Traffic Jam Events, LLC v. Lilley

TRAFFIC JAM EVENTS, LLC v. WILLIAM LILLEY, LILLEY CONSULTING, INC., AND TY PRESTWOOD

CIVIL ACTION NO: 2:21-CV-122 SECTION: "H"

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

April 1, 2021

ORDER AND REASONS

Before the Court is Defendants William Lilley and Lilley Consulting, Inc.'s Motion to Dismiss First Amended Complaint (Doc. 32). For the following reasons, the Motion is GRANTED IN PART and DENIED IN PART.

BACKGROUND

This action arises from an alleged breach of contract. Plaintiff Traffic Jam Events, LLC ("Traffic Jam") provides automotive marketing and advertising services. Defendants William Lilley and Ty Prestwood provided services to Plaintiff as independent contractors. As part of their work arrangement with Plaintiff, Plaintiff required that Lilley and Prestwood sign an agreement titled "Independent Contractor Non-Disclosure and Non-Solicitation Agreement" (the "Agreement").¹ In pertinent part, the Agreement prohibits independent contractors from using, disclosing, or removingPlaintiff's confidential information and from soliciting business from Plaintiff's customers while working for Plaintiff and for two years thereafter. Following the termination of Defendant Lilley's services for Plaintiff on December 21, 2020, Lilley opened a similar business, Strictly Results Marketing Group, doing business as Lilley Consulting, Inc. ("LCI"). Defendant Prestwood began working for LCI sometime thereafter. In Plaintiff's First Amended Complaint, Plaintiff alleges that Lilley, LCI, and Prestwood solicited business from Plaintiff's customers and used, disclosed, or transferred Plaintiff's confidential information in derogation of the Agreement. Plaintiff brings claims against them under Louisiana law for breach of contract and intentional interference with business relations.

Now before the Court is Defendants Lilley and LCI's Motion to Dismiss Plaintiff's First Amended Complaint wherein they ask this Court to dismiss Plaintiff's claims against them. Plaintiff opposes the Motion.

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts "to state a claim for relief that is plausible on its face."² A claim is "plausible on its face" when the pleaded facts allow the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged."³ A court must accept the complaint's factual allegations as true and must "draw all reasonable inferences in the plaintiff's favor."⁴ The court need not, however,accept as true legal conclusions couched as factual allegations.⁵ To be legally sufficient, a complaint must establish more than a "sheer possibility" that the plaintiff's claims are true.⁶ If it is apparent from the face of the complaint that an insurmountable bar to relief exists and the plaintiff is not entitled to relief, the court must dismiss the claim.⁷ The court's review is limited to the complaint and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.⁸

LAW AND ANALYSIS

In Defendant Lilley and LCI's (hereinafter "Defendants") Motion to Dismiss, Defendants argue that: (1) the non-solicitation clause in the Agreement is unenforceable under Louisiana law; (2) Plaintiff has failed to state a claim for breach of the Agreement's confidentiality provisions; and (3) Plaintiff has failed to state a claim for tortious interference with business relations. The Court will discuss each in turn:

A. The Enforceability of the Non-Solicitation Clause

The Agreement signed by Lilley contains a provision titled "Non-Solicitation of Traffic Jam Customers." The provision states:

For a period beginning on the date of this Agreement and ending two (2) years from the date of your termination as an independent contractor of Traffic Jam, you agree that you shall not, directly or by assisting others, solicit or attempt to solicit any business from any of Traffic Jam's customers, including prospective customers, with whom you had contact while working as an independentcontractor for Traffic Jam, for purposes of providing automotive marketing products or services that are competitive with those provided by Traffic Jam. This non-solicitation restriction shall apply to territories where you provided automotive marketing products or services to Traffic Jam's customers, including prospective customers, for Traffic Jam. If Traffic Jam provides you with a customer, that customer shall remain a Traffic Jam customer after termination of your status as an independent contractor of Traffic Jam and shall be subject to this non-solicitation restriction.⁹

In its First Amended Complaint, Plaintiff contends that Defendants solicited Traffic Jam customers in breach of the non-solicitation provision of the Agreement. In their Motion to Dismiss, Defendants now argue that the non-solicitation provision is not enforceable under Louisiana law.¹⁰

Louisiana has a strong public policy disfavoring noncompetition agreements.¹¹ Accordingly, under Louisiana law, "every contract, agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business . . . shall be null and void" unless it meets the exceptions provided in Louisiana Revised Statute § 23:921.¹² Relevant to this matter is the exception found in Subsection (C), which provides:

Any person, including a corporation and the individual shareholders of such corporation, who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer withina specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment. An independent contractor, whose work is performed pursuant to a written contract, may enter into an agreement to refrain from carrying on or engaging in a business similar to the business of the person with whom the independent contractor has contracted, on the same basis as if the independent contractor were an employee, for a period not to exceed two years from the date of the last work performed under the written contract.¹³

Defendants argue that the Agreement's non-solicitation provision is unenforceable under § 29:921 because (1) non-solicitation clauses are not enforceable against independent contractors under Subsection (C); (2) the non-solicitation clause fails to adequately specify a geographical limitation; and (3) the clause is impermissibly overbroad and vague. Finding the Agreement's non-solicitation clause unenforceable for failure to specify a geographical limitation, the Court does not address Defendants' first and third arguments.

Assuming that independent contractors are indeed subject to non-solicitation clauses, the non-solicitation clause must specify the geographic scope of the clause for it to be enforceable. As stated above, § 29:921(C) permits employees to agree "to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein . . ."¹⁴ Because of Louisiana's aversion to non-competition agreements, "[a] contract trying to fit into an exception to [the general rule against non-competition agreements]must strictly comply with the requirements contained in the statute."¹⁵ Accordingly, some Louisiana courts have found unenforceable non-competition or non-solicitation agreements that do not particularly specify the municipalities or parishes included in the geographic limitation.¹⁶

Here, the Agreement's non-solicitation restriction applies "to territories where you provided automotive marketing products or services to Traffic Jam's customers, including prospective customers, for Traffic Jam."¹⁷ In Defendants' Motion to Dismiss, Defendants argue that the Agreement's non-solicitation clause is unenforceable as it fails to specifically delineate the parishes to which it applies. In response, Plaintiff contends that the non-solicitation clause is valid as Louisiana courts have upheld non-solicitation provisions "where the geographic limitation was identifiable by reference to the location of the employer's business or clients."¹⁸

Plaintiff asks this Court to follow the reasoning of Petroleum Helicopters, Inc. v. Untereker, wherein the Louisiana Third Circuit Court of Appeal upheld a clause prohibiting competition "within the parishes in which [the employer] carries on a like business," finding that the parishes were sufficiently "identifiable."¹⁹ Defendants highlight, however, that many Louisiana Circuit Courts of Appeal have explicitly disagreed with the reasoning of PetroleumHelicopters, Inc., and instead held that Louisiana Revised Statue § 23:921 mandates an explicit listing of applicable parishes and municipalities.²⁰ Currently, there is no binding precedent under Louisiana law controlling this issue.²¹ "If there is no ruling by the state's highest court on the specific question, the Court must make an Erie guess as to how the state's highest court would decide the issue."²² Several federal courts in Louisiana have already made an Erie guess on this issue and have sided with Defendants, finding that Louisiana law demands "mechanical adherence" to the requirements of § 23:921.²³

In Total Safety U.S., Inc. v. Code Red Safety & Rental, LLC, another section of this Court addressed the enforceability of a similar non-solicitation clause within the context of a Rule 12(b)(6) motion to dismiss.²⁴ In Total Safety, the at-issue non-solicitation clause was geographically limited "to the Parishes in which the Associate assisted Company in providing its products and services, as are indicated below by circling."²⁵ An exhibit to the...