Continue Reading Two Words To Avoid When Drafting A Covenant Not To CompeteI will not directly or indirectly engage in (whether as an employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in the
What Happens To A Covenant Not To Compete Upon The Sale Of A Business?
Be careful with covenants not to compete when you buy or sell a business. That’s the lesson from Amerigas Propane, LP v. Coffey, 2014 NCBC 4, decided this week by Judge Jolly.
The Plaintiff had Defendant Coffey, an employee of the company which it was acquiring, sign a "Confidentiality and Post-Employment Agreement" after the acquisition. The Agreement contained a non-solicitation provision and a section protecting the buyer’s "confidential information."
The Plaintiff fired Coffey a year later, and he went to work for a competing propane company.
Plaintiff moved for
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Frayed Yarn: Business Court Grants Summary Judgment Against Former CEO on Severance Claims
The Business Court granted summary judgment last week to a company and dismissed claims brought by its former CEO for breach of a severance agreement, fraud, and unfair and deceptive trade practices.
In McKinnon v. CV Industries, Inc., the defendant (CVI) owned a number of subsidiaries which manufactured, among other things, high-end residential furniture (Century) and mid- to high-end jacquard fabric (Valdese Weavers). Plaintiff was an employee of the defendant or its subsidiaries for over twenty years, including five years as CVI’s president and CEO. In 2000, Plaintiff went to work
Business Court Awards Nominal Damages After Noncompete Bench Trial
An award of damages for breach of a noncompete agreement, like any other damages award, requires evidentiary support. In a judgment issued yesterday after a bench trial, the Business Court awarded the plaintiffs nominal damages absent such evidence.
In HILB Rogal & Hobbs Co. v. Sellars, the Court faced a common factual scenario: a former vice president of the plaintiffs resigned and went to work for a direct competitor. The businesses in question were insurance companies targeting building materials suppliers. The plaintiff and defendant executed an employment agreement that contained standard restrictions
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Nationwide Covenant Not To Compete Enforced By North Carolina Federal Court
It’s hard to get an injunction enforcing a covenant not to compete that has a nationwide territory, but the Plaintiff was successful at that in the Middle District’s decision last week in Philips Electronics North America Corp. v. Hope. The injunction was also based on the North Carolina Trade Secrets Protection Act.
This was a thorough 44 page opinion addressing a number of non-compete and trade secrets issues, so this is a long post. You’ll have to read to near the end to see why the post gets a picture of, of all things, a sausage?
Background
Hope was the Executive Vice President of Sales for DLO, responsible for the company’s sales of iPod accessories throughout the United States and Canada. Hope had substantial interaction in that position with a $75 million customer, Best Buy, and other major DLO customers.
In December 2006, Hope signed a Letter Agreement containing a broad covenant not to compete. It prevented him from working in the same or similar position for a DLO competitor anywhere that DLO conducted business, potentially throughout the entire world, for a two year period.
The stock of DLO was purchased by Phillips Electronics six months later. Phillips operated DLO as a separate entity until January 2009, when DLO was merged into Phillips. (This created an interesting standing issue regarding the right of a corporate acquirer to enforce a non-compete, discussed below under the heading "Standing").
In 2008, while still employed by DLO, Hope began planning to compete with the company. He contacted others at DLO about the possibility; began discussions with a manufacturer about making competing products; and used confidential DLO materials in his efforts, including DLO’s business plan and internal financial information.
Hope resigned from DLO months later, the day after his new company obtained financing. He misled his old employer about his intentions, saying he was going to work with his father. The new company immediately began selling to some of DLO’s customers, including Best Buy. Several months later, DLO discovered Hope’s involvement with the new competitor.Continue Reading Nationwide Covenant Not To Compete Enforced By North Carolina Federal Court
Hiring Of Employee In Violation Of Covenant Not To Compete Subjected New Employer To Personal Jurisdiction
The Business Court held today in Armacell v. Bostic that it had personal jurisdiction over an Italian company, L’Isolante, which hired a scientist, Bostic, away from a competitor.
The Plaintiff claimed that the hiring violated Bostic’s non-compete agreement, and that Bostic had also stolen "thousands of data files containing sensitive proprietary information and trade secrets."
The Business Court rejected the argument of L’Isolante that it was not subject to personal jurisdiction, finding that the Italian company had (1) pursued and offered employment to Bostic in North Carolina, (2) had
Courts Shouldn’t Question The Adequacy Of Consideration For Covenants Not To Compete, Rules NC Court Of Appeals
The adequacy of the consideration for a covenant not to compete entered into after the commencement of employment was the issue in Hejl v. Hood, Hargett, & Associates, Inc., decided by the Court of Appeals today.
In Hejl, the employer dealt with the consideration requirement by paying Hejl $500 to sign the non-compete. Hejl signed and took the money, but argued after he left his employer that the consideration for the non-compete wasn’t "anything of substance." He persuaded the trial court to invalidate the covenant for lack of consideration.
Zimbabwe, Ford Motor Company, And Covenants Not To Compete
The Court of Appeals for the Fourth Circuit invalidated a covenant not to compete today, in Lampman v. DeWolff Boberg & Associates, Inc. Along the way, the Court made allusions to Ford Motor Company and Zimbabwe to illustrate the overly broad scope of the agreement.
A couple of caveats first. The opinion is unpublished, and it involves South Carolina law. That said, the analysis is interesting, and potentially applicable to a North Carolina case given the similarity of South Carolina’s law on the subject of non-competes.
The restriction, contained
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Covenant Not To Compete Cases (Without More) Aren’t Within The Business Court’s Mandatory Jurisdiction
If a case involves only a breach of a covenant not to compete or a confidentiality agreement, it is not within the mandatory "unfair competition" jurisdiction of the North Carolina Business Court, based on two recent decisions.
The first case is Workplace Benefits, LLC v. Lifecare, Inc, decided by the Court on July 14, 2008. In that case, which the Defendant designated to the Court, the Plaintiffs were a former employee of the Defendant and her new employer.
The Complaint asserted that the Defendant was improperly using a Confidentiality Agreement signed by the individual
Covenant Not To Compete, And Summons, Held Invalid
Today, in its Order and Opinion in Bolick v. Sipe, the North Carolina Business Court rejected a novel argument regarding the validity of post-employment consideration for a covenant not to compete. It also dealt with the issue of the validity of a summons issued in the wrong name.
On the non-compete side, Plaintiff signed the non-compete with the cleaning company for which she had worked three years after she began employment. Defendant argued that it had held off from firing the Plaintiff in exchange for her execution of the agreement, and that
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