A Tactical Approach To Defending Virginia Non-Competes

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Virginia civil procedure provides a defendant with two principal avenues to challenge the sufficiency of a plaintiff’s claim.  The first, a demurrer, contends that even if all well-pled facts are true, the complaint is inadequate.  The court will not look beyond the four corners of the complaint in judging a demurrer.  In contrast to the first challenge, a plea in bar provides a defendant with the opportunity to offer evidence to defeat the plaintiff’s claim by proving or disproving a distinct factual element critical to the claim.

After the Virginia Supreme Court’s decision in Home Paramount Pest Control Companies, Inc. v. Shaffer changed the non-competition landscape in 2011, Virginia courts saw a surge in litigation as employees and former employees attacked the enforceability of non-competition agreements that were acceptable under the old law but might not pass under the Home Paramount standard.  The defendant’s demurrer in Government Strategy & Technology LLC v. O’Donnell was initially heard in the Loudoun County Circuit Court on the day the Home Paramount decision was handed down.  Judge Thomas Horne, unaware of the Supreme Court’s decision in Home Paramount, denied defendant Veronica O’Donnell’s demurrer.  She immediately asked the court to reconsider its ruling in light of the new holding.

In Home Paramount, the Supreme Court reviewed a Fairfax County Circuit Court’s ruling that a non-competition agreement was overbroad and therefore unenforceable because it could be interpreted as prohibiting the former employee from engaging in conduct that didn’t actually compete with Home Paramount. The significance of the decision is that the Supreme Court had found the exact same provision to be enforceable in 1989.  

In Home Paramount, the court said that since the restriction “did not confine the function element of the [noncompetition clause] to those activities it actually engaged in, [Home Paramount] bore the burden of proving a legitimate business interest in prohibiting [the employee] from engaging in [the allegedly competitive activities].”  The Supreme Court held that Home Paramount had failed to meet this burden; therefore, the non-compete could not be enforced.

On reconsideration in Government Strategy, Judge Horne noted a critical procedural distinction between Home Paramount and the case before him. In the trial court, the challenge to the Home Paramount non-competition clause came by way of a plea in bar, a process that provided Home Paramount the opportunity to put on evidence that the breadth of the function element was necessary to protect a legitimate business interest.  Since O’Donnell’s non-compete was challenged on demurrer, the employer did not have the chance to demonstrate the reasonableness of the non-compete’s breadth.

Though the Government Strategy non-compete seemed to run afoul of the new Home Paramount paradigm, Judge Horne was not willing to find the clause unenforceable without giving Government Strategy a chance to justify the breadth of the provision.  He denied O’Donnell’s motion for reconsideration, noting that the “arguments are premature and would be more appropriately argued in some other context.”

In Government Strategy & Technology LLC v. O’Donnell, we see a thoughtful jurist attempting to sort out the effect of a sudden and dramatic change in the law.  It is tempting to envision Judge Horne resorting to a procedural artifice to buy time for the impact of Home Paramount to be distilled, but it’s really the case of a judge struggling to get it right in real time. The case provides a telling peek at an important procedural nicety and an insight to a judge at work.

Topics:  Demurrers, Non-Compete Agreements, Restrictive Covenants

Published In: Civil Procedure Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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