousands of products. The court rejected Sigma’s argument that the information could not be considered trade secret, ruling that the implementation of Science Plan resulted in “publication” of the ideas, and the evidence showed that the former employee’s website knowledge came from his former employer and Sigma competitor, VWR.

Importantly, it does not appear that Sigma’s non-compete provision would be unenforceable in all instances. Rather, it would be necessary to reevaluate Sigma’s provision in light of the responsibilities of the specific employee against whom the provision would sought to be enforced. Such was evident from the extended analysis by the court of the former employee’s job responsibilities at Sigma compared with Alfa, as well as the nature of the Sigma information known by him.   Thus, as is the case with any non-compete provision, Sigma’s provision would need to be evaluated on case-by-case basis.