MI court lets nonsolicitation case go forward even though customer initiated contact

A Michigan trial court properly denied two former employees’ request to dismiss a case against them for allegedly violating a nonsolicitation agreement, the Michigan Court of Appeals recently ruled. The appellate court said genuine issues of material fact existed about the employer’s breach of contract and tortious interference claims. Further, “the trial court’s disputed factual findings following the bench trial were not clearly erroneous.”

Facts

Total Quality, Inc. (TQI) claimed former employees Terry and Nathan Fewless violated the nonsolicitation agreement by violating its third provision—namely, responding to customers’ requests to do business.

The Fewlesses argued, however, that unlike with a covenant not to compete, TQI’s nonsolicitation agreement “did not preclude them from responding to requests initiated by customers.”

Court’s decision

The court disagreed and opined that accepting business from a customer who initiates contact can constitute unlawful solicitation if the evidence shows the accused parties “assumed an active role in [the customer’s] decision-making process.” In other words, whoever “initiates” the contact isn’t dispositive (or the determining factor).

The Fewlesses also argued the third provision of the nonsolicitation clause ran afoul of Michigan’s noncompete statute, MCL 445.774a(1). They failed, however, to cite any authority supporting the notion that nonsolicitation agreements are subject to the statute.