Sixth Circuit Finds Preliminary Injunction Barring a Defendant From “Competing” With Plaintiff, Without Time Limits, Fails the Specificity Requirement of Fed. R. Civ. P. 65(d)

In Union Home Mortg. Corp. v. Cromer, No. 21-3492 (6th Cir. Apr. 6, 2022), in a case involving enforcement of a non-compete covenant, the Sixth Circuit vacates a preliminary injunction against the defendant to bar him from “competing with Union Home,” finding that it was overbroad and “fails to satisfy the specificity requirements of Federal Rule of Civil Procedure 65(d)(1).”

Defendant Cromer worked for the plaintiff, a mortgage broker, as “a team leader/managing loan officer” in the Youngstown branch office. “In accepting that position, Cromer and Union Home signed a two-page employee agreement (Agreement), governed by Ohio law.” The Agreement provided that until October 1, 2022—he “will not become employed in the same or similar capacity as [he] was employed with” plaintiffs with competitors.

There was a fallout between the parties—there are disagreements about who instigated it—and Cromer started working with defendant Homeside Financial (Homeside) as a “non-producing” branch manager.

Union Home sued Cromer and Homeside on February 18, 2021, alleging federal and state claims. “Union Home simultaneously moved for a preliminary injunction ‘to enjoin Cromer from: (1) competing in violation of the non-compete covenant in the Employee Agreement; (2) soliciting Union Home’s employees; and (3) using or disclosing Union Home’s confidential information for their or Homeside’s competitive benefit.’ (Emphasis added).”

The district court granted the injunction, ordering that “Cromer and anyone in active concert or participation with Cromer, including Defendant Homeside Financial, LLC, is enjoined from: (1) competing with Union Home within 100 miles of the office in which Cromer worked; (2) soliciting Union Home’s employees; and, (3) using or disclosing Union Home’s confidential information for their or Homeside’s competitive benefit.” (Emphasis in original.)

The Sixth Circuit vacates the preliminary injunction. It finds the order “impermissibly vague and overly broad” under Rule 65. “First, the word ‘competing’ is too vague . . . . The primary dispute in this case has always been the scope of the restriction that Cromer cannot be ‘employed in the same or similar capacity as [he] was employed with’ Union Home. (Emphasis added). Yet the district court never interpreted the meaning of that phrase.”

Second, the injunction ‘is addressed to mortal human beings, yet it has no limitation in time’ . . . . Because the parties to the injunction are ‘left to guess about its intended duration,’ Rule 65(d) does not permit us to endorse the district court’s injunction.” Here, Union Home tried arguing that the injunction was clear when considered in context with “the ‘entirety’ of the district court’s opinion,” but Rule 65(d) requires that the order be contained and reviewed within the four corners of its terms. A defect in an injunction “cannot be cured by using such language as ‘in keeping with the opinions expressed herein.’”

Third, the injunction is overly broad . . . . Cromer’s Agreement prohibits a specific action— ‘becom[ing] employed in the same or similar capacity as [he] was employed with [Union Home] by . . . any entity that competes with [Union Home]’ within the identified 100-mile radius . . . . But the injunction is an unmitigated restraint on Cromer ‘competing with Union Home’ within the 100-mile radius.”

Finally, in remanding the matter back to the district court, the panel also cautions about a legal error: “The district court erred when it failed to consider whether the noncompete covenant is reasonable and thus enforceable. Union Home has no likelihood of success on the merits of its claim for breach of the restrictive covenants unless it shows—under applicable state law—that the covenants are enforceable and Cromer breached the covenants.”

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