Non-compete
Non-competition/non-compete agreement can be transfered with sale of business
In Blakeman’s Valley Office Equipment, Inc., v. Bierdeman, 152 Ohio App.3d 86 (Ohio App.7 2003), the Seventh District Court of Appeals determined that a covenant not to compete was assignable when that covenant is contained within an otherwise valid contract which includes a valid assignment clause and thus was enforceable. Bradley W. Bierdeman entered into a contract for the sale of his office supply business to Copeco, Inc., for a sale price of $135,000. Bierdeman structured the sale so that Copeco would have to hire him as its service representative as part of the deal. To agree to this, Copeco required Bierdeman to sign a convenant not to compete. Under the terms of the non-compete agreement, Bierdeman agreed not to compete with Copeco for a period of five years; however, if Copeco unilaterally terminated his employment without cause, Bierdeman’s non-competition period was shortened to 18 months. The agreement between the two parties also contained an assignment clause which allowed Copeco to transfer the agreement to a new buyer of the business. Of the $135,000 sale price, $10,000 was allocated as payment for Bierdeman’s agreement to enter into the non-compete arrangement.
Almost a year later, Copeco decided to sell a portion of the business to Blakeman’s Valley Office Equipment. Copeco assigned the non-compete clause to Blakeman’s as part of the deal and then fired Bierdeman. Bierdeman continued to deal with customers of Copeco/Blakeman’s. Blakeman’s filed suit against Bierdeman requesting the court to grant a preliminary injunction against Bierdeman.
The appeals court boiled the argument down to Blakeman’s assertion that an assignment clause that covers an entire contract also covers a covenant not to compete within that contract versus Bierdeman’s assertion that a covenant not to compete must have its own, separate assignment clause to be validly transferred to another party outside the original agreement. Reviewing the contract, the court determined that the parties intended to make the contract and all its provisions assignable to a third party; therefore, the non-compete clause could be enforced against Bierdeman by the new buyer of the business, Blakeman’s.
It’s interesting to note that Blakeman’s also cited a case in which an Ohio court enforced the assignment of a non-compete clause even if the covenant contained no language concerning assignability. Artromick Internat’l, Inc. v. Koch, 143 Ohio App.3d 805 (2001). Buyers of businesses can enforce non-compete clauses against employees of the seller with or without assignment clauses in the original contract for sale.