August 2, 2021

LSI Sues Former Regional Sales Manager

A misdirected email from a large electrical distributor bolsters the company’s allegations

A former Regional Sales Manager for Atlas Lighting, a company of LSI Industries, is being accused of multiple violations of his employee agreement with the company. Carlos Pedroza, a former employee of LSI/Atlas is being accused of violating the non-compete, non-solicitation and non-disclosure agreement he signed when joining the company.

According to the complaint, Pedroza was hired by LSI/Atlas in August of 2019 as a Regional Sales Manager, responsible for a large swath of the south central United States, including Texas, New Mexico, Colorado, Arkansas, and parts of Arizona. He was well compensated for his services, with six-figure earnings. The company claims that Pedroza was terminated in November 2020 for performance related issues.

According to Pedroza’s LinkedIn profile he has been employed as a Regional Sales Manager with RCA Commercial Electronics / Solas Ray Lighting since February 2021. Our multiple messages seeking comments and additional information were not immediately returned by to Pedroza.

ACCORDING TO THE COMPLAINT:
Under the terms of the employee agreement Pedroza, for a period of twelve months following the termination of his employment, Pedroza was allegedly prohibited from engaging in “Competitive Activity.” Specifically, the agreement provided that he could not:

Accept employment with a Competitor of LSI/Atlas Lighting;
Call on, contact, communicate with, or solicit any Customer of LSI/Atlas Lighting for the purpose of inducing them to divert their business to another entity or business;
Interfere with any contract or other agreement that LSI/Atlas Lighting may now or hereafter have, including, that would or could in any way be injurious or detrimental to LSI/Atlas Lighting’s image, business relationships or its business.

Apparently, one of the items that triggered the lawsuit was a misdirected email from Elliott Electric Supply to Pedroza. According to the complaint, "the distributor was asking to place an order with RCA – through Pedroza – for a product directly competitive with what it purchased from LSI/Atlas through Pedroza when he was employed there. LSI/Atlas' sales to Elliott had dropped significantly to date this year, and now the reason is apparent."

LSI/Atlas alleges that Pedroza took the position with RCA, a direct competitor of LSI/Atlas, apparently in the exact same role, in the exact same geographic territory. The company claims that he has taken this position in direct violation of his noncompetition obligations set forth in his agreement with LSI/Atlas.

LSI/Atlas also accuses Pedroza of erratic bahavior during and after employment with the company. Additionally, the company alleges that Pedroza emailed a LSI/Atlas prorietary pricing tool to his personal account "just before his termination." The pricing tool email allegedly occured in August, three months before his termination.

A FEW TAKEAWAYS
Sometimes when a company tries to enforce a Non-Competition Agreement in court, it’s simply because an employee goes to work for a competing business. In this case, it appears that the actions of LSI/Atlas may have been triggered by what they describe as the employee’s “erratic behavior” during and after his employment, deleted files from a company laptop, alleged retention of confidential information and multiple misdirected customer emails that apparently demonstrate business shifting from LSI/Atlas to Pedroza’s new employer.

Pedroza is a Texas resident. Many of LSI/Atlas’ allegations describe behavior that occurred in Texas – and/or outside of LSI’s Cincinnati home base. But because one of the clauses in the LSI/Atlas employee agreement apparently stated that jurisdiction for any federal legal actions would take place in Ohio, Pedroza is likely required to defend this case in Ohio.

Non-competition agreements are coming under scrutiny by the U.S. government as President Biden has recently asked the Federal Trade Commission to “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” While some of LSI’s claims are relating to the non-competition aspects of the agreement, many other claims relate to alleged violations of mishandling confidential information and for violating non-solicitation of business clauses.