Labor & Employment Law Daily Appeal of preliminary injunction’s expired noncompete provision dismissed as moot
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Monday, March 2, 2020

Appeal of preliminary injunction’s expired noncompete provision dismissed as moot

By Thomas Long, J.D.

A six-month restriction against a logistics company’s former employee and his new employer, barring them from soliciting the plaintiff’s customers, did not present a live controversy because the six-month period had passed.

In a trade secrets dispute between a third-party logistics and supply chain management company against a former manager and his new employer, an appeal of a preliminary injunction granted by a federal district court in Michigan was moot because the six-month duration of the injunction’s requirements on solicitation of the plaintiff’s customers had passed. The Sixth Circuit accordingly dismissed the appeal. In addition, the defendants failed to object to a restriction in the injunction barring them from using the plaintiff’s trade secrets on an ongoing basis, and therefore forfeited their right to seek vacatur of that restriction (Radiant Global Logistics, Inc. v. Furstenau, February 25, 2020, per curiam).

The complaining company, Radiant Global Logistics, Inc., was in the business of helping its customers in the freight brokerage industry move things from one point to another using other companies to provide the shipping services. In February 2018, the manager of Radiant’s Detroit office contacted Radiant’s competitor BTX Logistics about joining the company as the head of a new BTX office in Detroit. The manager prepared a business plan and budget for the new office and provided a list of employees who would join him.

Before the move, he allegedly forwarded emails from his Radiant account to his personal account with data on revenues, profit margins, costs, and financial projections, as well as information about shipments the office handled, and a spreadsheet showing Radiant’s preferred shippers. After the manager left Radiant and opened the BTX Detroit office—taking most of the other Radiant employees in Detroit with him—Radiant sued him and BTX for misappropriation of trade secrets.

Preliminary injunction. Radiant moved for a preliminary injunction, and the district court granted its request. The court enjoined the manager, and all other former Radiant employees now employed by BTX Detroit, from soliciting business from or contacting customers with which they conducted business during the last 12 months that they were employed by Radiant for a period of six months. The court also enjoined the manager and the other former Radiant employees who had joined BTX from disclosing or using any Radiant confidential information or trade secret information for an indefinite period.

Appeal. BTX appealed the nonsolicitation requirements of the injunction but did not object to its trade-secret restriction. BTX requested a stay of the preliminary injunction while the appeal was pending; the Sixth Circuit denied the stay request. Therefore, the six-month contact restrictions ran their course and expired. BTX did not object to the trade-secret restriction of the injunction.

Case or controversy requirement. The appeals court noted that Article III of the U.S. Constitution limited its jurisdiction to active cases and controversies in which the parties have a legally cognizable interest at stake in the outcome. If a claimant loses a personal stake in the outcome during litigation, or it becomes impossible for the court to grant meaningful relief, there is no longer a case or controversy, and the court must dismiss the case as moot. Based on these principles, the Sixth Circuit said, BTX’s appeal was moot. The six-month noncompete restrictions had expired, and therefore they now required nothing of and meant nothing to BTX.

Ongoing restriction on trade secrets use. There also was no live case or controversy over the ongoing restriction against use of Radiant’s trade secrets, to which BTX never objected. BTX argued that a mootness exception applied because the dispute was “capable of repetition, yet evading review.” However, the court explained, “this narrow exception applies to disputes that by their nature will become moot before litigation runs its course, such as a college graduation date, and thus are ‘likely forever’ to evade appellate review.” In this case, a live controversy remained as to the merits of Radiant’s claims. There was nothing, said the court, about trade secret claims in general, or about this trade secret claim in particular that would stand in the way of eventual appellate review.

Dismissal vs. vacatur. Finally, the Sixth Circuit declined to vacate the district court’s order as part of its mootness resolution, deciding instead to dismiss the appeal for lack of jurisdiction. “For one, vacatur is an equitable remedy subject to the strictures of waiver and forfeiture,” the court said. “And here, BTX did not even request vacatur until after oral argument and so plainly ‘slept on its rights,’ to its detriment.” Moreover, even if BTX had not forfeited its right to request vacatur, that remedy would be inappropriate under the circumstances, in the court’s view. Because a preliminary injunction had no preclusive effect on the district court’s decision whether to impose a permanent injunction, the purpose of vacatur—to protect a losing litigant from having to live with the preclusive effects of an adverse ruling without having had a chance to appeal it—was inapplicable.

Concurring opinion. Circuit Judge Jeffrey Sutton wrote a brief concurrence, stating that he agreed that the appeal was moot and that BTX forfeited its request for vacatur by failing to raise the issue in its appellate briefs, but saying that he would leave it at that.

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