When an employer seeks a temporary restraining order (“TRO”) or temporary injunction in a Tennessee federal court against a former employee, or other person or entity with whom it had a non-compete agreement, to succeed, it must show irreparable harm will result to it if the TRO or injunction is not granted. (For purposes of this post, a non-compete agreement refers to an agreement that prohibits competition, use of confidential information, or solicitation of customers).
To obtain a TRO or temporary injunction, a federal district court in Tennessee must consider four factors: (1) The plaintiff’s likelihood of success as to the merits; (2) whether the plaintiff will suffer irreparable harm or injury if the relief is not granted; (3) whether substantial harm will be caused if the relief is granted; and (4) the effect of the injunctive relief on the interests of the public. The irreparable harm factor is indispensable. While a district court may grant a TRO or temporary injunction even where the plaintiff has not shown that it is substantially probable that the plaintiff will ultimately win the case on the merits, to grant either a TRO or a temporary injunction, a Tennessee federal district court must make specific findings that the plaintiff will suffer irreparable injury.
What is considered irreparable injury by Tennessee federal courts? An injury is irreparable if it cannot be compensated by money damages. In non-compete cases, a former employer or business cannot be compensated for lost revenues: From customers and contracts it can never prove it lost; from confidential information that was used by others to gain customers, sales or otherwise to increase profitability; or from lost customer goodwill. When someone breaches a non-compete agreement, the injured party will not be able to quantify its damages in many, if not most, cases. If it cannot quantify them, it cannot prove them and recover them. Thus, without injunctive relief, the injured plaintiff will suffer irreparable injury.
As a general rule, Tennessee federal courts recognize that irreparable harm occurs when a non-competition agreement is violated. In fact, they have recognized that, when a non-compete agreement is breached, in most cases, irreparable injury will result. The below are summaries of two instructive cases where former employees had signed non-compete agreements with their former employers. Continue reading