C.H. Robinson Worldwide, Inc. v. Tu

Background

C.H. Robinson Worldwide, Inc. alleged that it provides logistics and transportation services and that its Global Forwarding Division operates offices and employs people around the world. C.H. Robinson hired Steven Tu in 2013 as general manager of that division in New York. In December 2013, C.H. Robinson and Tu entered into a Management-Employee Agreement governing the employment relationship and Tu’s obligations after employment ended.

The agreement included restrictions concerning competing business activity, noncompetition, solicitation of employees, interference, and confidential information. Tu also entered into stock-option agreements that required compliance with the Management-Employee Agreement and other confidentiality and noncompete obligations. C.H. Robinson ended Tu’s employment in May 2018 as part of what it described as a bona fide reduction in force. The parties then entered into a Separation Agreement in which Tu reaffirmed his continuing obligations.

In 2018, Tu started Everest Global Freight Services in Edison, New Jersey, and has been its president and sole shareholder since its inception, according to the opinion. C.H. Robinson alleged that Everest obtained a license to operate as an ocean freight forwarder and therefore competed directly with C.H. Robinson’s Global Forwarding Division. C.H. Robinson also alleged that Tu solicited two former C.H. Robinson employees to work for Everest and created a related Chinese entity named Everest Logistics.

The motion and the noncompete

The defendants asked for judgment on the pleadings, a decision based only on the pleadings when no material factual dispute remains and the moving party is entitled to judgment as a matter of law. They sought an order declaring the noncompete unenforceable.

The agreement barred Tu, for two years after his employment ended, from directly or indirectly engaging in a competing business activity in any manner or capacity. The restriction applied anywhere in the United States or any other country where Tu had worked during the last 12 months of his employment. The defendants argued that the restriction was overbroad, unreasonable, and too favorable to C.H. Robinson, particularly because of its geographic scope.

Under Minnesota law, the court explained, a noncompete is enforceable only if it is reasonable. The analysis considers whether the restriction protects the employer’s business or goodwill and whether it imposes a greater restraint than reasonably necessary, considering the employee’s work, the length of the restriction, and its geographic scope.

Ruling

The court concluded that the enforceability of the noncompete depended on the facts and generally was not suitable for decision on a motion for judgment on the pleadings. The court also stated that, even if it considered the agreement’s reasonableness at that stage, it had to view the pleaded facts and reasonable inferences in C.H. Robinson’s favor. Under that standard, the defendants had not clearly shown that no material factual issue remained or that they were entitled to judgment as a matter of law.

Judge Michael J. Davis therefore ordered that the defendants’ Motion for Judgment on the Pleadings was DENIED. The opinion did not decide whether the noncompete ultimately is enforceable.