Maryland Covenant Not-compete Liquidation Damages Lawyers Attorneys
MARYLAND CASE FOR NON COMPETE
FACTS:
The former employee went to work for a competitor. Sometime during his employment with the employer, the employer presented a confidentiality and covenant not to compete agreement, which prohibited the former employee from working for a competing business within a 75-mile radius of the employer’s principal place of business for one year after leaving, subject to a liquidated damages provision of $ 50,000 in the event of a breach. The employer paid $ 50 to the former employee for signing the agreement. After a bench trial, the trial court awarded the employer nominal damages of one dollar, rejecting the employer’s argument that it was entitled to liquidated damages pursuant to the terms of agreement. Appellant employer challenged the judgment of the Circuit Court for Montgomery County (Maryland) in favor of appellee, a former employee. The employer had filed a breach of contract action against the former employee, seeking to recover liquidated damages based upon the terms of an employment contract.
ISSUES:
The issue here is whether the circuit court erred in failing to uphold the entire contract, duty of confidentiality and covenant not to compete, where the court found that the contract was valid, and that the Appellee had breached the noncompetition clause of the agreement, but rejected the agreed upon liquidated damage.
DISCUSSION:
Liquidated damage is defined as a specific sum of money expressly stipulated by the parties to a contract as the amount of damages to be recovered by either party for a breach of the agreement by the other. A liquidated damage clause is within the substantive law of contracts, and if not a penalty, is an enforceable provision as a sum agreed upon by the parties to be paid in the event of a breach, enforceable as any other provision or valid promise in the contract. The nomenclature used by the parties, although a circumstance, is not determinative in passing upon whether or not the payment of the designated sum is in fact a penalty. The decisive element is the intention of the parties, whether they intended that the sum be a penalty or an agreed-upon amount as damages in case of a breach, and that is to be gleaned from the subject matter, the language of the contract, and the circumstances surrounding its execution. If the sum agreed upon in a liquidated damages provision is a reasonable forecast of the just and fair compensation for the harm that would result by a breach of the contract and the resultant injury is difficult to estimate accurately or actual damages could not be easily ascertained, such a clause has been held enforceable as liquidated damages. One basis for deeming a stipulated damages provision unreasonable is if damages are so excessive as to demonstrate an inference of unfairness in bargaining. The specific context of a covenant not to compete presents a factual scenario in which stipulated damage provisions are generally enforceable, given that quantifying the amount of damages in such cases may be an elusive prospect. Stipulated damages provisions for breaches of covenants not to compete are in general analyzed by application of the principles under which enforceability of such provisions is generally determined, as a result of which provisions applicable to situations in which the potential damages are not uncertain or difficult to estimate, provisions intended to punish rather than compensate, and provisions the enforcement of which results in the awarding of damages which are disproportionate to the reasonably estimated or actual damages suffered by the party seeking to invoke the provision are unenforceable. It is clear from the facts that the clause itself was an agreement based upon inequalities of bargaining power. The lack of true arms-length dealing between the employer and the employees, including appellee, militates against a finding of reasonableness. Moreover, the employer presented no evidence of actual damages resulting from employee’s breach and resulting employment with rival company. The Court concluded that the stipulated damages clause in the restrictive covenant violates the compensatory nature of contract damages. Thus, the stipulated damages provision is unreasonable and unenforceable as a penalty.
JUDGMENT:
The court also concluded that the contract provision bore no rational relationship to the expected loss from a breach. The court affirmed the judgment.
Disclaimer:
These summaries are provided by the SRIS Law Group. They represent the firm’s unofficial views of the Justices’ opinions. The original opinions should be consulted for their authoritative content.
Virginia Campbell County Breached Covenant Not-compete Lawyers Attorneys
VIRGINIA CASE FOR NON COMPETE
FACTS:
A corporation filed its amended motion for judgment against a doctor, alleging that the doctor, the corporation’s former employee, breached a covenant not to compete. After the Circuit Court of Campbell County (Virginia) denied the doctor’s motion to dismiss, and following a bench trial, a judgment was entered in favor of the corporation. The doctor appealed. He asserted that the former corporation cannot “engage in the practice of medicine” in Virginia because it does not have a license to practice medicine in this Commonwealth. As a consequence, he contends that the former corporation does not have a legitimate business interest in enforcing the covenant not to compete.
ISSUES:
The issue here is whether the corporation, which is not a professional corporation, has a legitimate business interest in enforcing a covenant not to compete with its former employee, a licensed physician.
DISCUSSION:
When the parties executed the employment agreement, the corporation was a professional corporation, and its sole director and shareholder was a physician. The employment agreement contained a non compete provision. Later, the corporation converted from a professional corporation to a non-professional corporation by operation of law upon the physician’s death. The doctor asserted that the corporation was not permitted to “engage in the practice of medicine” in Virginia because it did not have a license to practice medicine in Virginia. A covenant not to compete between an employer and an employee will be enforced if the covenant is narrowly written to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and does not violate public policy. Restrictive covenants are disfavored restraints on trade and, therefore, the employer bears the burden of proof and any ambiguities in the contract will be construed in favor of the employee. Each non-competition agreement must be evaluated on its own merits, balancing the provisions of the contract with the circumstances of the businesses and employees involved. The Court first considered whether the Family Care Center, a non-professional corporation, may lawfully engage in the practice of medicine in Virginia, as set forth in the employment agreement. A non-professional corporation cannot engage in the practice of medicine in Virginia. It is unlawful for a corporation to practice a profession or occupation without holding a valid license as required by statute or regulation. Specific terms of the employment agreement states, in part, that Family Care Center “is presently engaged in the practice of medicine.” Family Care Center could not and cannot do so because it does not have a license to practice medicine from the Board of Medicine as required by Code §§ 54.1-2902 and -2929. Therefore, the Court held that the Family Care Center, which cannot practice medicine, cannot engage in a competing practice of medicine with Dr. Parikh, who is a physician licensed to practice medicine in this Commonwealth. Since the Family Care Center cannot lawfully engage in the practice of medicine, it has no legitimate business interest in enforcing the covenant not to compete with Dr. Parikh.
JUDGMENT:
The judgment was reversed and final judgment was entered in favor of the doctor.
Disclaimer:
These summaries are provided by the SRIS Law Group. They represent the firm’s unofficial views of the Justices’ opinions. The original opinions should be consulted for their authoritative content
Non Compete Agreement Virginia Maryland Lawyers Attorneys
Non-Compete Law in Virginia and Maryland
Non-compete agreements are often contained in an employment agreement or independent contractor agreement, but may also be executed as a separate document. Non-compete agreements are intended to ensure that during the term of employment or for a period thereafter, an employee or former employee will not directly compete with his or her employer. The non-compete agreement often contains provisions intended to prevent former employees from using proprietary information obtained during the employment relationship to appropriate their former employer’s customers at the expense of their former employer. Most non-compete agreements specify a period during which the former employee is expected to refrain from engaging in activities that will place him or her in direct competition with a former employer. Not all provisions contained in non-compete agreements are lawful – the validity of each provision is determined by state law.
Many employment or business relationships require that one of the parties agree not to compete with the other in a certain territory or for a certain time. The courts of law will sometimes uphold such agreements, and sometimes not. Advice from a qualified Virginia or Maryland non compete attorney is essential in this area. If you require assistance with a covenant not to compete or a non-compete agreement, either in negotiating or drafting such an agreement or in litigating such a dispute in Virginia or Maryland, the non compete attorneys of the SRIS Law Group, P.C. will bring their understanding of competition law to bear in aggressively assisting you with your case.
FACTS:
A corporation filed its amended motion for judgment against a doctor, alleging that the doctor, the corporation’s former employee, breached a covenant not to compete. After the Circuit Court of Campbell County (Virginia) denied the doctor’s motion to dismiss, and following a bench trial, a judgment was entered in favor of the corporation. The doctor appealed. He asserted that the former corporation cannot “engage in the practice of medicine” in Virginia because it does not have a license to practice medicine in this Commonwealth. As a consequence, he contends that the former corporation does not have a legitimate business interest in enforcing the covenant not to compete.
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FACTS:
The former employee went to work for a competitor. Sometime during his employment with the employer, the employer presented a confidentiality and covenant not to compete agreement, which prohibited the former employee from working for a competing business within a 75-mile radius of the employer’s principal place of business for one year after leaving, subject to a liquidated damages provision of $ 50,000 in the event of a breach. The employer paid $ 50 to the former employee for signing the agreement. After a bench trial, the trial court awarded the employer nominal damages of one dollar, rejecting the employer’s argument that it was entitled to liquidated damages pursuant to the terms of agreement. Appellant employer challenged the judgment of the Circuit Court for Montgomery County (Maryland) in favor of appellee, a former employee. The employer had filed a breach of contract action against the former employee, seeking to recover liquidated damages based upon the terms of an employment contract.
Click on above link to read more.
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