It is well-settled law that adequate consideration is required to create binding restrictive covenants such as non-compete agreements. Generally, such agreements are entered at the start of an employment relationship, and the new employment itself constitutes consideration. In North Carolina, continued employment following a merger of two companies does not satisfy the consideration requirement. In a recent decision, the North Carolina Business Court (“NCBC”) confronted the very issue.[1] In January 2012, AmeriGas Propane, Inc., a propane company that services over two million residential and commercial customers nationwide, merged with Shaw L.P. Gas. Ermon Coffey, an employee of Shaw, and…
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NCBC: Fifty-Mile Customer Based Geographic Restriction Makes Non-Compete Agreement Unreasonable
In August, the North Carolina Business Court (“NCBC”) determined a non-compete agreement was unreasonable because of its overly broad geographic restriction, and denied Plaintiff’s motion for preliminary injunction to prohibit a former employee from competing with it.[1] In North Carolina, non-compete agreements are generally disfavored and strictly construed against the drafting party. A non-compete agreement must be (1) in writing; (2) made a part of the employment contract; (3) supported by consideration; (4) reasonable both as to time and territory; and (5) no broader than necessary to protect the employer’s interest.[2] In determining the reasonableness of such agreements, the…
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Rule 11 Sanctions Imposed for Improper Breach of Fiduciary Duties Claims Against Rank-and-File Employees
In September 2011, Southeast Air Charter, Inc. (“Southeast Air”) brought suit against three (3) employees (“Defendants”) alleging, among other things, breach of fiduciary duty and constructive fraud. The North Carolina Business Court (“NCBC”) determined all defendants were rank-and-file employees of Southeast Air and therefore could not be subject to the breach of fiduciary duty and constructive fraud claims. As such, Plaintiff and Plaintiff’s attorneys were subject to Rule 11 sanctions for bringing these claims without any factual basis. In determining the appropriate amount of sanctions and the allocation of attorneys’ fees incurred by Defendants, Judge James Gale, Chief Special Superior Court Judge of the NCBC,…
