A recent Michigan trial court decision from the Oakland County Circuit Court illustrates the significance that noncompete agreements can have for employers and individuals who sign such agreements.
Specifically, Crain’s Detroit Business reported that an Oakland County Circuit court entered a judgment in excess of $2 million against Matt Prentice, a former employee and a well-known Metro Detroit restaurateur. This judgment arose out of a lawsuit filed against Mr. Prentice for claims of breach of a noncompete agreement and other related claims.
The lawsuit against Mr. Prentice was originally filed on July 11, 2012. It claimed that Mr. Prentice failed to comply with a noncompete agreement he signed in 2009 after the Matt Prentice Restaurant Group assets were acquired by an entity called Trowbridge Restaurants Inc. that was created by Stan Dickson. Mr. Dickson then hired Mr. Prentice to operate the restaurant assets. However, Mr. Prentice left Mr. Dickson’s company on March 29, 2009 to open up a restaurant called Morels and a steakhouse that would be called Detroit Prime (As an aside, both provided phenomenal dining experiences).
In handing down the decision, the Oakland County Circuit Judge, Michael Warren, framed the issue to be decided as:
At stake in this case is whether a sophisticated business owner can negotiate and sign a clear and unambiguous agreement (in which he agrees its terms are reasonable) and purposefully breach it without consequence? Because the answer is ‘no,’ the Court renders the judgment in favor of the Plaintiffs.
As noted above, that judgment was in excess of $2 million against Mr. Prentice.
A common question our law firm is asked by companies, usually start-ups, and individuals is what is the value or significance of having a noncompete agreement.
For companies, the question is usually asked in order to understand the business justification for expending resources for incorporating a noncompete agreement into their employment practices. For individuals, the question is often asked because the employee has previously signed a noncompete agreement but is now thinking about competing against his or her current employer by taking a job with a competitor or starting a new business.
In addressing both the company and individual interests, a decision like this is a good reminder that regardless of the perspective, i.e., a company seeking to enforce a noncompete agreement or an employee accused of breaching a noncompete agreement, the value and significance of having an enforceable noncompete agreement cannot be understated because it can have significant ramifications in terms of damages and eliminating competition.
For more information about enforcing noncompete agreements see our prior post: My former employer can’t prevent me from working, right? Dissecting the Enforceability of a Noncompete Agreement, search this site for other noncompete agreement articles, and contact Jason M. Shinn to discuss noncompete agreement law specific to your situation.