Declaratory Judgment Action Regarding Restrictive Covenants in Nike Employment Agreement Transferred to District of Oregon Pursuant to Federal First-Filed Rule

Posted by Benjamin I. Fink on

Woo v. Nike, Inc., Civil Action No. 1:10-CV-1018-RWS, 2010 WL 1565526 (N.D. Ga. April 19, 2010), demonstrates the application of the first-filed rule.  This doctrine frequently arises in federal court when an employer and a former employee each file separate lawsuits in different jurisdictions concerning the former employee’s restrictive covenants.  The employee and former employer are both likely selecting the jurisdictions in which they filed suit to seek out or to avoid favorable or unfavorable restrictive covenants law.  When such parallel litigation occurs, the federal court will often be asked to transfer the second-filed lawsuit to the “first-filed” jurisdiction.

Woo was an employee of Nike and had signed an employment agreement containing a non-competition clause.  She sought to leave her employment and to accept a position with Nfinity Products and Services, Inc. (“Nfinity”), a Georgia corporation.  On the day she announced her departure from Nike, Nike filed a Complaint against her and Nfinity in the Circuit Court of the State of Oregon and for the County of Washington.  Woo and Nfinity removed that lawsuit to the United States District Court for the District of Oregon.

Shortly thereafter, Woo and Nfinity filed a lawsuit in the Superior Court of Gwinnett County, Georgia.  Their lawsuit sought a temporary restraining order against Nike to preclude Nike from enforcing the non-competition covenant in Woo’s employment agreement, on the grounds that it was overly broad and unenforceable under Georgia law.  Nike removed that action to the United States District Court for the Northern District of Georgia.  Nike then requested the Court transfer the case to the United States District Court for the District of Oregon.  Because the Oregon lawsuit was the “first-filed”, Judge Story of the Northern District of Georgia applied the first-filed rule and transferred the case to the United States District Court for the District of Oregon. Judge Story also deferred ruling on Woo and Nfinity’s request for a temporary restraining order until after the case was transferred.  Thus, the federal court in Oregon rather than a Georgia court will rule on the enforceability of Woo’s restrictive covenants.  Whether Woo can convince the Oregon court to apply Georgia law to invalidate the covenants remains to be seen.