M&A-related Noncompete Decisions:
By U.S. States (see also International)
See generally: M&A Issues and Cases / Asset Purchases / Forum Selection Clauses
California - use this link.
Colorado
- Blog Post 8/14/2008: "In Tax Services [of America v. Mitchell], Judge Blackburn of the federal district court in Colorado found that one of the defendants had signed a non-compete when she sold a tax preparation business known as Qwik Tax. The other defendants signed non-competes when they were employed by the purchaser of the business. Despite these non-competes, the three defendants opened an office of "Kwik Tax Service" within 135 feet of the purchaser's business. Defendants then prepared many tax returns for thepurchaser's customers, effectively stealing the purchaser's business. ... Judge Blackburn not only entered injunctive relief against the defendants precluding them from breaching the non-compete, he also awarded damages to the purchaser for lost profits. Judge Blackburn also awarded over $370,000 in attorneys fees and costs against the defendants."
Delaware
- 2012.02.16 Georgia-Pacific Consumer Products LP v. Jadczak, C.A. 6695-VCL - Per a Young Conaway blog posted on 2/16/12, Delaware's Chancery Court dismissed an action to enforce a noncompetition provision against a former employee who had been employed in Georgia. Despite a restrictive covenant designating Delaware law and a Delaware forum, the court dismissed for lack of personal jurisdiction over the former employee - finding that his consent to litigate in in any court having jurisdiction was overly- broad and inexact to Delaware, especially given its tenuous contacts with the dispute.
Georgia
- Mohr v. Bank of New York Mellon, 11th Cir. (8/19/2010): "Because Mellon Corporation is entitled to a preliminary injunction that enforces the covenants not to compete and not to solicit, we reverse and remand with instructions to enter a preliminary injunction against Mohr and Sawyer."
Hawaii - see Uarco Inc. v. Lam, 18 F. Supp. 2d 1116, 1122 (D.Haw. 1998)
Illinois - see discussion under "Sale of Business" at Illinois Non-compete Law.
Maine
- The First Circuit's OfficeMax v. Levesque decision provides a classic lesson in buyer actions that left a loose-end that ultimately doomed enforcement of its noncompetition protections. In a nutshell, the buyer in the OfficeMax case sought to protect itself by having key employees of the seller execute non-competition agreements with the seller on the eve of the closing. Those non-compete agreements went further, by committing the employees to execute a post-closing non-compete with the buyer. When that did not occur due to refusal by the seller's key employees, the court took that as evidence that the non-compete was not intended to bind the buyer, and consequently declined to enforce it.
Massachusetts -- See generally: "Non-Compete Issues in Connection with the Sale of a Business" (3/22/2007).
- 2013.May.28 Massachusetts Court Declines to Enforce Non-compete. Equitable relief denied -- due to the executive's material change in duties (due to promotion) and his non-compete agreement being made with a smaller company rather than the larger one that bought it. See Massachusetts for case cite and quotations.
- 2012.Apr.28 Material Change in Post-Closing Employment Terms - New Noncompete Needed (Grace Hunt IT v SIS, Mass. Sup. Ct.). In the aftermath of M&A transaction, the buyer notified seller's key employees by letter describing a new more incentive-based compensation structure, and warning that they would have to sign a new non-competition agreement. Here are quotations from the court's ruling that denied enforcement of the non-competition agreements in effect before the closing ... more at Massachusetts under this heading.
Missouri -- see Alexander & Alexander, Inc. v. Koelz, 722 S.W. 2d 311, 312 (Mo. App. 1986).
Minnesota -- See Saliterman v. Finney, 361 N.W.2d 175 (Minn. Ct. App. 1985), opening the door for arguments that the assignment of a non-compete agreement as part of an asset sale is allowable even absent express assignment language. See 2009 article titled "Non-Compete Agreements: Can They be Assigned under Minnesota Law?"
Nebraska
- Noncompete in asset purchase agreemeernt enforced when for 5 year term and geographic scope established by reference to territory in which buyer does business -- RSG, Inc. v. Sidump'r Trailer Co., Inc., 2010 U.S. Dist. LEXIS 8206 (D. Neb. Jan. 29, 2010). See Blog Post 2/9/2010: "If buyer and seller shove very little of the purchase price into goodwill, a seller could raise the argument - as it did (unsuccessfully) in RSG v. Sidump'r Trailers - that a sale-of-business non-compete's protectable interest was worth very little and disproportional to the impact of the restraint of trade".
- Nebraska recognizes "the legitimate need of one who purchases a business to reasonably protect himself against competition from the seller." Presto-X-Co. v. Beller, 568 N.W.2d 235, at 238 (Neb. 1997).
New Jersey
- J.H. Renarde, Inc. v. Sims, 771 A.2d 410 (N.J. Ch. 1998) permits a purchaser to enforce an employee's noncompete obligation made to a seller.
New York
- 2012.Sept.09 Asset Purchase and Restrictive Covenants. In Milso Industries v. Nazzaro, a Connecticut District Court recently applied New York law to a dispute involving an asset purchase that involved the seller's assignment of employment agreements that did not expressly allow for that, the buyer's hiring of seller's key employees pursuant to offer letters that they did not sign. More at Asset Purchases.
- 2011.Apr.28 M&A-related Standard set forth by NY Court of Appeals ("What degree of participation in a new employer's solicitation of a former employer's client by a voluntary seller of that client's good will constitutes improper solicitation?"). Bessemer Trust v Branin ( 16 N.Y.3d 549, 949 N.E.2d 462).
Ohio
- 2012.Oct.11 Non-Compete Accordia Decision Reversed for Mergers. Ohio's Supreme Court reversed its May 2012 decision, and has held that "The merged company has the ability to enforce noncompete agreements as if the resulting company had stepped into the shoes of the absorbed company. It follows that omission of any “successors or assigns” language in the employees’ noncompete agreements in this case does not prevent the L.L.C. from enforcing the noncompete agreements."
Pennsylvania -- See Hess v. Gebhard & Co., 808 A.2d 912 (2002) which requires an express provision in order to provide for an assignment of a selling employer's rights.
Texas
2010 Article titled "Sale of Business Noncompete Agreements in Texas".
Virginia
- See 2012.Feb.14 Upheld in Land Sale though Overbroad. In BP Products v Stanley, the 4th Cir. ruled in favor of "BP's action seeking to enforce a restrictive covenant in a deed." More under this date at Virginia.