Tom Shumate's Tennessee Non-Compete Law Blog

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After Lane Kiffin, the widely despised former University of Tennessee football coach, hired the runninng backs coach away from the Tennessee Titans, the Titans sued Kiffin and his new employer, the University of Southern California, in federal court for interfering with its contractual relations with the running backs coach and for inducing the breach of his contract.  Since that time, two federal judges have recused themselves to avoid any appearance of impropriety -- Judge Campbell, who attended UT College of Law and has a daughter who is applying to USC, and Judge Trauger, whose husband was involved in negotiating the deal to bring the Titans to Nashville. The case has now been reassigned to Senior Judge John T. Nixon. Given the importance of football in Tennessee, this case might never be heard were it not for the lifetime tenure granted to federal judges.  As it stands now, this case is set for trial on August 2, 2011. You can read more about this story here.

Interesting Arguments Don't Necessarily Make Winning Arguments -- Hanger Prosthetics & Orthotics East, Inc. v. Kitchens

Hanger sued to restrain Kitchens, one of its former employees and a certified orthotist, from working for a competitor, Choice Medical.  It also sued Kitchens and Choice Medical for various torts, including Kitchens' employment contract with Hanger contained a two-year covenant not to compete within 75 miles of Hanger.  Ultimately, the trial court held that the non-compete agreement was enforceable for a period of one year.  It also held that Choice Medical induced Kitchens to breach his non-compete agrement.  In the process of making that determination, the trial and appellate courts resolved several interesting arguments made by the Defendants.

First, Kitchens argued at trial that he was an "allied health professional" [huh?] so the non-compete agreement was void as against public policy pursuant to the Tennessee Supreme Court's holding in Murfreesboro Medical Center, P.A., v. Udom, 166 S.W.3d 674 (Tenn. 2005).  The trial court disagreed since restrictive covenants are widespread in the orthotics industry, have not been addressed by the American Board Certification in Orthotics and Prosthetics, and, most importantly, patients rarely choose the orthotist. 

Second, Kitchens and Choice Medical argued that the non-compete agreement was not enforceable because there was not a protectable interest at the exact moment of the agreement.  They relied on Allright Auto Parks, Inc. v. Berry, 409 S.W.2d 361 (Tenn. 1966), in which the Court noted that it was "the duty of this Court to construe contracts as of the date of their making."  The Court of Appeals made quick work of that argument.  It held:  "We agree in general terms that it is necessary to examine the validity of the covenant not to compete as of the date that it was entered into.  However, that does not mean that future events are not or cannot be within the contemplation of the parties to the agreement when it is signed."  Based on this holding, proof of what the employer and employee intended to accomplish in the future is now a proper consideration when determining whether a non-compete agreement was valid when it was entered. 

Third, after the trial court awarded treble damages against Choice Medical to the tune of $480,364.00, Choice Medical argued that there was no clear showing that it intended to induce Kitchens to breach his contract or that it had a malicious intent.  The only evidence relied on by Choice Medical to counter the trial court's finding that Choice Medical hired Kitchens to take advantage of the existing relationships he developed while working for Hanger was that it had its attorneys review Kitchens' non-compete agreement before he was hired.  But Choice Medical failed to provide any proof regarding what its attorneys advised it after reviewing the agreement.  The Court of Appeals noted correctly that the attorneys could have advised Choice Medical that it should not have hired Kitchens and that it hired him over their objections.