Rathmann Group v. Tanenbaum

Since 1979, Joel Tanenbaum (defendant) worked as a sales agent for Fred Foster, who owned a beauty- and barbershop-supply business (the business). Tanenbaum and Foster had a one-year, written noncompetition agreement over a 12-state geographical area, and all other terms of Tanenbaum’s employment were oral. In 1988, Foster sold the business to Rathmann Group, Inc. (Rathmann) (plaintiff). Tanenbaum continued to work as a sales agent for the business under a new written employment agreement with Rathmann that described Tanenbaum’s sales territory and commission arrangement. The employment contract did not contain a noncompetition agreement, an integration clause, or any mention of Tanenbaum’s agreement with Foster. In May 1989, Tanenbaum resigned to start his own beauty- and barbershop-supply business and began soliciting customers of Rathmann. Rathmann sued Tanenbaum seeking to enforce the noncompetition agreement between Tanenbaum and Foster. The district court entered a temporary restraining order (TRO) conditioned on Rathmann’s posting a $5,000 bond. About a week later, at an evidentiary hearing on Rathmann’s motion for preliminary injunction, the court continued the TRO, conditioned on Rathmann’s posting an additional $5,000 bond. Tanenbaum produced evidence showing that he lost $13,000 in gross income per month from complying with the injunction. Not long thereafter, the court issued an order granting Rathmann’s motion for preliminary injunction. The court’s order restrained Tanenbaum from competing against Rathmann in the 12-state area for one year from the date of Tanenbaum’s resignation. The order did not address an injunction bond. Tanenbaum appealed, arguing that the court erred in failing to order an injunction bond and that the court effectively entered a permanent injunction without providing prior notice that the court was considering permanent relief.