Electrical engineer Stephen Coon wanted to break free of a noncompete pact he signed in late 2020 when WSP acquired kW Mission Critical Engineering, a leading data center design firm of which he was a part owner. So Coon went to court to prevent the new parent from enforcing the terms.

The Montreal-based engineeing giant refused, and in striking back. convinced a federal court judge in February to order him into arbitration.

A resident of Arizona, Coon initially sought protection from WSP enforcing his noncompete pact via a state court lawsuit in California, one of the least business-friendly states when it comes to noncompete clauses. 

The same day WSP filed to force arbitration of the request.

The conflict comes at a time of renewed attention to noncompete clauses after the Federal Trade Commission last month issued a wide ban on future noncompete clauses, with a few key exceptions. Construction associations, including the Associated Builders and Contractors, oppose the new rule, calling it federal regulatory overreach on a matter best left to states. 

When the rule takes effect it will ban new noncompete agreements with all workers, and existing clauses will not be enforceable. 

Existing noncompetes with senior executives will be allowed to remain, however. Fixed-duration employment contracts do not count as noncompetes and therefore remain outside the new rule's scope. 

Importantly, the ban also excludes noncompete clauses entered into by a person who sells a business, a share of a business or substantially all of its operating assets to another entity. Such noncompete provisions are common in buyouts of smaller companies.

So the pact signed by Coon and WSP, which has been prolific in acquiring smaller companies, is likely not covered by the new federal rule. But legal maneuvering over where the matter would be decided has been extensive.

According to WSP, Coon engaged in business dealings in more than one state before one of his contracts had expired or was been legally terminated.

The Buyout Employment Pacts

At the time Coon and other co-owners agreed to sell Kw Mission Critical, a deal that closed in December 2020, the Troy, N.Y.-based company had 175 employees and Coon was a principal. He had worked at the firm for 10 years.

Coon agreed to a three-year employee retention bonus agreement that restricted his ability to work for others but now is expired, he claimed in court documents.

At that time of the sale, Coon said in the documents, he also entered into a separate two-year senior leadership employment agreement. It had a clause to prevent Coon from operating or controlling a competing company that serviced or solicited clients to which Kw Mission Critical had provided services or submitted proposals, for a period of 12 months after the initial two-year interval had passed.

That agreement automatically extended unless either party gave 30-days notice of its intent not to renew—a provision Coon claimed in January was unconstitutional under state law in California, where he strategically filed his initial lawsuit.

Because Coon terminated his employment 58 days "early," he claimed—meaning before the contractually agreed expiration and notification requirement—WSP now is trying to put a one-year restriction on any competitive activity.

A David Versus Goliath Approach

The lawsuit focuses on the disparity in power between the parties involved, noting that Coon is an accomplished electrical engineer and engineering manager and started a new company in 2023. In addition, the suit said WSP had billions in revenue last year and boasts more than 66,000 staff members.

In January, after WSP argued that the choice of litigating in California was unjustified, the case was moved to federal court in San Francisco. In seeking that venue change and to buttress its argument that the matter must go to arbitration, the firm also claimed it had reason to believe that Coon "is in fact soliciting WSP clients who are not located in California

WSP also knows that Coon has solicited employees who were based in its office located "in the Northern District of New York." So a federal court was more appropriate.

Moreover, the noncompete provisions in Coon's contracts with WSP "apply only to clients and prospective clients to whom [he] had specifically defined types of exposure" while at kW Mission Critical.

WSP argued that the only connection between this action and California—the formation of a new company under state law—"was contrived by Coon for the sole purpose of taking advantage of California law."

Coon's attorney confirmed that his client and WSP had begun arbitration but declined to comment further.

WSP's lead attorney could not immediately be reached for comment.