Monthly Archives: April 2009

Bulls-Eye: An Overly Broad Radius

bullseyeMany non-competes will prohibit a former employee from competing with in a certain defined radius.  Drawing a circle and declaring it a non-compete zone makes for a good target for employees looking to hit the bulls-eye when attacking a noncompete.  One of my favorite cases is Stringer v. Herron, 309 S.C. 529, 424 S.E.2d 547 ( S.C. App. 1992).  In Stringer, Herron and Stringer had entered into a written employment contract on July 1, 1985.  The contract, which was to begin on July 1, 1986, and to end on July 1, 1991, contained the following covenant:

During a period of three years from the termination of the employee’s employment … the employee will not associate  himself or engage in, directly  or indirectly, any business or practice which exists for the practice of veterinary medicine within fifteen miles of any veterinary practice  operated by the employer … at the time of termination of employment.

As far as noncompetes go, seems fairly reasonable on its face, wouldn’t you say?  Well, consider the following facts:  ” The practice locations were so situated within the county that the 15-mile radius around each one overlapped with the others and together they created a proscribed area that embraced nearly all of Anderson County, parts of Abbeville, Greenville, Pickens, and Oconee Counties, and, indeed, a small part of Georgia. Although 96 per cent of Stringer’s 14,326 clients lived within 15 miles of at least one of the three practice locations, 55 per cent or about 7,879 of them lived within 5 miles and 84 per cent or about 12,034 of them lived within 10 miles of at least one of these locations.”

The court held that considering that a “overwhelming majority” of the customers live much closer than 15 miles of one of the three practice locations that the non-compete was overly broad and unenforceable.  The radius made the issue an all or nothing, winner take all.  The former employee was permitted to practice veterinary medicine wherever he chose.

What’s (all the) Muckenfuss about? Trade Secrets and Non-Disclosure Provisions

In Carolina Chemical Equipment Company v. Muckenfuss 322 S.C. 289, 471 S.E.2d 721 (S.C. Ct. App. 1996), the South Carolina Court of Appeals held that when a broad trade secret provision “basically has the effect of a covenant to to compete, [the Court] must subject it to the same scrutiny as a covenant not to compete.”  Although the South Carolina legislature attempted to limit the holding of Muckenfuss the following year, the case remains important for several reasons:  It began the difficult task of culling “trade secrets” from general business information as well as because it did so in the defense of an employee’s right to work.

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What’s (all the) Muckenfuss about? Quotations

You got to love the name Muckenfuss, as in the South Carolina Court of Appeals’ opinion in Carolina Chemical Equipment Company v. Daniel B. Muckenfuss 322 S.C. 289, 471 S.E.2d 721. The case involved claims for misappropriation of trade secrets and breach of contract.  I begin my review of this case with several quotes from the opinion:

“When an employee leaves a job, he is entitled to take his skills and general knowledge he has either acquired or increased during his employment.”

“[T]he right of an individual to follow and pursue the particular occupation for which he is best trained is a most fundamental right.”

“Because [the contract’s trade secrets provision] basically has the effect of a covenant to to compete, we must subject it to the same scrutiny as a covenant not to compete.”

“However, this is not to say all business ideas are trade secrets. A trade secret must be secret.”

“An employer has no legitimate commercial interest in prohibiting competition in itself.”