Though the blue-pencil, or equitable modification, rule often saves employers and allows them to enforce overbroad or unreasonable non-compete agreements, its use should not be relied upon for several reasons. The first of which is obvious: blue-penciling is (in most states) discretionary and a tough sell on some judges. The second reason is not as obvious: prevailing on an action to enforce a non-compete where blue-penciling is ordered may limit the right to recover attorneys' fees by contract.
As the Court of Appeals of Missouri held last week in Paradise v. Midwest Asphalt Coatings, when a party obtains discretionary modification of a non-compete, it has not "prevailed" on its central claim of enforcing the written contract - even if the remedy of injunctive relief is ordered by the court.
What is less clear - and what was not at issue in Paradise - is whether an employer can be considered the "prevailing party" if it affirmatively requests in its Complaint modification of an original contract to prevent some lesser restriction. Logically, if this theory were to hold any validity, the contract would have to contain a provision consenting to modification by the parties.
Court: Court of Appeals of Missouri, Western District
Opinion Date: 3/16/10
Cite: Paradise v. Midwest Asphalt Coatings, Inc., 2010 Mo. App. LEXIS 332 (Mo. Ct. App. Mar. 16, 2010)