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Nike, Inc. v. McCarthy

United States Court of Appeals for the Ninth Circuit
379 F.3d 576 (9th Cir. 2004)


Facts

Eugene McCarthy (defendant) began working for Nike, Inc. (plaintiff) in 1993. In 1997, Nike promoted McCarthy to regional footwear sales manager. McCarthy signed a noncompete agreement, which provided that during McCarthy’s employment with Nike and for one year after his employment terminated, McCarthy could not directly or indirectly work for any athletic-footwear, athletic-apparel, or sports-equipment-and-accessories business anywhere in the world, or with any other business that directly competed with Nike. In 1999, Nike promoted McCarthy to sales director for Nike’s Brand Jordan division. As sales director, McCarthy learned confidential information about Nike’s product development, including new-product launch dates through the spring of 2004 and Nike’s future sales orders and strategic sales plans. In June 2003, McCarthy resigned from Nike. One month later, he began working at Reebok as vice president of U.S. footwear sales and merchandising. In that role, McCarthy was responsible for developing sales strategies for Reebok products. Nike sued McCarthy for breach of contract in Oregon state court and requested a declaratory judgment that McCarthy had violated his noncompete agreement. McCarthy removed the action to federal district court, and Nike moved in that court for a preliminary injunction. At a hearing on the motion, a Nike executive testified that if a company knew about its competitor’s launch dates, the company could schedule its own product launches to interfere with its competitor’s sales. McCarthy did not dispute that testimony. The district court granted Nike’s motion and entered an injunction prohibiting McCarthy from engaging in any athletic-footwear or athletic-apparel business or any other business in direct competition with Nike through August 25, 2004. McCarthy appealed to the United States Court of Appeals for the Ninth Circuit.

Rule of Law

Issue

Holding and Reasoning (Fisher, J.)

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