Tips for Minimizing Attorney’s Fees in Non-Compete/Trade Secret Cases

An employee has left to join a competitor, and a lawsuit has been filed. You are the Assistant General Counsel in charge of Litigation and, in addition with being tasked with securing a favorable outcome, you have also been directed to keep attorney’s fees at an acceptable level. What to do? Here are a few tips:

  1. Hire outside counsel that not only has experience trying non-compete/trade secret cases, but who has experience trying non-compete/trade secret cases in the jurisdiction where the case is venued. Non-compete cases in particular frequently follow the same general story line – employee signs agreement containing restrictive covenant at the outset of employment, is responsible for maintaining/growing customer relationships and is given access to employer’s confidential information, abruptly resigns to go to work for a direct competitor, etc. Ask your attorneys if they have a set of pleadings in a prior case from the same jurisdiction, applying the same state’s law as that which will apply in the current case. There is not much “original writing” in this profession. Making sure that your outside counsel has a template from which to start can save a significant amount of money in legal fees that would be otherwise incurred from an attorney who “starts from scratch.” (Editor’s Note: I am up to 43 states, at last count, in which I have litigated non-compete and/or trade secrets cases. I have pleadings for all of those states.)
  2. Beware “Expedited Discovery”. Many non-compete and trade secret lawsuits are, of course, accompanied by motions seeking temporary restraining orders and/or preliminary injunctions. Often, the former employer has little or no information concerning the activities of the departed employee, and only knows that the departed employee is working for a direct competitor. The natural temptation is to seek broad, “expedited discovery” in advance of the preliminary injunction hearing in order to get to the bottom of what has occurred. But be careful what you wish for: When expedited discovery is granted, the defendant is almost always given the right to take discovery to the same extent. An overly broad request for expedited discovery, if granted, can result in attorney’s fees quickly getting out of hand. In-house counsel should take a hands-on role in determining what to ask for in expedited discovery, keeping in mind the costs/benefits of asking for more than what is really needed. On the flip side, if representing the new employer, in-house counsel should consider whether to resist expedited discovery. While the trend in my experience has been that most judges will allow some amount of discovery before a preliminary injunction hearing, the standards for evaluating requests for expedited discovery differ depending on the jurisdiction.
  3. Consider a Stipulated Injunction Order. When I am hired to represent the new employer in a non-compete and/or trade secret case, I often discover early on in the fact-gathering process that the departed employee is not doing what he is accused of doing and/or that the new employer has no intention of permitting him to do what he is accused of doing. The temptation in such situations is to battle it out with the plaintiff former employer, but working out a stipulated injunction order – one that merely prevents the departed employee and/or the new employer from doing what they are not doing and do not intend to do anyway – can save tens of thousands of dollars spent in expedited discovery and gearing up for and trying a preliminary injunction hearing. A stipulated injunction order is certainly not appropriate in every case, and may not be desirable even in cases in which there does not appear to be a real dispute over whether the employee will engage in the prohibited activity, but is certainly worth considering.