Equalizing the Threat of Noncompete Agreements: Solutions Beyond Louisiana's Tangled Web of Nullity

• Author: Kristen Amond
• Position: J.D./D.C.L., 2016, Paul M. Hebert Law Center, Louisiana State University.
• Pages: 1235-1275

Equalizing the Threat of Noncompete Agreements:

Solutions Beyond Louisiana’s Tangled Web of Nullity

TABLE OF CONTENTS

Introduction ................................................................................ 1236

I. Noncompete Agreements Throughout the United States

and Louisiana .............................................................................. 1241

A. Noncompete Agreements Throughout the United States ..... 1242

B. Noncompete Agreements in Louisiana ................................ 1243

1. Louisiana’s Oscillating History of Noncompete

Agreements .................................................................... 1244

2. Requirements of an Enforceable Noncompete

Agreement Under Section 23:921 ................................. 1248

II. The Doctrine of Nullity as Applied to Noncompete

Agreements ................................................................................. 1249

A. Dissolution and Damages: Louisiana Civil Code Article

2033 and Its Application to Noncompete Agreements ........ 1250

1. Application of Article 2033: Restoring a Party

through Damages ........................................................... 1251

2. Restoring the Employee Through Article 2033:

Kimball v. HEALTHCAREfirst, Inc. .............................. 1252

B. Reformation of Contractual Instruments .............................. 1254

1. Reformation of Noncompete Agreements Throughout

the United States ............................................................ 1254

2. Reforming Noncompete Agreements in Louisiana:

AMCOM of Louisiana v. Battson .................................. 1256

C. Lost in the Nebulous Web of Nullity ................................... 1258

III. Legal Problems Leading to Overused and Overly Broad

Noncompete Agreements ........................................................... 1259

A. Overly Broad Noncompete Agreements .............................. 1259

B. Overuse of Noncompete Agreements .................................. 1260

1. Protectable Interest Requirement in Other

Jurisdictions ................................................................... 1260

2. Louisiana’s Battle with Certainty and Fairness ............. 1262

IV. Alternative Solutions to the Overly Broad and Overused

Noncompete Agreements ........................................................... 1263

A. A Legislative Solution: Overhaul Louisiana’s

Noncompete Law ................................................................. 1263

1236 LOUISIANA LAW REVIEW [Vol. 76

1. Disincentivize Overbreadth of Noncompete

Agreements: Eliminate Reformation ............................. 1264

2. Curtail the Overuse of Noncompete Agreements:

Require a Protectable Interest ........................................ 1264

B. A Judicial Solution: Arming Employees and Employers

with the Counterweight of Intentional Interference with

Contractual Relations ........................................................... 1265

1. Intentional Interference with Contractual Relations

in Other Jurisdictions ..................................................... 1266

2. Intentional Interference with Contractual Relations in

Louisiana ....................................................................... 1267

3. Adopting Tortious Interference in the Employment

Context in Louisiana ...................................................... 1269

C. The Not-So-Magic Formula ................................................. 1273

Conclusion .................................................................................. 1274

INTRODUCTION

Noncompete agreements, once used infrequently and limited to highly

specialized industries, are becoming ubiquitous in employment contracts.1

These agreements are frequently overly broad and often restrict employees

who have no specialized knowledge or training and who pose no threat to

an employer’s competitive advantage. One such case is that of Catherine

Kimball. HEALTHCAREfirst (“HCF”) offered Catherine Kimball

employment as a consultant and salesperson in charge of providing

technology services to healthcare agencies.2 Before Kimball accepted the

Copyright 2016, by KRISTEN AMOND.

1. See Greg T. Lembrich, Note, Garden Leave: A Possible Solution to the

Uncertain Enforceability of Restrictive Employment Covenants, 102 COLUM. L.

REV. 2291, 2297 (2002) (“Given the degree of protection that restrictive

covenants can offer, some commentators have suggested that employers should

routinely include them in their employees’ contracts, even if they may not be

necessary.”).

2. HEALTHCAREfirst is a national company that provides web-based home

health and hospice services to caregivers. About Us, HEALTHCAREFIRST,

http://w2.healthcarefirst.com/who-we-are/ (last visited Mar. 9, 2016). The company

is based in Missouri, but has an office in Baton Rouge, Louisiana. Contact

HEALTHCAREfirst, HEALTHCAREFIRST, http://w2.healthcarefirst.com/contact-

us/ (last visited Mar. 9, 2016). Catherine Kimball’s attorney, Amy Newsom,

provided all of the information on Kimball’s journey through litigation. Interview

with Amy Newsom, Newsom Law Firm, in Baton Rouge, La. (Sept. 18, 2014).

Litigation arose in the Middle District of Louisiana. Kimball v.

2016] COMMENT 1237

position, but after she had resigned from her previous employment, HCF

informed her that she would be required to sign a noncompete agreement.3

Because Kimball had already resigned from her previous employment, she

felt that she had no option but to sign the noncompete agreement.

HCF, a national company that used both telephone and web-based

technology, allowed Kimball to work from her home in Baton Rouge,

Louisiana. Kimball’s service territory changed 13 times during her three

years of employment, allowing Kimball to service agencies in all 50 states

during her employment with HCF.4 Despite working for HCF for years,

the company laid off Kimball, forcing her to seek new employment.5

Kimball applied to work at a California company that did nearly

identical work to HCF and would allow her to work from her home in

Louisiana. The California employer was ready to offer Kimball a job when

she told the company that she had signed a noncompete agreement with

HCF. The company refused to hire Kimball unless HCF released her from

the noncompete agreement or a court invalidated the agreement. HCF

refused to release Kimball from the agreement, and as a result, the

California employer declined to offer Kimball employment.

Because of the restrictive noncompete agreement, Kimball was left

unemployed, and she had few options for future employment. The

noncompete agreement restricted employees from working in every state

in the United States, Guam, and Puerto Rico6 and thus was geographically

overbroad under Louisiana law.7 Only after Kimball filed suit, did HCF

concede that the noncompete agreement was overly broad and seek

reformation of the agreement to make it enforceable.8

HCF’s concession, however, arrived too late. By the time the court

declared Kimball’s noncompete agreement invalid, the California

company had rescinded the job offer.9 Throughout the litigation

HEALTHCAREfirst, Inc., No. 12–395, 2013 WL 4782139 (M.D. La. Sept. 5,

2013).

3. Interview with Amy Newsom, supra note 2.

4. Because Kimball worked in each state, HCF’s noncompete agreement,

which forbade ex-employees from working in any place where they did work for

HCF, effectively prohibited her from competing in any state in the nation.

5. Interview with Amy Newsom, supra note 2.

6. Memorandum in Support of Motion for Summary Judgment at 5, Kimball v.

HEALTHCAREfirst, Inc., No. 12–395 (E.D. La. Sept. 4, 2012), 2012 WL 6197360.

7. The agreement violated Louisiana law because it did not restrict

competition to the parishes or municipalities in which the employer did business.

LA. REV. STAT. ANN. § 23:921 (Supp. 2015).

8. Kimball v. HEALTHCAREfirst, Inc., No. 12–395, 2013 WL 4782139, at

*2 (M.D. La. Sept. 5, 2013).

9. Interview with Amy Newsom, supra note 2.