## Facts

- In 1979, Joel Tanenbaum began working as a sales agent for Fred F. Foster and signed a written noncompetition agreement barring him, for one year after termination for any reason, from working as a sales agent for beauty and barbershop supply manufacturers in a twelve-state Midwestern area; other employment terms were oral.
- In 1988, The Rathmann Group, Inc. purchased Foster’s business.
- On January 6, 1989, Rathmann and Tanenbaum executed a new written contract covering territory and commissions; it did not include a noncompete clause and did not mention the 1979 agreement.
- Tanenbaum proposed an integration clause stating the 1989 contract was the “sole and complete agreement,” but Rathmann rejected that clause.
- On May 9, 1989, Tanenbaum resigned, formed a competing supply company, and solicited customers in his former territory, including customers associated with Rathmann/Foster.
- Rathmann sued and sought injunctive relief to enforce the 1979 noncompete.
- The district court entered a temporary restraining order conditioned on a $5,000 bond and later entered a preliminary injunction restraining Tanenbaum from competing for one year from his resignation.
- Tanenbaum appealed the preliminary injunction.

## Issues

1. Whether, under the Dataphase preliminary-injunction framework, Rathmann showed a sufficient likelihood of success that the 1979 noncompete remained enforceable by Rathmann after the business purchase and the 1989 written contract.
2. Whether the district court appropriately applied the Dataphase factors in granting a preliminary injunction enforcing the noncompete.
3. Whether the injunction bond was adequate given the geographic scope and duration of the restraint and the potential losses from an erroneous injunction.

## Decision

- The Eighth Circuit remanded with directions to hold a prompt trial on the merits of Rathmann’s claims.
- The court directed the district court to substantially increase the bond required to support the preliminary injunction.
- The court signaled that merits questions about the continuing enforceability of the 1979 covenant were substantial and not suited to extended resolution through provisional relief on a limited record.

## Legal Principles

- A preliminary injunction in the Eighth Circuit is evaluated under Dataphase, considering irreparable harm, balance of harms, likelihood of success on the merits, and the public interest.
- When contract enforceability turns on disputed successor rights and the effect of a later written agreement that omits a restrictive covenant, likelihood of success may be uncertain and may warrant expedited merits adjudication rather than prolonged reliance on interim relief.
- An injunction bond must reasonably reflect potential damages to the enjoined party if the injunction is later determined to have been wrongfully issued, particularly when the injunction restrains a person from working in their line of business across a broad territory for an extended period.

## Conclusion

The Eighth Circuit required rapid adjudication of the underlying noncompete dispute and stronger financial protection for the restrained former employee, emphasizing that uncertain contract merits and potentially severe economic harm demand careful preliminary-injunction scrutiny and an adequate bond.


Rathmann Grp., Inc. v. Tanenbaum, 889 F.2d 787 (8th Cir. 1989)