794 F.2d 371 (8th Cir. 1986), affirming in relevant part 605 F. Supp. 1253 (E.D. Mo. 1985)
Sigma Chemical Co. v.
Under Missouri law and the Dataphase preliminary injunction framework, may a court enforce and tailor an overbroad noncompetition agreement to protect an employer's legitimate interests in trade secrets and customer relationships by enjoining a former employee from soliciting certain customers and using confidential information?
Missouri law enforces restrictive covenants ancillary to employment to the extent they are reasonable in time and geographic scope and are no broader than necessary to protect an employer's legitimate interests, such as trade secrets, confidential business information, and customer contacts. Courts may partially enforce or reform overbroad covenants to make them reasonable (the "blue-pencil" or reformation doctrine). A preliminary injunction in federal court within the Eighth Circuit is governed by the Dataphase factors: (1) likelihood of success on the merits, (2) threat of irreparable harm absent relief, (3) balance of harms, and (4) the public interest. Loss of customer goodwill and the risk of disclosure or misuse of trade secrets and confidential information can constitute irreparable harm not readily compensable by money damages.
Affirming the district court's grant of a tailored preliminary injunction, the Eighth Circuit held that Sigma was likely to succeed in enforcing the restrictive covenants to the extent necessary to protect its legitimate interests. The court approved injunctive relief that (1) barred Harris for a limited period (two years) from soliciting or accepting business from Sigma customers with whom he had material contact while employed at Sigma and (2) prohibited him from using or disclosing Sigma's trade secrets and confidential information. The court declined to enforce any broader restraint that would categorically preclude Harris from working in the chemical industry or from competing in territories and with customers with whom he had no prior relationship.
Sigma Chemical Co. v. Harris is a frequently cited exemplar of how courts handle overbroad noncompete agreements by reforming them to protect only legitimate interests. It teaches that (1) courts will not enforce restraints that simply suppress ordinary competition, (2) customer goodwill and confidential information are protectable, (3) preliminary injunctions are an appropriate tool when those interests are threatened, and (4) remedies should be no broader than necessary. For students, the case integrates contract interpretation, state-law policy on restraint of trade, and federal equitable standards for preliminary relief.