Compare and contrast Ohio and Nebraska’s positions on noncompete clauses. 

Once you have read and reviewed the case scenario, respond to the following questions:

  1. Discuss the legal implications for employers and employees for requiring employees to sign noncompete agreements. What factors did the court consider in making its decision? Compare and contrast Ohio and Nebraska’s positions on noncompete clauses.
  2. Which state’s laws support ethical reasoning in the resolution of this case?

Your response should be  two pages in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying APA style citations.

1. DCS Sanitation Mgmt. v. Castillo, 435 F.3d 892

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DCS Sanitation Mgmt. v. Castillo

United States Court of Appeals for the Eighth Circuit

October 14, 2005, Submitted ; January 25, 2006, Filed

No. 05-1201

Reporter 435 F.3d 892 *; 2006 U.S. App. LEXIS 1758 **; 152 Lab. Cas. (CCH) P60,135; 23 I.E.R. Cas. (BNA) 1772

DCS Sanitation Management, Inc., Appellant, v. Eloy Castillo; Efren George Castillo; Adolfo Martinez, Appellees.

Subsequent History: Rehearing denied by, Rehearing, en banc, denied by DCS Sanitation Mgmt. v. Castillo, 2006 U.S. App. LEXIS 8154 (8th Cir., Apr. 4, 2006)

US Supreme Court certiorari denied by DCS Sanitation Management, Inc. v. Castillo, 2006 U.S. LEXIS 7161 (U.S., Oct. 2, 2006)

Prior History: [**1] Appeal from the United States District Court for the District of Nebraska.

Core Terms

former employee, noncompete, parties, district court, noncompete agreement, overly broad, cleaning, plant, fundamental policy, contacts, moot, preliminary injunction, cleaning service, do business, choice-of-law, injunctive, materially, soliciting, courts

Case Summary

Procedural Posture Appellant former employer challenged a decision from the United States District Court for the District of Nebraska, which denied its motion for a preliminary injunction and granted summary judgment to appellee former employees in a case alleging a violation of a noncompete agreement.

Overview As a condition of employment, the employees each signed employment agreements containing a noncompete clause. The contract also contained a choice of law provision. After the employees were hired by another company, the employer filed an action for breach of contract. The district court denied the

employer injunctive relief, and it granted the employees summary judgment. Thereafter, the employer sought review. In affirming, the court determined that, although the one-year time frame in the agreement had expired, the claim for money damages was not moot. However, the request for injunctive relief was moot. Next, Nebraska law applied, notwithstanding the fact that the agreement provided for the application of Ohio law. Because the laws of each state with regard to noncompete agreements were so diverse, the district court properly found that the application of Ohio law would violate the public policy of Nebraska. Moreover, Nebraska had a greater material interest in the agreements. Finally, the agreements were invalid under Nebraska law because they were overly broad; the employees were prohibited from working for any cleaning service within 100 miles for one year.

Outcome The decision was affirmed.

LexisNexis® Headnotes

Civil Procedure > Remedies > Injunctions > Preliminary & Temporary Injunctions

Labor & Employment Law > … > Conditions & Terms > Trade Secrets & Unfair Competition > Noncompetition & Nondisclosure Agreements

Civil Procedure > … > Justiciability > Mootness > Real Controversy Requirement

HN1[ ] Injunctions, Preliminary & Temporary

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Injunctions

Under Nebraska law, when a noncompete agreement’s time period runs out, an appeal from the denial of a preliminary injunction is moot. Although an appeal from a denial of injunctive relief may become moot by the passage of time, a claim for damages remains viable.

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > … > Federal & State Interrelationships > Choice of Law > General Overview

HN2[ ] Standards of Review, De Novo Review

A district court sitting in diversity jurisdiction applies the conflict of law rules for the state in which it sits. An appellate court reviews de novo the district court’s choice-of-law determination.

Business & Corporate Compliance > … > Contracts Law > Contract Conditions & Provisions > Forum Selection Clauses

Civil Procedure > … > Federal & State Interrelationships > Choice of Law > General Overview