Duarte v The Black and Decker Corporation and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field |
| Judgment Date | 23 November 2007 |
| Neutral Citation | [2007] EWHC 2720 (QB) |
| Docket Number | Case No: HQO7XO24O1 |
| Court | Queen's Bench Division |
| Date | 23 November 2007 |
[2007] EWHC 2720 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Field
Case No: HQO7XO24O1
Mr Selwyn Bloch QC and Mr Julian Wilson (instructed by Addleshaw Goddard) for the Claimant
Mr Nigel Tozzi QC and Mr Mark Vinall (instructed by CMS Cameron McKenna LLP) for the Defendants
Hearing dates: 3, 29, 30, 31 October; 1, 2, 5, 6, 7, 8 and 12 November 2007
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The first defendant is head of a large corporate group. I shall refer to it and its group as “B&D”. The second defendant (“B&DE”) is a subsidiary of B&D.
On 4 July 2007 the claimant, Mr Duarte, resigned from his employment with B&DE to take up a position with a competitor of B&D, Ryobi Technologies (UK) Ltd (“Ryobi”). Ryobi is a subsidiary of Techtronic Industries Co Inc (“TTI”) which is also a competitor of B&D. The position offered to Mr Duarte by Ryobi is President – TTI Europe. Mr Duarte gave 3 months' notice as required by his contract of employment. The notice expired on 4 October 2007 but Mr Duarte has not yet started in his new job. This is because the defendants contend that he is bound by one of two post-termination restrictive covenants by which he agreed not to work for any of a number of specified competitors, including Ryobi and TTI, for two years following the termination of his employment. To clear the path to his taking up employment with Ryobi Mr Duarte seeks a declaration that the restrictive covenants are void and unenforceable. In their Amended Defence and Counterclaim B&D and B&DE assert that the covenants are lawful and seek an injunction to enforce them. They also advance a quite separate claim for an injunction restraining Mr Duarte from competing with the defendants for such period as may be just and equitable based on an allegation that in the few days before his resignation he wrongfully copied B&D's confidential information for use in his new position with Ryobi. I shall refer to this claim as the “dishonest copying claim”.
The restrictive covenants
The covenants were given in a letter agreement (“the LTIP agreement”) executed on about 18 th January 2007.
“LTIP” stands for Long-Term Incentive Plan. This is a cash-based incentive scheme in which a number of B&D high potential employees principally, but not exclusively, at Vice President level, are invited each year to participate. Under the scheme participants receive additional remuneration depending on B&D's performance over a two year period. LTIP's objective is accordingly to reward and retain high potential employees who can be expected to contribute significantly to the achievement of B&D's aims and financial objectives.
B&D also operates a separate incentive scheme for selected corporate officers known as “PEP,” which is short for Performance Equity Plan.
Mr Duarte joined LTIP in 2004 and was invited to continue in the scheme in January 2007 on condition that he entered into the LTIP agreement. Not being a B&D corporate officer, he was ineligible to participate in PEP.
The relevant parts of the LTIP agreement read:
[Y]ou have been selected to participate in the Long-Term Incentive Plan (the Plan) for the 2007–2008 performance period. …In that capacity, The Black & Decker Corporation and its subsidiaries (collectively referred to as Black & Decker in this agreement) entrusts you with its confidential information and trade secrets and relies on you to help create goodwill. Accordingly, in consideration of your current and future participation of the Plan ….you and other key team members must commit in writing to the following obligations to protect Black & Decker's interests.
By signing below, you confirm your obligation not to compete with Black & Decker while employed by it, and also further agree not to accept employment by, or otherwise assist, any of the companies included on attached Schedule A for two years following your termination from Black & Decker by your own choice or for cause.
During that same two-year period, you also agree not to hire any of Black & Decker's employees or to induce any to leave…
Competitor companies include the following, along with any of their parents, subsidiaries, affiliates and successors:
Robert Bosch GmbH
Chervon Power Tools Inc
Global Machinery Company
Greapo Electric Power Tools (Suzhou) Company
Hilti Corporation
Hitachi Limited
Makita Corporation
Newell Rubbermaid Inc
Positech Corporation
Techtronic Industries Co Limited
The LTIP agreement provided that it was to be governed by the laws of the State of Maryland.
I shall refer to the first post-termination covenant as “the non-compete covenant” and to the second as “the anti-poaching covenant”.
The organizational structure of the B&D global group
B&D is incorporated in Maryland, USA. The business of the B&D group is the manufacture, marketing and sale of: (a) power tools and related accessories; (b) hardware and home improvement products; and (c) technology-based fastening and assembly systems. The business is operated and managed on a globally integrated basis, although Power Tools and Accessories (“PTA”), Hardware and Home Improvement Products (“HHI”), and Fastening and Assembly Systems (“FAS”) are run as separate “business segments”.
The worldwide PTA segment (“WWPTA”) is run from B&D's head office in Towson, Maryland, USA. This segment employs approximately 19,000 employees worldwide and in 2006 accounted for US$4.7 billion in sales revenue this being 76% of B&D s total turnover.
The WWPTA business segment is divided into 5 regional business units, including (as one region), Europe, the Middle East and Africa. This region is known as “EMEA”. It employs approximately 3,100 employees and has manufacturing operations in the Czech Republic, Italy, the United Kingdom and Germany. It is headed by Mr Les Ireland who is President of EMEA and a corporate officer of B&D. In 2006, sales revenues for the EMEA Power Tools and Accessories segment amounted to US$1.1 billion, which was approximately 22% of the B&D's worldwide power tools and accessories revenues.
At a global level and within the US geographic region, the PTA business segment is divided into 2 groups: the Consumer Products Group (“CPG”) and the Industrial Products Group (“IPG”). The former is responsible for consumer power tools, accessories, lawn and garden tools and electric cleaning, automotive, lighting and household products, which are manufactured, marketed and sold under the 'Black & Decker' brand. The latter is responsible for high-performance industrial power tools, accessories, industrial equipment, laser products and air compressors, which are manufactured, marketed and sold under the 'DeWALT', 'Porter-Cable' and 'Delta' brands. Outside the USA, at a regional level the expressions “Professional SBU” and “Consumer SBU” are used rather than IPG and CPG, “SBU” standing for “Strategic Business Unit.
In 2006, the turnover of EMEA Professional SBU and EMEA Consumer SBU was respectively US$ 0.6 billion and US$ 0.5 billion.
Somewhat confusingly, within WWPTA there are product-related strategic business units, also known as “SBUs”. The product-related SBUs within CPG are: Consumer Power Tools; Automotive; Outdoor; Home Products; and Consumer Accessories. The product-related SBUs within IPG are: Construction; Woodworking; Accessories; Equipment; and (in USA only) Security.
EMEA has a Management Advisory Council (“EMEA MAC”) which operates from B&DE's headquarters in Slough. Its members are: President –EMEA (Mr Ireland); Vice President IPG – EMEA (the position held by Mr Duarte when he resigned); Vice President CPG – EMEA; Vice President Finance – EMEA; Vice President Human Resources (Mr Martin Whitthread); and Vice President Supply Chain – EMEA. The EMEA MAC has overall managerial responsibility within EMEA in respect of both Professional SBU and Consumer SBU for devising future strategy, deciding product and geographical market investment, identifying new product lines, budget planning, sales and marketing, identifying potential business acquisitions, negotiating key customer contracts and licensing agreements, carrying out Organisation Reviews of talent and succession and deciding employee compensation.
EMEA also has a European Leadership Team (the “ELT”) made up of the 6 members of the EMEA MAC, the 7 General Managers and 2 Commercial Directors who have responsibility for EMEA's 8 geographical markets, the EMEA Sourcing Director, and 2 EMEA Directors of Information Technology. The ELT communicates the strategies, policies and processes devised by the EMEA MAC to the key team leaders working within the 8 markets; it also oversees the implementation and operation of those strategies, policies and processes. In addition, it is a co-ordinating body, responsible for allocating, and managing the allocation of, resources and expertise across EMEA.
Mr Duarte's employment within B&D
Mr Duarte joined Black & Decker Portugal in March 1995 as an intern in its Marketing department whilst completing his degree in Business and Marketing. He became a permanent employee of Black & Decker Portugal in March 1996 with responsibility for helping launch the 'DeWALT' brand in Portugal and building a 'DeWALT' end-user specialist team there. In January 1998 he became a member of the IPG European Marketing Organisation based in Idstein, Germany as Assistant Product Manager for Cordless, DeWALT. At the beginning of 1999 he was promoted to Product Manager, DeWALT and...
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