Another Non-Compete Win: Pollard PLLC Defeats Preliminary Injunction in Tech Case Involving Ernst & Young

Pollard PLLC has successfully defeated another motion for a preliminary injunction, this time in a tech non-compete dispute involving Ernst & Young.  The Plaintiff, IDMWorks, specializes in identity and access management solutions, or, corporate network security, for commercial enterprises.  The Defendant, a software engineer named Gaurav Pophaly, began working for IDMWorks in 2012.  At the time of his hire, Defendant signed a non-compete and non-solicitaion agreement under which he agreed not to provide services to any company that he had “previously provided consulting services to on behalf of IDMWorks.”

Case Background

Shortly after joining IDM, Defendant was staffed on a project for the accounting giant Ernst & Young (“EY”).  But the project was not directly between IDM and EY.  Instead, IDM contracted its employees – including Defendant – out to a third party company called ClearPath.  ClearPath then contracted with EY.  IDM never had a contract for services directly with EY.

In November 2015, EY extended a job offer directly to the Defendant.  Defendant did not accept the job offer, but instead communicated that offer to IDM.  At that point, IDM decided to confront EY and tell them that they could not hire Pophaly directly. EY disagreed.  In response to IDM’s threats and bravado, EY decided it would stop using IDM contractors (via ClearPath) once the ClearPath engagement ended on December 31, 2015.

EY replaced the IDM contractors with a consultant from another vendor and had the IDM contractors transition their projects over to that vendor.  In January, once the original EY engagement expired, EY made a second employment offer to Defendant Pophaly.  He accepted.  Pophaly then became EY’s Assistant Director of Identity Management Engineering. So instead of implementing network security, Defendant manages a team of engineers.

In February 2016, IDM sued Defendant in the United States District Court for the Southern District of Florida, Miami Division.  Plaintiff alleged that Defendant had (1) stolen IDM’s confidential information by transferring it/uploading it to outside servers (2) breached his non-compete agreement.

The Non-Compete Defense Strategy

At a lengthy hearing on May 16th, Jonathan Pollard, counsel for the Defendant and the principal of Pollard PLLC, cross-examined Todd Rossin, the CEO of IDMWorks and got the following:

  • Extraordinary Training: Rossin had filed a declaration that detailed lengthy and expensive “extraordinary training” IDM supposedly provided to Defendant during his employment.  That declaration turned out to be less than true.  IDM had made a database of Oracle training materials available to Defendant and many of its other employees.  The dollar amounts listed in Rossin’s declaration were not the amounts that were paid for Pophaly’s training.  It was a lump sum dollar amount that IDM paid for all of its employees to have such access.  Further, there was nothing extraordinary about those materials: Oracle makes the same materials available to hundreds of companies.  The only other training was standard, on the job training that Defendant could have gotten anywhere.
  • Relationships:  Rossin was forced to admit that his company never had a contract with EY, that they never had an exclusive relationship with EY and that EY used other technology vendors.

In addition to live testimony at the injunction hearing, Defendant also filled the record with deposition testimony that countered many of Plaintiff’s key allegations.  Defendant introduced the deposition testimony of Pophaly’s former supervisor, who testified that there was no formal training and that much of the supposed training took place after hours, outside of work.  Defendant also introduced testimony from an EY employee who testified that the company never had a contract with IDM, and that the company did not maintain an exclusive relationship with either vendor.

The Court’s Ruling: No Legitimate Interest

On June 23, the Court denied Plaintiff’s Motion for a Preliminary Injunction in an order that can only be viewed as a huge victory for the Defendant and an embarrassing defeat for IDM.  The Court found – generally – that the non-compete agreement was not necessary to protect any legitimate business interest.  First, there were no substantial customer relationships to protect.  The statute only protects “substantial” customer relationships and that word cannot be read out of the statute.  On this point, the Court relied heavily on a recent and important Florida state appellate court decision, Evans v. Generic Solutions Engineering (5th DCA 2015).  Evans provides significant guidance on what constitutes a substantial customer relationship under Florida law.  Specifically, Evans held that non-exclusive customer relationships with no reasonable expectation of continued business and former customer relationships are not substantial.  Ironically, Pollard PLLC is counsel for the defendant in that case as well and successfully prosecuted that appeal.

Next, the Court held that Plaintiff’s argument regarding extraordinary training was a non-starter.  None of the training Pophaly received on the job at IDM ddwas anything out of the ordinary.  As such, an investment in training could not justify enforcement of the non-compete agreement.

In addition to Jonathan Pollard, attorney Brooke Bach, who joined the firm in February, played a significant role in securing the win.

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Pollard PLLC is a litigation botique based in Fort Lauderdale, Florida and focused on competition law.  Its attorneys have extensive experience litigating non-compete, trade secret, trademark and antitrust matters.  The firm’s principal Jonathan Pollard is regarded as an authority on non-compete matters. For more information, call 954-332-2380. 

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