ENFORCEMENT OF EMPLOYMENT AGREEMENT RESTRICTIVE COVENANT FOLLOWING PREDECESSOR’S BANKRUPTCY IS DENIED

In the employment law and business litigation case of Innocor, Inc. vs. Sinomax USA, Inc (D.N.J., 25-7-1346) the plaintiff, Innocor Inc. filed a motion for a preliminary injunction. Innocor sought an injunction enjoining and prohibiting defendant Ann Ellis from: (1) working with any company that competes with Innocor, including defendant Sinomax USA Inc., for one year; (2) communicating with or soliciting any of Innocor’s clients; and (3) disclosing or using any of Innocor’s confidential, proprietary information and trade secrets, and requiring that Ellis destroy same.

The issue was whether a noncompetition and nondisclosure agreement between Innocor and Ellis was still in effect following Innocor’s predecessor’s bankruptcy in which it rejected various employment agreements, including Ellis’. Innocor contended that this rejection only terminated Ellis’ employment agreement and Ellis remained bound by non-competition and nondisclosure agreement.

Defendants argued that the signed agreements were terminated by the bankruptcy court’s order. In support of this argument, defendant stated that following the bankruptcy proceedings, Innocor provided all employees with new non-compete agreements in addition to new employment agreements, both which Ellis refused to sign. Innocor failed to demonstrate a substantial likelihood that the non-competition and nondisclosure agreement was valid at the time of Ellis’ alleged breach. Innocor failed to prove its likelihood to succeed on the merits and failed to demonstrate the remaining three factors necessary for the court to grant an injunction. Its application for the preliminary injunction was denied.

Reference: Case & Analysis, New Jersey Law Journal, 222 N.J.L.J. 3091 (September 26, 2016)

Filed Under: Employment Agreement, Litigation, Restrictive Covenants

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