Most people think of non-compete agreements as a contract between an employer and an employee. However, this is not the only relationship where covenants not to compete may be valid. There are a number of other relationships in which courts have enforced non-compete agreements, including non-compete agreements between a business and an independent contractor and non-compete agreements between a buyer and seller of a business. Covenants not to compete may be included in or ancillary to a variety of business contracts, such as affiliate agreements and joint marketing agreements. One of the most common questions is whether a business can require a “1099” independent contractor to execute a non-compete, and if so, whether the agreement is enforceable as to the independent contractor. As noted in my recent blog post regarding the general enforceability of non-compete agreements, the law governing non-compete agreements is state specific. In Tennessee, the Court of Appeals has determined […]Continue Reading
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The U.S. Court of Appeals for the Sixth Circuit recently released an opinion with a bizarre set of facts, Thomas Kinkade Co., et al. v. White, et al., 2:09-cv-10757 (6th Cir. Apr. 2, 2013). This case concerns a federal court review of an arbitration involving a business dispute between Thomas Kinkade Co. and one of its art dealers, the Whites. The Sixth Circuit succinctly stated that the “arbitration itself was a model of how not to conduct one.” The circumstances of the arbitration are sorted and full of irregularities, including the following: During the arbitration, counsel for the Whites surreptitiously sent a live feed of the proceedings to disgruntled former employee in a hotel room to assist with the case. The arbitration panel refused to grant Kinkade any relief for the White’s outright failure to respond to pre-arbitration discovery. The panel, over Kinkade’s objections, allowed the Whites after the arbitration to submit further […]Continue Reading
I am often asked by business clients to prepare non-compete agreements for employees. As you might imagine, many businesses feel more secure knowing that their key employees are restricted from leaving and then going to work for business competitors. I am also asked by business executives to review non-compete agreements and consult on whether and how to strategically pursue a career opportunity. In both instances, the crucial issue centers on whether the non-compete is legally enforceable. The enforceability of a non-compete agreement is treated differently in every state. Some states, such as Florida, have enacted statutes that regulate non-compete agreements while other states, such as Tennessee, have a body of law applicable to non-competes that has been developed by the courts. In Tennessee, covenants not to compete are generally disfavored by the courts because they are deemed to be a restraint of trade and may place an inequitable burden upon […]Continue Reading
In a recent case, Regions Bank v. Thomas D. Thomas, et al., No. W2011-02320-COA-R3-CV (Tenn. Ct. App., March 4, 2013), the Tennessee Court of Appeals addressed the process for disposition of collateral under the Uniform Commercial Code (“UCC”). In August 2004, LGT Aviation, Inc. (“LGT”) obtained a loan in the amount of $2,351,700 from Regions Bank. The loan was secured by a 1981 Hawker HS 125-700A aircraft and guaranteed jointly and severally by two individuals and a family trust. One of the guarantors was the sole shareholder of LGT and the aircraft was acquired for his personal use. Among other things, the loan documents required that LGT maintain insurance on the aircraft in the amount of the outstanding loan balance. In August 2006, LGT allowed the insurance policy on the aircraft to lapse. Region’s Bank contacted LGT multiple times regarding the insurance coverage, and on numerous occasions, requested proof of insurance. […]Continue Reading
In a recent opinion, the United States Supreme Court reminded litigants that the loser could be stuck with litigation costs. On February 26, 2013, the Supreme Court decided Marx v. General Revenue Corp. and addressed the taxation of litigation costs in lawsuits brought under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. In this case, plaintiff Olivia Marx filed suit alleging that General Revenue Corporation (GRC) violated the FDCPA by harassing and threatening her in order to collect on a debt related to a student loan. She claimed that GRC violated the FDCPA by making improper phone calls and faxes in its attempts to collect the debt. The FDCPA is a consumer protection statute that prohibits certain abusive, deceptive, and unfair debt collection practices. The case was tried without a jury and the district court ruled in favor of the debt collection company and dismissed the case. […]Continue Reading