Opinion ID: 2338953
Heading Depth: 1
Heading Rank: 7

Heading: Upon termination of the Agreement, the district court should have dissolved the preliminary injunction as it applied to the restrictive covenants contained in the Agreement

Text: Finkel argues that the district court erred in refusing to dissolve the injunction despite termination of the Agreement. We agree with Finkel that the injunctive provisions that restricted his business activities based on his likely violations of the Agreement should have been dissolved once the Agreement was no longer enforceable. However, we do not necessarily agree that the injunctive provisions that applied to prevent likely trade secret violations should have been dissolved. Although this is an issue of first impression in Nevada, the majority of courts that have considered this matter have declined to enforce an agreement not to compete after the period set forth in the agreement had expired. Economics Laboratory, Inc. v. Donnolo, 612 F.2d 405, 408 (9th Cir.1979); see also id. at 409 (There is no reason ... to enforce a covenant which by its terms is no longer in effect.). We agree with the Ninth Circuit's reasoning, and therefore conclude that the district court abused its discretion by denying Finkel's motion to dissolve the injunction to the extent that it restricted Finkel's business activities based on the terminated Agreement, as there was no longer any basis for enforcing that portion of the injunction. [3] Accordingly, we reverse the district court's second order to the extent that it maintains the injunctive provisions relating to Finkel's alleged breach of the Agreement and remand with instructions to grant Finkel's motion to dissolve as to this portion of the injunction. This brings us to the remaining portion of the injunction, which was based on Finkel's likely trade-secret violations. An injunction entered under Nevada's Uniform Trade Secrets Act must be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time to eliminate commercial or other advantage that otherwise would be derived from the misappropriation. NRS 600A.040(1). Here, the district court maintained the preliminary injunction on the independent basis that Finkel had likely misappropriated Cashman's trade secrets. While this may be a valid ground for maintaining a preliminary injunction beyond the termination date of the parties' agreement, we conclude that additional findings were required by the district court. First, NRS 600A.040(1) requires that an injunction be terminated when the trade secret no longer exists. Here, the district court should have made findings as to the extent that Cashman's contracts, customer lists, process, and prices remained protected as trade secrets. Assuming that trade secrets are found to exist, an injunction may only be extended for a reasonable period of time pursuant to NRS 600A.040(1). Thus, the district court should also have articulated a duration for extending the injunction pursuant to statute. This conclusion is consistent with the comments to the Uniform Trade Secrets Act, which indicate that an injunction should last for as long as is necessary, but no longer than is necessary, to eliminate the commercial advantage or lead time' with respect to good faith competitors that a person has obtained through misappropriation. Unif. Trade Secrets Act § 2 cmt., 14 U.L.A. 620 (2005). Accordingly, such a determination should be made on a case-by-case basis by the district courts. Therefore, we also reverse the part of the district court's January 2010 order in which it maintained the injunctive provisions based on Finkel's alleged misappropriation of trade secrets. On remand, the district court shall reconsider to what extent the injunctive provision should be maintained under NRS 600A.040(1) in light of this opinion.