Buyer Beware: Hiring Competitor’s Star Executive May Not Only Get You Sued but Get You Sued in the Competitor’s Favorite Court
We have written before here on Suits by Suits about the risk to a company hiring an executive from a competitor of being sued by the competitor for tortiously interfering with the executive’s non-compete agreement. A recent decision from a federal court in Pennsylvania sheds light on another facet of that risk: being forced to defend the lawsuit in a faraway court favored by the competitor because the executive agreed to be sued there.
In the Pennsylvania case, Radian (a company in the private mortgage insurance business) has sued its competitor Arch MI Services for allegedly tortiously interfering with a non-compete agreement between Radian and Rhiannon Bolen. Ms. Bolen was working for Radian as an account manager when she was recruited by Arch to be a regional vice president. Radian is based in Philadelphia. Arch is based in Bermuda. Ms. Bolen is in Texas and her region for both Radian and Arch is the southern states. The Pennsylvania federal court nevertheless held that Arch is subject to the court’s jurisdiction because Ms. Bolen (not Arch) agreed as part of her non-compete agreement with Radian that Arch could sue her for breaching the agreement in the United States District Court for the Eastern District of Pennsylvania. (See our earlier post explaining forum selectition clauses.)
The court reasoned: “Having sought to employ Bolen while knowing that she was employed by Radian under a contract with a non-competition agreement, [Arch is] sufficiently closely related to Bolen so as to foresee being bound by the forum selection clause in the [non-competition agreement].” So, there you have it. When a company hires from its competitor, it should not only assess the risk of litigation over interfering with a non-compete but also the risk of litigation in a faraway court in the competitor’s backyard that was specially selected by the competitor.