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Non Compete clause

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VanMan99

Junior Member
What is the name of your state? Washington

I recently settled on a law suit where by I had to give my company over to my opponent because I did not have the money to take it to discovery or trial. The court costs alone would have wiped me and the company out. So I settled and gave him the company including my services to stay on and run it for a salary and shares in his company. I was also forced to sign a non compete section that said I could not sell specific products.

I now wish to start a new company that does not sell the specified products outlined in the agreement but I am still concerned he may sue me anyways.
He caught wind that I bought a domain and has already threatened to sue me.

I live in a different state then the one the contract says is the governing law of the agreement. but the product is Internet based and holds a world wide appeal for both companies.

Do I take the chance he won't sue? or do I put off my plans and miss out on this opportunity to start fresh? If I wait I may not get another opportunity like this again.What is the name of your state (only U.S. law)?
 


Mass_Shyster

Senior Member
What is the name of your state? Washington

I recently settled on a law suit where by I had to give my company over to my opponent because I did not have the money to take it to discovery or trial. The court costs alone would have wiped me and the company out. So I settled and gave him the company including my services to stay on and run it for a salary and shares in his company. I was also forced to sign a non compete section that said I could not sell specific products.

I now wish to start a new company that does not sell the specified products outlined in the agreement but I am still concerned he may sue me anyways.
He caught wind that I bought a domain and has already threatened to sue me.

I live in a different state then the one the contract says is the governing law of the agreement. but the product is Internet based and holds a world wide appeal for both companies.

Do I take the chance he won't sue? or do I put off my plans and miss out on this opportunity to start fresh? If I wait I may not get another opportunity like this again.What is the name of your state (only U.S. law)?
There is no way to guess if he will sue or not. Keep in mind that anyone can sue anyone for any reason. The issue is whether you win.

What you need to know is if you will be able to successfully defend yourself against a lawsuit.

If the non-compete calls for you to refrain from selling spaceships, and you start selling baseball cards, you probably have a pretty good defense, and the suit would never get to trial

If the non-compete calls for you to refrain from selling xyz widgets, and you start selling abb widgets, that look and work just like xyz widgets, you'll have a harder time defending yourself, and will likely end up at trial.

In essence, without reading your non-compete contract, and without any knowledge as to what you wish to sell, I can't give an answer.
 

latigo

Senior Member
You haven’t really given me much to go on. But rather than ask you a lot of detail about this particular “covenant not to compete” let me give you a short lesson on how the courts in the United States look at and treat these agreements. (Like most it’s a bit complicated so bear with me.)

Because I think that once you have some understanding you may feel less threatened by a future lawsuit.

To begin covenants not to compete are not favored by the courts. The reasons given is that by their nature they restrain trade, commerce, constitutional privileges and restrict the individual’s freedom to earn a living.

In reading the case law you often find the expression that they are against public policy or the public good.

Due to that philosophy the courts give them only the narrowest of interpretation or construction. They are more often struck down by the courts than they are upheld. But here are the rules that apply to them:

1. The agreement must be supported by adequate consideration. In other words, the promissor must receive something besides a job in return for the promise not to compete. He must receive something of particular value in exchange.

(If the covenant was a condition to your being hired on to run the company, rather than as an ordinary employee, it could serve as the necessary consideration to support your promise.)

2. They must be reasonable in terms of how long they are to be in effect.

3. The must be reasonably restrictive in terms of physical space.

4. The covenant must be found to reasonably protect a legitimate business interest.

Also, in examining your situation we need to consider what legal recourse would be open to your “opponent” should he believe that you have breached the covenant.

Unless he could show that you actually diverted business from his door, about the best he could hope for would be injunctive relief. And you’d be back where you are now.

Moreover, the burden of proving all of the above mentioned elements, and that you are violating the covenant and establishing any resulting financial loss would rest entirely on his shoulders.

Every case of this nature will rest on the language in the covenant and its peculiar circumstances. So nothing is predictable. But from what you have told me, I don’t think this guy is going to spend the time and money it would take to chase you around the various states hoping that a court will uphold the covenant.

That’s just my take from what little I know. I suggest you have an attorney take a harder look.

Sax
 

Some Random Guy

Senior Member
Your last lawsuit proved to your opponent that you will roll over and play dead if sued. If you insist on doing something which MAY violate the non compete, then you should expect to be sued again.

If you actualy plan to fight the next lawsuit, then continue on your new adventure. But if you just plan on signing your new company over to him once you are sued, then don't start the new company.
 

latigo

Senior Member
“Roll over and play dead”! Huh, random guy?

Witty analogy!

I’ll bet your rhetorical closet is full of such catchy, satirical expressions that you find useful when lost for a meaningful observation.

As here where you’ve tactlessly censored the guest for settling the business lawsuit WITHOUT HAVING A BLOODY NOTION OF WHAT THE HELL THE CASE WAS ABOUT!

Did you bother to read of the practical considerations that compelled him to settle – “ the expense of discovery and trial would have wiped me and the company out”?

Do you know how much it costs to “FIGHT” a lawsuit or how quickly $300 to $500 an hour in legal fees can add up in the course of pre-trial discovery ALONE?

Was he not only facing paying his own attorney fees but the prospect of pay those of his opponent as well?

Do you think that the cost of litigation is never a factor in deciding whether to proceed to trial or negotiate?

Did he “PLAY DEAD” when he accepted the offer that he stay on to manage the surviving company and participate in its ownership?

OR WAS HE TRYING TO PREVENT HIS FAMILY FROM LIVING ON THE STREET AND STARVING TO DEATH?

Its seems apparent that you are either ill equipped to advise the guest on his questions relating to the covenant not to compete. or for some reason unstated reason elected not to do so.

Instead, for no useful purpose you chose to insult his business judgment and resolve.

Sax
 

LeeHarveyBlotto

Senior Member
Actually, it was a valid point. If I sue you and you give in, what the hell else would I do if we have a future conflict? It answers the question of "what are the chances he'll sue". The answer is that it's very likely.
 

Some Random Guy

Senior Member
latigo,

Yes, I have been involved in lawsuits and am aware that the process costs money.

My point stands: He is considering embarking on a plan of action for which a lawsuit is already threatened and, judging by past events, is likely to be filed. Before commencing this plan he should decide whether he will be willing to defend himself in court. If he cannot defend against the new lawsuit for the same reasons as the first, then he should not go through with his plans.

I have no legal advice regarding his non-compete because there are no concrete details of what is contained in the agreement of what the nature of his new business is.
 

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