A Question About Non-Compete Agreements

Posted on | April 7, 2009 | 2 Comments

Question for Matt-

“Matt-

I am in litigation with a company I had a 3 year non-compete. They litigate many of their former dealers. It has been almost 4 years since I left, and I have one the preliminary injunction hearing in December. My attorney now wants $50,000 up front to continue the case, my small growing business is struggling because of the suit. I am worried about the small amount of assets I have left – I don’t think its possible for me to fight the case this summer – when its slatted for trial. If I fight, if possible, I risk all I have, but if I don’t – I am in the same boat.

I can’t get a straight answer from my attorney about if I loose, although she is great about fighting the case.

Any help?

CM”

Matt’s answer-

First of all, your lawyer stinks at her job!

If she can’t help you understand your case, the law governing your case, your options and the costs-benefits of your options, then she is doing a horrible job.  A lawyer is first and foremost an educator.  We TEACH our clients what the law is.  We TEACH judges what the law is or should be.  And we TEACH juries what the facts of a case are and how they mesh with the law.

Good lawyers even TEACH opposing counsel about the strengths and weakness of a case or what the controlling law is, as part of a lawyer’s advocacy for the client.

If you can’t get basic guidance from your lawyer, you have to question everything she does.  TEACHING is job #1 for a lawyer.  If she can’t TEACH, she can’t “lawyer.” 

How is your lawyer going to explain your case to a judge or jury, if she can’t even explain it to you?

Fire your lawyer and find one who can communicate well enough to do the job!

As to your particular covenant not to compete, I would need to read it.  I’ve enforced many covenants, and I’ve defeated many covenants here in Indiana.  Each case is different, as the facts and the contracts differ from case to case.  Also, I am unsure of where you live or what state’s law will control.  In some states, restrictive covenants are harder to enforce.  So, I would need more details.  Sorry, but that’s an honest answer.

I think you might start your analysis with getting a second opinion from a new lawyer!

You can also read Are Covenants Not To Compete Really Enforceable?  That’s a blog I posted here several weeks ago.

Best of luck!

Are Covenants Not to Compete Really Enforceable?

Posted on | February 2, 2009 | 1 Comment

READER’S QUESTION:  Are Covenants Not to Compete Really Enforceable?

MATT’S ANSWER:  Yes.  In most states.  In Indiana for sure.  In most cases.  If “reasonable.”

 There is a huge misperception that covenants not to compete (“restrictive covenants”) are unenforceable.  I hear that all the time.

Where do people get such bad legal information so often?

Restrictive covenants are enforceable in Indiana and many other states, if “reasonable.”  The courts have defined “reasonable” to mean limited: (1) in the time or duration of the restrictive period; (2) in the geographic range or area and (3) to activities likely to protect a legitimate business asset or interest.  So, for example, if a truck parts salesman with inside “secret” knowledge of customer needs, pricing strategies, new marketing strategies, costing, etc. quits his job to work for a competitor, a restrictive covenant of 18 months in the same sales territories would probably be enforceable.

Restrictive covenants are even more important and easier to get approved in court, when a business owner sells to or merges with another business.  In those situations, the buyer wants to know that he is the only person or company that will have access to the business assets (information, data, documents, etc.) that is being purchased.  The courts are much more likely to enforce a restrictive covenant in these situations.

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