Covenant Not To Compete Ruled Unenforceable By Middle District Of North Carolina

You can't use a compass to draw a circle without working from a fixed point in the center. That basic principle of geometry is what doomed Plaintiff's effort to enforce a covenant not to compete in Asheboro Paper and Packaging, Inc. v. Dickinson, decided by Judge Schroeder in the Middle District of North Carolina on February 19th.

The Defendant, Dickinson, had signed a covenant not to compete saying that he wouldn't work for a competitor within a 150 mile radius of the Asheboro Paper's "branch office" in Virginia.

The problem for the Plaintiff was that although it had intended to open a Virginia office at the time the agreement was signed, it had never done so.  Dickinson therefore ended up working from his home, as did another Virginia-based employee of Asheboro Paper.  The Court therefore had no starting point to draw a circle with a radius of 150 miles.

Judge Schroeder rejected the argument that the covenant should be drawn from the locations of Dickinson and his fellow employee, saying that "such an interpretation would reduce the 'branch office' reference in the No-Compete Agreement to a concept rather than a place and fail to establish any reasonable basis from which to calculate a territorial restriction of 150 miles."

The case also serves as a reminder that a covenant not to compete may be too broad if it prevents the employee from working for a competitor "in any other relationship or capacity whatsoever," as this one was worded.  Judge Schroeder held that "[w]here a covenant requires an employee to have no association whatsoever with any business irrespective of whether he or she would be in a position to compete or divulge protected information, the covenant is overbroad."

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