Thanks to reader Steven Sholk, I learned about the recent Ninth Circuit opinion in Richey v. Metaxpert LLC. (Click here to go to a PDF copy.)
Before Richey started working for the appellants, in 2007 he signed an employment contract in which he agreed that he wouldn’t compete with the appellant company “in the computer gaming business” for two years after leaving the company. The contract didn’t elaborate on what “computer gaming business” meant. After Richey left the company, he started designing software for smartphone games. The appellants sought a preliminary injunction stopping Richey from designing smartphone gaming software; the district court denied the request on the grounds that the term “computer gaming business” was ambiguous.
In affirming the district court’s decision, the Ninth Circuit affirmed:
Here, we agree with the district court that the term “computer gaming business”—without any further definition by the parties in their 2007 agreement—is “capable of being understood as having more than one meaning.” Mayer, 909 P.2d at 1326. Indeed, the term “computer” itself is ambiguous in light of the objectively blurry line between personal computers and devices like smart phones which can perform many of the same functions—including the capability to support games—but remain popularly understood as distinct devices. Because these terms are ambiguous and their meaning must be decided by the trier of fact, the district court did not abuse its discretion when it denied Manning preliminary injunctive relief on the ground that he failed to meet his burden to demonstrate a likelihood of success on the merits.
It may well be that in this case, a contract that wasn’t ambiguous at signing became ambiguous over time. The year Richey signed his contract was also the year the iPhone was launched, so I can’t fault the drafter of that contract for not having anticipated the smartphone boom.
This case is a salutary reminder that you’re not just drafting for now, you’re drafting for the future.