By Marjorie Johnson, J.D.
At Amazon a sales exec worked in the financial services sector, so the court refused to completely remove him from his new job at Google in the healthcare sector. It was unreasonable to restrain his “occupational field and his ability to capitalize on his general knowledge, skills, and sales experience.”
A sales exec who left his job at Amazon Web Services (AWS) selling cloud computing services in the financial sector to join competitor Google Cloud as the vice president in its healthcare sector, can continue working in that job, but with some restrictions, while Amazon’s lawsuit seeking to remove him completely is litigated. Granting in part Amazon’s motion for a preliminary injunction, a federal court in Washington ruled that while his non-compete agreement with Amazon was unreasonable, it was appropriate to reform it and enjoin him from participating in activities directly related to Google Cloud’s financial services sector or customers, from contacting any of his former AWS financial services customers or any current AWS customers from any sector, and from contacting any potential Google Cloud/AWS financial services customers (Amazon.com, Inc. v. Moyer, October 24, 2019, Martinez, R.).
When the sales exec was hired by Amazon as its director of sales for financial services for AWS, he signed an employment agreement that contained non-compete provision. He left two years later and was hired by Google Cloud as VP of sales for the healthcare and life sciences sectors. Amazon brought this lawsuit asserting he breached his non-compete agreement and moved for a preliminary injunction preventing him from keeping that job. In response, the sales exec argued that he would not be forced to violate his agreement because the needs of the healthcare sector and its customers were distinct from those of financial services.
Likelihood of success. Amazon argued that it was likely to succeed on the merits because if the sales exec was not restrained from performing his new role, he would breach his promises not to compete with Amazon. Thus, at issue was whether the non-compete was reasonable, which entailed consideration of whether the restraint was necessary to protect Amazon’s business or goodwill, whether it imposes on the sales exec any greater restraint than was reasonably necessary, and whether it violated public policy.
Amazon’s business or goodwill. Amazon identified a significant interest in the goodwill it had built with its existing customers as well as an interest in maintaining the competitive advantage it anticipated from its sales strategies, new features, and new services. However, the court noted that the employment agreement’s nondisclosure and non-solicitation provisions adequately addressed Amazon’s interests in preventing the sales exec from directly contacting his AWS customers and directly disclosing its confidential information to Google Cloud’s existing and potential customers or partners. He also could not disclose Amazon’s sales strategies or who Amazon viewed as important partners and customers so that Google Cloud could target them.
However, Amazon was also concerned that his role at Google Cloud was essentially the same role he had with AWS, albeit with different customers, and that his knowledge of Amazon’s confidential information would effectively “taint” his actions. The court agreed that Amazon provided essential considerations in this regard, and that a non-compete was necessary to protect it from his positioning Google Cloud to better compete with AWS even if he did not disclose confidential information in the process.
As written, non-compete was unreasonable. However, the non-compete was unreasonable since it placed restraints on the sales exec’s ability to earn a livelihood that were greater than necessary to protect Amazon’s business interests and goodwill. In particular, it prohibited competition as to “any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future) that Employee worked on or supported, or about which Employee obtained or received Confidential Information.” Because Amazon claimed the sales exec received confidential information about almost all AWS’s product roadmaps and sales strategies, he would thus be precluded from working for any competitor providing cloud services anywhere around the globe.
Some restraint reasonable. Though the court determined that reformation of the non-compete was appropriate to provide some restriction, it noted Amazon’s failure to make any attempt to tailor its non-compete to the sales exec’s job even though it could have “easily” done so. Instead, by expanding the “already broad non-compete” if it exposed an employee to information outside the scope of their original position, it gained greater leverage should an employee ever seek to work elsewhere. However, the sales exec was “fully able to protect his interests and undoubtedly was aware of and agreed to a limitation on his post-separation employment.”
Can’t contact any financial services or AWS customers. To protect Amazon’s interests in its customer relationships and goodwill, the court found it reasonable to restrain the sales exec from any contact with any financial services customers so as not to allow for unfair competition. The court also found it reasonable to restrain him from contacting any existing AWS customers, including healthcare customers, as he would be able to unfairly jeopardize and harm Amazon’s relationships with them which was “the essence of non-compete clauses.”
But can contact others. However, it was not reasonable to extend the restraint beyond AWS’s existing customers (except financial services), including potential healthcare customers. Because he was prohibited from disclosing Amazon’s confidential information, any competitive advantage would have to come from “intimation and inference” and potential customers were far less likely to understand the nuances of AWS and Google Cloud services. The playing field was “substantially evened” and restraining his contact with potential customers in such a way was not reasonable to protect from a “speculative advantage.”
Internal activity unrelated to financial services also okay. It was also not reasonable to restrain his internal Google Cloud activities outside of activity related to financial services. Significantly, he provided evidence that his AWS work was primarily limited to financial services and independent of the healthcare sector, and that cloud services sold to each sector were largely distinct. While Amazon established that he had some exposure to confidential information outside of the financial services sector, it did not establish it would be reasonable to restrain him from serving as Google Cloud’s VP of healthcare to protect the “general and conceptual” knowledge he gained at Amazon outside of the financial services sector.
Irreparable harm. Amazon also failed to show that it would be irreparably harmed if the sales exec was not barred from selling Google Cloud services to prospective healthcare customers. The court reasoned that he was “no expert” on AWS’s sales strategies to healthcare customers, Google Cloud presumably already developed its own sales strategies which he could elect to implement, and he would not be the sole decisionmaker in many of the competitive decisions. Moreover, any harm caused by his potential impact on the development of Google Cloud services and features was speculative.
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