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BMO Harris Bank N.A. v. Lailer: Non-Solicitation Agreement Enforced in Wisconsin

There are so many stories about restrictive covenants being unenforceable in Wisconsin that it is refreshing to see a case where a restrictive covenant is enforced – especially at the preliminary injunction stage.  This week, the U.S. District Court for the Eastern District of Wisconsin granted a preliminary injunction in favor of BMO Harris Bank, ordering the bank’s former employee to abide by her customer non-solicitation agreement for the remainder of its term. (BMO Harris Bank N.A. v. Lailer, E.D. Wis., Case No. 16-CV-545-JPS, 10/21/16)

Wisconsin, StampThe court found that it was highly likely that the bank could show that the agreement was enforceable and that the harm it would suffer if the agreement was not enforced was far greater than the harm the former employee and her new employer would suffer if the employee was required to abide by her contract.  The Court also noted that the agreement is narrowly tailored to protect the bank’s interest in its customer relations without preventing the former employee from maintaining new employment.

The agreement provided that:

During your employment and for twelve months following the end of your employment with the Company, you must not, directly or indirectly, solicit … any client of the Company that you serviced during your last twelve months with the Company to offer any product or service that is the same or similar to any product or service that you provided to that client previously.

The court noted with approval that this covenant was reasonably restricted as to time because it was limited both retroactively – applying only to customers with whom the employee actually worked within the last year – and prospectively – restricting solicitation only for one year post-employment.  It also found that the customer-based restriction could appropriately substitute for a territorial limitation because it was probably more narrowly tailored than a geographic restriction.

Having found that the covenant was reasonable, the court then looked at the harms from enforcing and not enforcing its terms during litigation.  Because the former employee served as a liaison between the bank and its high-net-worth clients, she had developed goodwill with clients that properly belonged to the bank.  She solicited those clients by telling them that her research in the industry led her to her new employer, effectively telling them that her new employer was a superior financial services provider compared to BMO.  Such solicitations, the court ruled, irreparably damaged BMO’s reputation and made this a “particularly strong candidate for injunctive relief.”  The potential harm to the former employee and her new employer, by contrast, was fairly limited, as the restrictive covenant would be in effect for only a limited time and they could solicit other potential customers in the meanwhile.

Jackson Lewis P.C. © 2021National Law Review, Volume VI, Number 300

About this Author

Clifford R. Atlas Protection Against Unfair Competition Attorney Jackson Lewis New York, NY

Clifford Atlas is a Principal in the New York City, New York, office of Jackson Lewis P.C. He is the Co-Leader of the Non-Competes and Protection Against Unfair Competition Practice Group.

Mr. Atlas works extensively with clients in developing and drafting employment contracts and restrictive covenant agreements, and developing programs to best protect clients’ confidential business information. He has significant experience in prosecuting as well as defending actions involving breach of non-competition and non-solicitation agreements, employee raiding,...

Sharon Mollman Elliott, Labor and Employment Attorney, Jackson Lewis Law Firm, Of Counsel
Of Counsel

Sharon Mollman Elliott is Of Counsel in the Madison, Wisconsin, office of Jackson Lewis P.C.

Ms. Elliott has handled all aspects of employment cases, including from the initial employment problem in the workplace through trial. Ms. Elliott regularly counsels employers in cases involving the most difficult employee discipline and termination situations, harassment and discrimination claims, handbooks, wage and hour issues, and disability and FMLA requests. She also has extensive experience in both invalidating and enforcing non-competition and confidentiality agreements, including...