Ecosense Files Lawsuit vs. Former Employee
(We imagine that the Ecosense statement above accidentally left out an important "not" in the phrase "...shall not divert...")
Lawsuit may be an interesting examination of (1) the enforceability of non-compete agreements and (2) how we define "competition" in the lighting industry.
On Monday, June 29, Ecosense filed a lawsuit in New York Southern District Court against Josh Ryan who recently left the company after a 9 ½ year period. Here are some of the company's statements from the complaint:
BACKGROUND
- Josh Ryan, currently a North Carolina resident, joined Ecosense in 2011.
- Ecosense, a California company, was founded in 2009.
- Upon joining the company, Ryan signed a Nondisclosure, Noncompetition and Developments Agreement (NND Agreement).
- Ryan was granted stock options in 2011, 2012 and 2014.
- The company is claiming that Ryan breached the noncompetition portion of the NND Agreement in June 2020 by joining Coronet LED, a New Jersey based LED lighting manufacturer.
- Ecosense recently determined that Ryan is ineligible to exercise his stock options which have matured to an amount that exceeds $75,000.
- Company issued a check to Ryan for the exercise price of the options -- essentially negating any of the gains.
- In June, Ryan's attorney sent a letter to the Company claiming that the signing of a 2017 non-disclosure agreement that did not include a non-competition clause supersedes the 2011 NND Agreement. Ecosense contests that allegation.
PROPOSED REMEDIES:
- Ecosense is seeking a permanent injunction barring Ryan from working for Coronet LED.
- Ecosense is seeking that the court upholds their decision to terminate Ryan's stock options.
inside.lighting OBSERVATIONS
Firstly, the summary above is only Ecosense's side of the story. We imagine that if we read a recap from Josh Ryan that we would learn other enlightening information that would also likely contest some of the company’s allegations.
In its arguments to support enforcement of the noncompetition clause, Ecosense touts Ryan's high value to the company by citing some of his important contributions. But then their arguments to support Ryan's ineligibility to receive stock options seem to be based on more of a technicality and not based on whether he earned those stock option benefits. Stock options are a vehicle to strengthen the loyalty and reward the contributions of valuable employees. Ryan was deemed valuable and lauded as a performer for 9 ½ years, but then the company disqualifies his payday based on this breach of contract claim when he leaves the company.
We don't know all of the nuances of employment law and how enforceable a noncompetition agreement is in this matter. Ecosense is in California. Ryan lives in North Carolina. The court is in New York. And Ryan's new employer is headquartered in New Jersey. The enforceability and "right to work" aspect will likely play a major role in how this case is remedied.
We would expect Ryan and his attorney to respond with strongly worded counterarguments that will probably include a counterclaim for immediate release of monies on the stock options matter.
Our multiple messages to Ecosense on the afternoon of June 29 were not returned at press time. Ditto for our June 29 message to Josh Ryan.
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