So, one of the risks of fighting a non-compete is the provision that require employees to pay for their former employer’s attorneys fees if they lose the case: Seems fair. But, of course if fairness were the issue, the provision would be reciprocal and provide attorney’s fees for prevailing employees. And the standard for the amount is “reasonable attorneys fees,” and we know reasonableness is truly in the eye of the beholder. The first take away is to beware of fee shifting provisions, and if you have a chance to actually negotiate your agreement, make sure the fee shifting is a true mutual obligation.
Recently, I tried a case in which the former employer proved a breach of the agreement and sought attorneys fees in the amount of $750,000+. (Of course, this was a 6 year case.) And much of my experience is in litigating cases with fee shifting statutes, and those fees are awarded by the court and not the jury. But, the fee petition was so large, three times what the damages for breach were, and it seemed to me that an attorney’s fees claims should be a jury issue. A one week trial on lost profits, but an half hour hearing on three-quarters of a million dollars. So, I researched the issue and found that the issue of attorneys fees in contract cases may trigger Seventh Amendment rights.
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I have tried three cases in the last 12 months, but none more difficult than a non-compete case in Lexington County. The judge did not grant summary judgment on the non-compete or non-solicitation provisions, and my client had conceded he breached the non-compete. The defendant was permitted to argue he was entitled to $2.7 million in lost profits, which encompassed a 5 year period although the non-compete was 1 year long. A jury deliberated 5 hours before asking for a calculator, and another couple doing math. When it was all said and done, the defendant will receive a breach of contract remedy that is 10% of the lost profits sought and one-half of the first settlement offer. But the motion for attorneys fees’ is still pending. (Defendant asked for a figure in excess $700,000.).
Well. This case has a lot of “boots on the ground” experience to dissect. Couple if quick take aways for now:
1. It is cliche, but you never know what a jury is going to do. This verdict appears to be an inconsistent verdict; it may be a compromise verdict; it is likely a confused verdict. But, do the parties really want to try this one all over again? Cost-benefit says “no.” However, rationality gets lost in the passion for revenge that can infect these cases.
2. Judges do not wade very deep into non-competes that often. The appellate law in the state of South Carolina is not as clear as it could be. The law has evolved slowly over the last 50 years, and sometimes in ways that appear to be inconsistent. This lends itself to variability and lack of predictability at the trial court level.
3. There is a fairness standard that seems to underpin much of what drives juries, and in the present political and cultural environment, juries in certain locales and/or in response to certain fact patterns are not as hostile to non-competes as one might guess. Whoever wins the fairness battle, wins the war. And, if there is a split decision in the fairness equation, then verdicts tend to reflect that through a compromise verdict.
Conditions 1, 2 and 3 make an appeal likely.
Trying cases is what I think I do best. There are some lessons that I have learned along the way. Twitter helped be shrink them down to 140 characters or less. Here are my top 10:
1. Cases are won as much by facts forgotten as facts remembered.
2 If truth is in the middle, then so will be the verdict.
3. Juries tend to make humble lawyers proud and arrogant lawyers humble.
4. The billable hour, whether your own or another’s, will dictate the course & length of litigation more times than not.
5. If you don’t pay attention to the trivial aspects of your case, the jury just might. Know thy case.
6. Don’t ask, if you don’t already know.
7. Jurors want to know you believe in your case before they believe in it.
8. If you don’t like your client, the jury surely will not.
9. Moderation in all things, except your passion for your case.
10. Make your case a cause.
[From my blog Blogger at Law. These lessons are just as applicable to efforts to beat a non-compete.]
In its first non-compete case involving a physicians, the South Carolina Court of Appeals used mostly well-trodden commercial case precedent to reverse a bench trial holding that the agreements were unenforceable and awarding relief under the Wage Payment Act in Baugh v. Columbia Heart Clinic, P.A., 2013 S.C. App. LEXIS 5, 20 Wage & Hour Cas. 2d (BNA) 202 (S.C. Ct. App. Jan. 16, 2013). Baugh involved two cardiologists who left Columbia Heart in 2006 and, within one month, established their own cardiology practice approximately 300 yards from Columbia Heart’s then-new Lexington County facility. The doctors sought an injunction preventing enforcement of no-compete agreements based on forfeiture and liquidated damages clauses that were intended to prohibit them from practicing or assisting in the practice of cardiology for one year within 20 miles of Columbia Heart offices where they had routinely practiced.
The Court of Appeals upheld the non-compete in a set back for all employees as well as consumers of medical services. Non-competes in the medical field (like many others) limit choices and limit supply for services. However, Baugh ignored robust debate in other states– including a pronouncement by the American Medical Association — concerning what some consider the injurious public impact of physician non-compete agreements. Among the other holdings in Baugh, Court of Appeals held the following:
- the non-compete agreements at issue in the case were supported by consideration (a $5,000-per-month/ $60,000 total for compliance with the non-compete agreement) ;
- liquidated damages for each doctor of one year’s W-2 income of roughly $591,710 and forfeiture by each doctor of $240,000 — in a combination earned but unpaid salary, pro rata shares of accounts receivable, and the $60,000 noted above — were not penalties; and
- unpaid salary and accounts receivable, along with director’s fees, were not wages “due” under South Carolina’s Wage Payment Act (on the rationale that the doctor’s forfeited their rights to these items).
There were several issues that deserved greater consideration–for more in-depth treatment click and read on. [click to continue…]
FOR IMMEDIATE RELEASE
GREENVILLE, S.C. – Greenville Business Magazine has recognized Andy Arnold as one of the area’s Legal Elite in the practice of Labor and Employment Law.
In its first-ever survey, the magazine sent emails to 850 Greenville-area lawyers and asked them who, in their opinions, were the best lawyers in 20 practice areas. Respondents could nominate lawyers in their firms, but for each in-firm lawyer there had to be an out-of-firm lawyer nominated, although not necessarily in the same practice area.
A total of 95 lawyers were identified by their partners and peers as the Legal Elite of the Greenville area.
Greenville Business Magazine will honor the Legal Elite with a reception Aug. 16 at High Cotton.
The most recent reported South Carolina case involving a non-compete is Team IA, Inc. v. Lucas, 717 S.E.2d 103 (S.C. Ct. of App. Oct. 2011). The case provides only modest insight into the legal landscapes of non-compete agreements, and in some ways creates a bit of uncertainty. In Lucas, the Court of Appeals struck down the nationwide non-compete as being overly broad, but left open the possibility of enforcing the alternative geographic restriction “defined as the states of South Carolina, North Carolina, Georgia and Alabama.” Not unlike the last Supreme Court case on the subject, this case is curious for the issues not addressed in more detail and the cases not cited. But, I get ahead of myself: First the facts. [click to continue…]
After a lull in January, non-compete inquiries to my law office and resulting consults have returned to 2011 levels. The most disturbing trend seems to be that young, ambitious individuals who have seen their pay and commissions cut feel trapped because the risk of fighting a non-compete seems so daunting. Many of these folks believe they can offer more efficient service and better prices to customers. I can’t recall an instance in which the customers committed to an exclusive relationship. These customers stand to gain from competition: This is a fact. [click to continue…]
The law in South Carolina regarding non-compete agreements is sparse. So, trial courts are left to hash out disputes with modest guidance. Unfortunately, too often legal memorandums are not read prior to the hearing. In my last 3 non-compete hearings all in different counties, the opposing parties and I have submitted briefs, affidavits and exhibits before the hearings (two injunctions and one summary judgment motion) and not once had the judge read any of it by the time the arguments began. This would not have been so disturbing but for the fact that two of the three judges who had done no preparatory work felt able to rule from the bench after 15 or 20 minutes of opposing arguments, when some minimal review of the written materials submitted by both parties–even just the written contract itself–was necessary for a minimal understanding of the facts and the arguments. [click to continue…]
I was admitted to the practice of law in South Carolina on November 18, 1992. Just as watching my children age so rapidly before my eyes amazes me, the realization that I have practiced law for almost 20 years is hard to believe. When I first opened my own practice in 1994 I dreaded being asked how long I had practiced law; who in their right mind would hire someone only two years out of law school to handle an important case? Fortunately, the answer was enough for my practice to survive and eventually thrive. [click to continue…]