Ohio Appellate Court Holds Logistics Company was Improperly Limited to Half a Remedy, Reviving Noncompete Suit Against a Former Employee

The day after obtaining federal brokerage authority for the logistics company he formed a month earlier, Christopher Johnson, a North Carolina resident, resigned from his employment with Cincinnati-based Total Quality Logistics, LLC (“TQL”). TQL then sued Johnson and his company Patriot Logistics (“Patriot”) in the Clermont County Court of Common Pleas, alleging Johnson breached his employment agreement and misappropriated trade secrets in forming Patriot while still employed by TQL.

Johnson and Patriot removed the case to federal district court based on diversity jurisdiction. TQL moved to remand the case back to state court, considering the $75,000 amount in controversy requirement was not met. After the federal court denied TQL’s remand motion, TQL voluntarily dismissed the case and refiled in state court. Johnson and Patriot removed the case yet again.

This time, however, TQL filed a binding stipulation declaring it would accept only a cumulative amount up to $75,000, “inclusive of compensatory damages, punitive damages, attorney’s fees, and the fair value of any injunctive relief.” For this reason, the federal district court remanded the case back to Clermont County, finding it lacked subject matter jurisdiction because the monetary threshold for maintaining the case in federal court could no longer be reached.

Once the case was returned to state court, Johnson and Patriot offered $75,000 to TQL as a “tender of payment,” which they insisted on effectively ending the case because that was the maximum monetary amount TQL could win at trial. TQL unequivocally rejected their efforts, taking the position that a monetary payment could not moot the case “because it failed to include any injunctive relief” and that Johnson could not unilaterally decide to “buy out” his restrictive covenants and continue to use misappropriated confidential information .

Nonetheless, Johnson and Patriot deposited $75,000 with the court clerk. They then filed a motion to dismiss under Rule 12(B)(1), claiming their tender of the $75,000 referenced in TQL’s stipulation moot all of TQL’s claims for relief and deprived the court of subject matter jurisdiction. The trial court agreed.

TQL appealed to the Ohio Twelfth District Court of Appeals, which reversed, first noting “the trial court made no distinction between past compensatory damages and the equitable remedy of injunction.” TQL’s complaint sought “damages for losses incurred as well as injunctive relief.” Johnson’s employment agreement “specifically entitled TQL to both remedies to protect its trade secrets and enforce the Agreement.”

In other words, the Court of Appeals reasoned, “the trial court’s decision effectively limited TQL to only a partial remedy.” This is because “the purpose of contract damages is to compensate the non-breaking party for the loss suffered as a result of the breach,” while “the purpose of an injunction is to prevent future harm.” The trial court’s decision would have allowed Johnson to “simply buy the stolen secret” and deprive TQL of its intrinsic value—the secret itself.”

Ultimately, the Court held, it was “undeniably clear” that TQL’s “stipulation did not waive injunctive relief or limit TQL to only monetary damages” and “an award of compensatory damages and injunctive relief is not a double recovery.”

As evident by this decision, the noncompete and trade secret case law continues to evolve. This case provides useful guidance distinguishing between the two main remedies available to an employer in such situations—monetary damages and injunctive relief—and steps that can be taken both before and during litigation to maximize recovery.