Delphi Automotive PLC v. Absmeier

Majority - Hon. Gershwin A. Drain

Yes, a federal court sitting in Michigan will apply Michigan's choice-of-law rules, determining that New York law does not apply, and will issue a preliminary injunction to enforce a modified non-compete clause under Michigan law. The court first addressed the choice of law, applying Michigan's choice-of-law rules, which follow the Restatement (Second) of Conflict of Laws §§ 187 and 188. Under § 187, a chosen state's law applies unless it has no 'substantial relationship' to the parties or transaction, or its application would violate a fundamental policy of a state with a 'materially greater interest.' The court found New York lacked a substantial relationship, as neither party was domiciled there, it wasn't Delphi's principal place of business, and the contracts weren't made or performed there. While Delphi argued for New York law for consistency across executive agreements and its stock trading there, the court determined these reasons did not establish a 'reasonable basis' without a stronger connection to the parties or transaction. Thus, the choice of New York law was invalid. Applying Michigan's § 188 contacts test (place of contracting, negotiation, performance, subject matter, parties' domicile/residence) and § 6 principles (state interests, justified expectations, predictability), the court determined Michigan law should apply. Michigan was Delphi's principal place of business, and the forum state has an interest in protecting its businesses, especially regarding employment restrictions and trade secrets. California also had significant contacts, but Michigan's interest was deemed materially greater given the forum and Delphi's operations. Next, the court evaluated the four factors for a preliminary injunction under Michigan law: (1) Likelihood of success on the merits: For Breach of Contract, the court found the non-compete agreement's duration (1-2 years) and global geographic scope (due to specialized field of autonomous vehicles) reasonable under Michigan law. However, the scope of prohibited employment ('any activity that directly or indirectly competes') was overbroad. The court exercised its power under Michigan Compiled Laws § 445.774a to modify the non-compete, limiting it to 'only prohibit Defendant from working in the area of autonomous vehicle technology, including marketing and development of that technology.' With this modification, Delphi showed a strong likelihood of success. The Common Law Misappropriation of Trade Secrets claim was preempted by the Michigan Uniform Trade Secrets Act (MUTSA). For the MUTSA Claim, Delphi failed to specifically identify a trade secret likely to be misappropriated or provide adequate evidence of Absmeier's duplicity, as Michigan does not adopt the 'inevitable disclosure' doctrine, and Absmeier was forthcoming about his new employment and quarantined the files. Thus, no strong likelihood of success. For Breach of Fiduciary Duties, Delphi did not sufficiently allege specific confidential information disclosed, how it differed from trade secrets, or any damages, nor was there strong evidence of a breach. Thus, no strong likelihood of success. (2) Irreparable injury: Delphi would suffer irreparable injury without an injunction, as the loss of competitive advantage in the critical and highly expensive autonomous vehicle technology field would be incalculable. This factor weighed in favor. (3) Substantial harm to others: An unmodified injunction would cause Absmeier substantial hardship by precluding him from his field of expertise. However, the court's modification limiting the restriction to autonomous vehicle technology reduced this harm, and Absmeier voluntarily entered the agreements. This factor weighed in favor. (4) Public interest: There is a public interest in enforcing contracts and protecting trade secrets, balanced against an individual's right to pursue a livelihood. The modified injunction protected Delphi's legitimate business interests without being overly burdensome, serving the public interest. Balancing these factors, the court granted the preliminary injunction, enjoining Absmeier from working in autonomous vehicle technology for twelve months and from using or disclosing Delphi's confidential information or trade secrets, and ordering preservation of data.