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September 2020: Non-Compete Victory for California Company Against Non-California Employee

September 2020

Quinn Emanuel recently obtained a preliminary injunction enforcing an employee non-compete agreement for its client, Farmer’s Business Network Inc. (“FBN”), in South Dakota state court.  The injunction prohibits FBN’s former Head of Seed, Ron Wulfkuhle, from working for FBN’s competitor, Inari Agriculture, Inc. (“Inari”), for one year. 

FBN is a successful agricultural start-up that launched in 2014 and has built an online community of over 10,000 farmers who can share information about agricultural techniques, inputs, and growing conditions.  FBN allows its members to use that information to identify and purchase the most productive agricultural inputs (nutrients, pesticides, etc.) for their particular farm from FBN.  

In 2018, FBN decided to start developing and selling seeds—a market that for years has been dominated by a few industry giants.  FBN sought to disrupt the market by removing intermediaries and selling directly to farmers with greater transparency about seed features and pricing.  FBN hired Mr. Wulfkuhle, an industry veteran, to lead that effort and build FBN’s seed business from scratch as the Head of Seed.  In connection with his employment, Mr. Wulfkuhle signed FBN’s standard employment agreement that contained, among other provisions, a one-year non-compete agreement governed by South Dakota law (where Mr. Wulfkuhle would live and work).  

Despite the success of FBN’s seed business, Mr. Wulfkuhle suddenly resigned as Head of Seed in February 2020.  Unbeknownst to FBN, he had already accepted a position with Inari, a Cambridge, Massachusetts start-up that states it is working to develop gene editing technology (e.g., CRISPR) to create next-generation corn seeds.  FBN only found out about Mr. Wulfkuhle’s move in April, when a contractor who intended to email an Inari business plan to him at Inari accidentally sent the email to his FBN email account.  

Upon learning of the email, FBN hired Quinn Emanuel to seek enforcement of the non-compete agreement and prevent Mr. Wulfkuhle from working for Inari.  The firm quickly filed a complaint and sought injunctive relief in South Dakota state court.  Inari and Mr. Wulfkuhle pushed back, claiming that Inari and FBN are not competitors, because Inari was solely in the “gene editing” space, and because Mr. Wulfkuhle had not taken any FBN confidential information or otherwise solicited (much less taken) any of FBN’s customers, business partnerships, or employees.  

Based on conflicting evidence, the court set an evidentiary preliminary injunction hearing with live witness testimony for four weeks later, and granted FBN’s request for expedited discovery.  During those four weeks, Quinn Emanuel opposed Defendants’ motion to dismiss; prepared and responded to written discovery requests; successfully moved to compel improperly withheld evidence; crafted expert reports; and took or defended some 10 depositions.  During discovery, Quinn Emanuel uncovered documents and obtained admissions that put the lie to Defendants’ claims, and showed that they were in fact engaged in the same seed development business as FBN.     

Just one weekend after the end of expedited discovery, the parties conducted a two-day evidentiary hearing, akin to a bench trial, including a combined opening/closing presentation, submission of 263 exhibits and approximately 1,400 pages of designated deposition testimony, and live testimony from four witnesses (one in person in the courtroom, three by Zoom).  

As demonstrated by the court’s decision after several weeks of deliberation, Quinn Emanuel methodically dismantled all of Defendants’ arguments.  The court issued a lengthy, detailed order adopting all of Quinn Emanuel’s arguments and evidence, and issuing a preliminary injunction prohibiting Mr. Wulfkuhle from working for Inari for one year.  The case is proceeding as FBN seeks to recover for any economic harm caused by Mr. Wulfkuhle’s and Inari’s improper competition.