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Blue-Penciling An Overbroad Non-Compete Covenant

Blue-Penciling An Overbroad Non-Compete Covenant

In Paradise v. Midwest Asphalt Coatings, Inc., 316 S.W.3d 326, the Plaintiff sued his former employer, Midwest Asphalt Coatings, Inc., to have the non-compete agreement he had signed declared unenforceable. Plaintiff worked at Midwest for seven years both as a manager and a salesperson in the asphalt paving and asphalt maintenance industry. As such, Plaintiff developed goodwill for Midwest, built customer relationships, promoted its business, obtained repeat customers, generated customer lists, and executed Midwest's bidding procedure with those customers.

When Plaintiff resigned and opened a similar business he sued Midwest seeking to have the non-compete agreement declared unenforceable. Midwest counter-sued, asking the trial court to deny Plaintiff's requests, to declare the agreement valid or modify the agreement to be valid, grant an injunction against Plaintiff prohibiting him from breaching the agreement, and award Midwest contractual attorneys' fees.

The trial court found the agreement as written was unreasonably broad in the terms governing the duration of the restrictive covenants. The trial court then engaged in what is referred to as "blue-penciling" the agreement. Blue-penciling is employed by the court to shave down an otherwise overbroad agreement so that it becomes reasonable and so that it may be enforced.

Ultimately, the trial court modified the duration of the non-compete agreement for a period of twenty-six (26) months and the court of appeals agreed that the time period was reasonable as modified. Notably, as is the case in similar non-compete cases, by the time the court of appeals reviewed the trial court's decision the twenty-six (26) month restrictive period had already passed. Thus, since the restrictive covenant was no longer enforceable because so much time had passed, both the Plaintiff and Midwest Asphalt Coatings no longer had any form of enforceable remedy available.

In sum, Paradise v. Midwest Asphalt Coatings, Inc. was an exercise in blue-penciling a restrictive covenant so as to conform with what the court concluded was a reasonable duration of time. As noted above, time often plays a pivotal role in the development of these non-compete cases. When the non-compete period has run, whether by its own terms or by the court's modified terms, the parties typically go their separate ways since the employer no longer has an enforceable agreement.

 

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