## Facts

- Christopher J. Dearborn, an Indiana resident, worked for Everett J. Prescott, Inc. (EJP) for about ten years as a sales representative in central Indiana.
- About two years before he left, EJP required Dearborn to sign a noncompetition agreement in exchange for $250.
- The agreement imposed a three-year post-employment restriction and covered any area within 100 miles of any EJP office, distribution center, or other place of business.
- The agreement included a Maine choice-of-law clause.
- Dearborn resigned and began working for Ferguson Enterprises, Inc., a competitor serving the same central Indiana market.
- EJP sent Dearborn a cease-and-desist letter asserting its noncompete rights and seeking enforcement in a narrower manner than the agreement’s broad text.
- Dearborn filed a diversity action seeking declaratory and injunctive relief against enforcement and damages for alleged contractual breaches by EJP.
- EJP moved for a preliminary injunction to stop Dearborn from working for Ferguson in his former sales territory while the case proceeded.

## Issues

1. Under Indiana choice-of-law rules, whether the Maine choice-of-law clause governed enforceability of the noncompetition agreement or whether Indiana law applied.
2. Whether EJP met the requirements for a preliminary injunction, particularly a reasonable likelihood of success on the merits of enforcing the covenant.

## Decision

- The court denied EJP’s motion for a preliminary injunction.
- Applying Indiana choice-of-law rules, the court declined to apply Maine law because it conflicted with Indiana public policy governing employee noncompetition covenants.
- Applying Indiana substantive law, the court found the covenant likely unenforceable due to overbreadth in geographic scope and restricted activities, viewed with its three-year duration.
- Because EJP failed to show a reasonable likelihood of success on the merits, the court did not proceed with an extended analysis of the remaining preliminary-injunction factors.

## Legal Principles

- A party seeking a preliminary injunction must, as threshold showings, establish (1) a reasonable likelihood of success on the merits, (2) no adequate remedy at law, and (3) irreparable harm; only then does the court weigh harms and the public interest.
- In diversity cases, federal courts apply the forum state’s choice-of-law rules.
- Indiana generally enforces contractual choice-of-law clauses, but not where applying the chosen law would violate an important Indiana public policy in an area where Indiana has a materially greater interest.
- Indiana scrutinizes employee noncompetition agreements strictly, construes them against the employer, and requires reasonableness in duration, geographic scope, and scope of restricted activities.
- Under Indiana law, overbroad noncompetes are not typically salvaged through judicial rewriting into narrower restrictions; enforceability is assessed primarily based on the covenant as written.

## Conclusion

The court refused to apply the contract’s Maine choice-of-law clause because it conflicted with Indiana public policy on employee noncompetes and, under Indiana law, concluded EJP was unlikely to enforce the overbroad covenant; lacking likely success on the merits, EJP was not entitled to a preliminary injunction barring Dearborn’s competitive employment.


Dearborn v. Everett J. Prescott, Inc., 486 F. Supp. 2d 802 (S.D. Ind. 2007)