Anatomy of a Big-Time Noncompete Dispute
“Nasty, brutish, and short” isn’t just Hobbes’s famous explanation of human life in the state of nature. It also hits close to the mark in describing how litigation over non-compete provisions often proceeds, as a recent case illustrates.
The plaintiff in the case was American Realty Capital Properties, Inc. (ARCP), a publicly-traded REIT (a real estate investment trust). Allied on the other side were the Carlyle Group LP and Jeffrey Holland. Holland used to work for Cole Real Estate Investments, a company that ARCP bought in February of 2014. According to ARCP’s court filings, it paid Holland handsomely when it acquired Cole, giving him $7.1 million in connection with the change. Holland then told ARCP that he wanted to take some time off. ARCP was comfortable with that, given that Holland had previously signed both an employment agreement and a consulting agreement in which he agreed not to solicit Cole’s or ARCP’s investors for 12 months.
Within a couple of months, Holland joined Carlyle, one of the world’s largest investment firms, to raise funds for its products. To put it mildly, ARCP was not pleased with this development. At the beginning of April, it sued both Holland and Carlyle and filed an application for a preliminary injunction and temporary restraining order (TRO).