Battery Handling Systems, Inc. Obtains Injunction Against Materials Transportation Company

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Battery Handling Systems, Inc. (BHS), a worldwide manufacturer and supplier of battery handling systems, products and services, successfully requires its competitor, Materials Transportation Company, to honor BHS’s non-competition and non-disclosure agreement with its employee.

After almost five months of litigation, Battery Handling Systems, Inc. (BHS) (http://www.bhs1.com) has obtained an agreed, permanent injunction prohibiting its competitor, Materials Transportation Company (MTC) (http://www.mtcworldwide.com) from hiring BHS’s former National Accounts Manager, James Stoneman. The agreed permanent injunction was entered September 9, 2014, in the case styled Battery Handling Systems, Inc. v. James D. Stoneman, et al., case number 4:14-CV-00782-CEJ, filed in the U.S. District Court for the Eastern District of Missouri. BHS had alleged that MTC’s CEO, Jim Granfor, MTC, and James Stoneman conspired to violate a non-compete agreement signed by Mr. Stoneman, and obtain access to BHS’s confidential trade secrets.

According to the complaint, Mr. Stoneman was employed by BHS between 2011 and 2012, and, during that time, helped to develop and implement key sales and marketing strategies designed to grow BHS’s business with major accounts in its North American territory. Because of his involvement with BHS’s customers and access to sensitive information, Mr. Stoneman was required to sign an agreement that prohibited him from being employed by a direct competitor or selling a direct competitor’s products for a period of three years after leaving BHS. The agreement also prohibited Mr. Stoneman from disclosing any of BHS’s trade secrets or other confidential information.

Mr. Stoneman complied with his agreement for over a year. BHS alleged, however, that, in March, 2014, it learned Mr. Stoneman had negotiated a position with MTC. BHS issued cease and desist letters to Mr. Stoneman and MTC, and initiated its lawsuit against both parties to force compliance with the agreement. According to the court documents, MTC initially terminated Mr. Stoneman’s employment, and convinced BHS to dismiss its lawsuit by providing a copy of the termination email sent by Mr. Granfor to Mr. Stoneman. BHS alleged, however, that it subsequently learned from third-party sources that MTC had rehired Mr. Stoneman just days after the lawsuit was dismissed. BHS refiled the action, adding counts for conspiracy and fraud against MTC and Mr. Granfor.

According to hearing transcripts, MTC, Mr. Granfor, and Mr. Stoneman attempted to defend the action on the grounds that the three year restriction on competition was too long and that BHS’s confidential information did not constitute a “protectable interest.” Judge Carol E. Jackson rejected the defendants’ arguments and issued a temporary restraining order enforcing BHS’s non-compete agreement with Mr. Stoneman. In making her ruling, the judge also noted MTC’s conduct in terminating and then rehiring Mr. Stoneman, without informing BHS.

The lawsuit ultimately concluded with the parties filing an agreed permanent injunction. The permanent injunction prohibits MTC from hiring Mr. Stoneman, and prohibits Mr. Stoneman from working for any of BHS’s direct competitors or selling any of those competitor’s products, until December 31, 2015. In addition, the permanent injunction requires MTC and Mr. Stoneman to update BHS on a quarterly basis between December 1, 2014 and December 31, 2015 to confirm their compliance with the agreed restrictions. Information was not available to confirm whether there also was a monetary payment made by MTC or Mr. Stoneman to resolve the case.

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James McMinn

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