Covenant Not To Compete

The Business Court granted summary judgment last week to a company and dismissed claims brought by its former CEO for breach of a severance agreement, fraud, and unfair and deceptive trade practices.

In McKinnon v. CV Industries, Inc., the defendant (CVI) owned a number of subsidiaries which manufactured, among other things, high-end residential furniture (Century) and

An award of damages for breach of a noncompete agreement, like any other damages award, requires evidentiary support.  In a judgment issued yesterday after a bench trial, the Business Court awarded the plaintiffs nominal damages absent such evidence.

In HILB Rogal & Hobbs Co. v. Sellars, the Court faced a common factual scenario:  a former vice president

It’s hard to get an injunction enforcing a covenant not to compete that has a nationwide territory, but the Plaintiff was successful at that in the Middle District’s decision last week in Philips Electronics North America Corp. v. Hope.  The injunction was also based on the North Carolina Trade Secrets Protection Act.

This was a thorough 44 page opinion addressing a number of non-compete and trade secrets issues, so this is a long post.  You’ll have to read to near the end to see why the post gets a picture of, of all things, a sausage?


Hope was the Executive Vice President of Sales for DLO, responsible for the company’s sales of iPod accessories throughout the United States and Canada.  Hope had substantial interaction in that position with a $75 million customer, Best Buy, and other major DLO customers.

In December 2006, Hope signed a Letter Agreement containing a broad covenant not to compete.  It prevented him from working in the same or similar position for a DLO competitor anywhere that DLO conducted business, potentially throughout the entire world, for a two year period.

The stock of DLO was purchased by Phillips Electronics six months later.  Phillips operated DLO as a separate entity until January 2009, when DLO was merged into Phillips.  (This created an interesting standing issue regarding the right of a corporate acquirer to enforce a non-compete, discussed below under the heading "Standing").

In 2008, while still employed by DLO, Hope began planning to compete with the company.  He contacted others at DLO about the possibility;  began discussions with a manufacturer about making competing products; and used confidential DLO materials in his efforts, including DLO’s business plan and internal financial information.

Hope resigned from DLO months later, the day after his new company obtained financing.  He misled his old employer about his intentions, saying he was going to work with his father.  The new company immediately began selling to some of DLO’s customers, including Best Buy.  Several months later, DLO discovered Hope’s involvement with the new competitor.Continue Reading Nationwide Covenant Not To Compete Enforced By North Carolina Federal Court

The Business Court held today in Armacell v. Bostic that it had personal jurisdiction over an Italian company, L’Isolante, which hired a scientist, Bostic, away from a competitor.

The Plaintiff claimed that the hiring violated Bostic’s non-compete agreement, and that Bostic had also stolen "thousands of data files containing sensitive proprietary information and trade secrets."

The adequacy of the consideration for a covenant not to compete entered into after the commencement of employment was the issue in Hejl v. Hood, Hargett, & Associates, Inc., decided by the Court of Appeals today.

In Hejl, the employer dealt with the consideration requirement by paying Hejl $500 to sign the non-compete.  Hejl

If a case involves only a breach of a covenant not to compete or a confidentiality agreement, it is not within the mandatory "unfair competition" jurisdiction of the North Carolina Business Court, based on two recent decisions.

The first case is Workplace Benefits, LLC v. Lifecare, Inc, decided by the Court on July 14, 2008In that

Today, in its Order and Opinion in Bolick v. Sipe, the North Carolina Business Court rejected a novel argument regarding the validity of post-employment consideration for a covenant not to compete.  It also dealt with the issue of the validity of a summons issued in the wrong name.

On the non-compete side, Plaintiff signed the non-compete with