District Of Arizona Evaluates Restrictive Covenants

The U.S. District Court for the District of Arizona recently evaluated the reasonableness of two restrictive covenants—the nonsolicitation of customers and the nonsolicitation of employees—along with claims related to violation of the company's confidential information policy. In Fire Security Electronics & Communications Inc. v. Nye, 2024 WL 620813, an electronics company initiated an action against two of its former employees, alleging breach of contract, among other claims, and seeking a preliminary injunction that would prohibit them from soliciting the company's customers and employees. In granting the preliminary injunction request in part, the court held that the company was unlikely to succeed on its breach of contract claim because the underlying restrictive covenants were unreasonable as to scope and duration. In contrast, the court held that the company was likely to succeed on the breach of confidentiality claim based on obligations in the company's