Peter Steinmeyer Quoted in “5 Noncompete Developments to Watch for as 2020 Ends”

With a recent California high court ruling on how a state law affects business contracts, a Computer Fraud and Abuse Act case pending before the U.S. Supreme Court and the impact of COVID-19, there are plenty of developments for employee mobility attorneys to watch out for in the home stretch of 2020. 

Here, Law360 looks at five issues worth keeping an eye on. …

Circuit Split on CFAA Nears End

The U.S. Supreme Court is finally set to weigh in on the scope of the Computer Fraud and Abuse Act in Van Buren v. United States, a case taken up by the justices in April that could provide some clarity for attorneys who work on issues surrounding trade secrets.

Currently, the circuit courts are divided on whether individuals who are allowed to access a computer system break the law if their conduct violates the system owner’s policies or contractual restrictions for that use, a question that has implications for trade secret misappropriation claims.

While the Second, Fourth and Ninth Circuits have taken a narrow view of the law and only allow CFAA claims where someone lacked authorization, the First, Fifth, Seventh and Eleventh Circuits have allowed claims where someone misused information even if they had access to the material. …

Peter A. Steinmeyer, who co-leads Epstein Becker Green’s trade secrets and employee mobility strategic initiative, said that though the Supreme Court’s decision won’t be as significant given the DTSA, it will still be nice to have the issue cleared up.

“Lawyers have spent hundreds and thousands of hours briefing CFAA issues, myself included, and parsing the circuit split and even district court splits within given jurisdictions over the meaning of the CFAA,” Steinmeyer said. “So it will be nice to finally get clarity and put some of that to rest.”

The case is Van Buren v. United States, case number 19-783, in the U.S. Supreme Court. …

Courts Parse Choice-of-Law Provisions in Contracts

Cases over choice-of-law provisions in restrictive covenants will also likely capture attorneys’ attention in the coming months, as courts continue to interpret contracts to see which state’s law should govern when a dispute arises.

Such provisions can be included in contracts to specify what jurisdiction’s law should apply. Because state laws on noncompetes and other restrictive covenants vary so greatly, which law is applied in any given case can really have an impact on the outcome, attorneys noted. For instance, while Delaware is considered to be fairly friendly towards enforcing restrictive covenants, doing so in California is known to be more difficult. …

In April, the First Circuit handed NuVasive a win when it found that a Delaware choice-of-law provision applied and upheld a preliminary injunction enforcing a nonsolicitation and noncompete agreement that a worker signed with the medical device company. The court found that NuVasive’s incorporation in Delaware is a substantial enough relationship to invoke the state’s laws in a contract and that recent Massachusetts reforms of noncompete law weren’t in play since the worker signed his agreement before they took effect.

But the Third Circuit ruled the same month that sporting goods retailer Cabela’s LLC couldn’t block former workers from using proprietary information elsewhere because the agreements they signed ran afoul of Nebraska law, even though the company brought its suit in Delaware.

The panel said the district court properly identified a conflict between “Delaware’s fundamental policy in upholding the freedom of contract” and “Nebraska’s fundamental policy of not enforcing contracts that prohibit ordinary competition.” That both the execution of the agreements and alleged breaches, among other things, took place in Nebraska showed that the Cornhusker State had a “materially greater interest” in applying its laws to the agreements, the Third Circuit held.

“It’s an interesting and noteworthy case because so many companies are incorporated in Delaware, and so employers should be mindful of where their employees actually work when they’re having them sign these noncompetes,” Steinmeyer said.

The cases are NuVasive Inc. v. Day, case number 19-1611, in the U.S. Court of Appeals for the First Circuit, and Cabela’s LLC v. Matthew Highby et al., case number 19-1423, in the U.S. Court of Appeals for the Third Circuit. …

COVID-19’s Effects Remain to Be Seen

The coronavirus pandemic is also expected to leave a mark as the economic fallout from the crisis impacts employee mobility and presents novel questions for the courts to decide. …

And employee mobility may be put on hold by the outbreak, Epstein Becker’s Steinmeyer suggested.

“I haven’t seen any statistics, but anecdotally, my sense is that there has been less employee mobility among senior people because of COVID, and it’s the movement of senior people that tends to lead the litigation,” Steinmeyer said. “What will be interesting to see is, is there pent-up demand for movement, and will we see that either toward the end of this year or early next year.”