Judge Russell declines to enjoin employees who left their former employer en masse

Last week in Furmanite America, Inc. v. Precision Pump and Valve Service, Inc., et al. (click here: Download Furmanite3806.pdf), Judge Russell denied Furmanite's motion to enjoin 17 former Furmanite employees from working for Precision Pump.

The case has an interesting fact pattern.  Precision Pump is based in W.Va.  It has an exclusive area distribution agreement covering W.Va. with a company called Dresser to sell and service certain industrial safety valves.  A division within a company called FlowServe had a similar contract covering some or all of Kentucky. This contract represented $3 Million of the FlowServe division's $5 Million in yearly sales. On December 31, 2005, Furmanite purchased the FlowServe division.  Trouble came on February 1, 2006 when Dresser informed Furmanite that it was terminating the area agreement covering Kentucky.  On February 2, 2006, Furmanite met with its employees and informed them of the development and that it was working to replace the lost business.

On February 2, 2006, Dresser informed Precision Pump that it would be awarded the area agreement for Kentucky, i.e. that agreement that was not being renewed with Furmanite. Over the next few days, Precision Pump had conversations with various Furmanite employees regarding coming to work for Precision Pump.  On February 6, 2006, seventeen (17) of the twenty (20) employees working at Furmanite's Louisville office tendered their resignations.  The opinion is not clear, but it appears the employees either later went to work for Precision Pump or had been offered, and were about to begin, employment with Precision Pump. 

Note that none of the employees had signed a non-compete agreement with Furmanite. Furmanite nevertheless felt aggrieved by this turn of events and sued Precision Pump and its former employees on a variety of counts, including, among others, breach of the Sherman Act, misappropriation of trade secrets, and breach of fiduciary duties.  Furmanite filed a motion for a restraining order and preliminary injunction to prevent Precision Pump from competing with Furmanite and/or employing any former Furmanite employees.  Judge Russell declined to issue the injunction on the basis that Furmanite did not establish a likelihood of succeeding on the merits of its claims against Defendants.

As to the Sherman Act claim, Judge Russell cited 4th Circuit law that "special concern must be given to finding antitrust violations for hiring personnel away from competitors. Courts should be careful not to impede the ability of the employee to market his or her skills."  As to the trade secrets claim, Judge Russell found that Furmanite had not clearly established the alleged trade secrets were "not readily ascertainable by proper means...."  Finally, as to the remaining claims, Judge Russell found that the evidence before him at this time was not sufficient to establish a likelihood of success on the merits.

Obviously the case is still alive and Furmanite will still be able to attempt to prove its case, but for now its former employees can work for Precision Pump in Kentucky.  If you are wondering, according to the opinion, "The employees range from technicians to sales representatives to an administrative assistant.  They are mostly blue collar workers with good technical skills."