I wrote an article in the Michigan Business Law Journal titled, "Choice of Law in Noncompetition Law and Litigation. Because non-compete law differs sharply from one state to the next, choice of law takes on a magnified importance in the non-compete arena.
The article discusses several notable cases and concludes with these lessons for litigators:
Those seeking to enforce a noncompetition agreement may emphasize that a choice-of-law provision can be enforced even where the noncompetition laws of an alternative state are relatively stringent. As the Stryker case suggests, if the chosen state and the alternative state both allow reasonable noncompetition agreements, the mere fact that the alternative state may impose more demanding reasonableness standards does not mean that a fundamental policy of that state would be violated by application of the chosen state’s law. Moreover, the Cardoni case illustrates the importance of closely examining the policy allegedly implicated by a noncompetition agreement. Once the policy is understood, the agreement may turn out to be broadly consistent with it.
For those challenging a noncompetition agreement, Ascension Holdings shows that merely being incorporated in the chosen state may not be enough to ensure that the state’s laws will be applied. If the parties and the activities at issue are chiefly in another state, the court may not enforce the parties’ contractual choice of law. Moreover, Brown & Brown demonstrates that a choice-of-law provision can be successfully challenged even in a jurisdiction that is relatively friendly towards noncompetition agreements. A challenger may find it useful to contrast the substantive and procedural rules of the states at issue (for instance, regarding burdens of proof in demonstrating reasonableness or whether hardship to the individual subject to the agreement is considered) to try to establish that one state favors
employers while the other favors employees.
You can read the whole thing here.
Law and the Creative Economy comments on non-competes, trade secrets, intellectual property, and other areas of law. The blog is only for informational purposes. Lawyer Maxwell Goss maintains this blog. Click here to contact Max.