Suits In The WorkPlace

Paradise Lost; Injunction Found

In sorting out a dispute between two federal contractors, a district court recently issued a ruling (Science Applications International Corporation v. CACI-Athena, Inc., 2008 U.S. Dist. LEXIS 37849 (E.D. Va. 2008)) that may impact numerous other trade secrets and non-compete cases for employers.  In a nutshell, the court ruled that the loss of a specific business opportunity – here the opportunity to bid on a specific federal contract – constitutes irreparable harm warranting an injunction.  Interestingly, this decision departed from prior cases that had reached nearly the opposite conclusion.

The case actually involved three federal contractors that provided services to the U.S. Government for the Counter Improvised Explosive Device Targeting Program ("CITP").  (The name of the program is wholly irrelevant to the holding, but the program title was just too cool not to mention.)  Difficulties arose when one contractor (“Athena”), which had been working cooperatively with another (“SAIC”) on the CITP, was acquired by a competitive organization.  For continuity reasons, the parties agreed to try to continue their cooperative efforts on the project.  Unfortunately, when the Government issued a RFP seeking bids for additional CITP work (worth about $60 million), the cooperation ended and Athena indicated its intention to cooperate, not surprisingly, with its new owner instead of SAIC.

On May 2, 2008, SAIC filed an Emergency Temporary Restraining Order (“TRO”) seeking an order requiring that Athena honor its contract with SAIC and preventing it from assisting any other contractor in biding on the CITP work.  SAIC contended that it could not submit a competitive proposal to the Government without Athena as its subcontractor as most of the employees on the proposal would have been Athena employees.   

The court granted the request and issued a TRO.  The decision is noteworthy for several reasons.  First, the court held that "the loss of the opportunity to bid on a specific contract constitutes irreparable harm."  In distinguishing the prior precedent, the district court pointed to several other circuits holding that "a lost opportunity to compete on a level playing field for a contract is a sufficient basis for finding irreparable harm."  Employers pursuing former employees for trade secret violations should find this aspect of the case particularly useful, especially where lost business may be a factor.

Second, the district court agreed with SAIC's contention that money damages would be too difficult to quantify.  While the court noted that there is a general reluctance toward preliminary injunctions where harm can be remedied by an award of monetary damages, in the present case, the court found that "SAIC's alleged injuries cannot be undone through monetary remedies and that it would incur irreparable harm without a TRO."  This language was also a departure from most courts in a lost contract expectancy fact pattern, since usually one can quantify the amount of damages when the quantity is spelled out in a contract.  Again, potential fodder for the employer’s cannon.

Third, in balancing the harm of both parties, the court concluded that Athena would not suffer any harm because it would simply be required to perform its obligations under the existing contract with SAIC.  The court said "an injunction that merely commands a party to perform its contractual obligations does no harm to that party."  While not really a new ruling, this language may well be used in other injunction settings where a party is attempting to enforce a non-compete against an individual or group of individuals.

Fourth and finally, it is noteworthy that the hearing and opinion were issued less than one week after the case was first removed to federal court, demonstrating once against that the U.S. District Court for the Eastern District of Virginia’s reputation as the “Rocket Docket” is well deserved.

In short, while not as juicy as some of our other reported cases, the SAIC decision may have some ongoing usefulness for employers, especially given the growing trend in trade secret and non-compete litigation that we always see in a struggling economy.

A special thanks to our colleague David Greenspan for his contribution to this post.  Accordingly, if you disagree with any aspects of our analysis, blame him.