A recent Eleventh Circuit decision, Puris LLC v. CMG Pipelines Inc., highlights both the breadth of equitable relief available in restrictive covenant disputes and the potential exposure facing non-signatories who allegedly assist in violating agreements.
Background
In 2020, PURIS purchased Murphy Pipeline Contractors for approximately $55 million. Murphy specialized in rehabilitating municipal water and sewer lines through a propriety “trenchless” technology that repairs the sewer lines from within rather than digging up the old pipe. Andrew Mayer—Murphy’s founder—agreed to remain with the company as president following the sale. As part of that sale, Mayer signed a non-compete agreement preventing him from competing with Murphy, soliciting or diverting customers, raiding employees, or supporting a competing business.
The Eleventh Circuit concluded that Mayer later developed a strategy document titled “THE PLAN,” which outlined a roadmap for building CMG Pipelines, a separate entity, into a direct competitor. According to the Eleventh Circuit, evidence showed that Mayer allegedly steered opportunities to CMG, helped it obtain competing technology, recruited former Murphy employees, and leveraged Murphy’s business opportunities and customer relationships to help CMG compete in the same market.
PURIS ultimately sought and obtained a preliminary injunction not only against Mayer, but also against CMG and its owner based on their alleged participation in the scheme.
Court’s Analysis
Irreparable Harm
CMG argued that the preliminary injunction was improper because any harm to PURIS could be addressed through monetary damages. The Eleventh Circuit disagreed, holding that the district court did not abuse its discretion in finding irreparable harm. The Eleventh Circuit emphasized that the district court carefully tailored the relief by allowing CMG to complete certain projects already underway while enjoining future trenchless work within the restricted territory.
In doing so, the district court distinguished between harm that could potentially be addressed through damages and future competitive harm that could not. The court found that the alleged injuries extended beyond lost contracts and profits and included threats to customer relationships, goodwill, a trained workforce, confidential business opportunities, and PURIS’s competitive position.
Scope of the Injunction
CMG argued that the injunction was overly broad because it prohibited work within fifty miles of 553 locations and, more importantly, because CMG and its owner never signed Mayer’s noncompete agreement.
The Eleventh Circuit rejected that argument. The court explained that the injunction was not simply enforcing Mayer’s noncompete against CMG. Rather, the district court found that PURIS was substantially likely to prove that CMG and its owner tortiously interfered with Mayer’s restrictive covenant and used that relationship to help build CMG into a direct competitor. Under those circumstances, the district court possessed broad equitable authority to fashion relief designed to prevent CMG from benefiting from that misconduct while the case proceeded.
Key Takeaways
First, restrictive covenant litigation can expose more than the employee or seller who signed the agreement. Competitors and business partners alleged to have facilitated a violation may face tortious interference claims and injunctive relief themselves.
Second, businesses should carefully evaluate the risks of working with restricted individuals. When a business’s growth is tied to alleged customer diversion, employee raiding, or misuse of confidential information, courts may be willing to impose meaningful restrictions on that business while the litigation proceeds.
Finally, courts have broad authority to craft equitable relief that protects more than lost profits.Even where monetary damages may be available for some aspects of the alleged harm, courts may issue tailored injunctions to protect customer relationships, goodwill, confidential business opportunities, workforce stability, and competitive position when those injuries are difficult to measure.
