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LITIGATION 3: Defendant filed a counter claim to protect customer base.

In this case, plaintiff was to work full-time for Company R, and was to be paid 50 percent of the gross profits on the sales he generated. The employment agreement established a financial goal of total gross profits of $750,000 as the point at which the agreement would automatically terminate.

In September 2015, plaintiff provided a letter to defendant giving written notice expressing his intent to leave Company R and noting that he was fast approaching the $750,000 goal. He communicated his plan to continue working in a similar capacity with his current customer and vendor base under a newly formed company. Plaintiff advised defendant that he would complete all work in progress, even after transitioning to his new company. The parties began discussions on the terms of an accelerated separation process. During these discussions the parties agreed that the preliminary amount of received gross profits was $705,000 and an additional $30,000 was in process through invoice orders and work in progress. They discussed an arrangement where the remaining $15,000 would be offset against the amounts which would become payable to plaintiff from Company R as commissions.

However, prior to any formal modification of the written agreement, defendant sent plaintiff an email stating that plaintiff’s plans were in violation of their employment agreement. From that point forward the relationship between plaintiff and defendants became contentious. Defendant locked plaintiff out of all computer systems. This restriction made it impossible for plaintiff to directly access customer files or issue computer based purchase orders.  Company R ultimately received $751,000 in gross profits arising from plaintiffs’ work on.

In October 2015, plaintiff began operating under his new company and filed an action for declaratory relief seeking to have the parties’ respective rights under the employment agreement clarified. Defendant filed a counter claim for damages and injunctive relief to protect Company R’s customer base.

The trial court issued an opinion and order that held that while plaintiff did breach the employment agreement by engaging in business activities prior to reaching the goal, defendants failed to establish that they suffered any damages arising from the breach. The court declined to award monetary damages because defendants had in fact received the contractual benefit of the total gross profits of $750,000. However, the court issued an injunction pursuant to the employment agreement, ordering plaintiff to honor his contractual obligations to refrain from soliciting business from customers on defendants’ protected list.

Aldrich Legal Services lawyers serve clients throughout southeast Michigan who are business owners. They will use their knowledge of business law, real estate law and risk management to help you avoid any potential pitfalls.

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