Litigation Team Beats Back Preliminary Injunction Motion in C-Suite Employee Dispute

A Latham & Watkins Chicago-based litigation team, working with Delaware counsel Morris Nichols Arsht & Tunnell, notched a significant victory on December 18, 2020 when Vice Chancellor Joseph R. Slights III of the Delaware Court of Chancery denied a preliminary injunction motion filed this summer against Latham client, SMP Automotive Systems Alabama, Inc. (SMP). SMP is an automotive parts component supplier and an indirect subsidiary of Motherson Sumi Systems Ltd.

Plaintiff International Automotive Components Group North America, Inc. (IAC), which is represented by Kirkland & Ellis LLP, filed suit in July 2020 against SMP and an employee of one of SMP’s affiliates, Natale Rea. IAC, who had formerly employed Rea, alleged that Rea’s work on behalf of SMP violated certain restrictive covenants in Rea’s IAC employment agreement and that SMP had tortuously interfered with that agreement by inducing Rea to violate those covenants. Shortly after filing its lawsuit, IAC filed a motion for preliminary injunction seeking to enjoin: 1) Rea from violating his non-competition, non-solicitation, and confidentiality covenants; 2) SMP from employing Rea; and 3) both Rea and SMP from interfering with IAC’s client relationships.

After the parties engaged in expedited discovery, submitted extensive briefing, and participated in a five-plus hour hearing by Zoom, Vice Chancellor Slights entered an order denying IAC’s motion in its entirety. Critically, the Vice Chancellor denied the motion primarily based on his finding that IAC had failed to demonstrate on the record that it would suffer irreparable harm as a result of the conduct of the defendants or that any such harm was imminent. He also went on to note that, even if IAC had shown such harm, the defendants “have a strong case for application of affirmative equitable defenses, including laches and acquiescence.” In support, the Vice Chancellor cited key admissions from IAC executives secured by Latham through depositions and certain documents Latham obtained during expedited discovery. 

Chicago partner Matthew Walch led the case for SMP with support from Chicago associates Russell Mangas and Sophia Mendez and Delaware counsel, Kevin Coen, Alexandra Cumings and Sara Toscano of Morris Nichols Arsht & Tunnell. Ryan Newell and Lauren Dunkle Fortunato of Young Conaway Stargatt & Taylor represented Mr. Rea.