## Facts

- Eugene McCarthy began working for Nike in 1993 and advanced through sales and management roles.
- During a 1997 company reorganization, Nike promoted McCarthy to eastern regional footwear sales manager after a phone offer; details such as salary were finalized later.
- Nike presented a written offer letter and a noncompetition agreement dated April 23, 1997; McCarthy signed the noncompete on May 5, 1997.
- The covenant restricted McCarthy, during employment and for one year after termination, from working directly or indirectly for competing athletic footwear, apparel, or related sports-equipment businesses worldwide.
- Oregon law generally makes noncompetes void unless agreed to upon initial employment or a subsequent bona fide advancement.
- In 1999, McCarthy became director of sales for Nike’s Brand Jordan division and obtained confidential information, including product launch timing, sales orders, and long-term plans.
- McCarthy resigned in June 2003 and soon joined Reebok as vice president of U.S. footwear sales and merchandising, a role involving product allocation, sales, and pricing strategy.
- Nike sued for breach of contract and declaratory relief and sought a preliminary injunction enforcing the noncompete; the district court enjoined McCarthy from specified competitive work through August 25, 2004.
- McCarthy appealed, disputing the covenant’s statutory validity and the propriety of preliminary injunctive relief.

## Issues

1. Whether the 1997 noncompete satisfied Or. Rev. Stat. § 653.295(1)(b) because it was agreed to “upon” a “subsequent bona fide advancement” rather than initial employment.
2. Whether Nike showed a protectable business interest and a reasonable basis to restrain McCarthy’s competitive employment.
3. Whether the district court abused its discretion in granting a preliminary injunction based on likelihood of success and likely irreparable harm.

## Decision

- The Ninth Circuit affirmed the preliminary injunction.
- The court held McCarthy’s promotion to regional footwear sales manager was a “subsequent bona fide advancement” under Oregon law.
- The court held the covenant was agreed to “upon” that advancement because it was executed as part of the promotion process, despite not being signed on the same day the promotion was discussed.
- The court found Nike showed a legitimate interest in protecting confidential strategic information and a substantial risk of competitive misuse in McCarthy’s Reebok role.
- The court upheld findings of likely irreparable harm and determined the balance of hardships supported injunctive relief, including because Nike was obligated to pay McCarthy during the restricted period.

## Legal Principles

- Under Or. Rev. Stat. § 653.295(1)(b), a noncompete may be enforceable when tied to a subsequent bona fide advancement, not only when signed at initial hire.
- “Upon” a bona fide advancement does not require simultaneous execution; a reasonable temporal and causal connection within the promotion process can satisfy the statute.
- A bona fide advancement is supported by evidence such as a new title, increased responsibilities, and increased compensation.
- An employer has a protectable interest in enforcing a noncompete where a former employee possesses confidential strategic information and assumes a competitor role in which that information could be used to divert business.
- For preliminary injunctions, a demonstrated likelihood of success on the merits and a noncompensable risk of harm from disclosure or use of confidential business information can justify injunctive relief, especially where hardship to the employee is mitigated.

## Conclusion

The Ninth Circuit affirmed a preliminary injunction enforcing Nike’s one-year noncompete, concluding the covenant was executed in connection with a bona fide promotion as required by Oregon statute and that Nike showed likely success and likely irreparable harm based on the risk that McCarthy could use Nike’s confidential strategic information in his senior role at a direct competitor.


Nike, Inc. v. McCarthy, 379 F.3d 576 (9th Cir. 2004)