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 and a red “H&P” mark on its website and printed materials. PHP used a red “PHP” mark and its website is 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. Joe, you might want to do some reading on the fate of Hoosier whistleblowers before you get your expectations raised up.

  2. I had a hospital and dcs caseworker falsify reports that my child was born with drugs in her system. I filed a complaint with the Indiana department of health....and they found that the hospital falsified drug screens in their investigation. Then I filed a complaint with human health services in Washington DC...dcs drug Testing is unregulated and is indicating false positives...they are currently being investigated by human health services. Then I located an attorney and signed contracts one month ago to sue dcs and Anderson community hospital. Once the suit is filed I am taking out a loan against the suit and paying a law firm to file a writ of mandamus challenging the courts jurisdiction to invoke chins case against me. I also forwarded evidence to a u.s. senator who contacted hhs to push an investigation faster. Once the lawsuit is filed local news stations will be running coverage on the situation. Easy day....people will be losing their jobs soon...and judge pancol...who has attempted to cover up what has happened will also be in trouble. The drug testing is a kids for cash and federal funding situation.

  3. (A)ll (C)riminals (L)ove (U)s is up to their old, "If it's honorable and pro-American, we're against it," nonsense. I'm not a big Pence fan but at least he's showing his patriotism which is something the left won't do.

  4. While if true this auto dealer should be held liable, where was the BMV in all of this? How is it that the dealer was able to get "clean" titles to these vehicles in order to sell them to unsuspecting consumers?

  5. He has refused his Assent to Laws, the most wholesome and necessary for the public good. He has forbidden his Governors to pass Laws of immediate and pressing importance, He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance. He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation: For imposing Taxes on us without our Consent: He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.. He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless [ ] Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions. GOD BLESS THE GOVERNORS RESISTING! Count on the gutless judiciary to tie our children down and facilitate the swords being drawn across their throats. Wake Up America ...