Friday, March 24, 2006, 3/24/2006 10:42:00 AM

"Misty taste of moonshine, Tear drop in my eye . . . "

By Todd
The teardrops are in the eye of Nalco Company in the recently reported decision of McGough v. Nalco Company, 2006 WL 681142 (N.D. W.Va., March 15, 2006). Nalco is a water-treatment chemical company. McGough is a former salesman for Nalco, apparently having sold water-treatment chemicals to the coal mining industry in West Virginia. Nalco hired McGough on November 6, 1978 pursuant to an oral, at-will employment contract at an annual salary of $22,000 per year. Ten days after he started work, McGough received Nalco's "Field Representative Agreement" and pressure was put on him to sign it. The agreement specified that McGough was not to disclose any of Nalco's trade secrets nor could he compete with Nalco for a period of two years following his termination. He agreed to sign the same on November 16, 1978. There was an issue of fact in the case whether McGough resigned sometime in 1989 for a couple of weeks or was employed continuously from November 1978 until his resignation in June, 2005 when McGough went to work for Appalachian Chemical Services. In his work for Appalachian Chemical Services, McGough competes directly with Nalco and there was evidence in the case that McGough had picked off customers of Nalco AND destroyed or deleted a good amount of Nalco confidential information on his way out the door.

McGough sought a declaratory judgment he wasn't bound by that agreement he signed in 1978. Nalco countersued for breach of contract and sough an injunction prohibiting McGough from competing with Nalco and disclosing any of Nalco's trade secrets. The court DENIED the injunction after one of the most descript analyses of the Fourth Circuit's injunction balancing standards. The court essentially found that both parties would sustain significant harm if the injunction didn't issue (or did, depending how you look at it) but that the agreement's enforceability had a low likelihood of success on the merits. It certainly didn't help Nalco that there were fact issues concerning the date of its execution and whether McGough resigned at some period in 1989 for a short period of time.

Our thought is that it is interesting that Nalco didn't move for an injunction on misappropriation of trade secrets claim. McGough admitted, after all, destroying some confidential customer and sales data claiming he didn't want Nalco to "misuse it." There was evidence that he was successful in his competitive efforts. Thus, we wonder whether the Nalco attorneys put all their eggs in the noncompete basket and didn't prosecute what might've been a decent misappropriation case. Only time will tell - injunctions denied are not the end of the world. As McGough proceeds, damages will surely mount. Stay tuned on this one. One gets the sense that Nalco may not let this former employee go down a country road without some more skirmishing.


Anonymous Anonymous said...

Very interesting - good to know

3:13 AM, March 25, 2006  

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