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February 22, 2015 Practice Points

Be Cautious When Attempting to Enforce Non-Compete Agreements

The Boudreaux decision serves as a reminder for Louisiana employers.

By Wm. Brian London

In Boudreaux v. OS Restaurant Services, LLC, et al., a Louisiana federal district court refused to dismiss an employee’s unfair-trade-practices claims based on allegations that his former employer had knowingly attempted to enforce an unenforceable non-competition agreement. The employee had signed an employment agreement containing non-competition and non-solicitation provisions during his employment with Outback Steakhouse. Following his termination, the employee sought employment with a competing steakhouse, but the competing steakhouse refused to hire him because of the restrictive covenants in his employment agreement with Outback. The employee then sued Outback, seeking an injunction and a declaratory judgment that the non-competition provisions were unenforceable. After his first two complaints were dismissed, the employee filed a third amended complaint, asserting claims for violations of the Louisiana Unfair Trade Practices Act (LUTPA) and for intentional interference with business relations. Outback responded by filing a motion to dismiss pursuant to Rule 12(b)(6).

The court denied the motion, finding that the plaintiff had stated a plausible claim under both theories. Although LUTPA does not specifically define which actions constitute an unfair trade practice, the court observed that other Louisiana courts have recognized that enforcement of an invalid non-competition agreement can form the basis of a LUTPA claim. The employee had alleged that Outback had knowingly sought to enforce an unenforceable non-competition agreement, and that the employee’s ability to obtain employment had been negatively impacted. Accepting these allegations as true, the court found that the employee had stated a plausible claim that Outback had engaged in an unfair or deceptive trade practice, in violation of LUTPA.  

With respect to the intentional-interference-with-business-relations claim, the court explained that the employee was required to allege that the defendant acted with “actual malice.” The court observed that the employee’s allegations regarding the business-relations claim were essentially the same as those made in support of his LUTPA claim. The employee had specifically alleged that Outback “maliciously and intentionally” breached its obligation not to attempt to enforce the unenforceable non-competition agreement. Although Outback contended that it was only protecting its legitimate business interests, the court found that the employee’s allegations were sufficient to state a plausible claim that its motivations were malicious, rather than legitimate. The court therefore held that the amended complaint stated a valid claim under Louisiana law that Outback had improperly influenced others not to deal with the employee.

Although the court’s ruling did not address the ultimate merits of the employee’s claims, theBoudreaux decision nevertheless demonstrates that Louisiana employers and employers in other states with laws prohibiting unfair trade practices should be cautious in drafting and attempting to enforce non-competition agreements against former employees.

Wm. Brian London, Liskow & Lewis, New Orleans, LA

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