David Schaeffer Presents on Unique Mediation Issues in Restrictive Covenant Cases

Fri, Jan 11th, 2019 | by Miles Mediation and Arbitration | News | Social Share

ATLANTA, January 10, 2018–  David Schaeffer recently presented at the State Bar of Georgia CLE  “Restrictive Covenants and Trade Secrets” on Thursday, January 10, 2019.  Schaeffer served as a panelist on an interactive panel discussion about mediation and settlement of the restrictive covenant case.Mediation/Settlement of the Restrictive Covenant Case. The program was chaired by Benjamin I. Fink, of Berman Fink Van Horn P.C.

Excerpt from David Schaeffer’s seminar paper, “Unique Mediation Issues in Restrictive Covenant Cases”:

There are an extraordinarily large number of moving parts and remedies in restrictive covenant cases and the settlement of such cases. The first issue is always whether injunctive relief is appropriate. That normally depends on whether the covenants are enforceable, which in turn may depend on when they were entered into. If before 2011, they will be subject to the old rules and if after early 2011, they will be subject to the new Restrictive Covenants Act, O.C.G.A § 13-8-1 et seq. (“New Act”), for which there is very little appellate guidance. That first issue is essentially a question of law, but the New Act is anything but clear and leaves open many interpretations.  The second issue will always be whether the defendants violated the provisions and whether the defendant competing company induced those violations. That can be a complicated factual issue, especially when it comes to non-solicitation covenants. The third issue will be whether, if violations have occurred, damages can be proved. This is also a complicated issue, as proving lost profits and lost customers can be very difficult unless the customers are willing to participate as witnesses in the case.  The mediation may also be quite different depending on whether the restrictive covenants are in conjunction with an individual employee or independent contractor leaving an employer or whether it is in the context of the seller of a business competing in violation of a non-compete provision.  Different remedies may be considered depending on the context.

Many of the moving parts depend on when the mediation takes place. Generally, these cases are settled after temporary restraining orders or interlocutory injunctive relief are either granted or denied by the court handling the litigation. If the initial efforts on the part of the plaintiff to obtain injunctive relief fail, generally mediation will focus on contested enforceability of the covenants and any actual damages incurred because of their alleged violations. The plaintiff will have much less leverage if the court has not entered a TRO or interlocutory injunction. If the court orders an interlocutory injunction, the plaintiff has considerable leverage and will be hard pressed to give that up without a substantial payment, which in turn brings damage calculations into the mix.

It is critical for the neutral mediator to understand both the procedural, equitable, legal, and practical business issues involved and to be familiar with not only the New Act, but for older covenants, the old rules set forth by decades of case law. The mediator must also understand the difficulty in assessing and proving damages and the time and expense that doing so entails.

Click here to continue reading the full paper.

David Schaeffer, Esq. is a trained mediator and has participated in hundreds of mediations and arbitrations over his career.  He is available to mediate any business litigation, personal injury, medical and professional malpractice actions, and employment.

Click here to view David’s online calendar and bio.