Eastern District Dismisses Breach of Contract Claim Against Former Employee for Alleged Violation of Non-Compete

In Sales Benchmark Index LLC v. DeRosa, SBI sued DeRosa after he resigned from the company and went to work for another company. No. CV 18-2680, 2018 WL 3918090, at *1 (E.D. Pa. Aug. 16, 2018). SBI claimed DeRosa was in violation of the non-compete provision within his employment agreement by providing the same or substantially the same duties at the new employer; however, SBI did not allege the subsequent employer was a competitor of SBI, but that DeRosa himself was competing. The relevant portion of the agreement stated:

“Employee shall not directly or indirectly, in any Capacity, engage in Restricted Activities for a Competing Business[.]” “Restricted Activities” are “work activities, duties and/or responsibilities” that are “the same as, substantially similar to, or include,” the type of activities an employee had with SBI, including “sales and/or marketing advisory and/or consulting services.”

The Court’s analysis of this issue required a resolution to whether or not DeRosa was providing the same or substantially similar services for the subsequent employer, as he did when he was with SBI. To classify as a competing business, thereby creating a potential violation of the non-compete, the agreement defined a “Competing Business” as:

[A]ny Person in the business of providing sales and/or marketing advisory and/or consulting services, including businesses that supply, manufacture, produce, design, sell and/or market, as applicable, products and/or services which are the same or substantially similar to the products and/or services that [SBI] … supplied, manufactured, produced, designed, sold and/or marketed during the Reference Period. Businesses that engage in Competing Business include … the Employee operating Employee’s own business in any Capacity.

SBI attempted to argue DeRosa should be considered a “Competing Business” for purposes of an alleged breach of the non-compete. The Court refused to accept SBI’s argument, that the agreement prevents DeRosa from doing the same or substantially the same duties for a competing business. The Court noted that nowhere in the complaint did SBI allege the DeRosa ran his own business.

Since the Complaint failed to show DeRosa was not personally competing with his new employer, and SBI did not claim the new employer is a competitor, the Court dismissed the breach of contract claim for a violation of the non-compete.

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