the Zealous

Consider the following all-too-common scenario: employee leaks valuable company information to a competitor and is fired. Company then sues the employee for breach of an employment NDA, which applies to “all proprietary information” that the employee received. The confidentiality obligation is evergreen--an all-too common feature of employee NDAs.

Outcome? In a state where employer-mandated non-compete covenants are enforceable if reasonable, a US court has struck down this exact NDA as an unreasonable restraint of trade.

In the early 20th century, the limited liability afforded by the corporate form was in its nascency. Lawyers consequently resorted to contract language to shield shareholders from liability for the corporation’s debts, using the so-called “no recourse against others” clause.

Today, most lawyers take corporate liability protection for granted, and probably assume that such a clause is unnecessary. Yet, trust in the supposed impenetrability of the corporate veil could be misplaced.

From Randy T. Austin, The Reasonable Man Did the Darndest Things, 1992 BYU L. Rev. 479 (1992):

Obviously the Reasonable Man spends most, if not all, of his time doing reasonable things. Indeed, the very essence of the Reasonable Man is his unparalleled propensity to act reasonably. Oddly, however, the Reasonable Man has been spotted doing some rather peculiar things, peculiar at least for the Reasonable Man. For example, the Reasonable Man has been observed disobeying the direct requests of a gunman at point blank range. He has been seen driving through puddles splashing muddy water on unsuspecting pedestrian, jumping out of a moving car, and even running people over occasionally. In addition, he has been known to flip-out periodically, some have even seen him leaving people to die although he could have saved them. One of his most famous acquaintances claims that the Reasonable Man gets out of his car at every railroad crossing to check for oncoming trains. One judge has even suggested that the Reasonable Man may even turn down box seats to watch a baseball game from the bleachers.