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COA divided on noncompete agreement, injunction

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Even though Indiana courts strongly disfavor noncompete clauses in employment contracts as restraints of trade, the majority of Indiana Court of Appeals judges affirmed the grant of a preliminary injunction against a Porter County man. They found the company had a legitimately protectable interest in the man’s knowledge of its customers and market.

In Steven E. Coates v. Heat Wagons, Inc., et al., No. 64A03-1004-PL-232, Steven Coates, a former employee of Heat Wagons Inc. and Manufacturers Products, appealed the preliminary injunction granted against him to prevent him from operating a side business, Second Source, which was also involved in the sale of portable heater parts. Manufacturers Products (MPI) had a portable heater parts division, Portable Heater Parts (PHP), that Coates was also involved in.

When Coates’ father died and the company was sold, the new owners retained Coates as an employee and he signed an employment agreement, which contained a noncompete clause. Just before he was retained by the new owners, Coates changed the name of Second Source to S&S and concealed his involvement with the company. S&S often sold parts to MPI.

After Coates was fired in 2009, the company discovered his involvement with S&S and filed the complaint to enjoin him from continued operation of S&S. It later filed a petition for preliminary and permanent injunction. The trial court granted the preliminary injunction against Coates.

Judges L. Mark Bailey and Patricia Riley upheld the injunction and affirmed the trial court in all respects except with regard to the part of the injunction that prevented any use by Coates of heatersandparts.com and a red “H&P” mark on its website and printed materials. PHP used a red “PHP” mark and its website is portableheaterparts.com. There was no evidence that Coates’ use of the website or mark created any confusion among its current or potential customers, wrote Judge Bailey. The judges also found the relief to be overly broad, because by restricting the use of the web address and mark, the trial court effectively restricted Coats from using these means of advertising in the U.S. and globally.

The majority found the trial court didn’t err in determining MPI faced a risk of irreparable harm and lacked adequate remedy at law as a result of any breach by Coates of the agreement not to compete. They also held the trial court didn’t err by determining that MPI has a reasonable likelihood of success on the merits of its case.

Judge James Kirsch dissented because he believed the covenant to not compete failed to be reasonable in terms of both activity and geographic area. He found the purpose of the covenant at issue is solely to prevent competition by restricting Coates from engaging in competition with the employer “in any capacity whatsoever” and prevent Coates from competing in any way.

He also found the geographic scope of the restriction, which applied to all the states in which MPI had done business, was without regard to whether Coates actually had any involvement in such states. Judge Kirsch also questioned the trial court’s re-writing of the contract as a matter of policy. The trial court “blue penciled” the contract, including the scope of the provisions of the covenant to strike out the 13 states which Coates had no contact, and made other changes.

“Here, as a result of re-writing the employer’s contract by the trial court, a contract that is unreasonable in its scope and unenforceable as over-broad becomes enforceable against the employee,” he wrote. “I believe that the restrictive covenant is unenforceable in its entirety.”

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  1. My daughters' kids was removed from the home in March 2015, she has been in total compliance with the requirements of cps, she is going to court on the 4th of August. Cps had called the first team meeting last Monday to inform her that she was not in compliance, by not attending home based therapy, which is done normally with the children in the home, and now they are recommending her to have a psych evaluation, and they are also recommending that the children not be returned to the home. This is all bull hockey. In this so called team meeting which I did attend for the best interest of my child and grandbabies, I learned that no matter how much she does that cps is not trying to return the children and the concerns my daughter has is not important to cps, they only told her that she is to do as they say and not to resist or her rights will be terminated. I cant not believe the way Cps treats people knowing if they threaten you with loosing your kids you will do anything to get them back. My daughter is drug free she has never put her hands on any of her children she does not scream at her babies at all, but she is only allowed to see her kids 6 hours a week and someone has to supervise. Lets all tske a stand against the child protection services. THEY CAN NO LONGER TAKE CHILDREN FROM THERE PARENTS.

  2. Planned Parenthood has the government so trained . . .

  3. In a related story, an undercover video team released this footage of the government's search of the Planned Parenthood facilities. https://www.youtube.com/watch?v=ZXVN7QJ8m88

  4. Here is an excellent movie for those wanting some historical context, as well as encouragement to stand against dominant political forces and knaves who carry the staves of governance to enforce said dominance: http://www.copperheadthemovie.com/

  5. Not enough copperheads here to care anymore, is my guess. Otherwise, a totally pointless gesture. ... Oh wait: was this done because somebody want to avoid bad press - or was it that some weak kneed officials cravenly fear "protest" violence by "urban youths.."

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