A recent decision by Ohio's First District Court of Appeals in Cincinnati gives some additional teeth to employee noncompete clauses, concluding that the Ohio appellate court lacked jurisdiction to review a preliminary injunction barring the would-be defendant-employers from "hiring, soliciting, and/or recruiting" the plaintiff's employees. The case is Medpace, Inc. v. ICON Clinical Research, L.L.C., 1st Dist. Hamilton, C-230133, 2023-Ohio-4552 (Dec. 15, 2023).
The facts of the Medpace case are familiar ones. The plaintiff-appellee, Medpace, Inc., conducts clinical trials for biotech, pharmaceutical, and medical device companies. To perform its services, it hires clinical researchers and other employees, to whom it provides proprietary training. As a condition of employment, it required (at least for purposes of this case) the defendant-employees to sign an agreement that included noncompete and other restrictive covenants, called a Proprietary Rights Agreement (PRA).
Defendants ICON Clinical Research, LLC and DOCS Global, Inc. also provide clinical research services. According to Medpace, ICON and DOCS tortiously interfered with Medpace employees' PRAs by soliciting them to work for them; "coaching them on how to best get out of their PRAs"; and then hiring them in violation of those agreements.
Medpace did not move for a temporary restraining order or preliminary injunction to enjoin defendants from breaching their noncompetes with the filing of its complaint. Rather, over the course of the first year of the litigation, Medpace offered evidence to the court on two occasions that allegedly showed that ICON and DOCS had continued to solicit its employees after Medpace had filed its complaint. The second time (at a court status conference) the trial court—without a formal motion—issued an oral order "that ICON, DOCS, and their named recruiters 'cease and desist contracting Medpace' until the litigation is resolved." The trial court ultimately reduced the order to a written entry after the court of appeals instructed it to do so following ICON and DOCS' attempt to appeal. The subsequent written order directed ICON and DOCS to "cease and desist hiring, soliciting, and/or recruiting Medpace, Inc.'s employees who are subject to active proprietary rights agreements and/or restrictive covenants prohibiting employment with Medpace's competitors and restricted businesses." After entry of the written order, ICON and DOCS appealed to the First District.
Following requested briefing from the parties on the appellate court's jurisdiction to review the order, the court provisionally decided that the order "appeared to be a final appealable order" but allowed the parties to raise the issue further in their briefs. After full briefing on the merits, the panel reached a different conclusion, holding that the appellate court did not have jurisdiction to review the order because it was not a "final order" within the meaning of R.C. 2505.02(B), and thus, not appealable.
In its opinion, the court first addressed ICON and DOCS's argument that the order barring them from soliciting Medpace's employees was a prior restraint on speech, and thus, made the order immediately appealable under Ohio law. The court rejected this argument, holding that the order only barred them from engaging in commercial speech, and that a restraint on commercial speech did not constitute a "prior restraint" to which a right of immediate appeal might attach under the First Amendment to the United States Constitution. The court reasoned that if it were to hold otherwise, "[e]very run-of-the-mill tortious interference case between competing businesses would suddenly assume constitutional magnitude" and that "[n]o court could stop a business from improperly interfering with the counter-party's employees without tripping over the First Amendment."
Having rejected ICON and DOCS's First Amendment argument, the court turned to whether the preliminary injunction satisfied the requirements of R.C. 2505.02(B)(4), which treats, as a "final order":
An order that grants or denies a provisional remedy and to which both of the following apply:
(a) The order in effect determines the action with respect to the provisional remedy and prevents a judgment in the action in favor of the appealing party with respect to the provisional remedy.
(b) The appealing party would not be afforded a meaningful or effective remedy by an appeal following final judgment as to all proceedings, issues, claims, and parties in the action.
As an initial matter, despite the somewhat informal and procedurally deficient manner in which the order came into being, the court of appeals previously concluded that it constituted a preliminary injunction within the meaning of Ohio Civil Rule 65. Thus, the order granted a "provisional remedy" within the meaning of R.C. 2505.02(B)(4).
With respect to the first prong of the two-part test, the court concluded that it was satisfied, finding that the trial court did not indicate that the order was "tentative or contingent in any manner." The court's decision holding that it lacked jurisdiction thus turned on its analysis of the second requirement.
For this requirement, the court looked first at whether the injunction "would irreparably change the party's position between provisional remedy and final judgment." The court concluded that it did not, holding that "the individuals at hand all signed noncompetition agreements and any restriction on their ability to consider other employment is temporary in nature." Although the court acknowledged that "certain parties" would be negatively impacted until appellate court review at the end of the case, it opined that this was the case with any preliminary injunction, and the reason Rule 65 imposes bond requirements.
The court of appeals next addressed whether the injunction altered the status quo, observing that "[g]enerally, Ohio courts do not permit appellate review of preliminary injunctions preserving the status quo . . ." The court defined an order preserving the status quo as one that "returns the parties to their last legally uncontested status." Applying this standard, the court held that the order did not alter the status quo, but instead "returns the parties to the status quo by preventing Defendants from 'hiring, soliciting, and/or recruiting Medpace Inc.'s employees' subject to active noncompete obligations."
Last, the court rejected Defendants' argument that they would lack a meaningful and effective remedy by appeal after final judgment because the order was broader than the permanent injunction sought by Medpace, finding that the order mirrored the relief sought in the complaint.
The Medpace decision highlights what is now a stark contrast between litigating noncompete obligations in state and federal courts in Hamilton County, Ohio. The order in this case—had it been issued in a Cincinnati federal court—would have been immediately appealable to the Sixth Circuit, and reviewed, on the merits, for abuse of discretion. As it does not appear Medpace ever filed a motion for preliminary injunction, or that the trial court held a formal evidentiary hearing, it seems likely than that such an order would not have survived appeal to the Sixth Circuit. Nevertheless, the defendants would have received merits review of the decision, including an inquiry into the likelihood of success of Medpace's claims against ICON and DOCS.
Now, in Hamilton County at least, the Medpace decision (so long as it remains undisturbed) establishes that immediate review of a preliminary injunction in noncompete cases may not be (and probably is not) available. Although there may be fact patterns where the First District would conclude that a preliminary injunction prohibiting a would-be employer from soliciting or hiring an employee (allegedly) bound by a noncompete agreement satisfies the second prong of R.C. 2505.02(B)(4), defendants will face an uphill battle to convince the court of that in the wake of the Medpace decision. And as litigation can often take years to resolve, a plaintiff who obtains a preliminary injunction barring its competitors from hiring its current or former employees may, in many cases, get all of the equitable relief to which it would have ever been entitled under its agreement, simply by dragging the case out beyond the noncompete period.
At the time of publication, defendants had not sought discretionary review of the First District's decision in the Ohio Supreme Court. But that could still happen. And if it does, given the asymmetry between federal and state court practice the Medpace decision highlights (creates?), it could very well be an issue that the Court deems worthy of its attention.