Thursday, November 11, 1999
P&G loses ruling in noncompete case
Ex-exec can work for Alberto-Culver
BY RANDY TUCKER
The Cincinnati Enquirer
An Ohio state judge has ruled that a former Procter & Gamble executive can continue to work for one of the company's biggest competitors, rejecting P&G's bid to enforce a noncompete agreement intended to protect trade secrets.
Hamilton County Common Pleas Judge George Elliott has denied P&G's request for preliminary and permanent injunctions barring Paul Stoneham from working for the suburban Chicago-based Alberto-Culver, which competes against P&G in the hair-care business with its VO-5 and St. Ives Swiss Formula brands.
Mr. Stoneham, 37, joined Alberto-Culver as president of its international operations in the fall of 1998 after resigning as P&G's hair-care marketing director in Germany.
Shortly thereafter, P&G filed a lawsuit accusing Mr. Stoneham of violating the noncompete agreement he signed with the company in 1997 to receive stock options. The agreement prohibits middle- and upper-level managers who receive stock options from working on competing brands for other companies for three years after leaving P&G.
But Judge Elliott ruled late last month that no evidence was presented to indicate that P&G would be harmed by Mr. Stoneham's departure.
The sealed decision is the first time a judge has ruled against P&G in such a matter.
“I am gratified with the court's decision, which has cleared my name and dismissed P&G's groundless allegations,” Mr. Stoneham said in a statement. “I have always kept P&G's information in confidence and will continue to do so.”
P&G, which alleged in the lawsuit that Mr. Stoneham has knowledge of secret information that could give Alberto-Culver an unfair competitive advantage, said it plans to appeal.
“P&G had no choice but to bring this lawsuit, and the company expects to win on appeal,” the company said. “Mr. Stoneham signed an agreement in which he committed not to work in a directly competitive business for a period of three years after he left P&G. He admitted in court that he made such an agreement, and that he is, in fact, working in a directly competitive hair-care business.”
P&G has settled lawsuits with several other former P&G executives who left to join competitors before the three-year period had expired.
But in Mr. Stoneham's case, the judge said that P&G was essentially using its noncompete agreement to keep a key employee rather than protect trade secrets.
“Clearly, what the judge is ruling here is that this (noncompete agreement) doesn't apply to Mr. Stoneham; and in the course of performing his new duties, it is not necessary for him to use P&G information,” said Todd Bailey, who handles unfair competition and trade-secret cases for Cincinnati law firm Frost & Jacobs.
The decision might have ramifications for other companies seeking to enforce noncompete contracts, but most will probably be decided on a case-by-case basis, Mr. Bailey said.
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