cases, commentary and news related to restrictive covenants
Monday, December 15, 2008
Who's On First Routine Plays Out in Georgia Non-Compete Dispute (Accurate Printers v. Stark)
Accurate Printers v. Stark took me back to law school contracts class. This is an example of how not to close a deal or conduct a lawsuit.
Kenneth Stark sold his business, Oxford Printing, to Steven Young. Accurate Printers was Young's company and admittedly a competing business with Oxford. As a condition of closing, Stark agreed to work for Young to help with the business transition. Stark also executed customary covenants not to compete and not to solicit customers for a period of 5 years. Predictably, the relationship deteriorated, and Stark went to work in printing sales, purportedly in violation of the restrictive covenants.
The asset purchase agreement (and accompanying restrictive covenants), though, was between Young - individually - and Oxford Printing. Accurate Printers was not a party to either contract. Young admitted he entered into the contract in his individual capacity, and that AP was not a party. Still, AP sued to enforce the non-compete clause.
The trial court rendered a directed verdict in favor of Stark, and the Court of Appeals of Georgia affirmed. The appellate court was not persuaded by Young's post-closing attempt to assign the restrictive covenants to AP. The closing documents required Stark's express consent to any such assignments, and there was no evidence Stark was ever aware Young assigned the contract rights he obtained at closing. Further, the closing documents prohibited an assignment unless Young's promissory note to Stark had been paid in full (which it had not).
But Stark did not emerge completely victorious. His award of attorney's fees against Young was reversed by the appellate court. Although Young was a party to the restrictive covenant (which contained a fee-shifting provision), Young was not named in the lawsuit as a plaintiff - and Stark never added him to his attorney's fee claim.
Court: Court of Appeals of Georgia, Second Division
Opinion Date: 11/26/08
Cite: Accurate Printers, Inc. v. Stark, 671 S.E.2d 228 (Ga. Ct. App. 2008)
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