Thursday, May 27, 2010
Supreme Court of South Carolina Holds Trial Court Cannot Rewrite Territorial Restriction (Poynter Investments v. Century Builders of Piedmont)
South Carolina is a state with a fairly strict blue-pencil rule, meaning that drafting is at a premium. Because judges cannot rewrite parties' agreements for them, a non-compete will stand or fall on its own, with courts able to strike only certain terms to avoid overbreadth problems.
The Supreme Court of South Carolina issued another ruling illustrating the narrow scope of its blue-pencil rule in a sale-of-business non-compete. The trial court determined that the seller of a business should be enjoined from violating the covenant, but issued a ruling which modified the geographical scope of the contract beyond what South Carolina courts permit.
The non-compete at issue contained a step-down clause (a topic on which I recently wrote), first providing that it would extend to an area of 75 miles from the principal place of business. If that were unenforceable, the covenant would be limited to Greenville County and any county that borders it. If that were unenforceable, the covenant then would be limited to just Greenville County.
The court went with the last step-down clause and enforced the covenant only in Greenville County. Its error was apparently trying to craft some compromise among the various step-down provisions. The court held the seller was enjoined from competing within Greenville County and an area within 15 miles from the principal place of business.
The latter part of the order, the 15-mile restraint, was an addition to the non-compete's geographic term. While it may not seem unfair or unreasonable, the court's modification of the covenant went beyond what South Carolina courts permit. In a state that employs the equitable modification rule, the result likely would have survived appellate scrutiny.
Court: Supreme Court of South Carolina
Opinion Date: 5/24/10
Cite: Poynter Investments, Inc. v. Century Builders of Piedmont, Inc., 694 S.E.2d 15 (S.C. 2010)
Law: South Carolina