An Unfair Competition Claim

DTC Energy Group Inc. is a Colorado staffing company.

Adam Hirschfield was DTC’s business development manager and signed an employment agreement with a non-solicitation clause. DTC and another staffing entity, Ally Consulting LLC, began working together on a limited basis regarding staffing projects. DTC discovered that Hirschfield was sending DTC’s business and contacts to Ally. DTC confronted Hirschfield about this behavior but allowed him to continue working for a few more months until he resigned and began working for Ally.

As an employee for Ally, Hirschfield continued to solicit DTC’s business and customers. Months later, DTC filed a lawsuit against Hirschfield and sought a preliminary injunction to prevent him from continuing to solicit DTC’s customers. DTC alleged that Hirschfield breached his employment agreement, stole trade secrets and engaged in unfair competition.

The U.S. District Court for the District of Colorado denied DTC’s motion for a preliminary injunction, and the U.S. Court of Appeals for the 10th Circuit affirmed this decision. The 10th Circuit held that DTC could not show how it was being irreparably harmed by Hirschfield’s conduct so as to require a preliminary order preventing Hirschfield from soliciting DTC customers.

Rather, Hirschfield had already diverted 12 contracts from DTC to Ally. The court held that this restrictive covenant had lapsed and there was no further basis to enjoin Hirschfield.

DTC Energy Group Inc. v. Hirschfield, No. 18-1113, 2018 WL 6816903 (10th Cir. Dec. 28, 2018).

IMPACT: It’s important that companies plan in advance for unfair competition scenarios.