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Im involved in a non-compete litigation as the defendant.

I'm involved in a non-compete...
I'm involved in a non-compete litigation as the defendant. The courts suggested we try ADR, and in that light we've setup a time for a call between both parties. Are there any resources out there for settlement talks strategies? should I ask the opposing party where they think they stand and what they think I stand, and vice versa, in order for us to understand where each position comes from? sort of an informal discovery process? I'm just brainstorming, I have no idea how settlement talks are, or their 'stages', so I'm looking for either resources online or a brief run down of how these things take place and what's discussed in them.
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6/24/2013
John
John, Attorney
Category: Business Law
Satisfied Customers: 5,801
Experience: Licensed and practicing attorney helping businesses achieve their legal and practical goals.
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Thanks for submitting your question today. Generally what will occur is first the mediator will want a synopsis of the issues of fact and law in the matter from each party. The mediator will then want to meet witht the parties individually to discuss their perceptions of their strengths and weaknesses of the matter. The meditaor may also individually point out to a party what he or she percieves as a strength or weakness of a party; and may convey the same to the other party.

Ultimately however, the mediator will attempt to get from the parties a range of settlement (whether it be $ or doing a certain thing). The mediator is going to attempt to put together a deal or dollar figure (or even a range of dollar figure) in which he or she believes the parties may come to an agreement. The mediator also will likely have a fairly rational explanation as to why the deal should be accpeted. It's completely voluntary amongst the parties to reject any proposal or not, but as the mediator generally will explain, a deal that parties are able to strike on their own is almost always preferrable to one that a court will fashion for the parties; i.e., at least you get some choice as to the outcome.

It may sound fairly straight forward, but my experience with mediation is that 1) whether a deal will be struck depends on how hard the mediator work to find the parties' motivations adn to explain the potential consequences of not settling the particular matter; 2) whether a party can remove his or her emotion from the process.

I believe this answers your question. However, if you need clarification or have follow-up questions regarding this matter, I will be happy to continue our conversation – select the Reply to Expert or Continue Conversation button. If you are otherwise satisfied with my response, please leave a positive rating as it is the only way I am able to get credit for my answers. Thank you, XXXXX XXXXX wish you all the best with this matter.

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Customer reply replied 4 years ago

Actually at this point there will not be any mediators involved. I understand without any details on the specifics of the situation, your advice will be limited, but would you know what would a first meeting (phone call) generally entail? I do not think that any agreements would be locked in on a first call, so what are some suggestions to discuss or approach this initial conversation?

To be considered ADR, a mediator or arbitrator has to be involved. What you're really dealing with here is just an attempt at settlement. It really depends then on where the parties are at in the litigation process. For example, if several motions have occurred, discovery is done, then parties are more likely to have a more clear (and hopefully realistic ) view of what the case is worth. In this case I'd expect the discussion to go right to the terms of proposed settlement.

If it is still early yet in the litigation time line, I'd expect there to be more debate of the merits of the case and defenses by the parties before terms of settlement are whittled down. From my experience the parties often find out fairly early in the discussion that 1) they're never going to truly agree on the merits of the case, 2) the cost of litigation is going to spiral out of control quickly (specially in non-compete cases); 3) for the sake of settlement and to avoid costs and time they'll bend a little on how much they're willing to pay/accept.
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Customer reply replied 4 years ago

I agree that at least right off the bat we will not agree on the merits of each other's position. And I suppose knowing this will help me in not even trying to go there. We'll see how that goes. Out of curiosity, I've read about how non-compete cases can get costly. Why is this so, compared to other business litigation cases(?) Perhaps these could be talking points in the conference.

Because the party seeking to enforce the non-compete agreement is asking the court to issue an equitable remedy - meaning issuing an order to make person do or not do something. These require a lot of work on the lawyer's end early in the case to get a temporary restraining order and then a permanent injunction, and the defense has to oppose all these motions early on. Thus the parties are sometimes motivated to settlement in whole or in part to avoid these costs.
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Customer reply replied 4 years ago

Right now there was an action filed, to which we filed a motion to dismiss (which is now pending for the court's decision). Are we past the TRO phase? or can they still do that?

You're probably past it because in most non-competes (those I've been involved with and every heard of) the plaintiff files the tro with the complaint. Then there is immediately a motion for permanent injunction filed. Doesn't sound like the plaintiff properly followed the procedure in your case. Generally the longer a party waits for a tro the less likely it is to be granted because the argument is that emergency relief is needed now because irreparable damage is being done. So if a plaintiff waits, it's hard for him to argue he is being irreparably damaged because he's waited so long.
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Customer reply replied 4 years ago

Well this maybe slightly outside the scope of this question (and I can certainly post another one if needed), but the complaint does state an injunctive relief and I quote "...This is an action for damages and injunctive relief arising from the breach and..." and one of the requests is "Preliminarily and permanently enjoining [defendant]..." now, without having to go through the actual complaint, and based solely on those statements, it seems they may have asked for it but failed to follow proper procedure? My response was to file a motion to dismiss (reasons for which should be irrelevant to this question), and they filed an answer to the motion to which I filed a answer, now waiting on the oral hearing.


 


How does the TRO (if that's the same as a preliminary injuction) falls within the scope of the complaint, and within the process? This was filed back in February.

There's no way they're getting a tro now, the best they can get is a permanent injunction stopping you from supposed competition. These are different - tro (temporary restraining order) only covers the time between when the complaint is filed and when the permanent injunction motion occurs. Usually what occurs is, these are really fast, the plaintiff files the complaint and tro at once, the tro is usually granted, then the plaintiff (at most a week later or even with the complaint) files a motion for summary judgment for the permanent injunction. If there is any testimony needed the judge will have a hearing and take testimony.

Your case sounds odd frankly. Lets say you were unlawfully competing...you've been doing it since February? It will be increasingly difficult for plaintiff to argue it is being irreparably harmed as time passes and it does not file a motion.
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Customer reply replied 4 years ago

Well, again, I don't want to overstep the bounds of the original question, but your answers open up other lines of questioning, and I will certainly rate and reward accordingly if we can continue this conversation. Even if they chose not to go with a TRO (and based on your assessment of the time that's elapsed), their claim of breach of the compete would still allow them to pursue lost profits and unjust enrichment damages. In a way, that they are not pursuing a TRO, is it possible to come with some affirmative defense that, as you say, the business effect of the compete isn't very crucial? Even if I'm competing since February, I could be making $1/month or be at a loss. In that case lost profits or damages would be non existent even if they won?

No problem, I'm happy to help. What you're thinking about isn't an affirmative defense so to speak but rather an issue of fact specifically going to the measurement of plaintiff's damages in the supposed breach. Your argument is essentially - so what if I competed , at the very most I caused $1 of damages per month and you should be limited to that amount. This is a perfectly fine theory of your defense, but it doesn't go to what lawyers would call "liability" (i.e., whether or not you are responsible) but factual damages (i.e., you are responsible but have limited damages you owe). It very well could be that they only have very limited damages even if they win; that's correct. This is why some people put liquidated damages clauses in their non-compete agreements (e.g., $20k or something is due if found to be competing), These are awarded if the the liquidated damage is a reasonable estimate of actual damages.
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Customer reply replied 4 years ago

No, I completely understand that damages calculation isn't part of actually establishing liability for the breach. My point was simply to the fact that you stated they didn't follow due process (or flat out pursue) in trying to get a TRO in place, and as such you stated it was an odd behavior. It still does not invalidate the fact that a breach on the compete is still to be determined.


 


 


My question was really towards whether or not them not pursuing a TRO affects the case in any other way, and I suggested as a possible effect, the fact that there would be an assumption that the damages would _not_ be irreparable (and I used the $1/month example). In other words, as per what you stated, if urgency on filing for a TRO supports the notion of irreparable damage, does the lack of it imply that damages might not be 'too serious' (for lack of better word).


 


 


To tie this to the phone conversation that I will be having, would there be an assumptions to be made related to the TROs? if they felt my competition would undermine their business why didn't they request a proper TRO? and that they didn't, might it mean that perhaps they are fighting this over a much less strong belief that the competition will harm (and as such it might hint that they might not want to go the extra mile in terms of costs or time to fight this). To tie it to your experience more directly, do you see a difference in cases when TROs are in place and not in place? and if so, how so.

Answering your follow up questions as follows:


In other words, as per what you stated, if urgency on filing for a TRO supports the notion of irreparable damage, does the lack of it imply that damages might not be 'too serious' (for lack of better word). -- yes that's correct.

To tie this to the phone conversation that I will be having, would there be an assumptions to be made related to the TROs? if they felt my competition would undermine their business why didn't they request a proper TRO? and that they didn't, might it mean that perhaps they are fighting this over a much less strong belief that the competition will harm (and as such it might hint that they might not want to go the extra mile in terms of costs or time to fight this). To tie it to your experience more directly, do you see a difference in cases when TROs are in place and not in place? and if so, how so. -- You're making the correct observation and the same one that would be made by the court - indeed why didn't they go for the tro or file for summary judgment to stop you from competing. And of course the implication is that your competing is not a serious threat, thus they do not have a legitimate business interest in getting you to stop. Honestly, I've never had a case in which a tro was not sought (its a standard procedure for parties to ask for the tro). There are those in which the tro is not granted, and these generally are less likely to win...basically because once they are not able to get it they realize the case is going to be 1.5.years and the person may or may not be allowed to compete at the end anyway; so they lose interest in the case and will settle of dismiss the matter.
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