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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Business Law
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Experience:  Run my own successful business/contract law practice.
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We are a Small Business firm in the State of GA, offering Information

Resolved Question:

We are a Small Business firm in the State of GA, offering Information Technology Staffing services.
We have engaged Consultant who has his own firm based in the State of WI and as a supplier he has signed a Agreement with our firm that has a Non-Compete clause as mentioned below:

"The Supplier agrees not to compete with our firm in providing staffing or services in any capacity (either directly or indirectly) to Client for a period of one (1) year from the date of introduction or one (1) year from the last day of services provided, whichever is later. During this period, the Supplier will not directly or indirectly, or in any capacity, compete or attempt to compete with our firm to provide services to the Client."

It is a 18 months contract and now before the completion date of contract, he chose to represent another firm (competitor) and let them submit her profile to our Client thus violating our agreement. Next week, one of her invoices is due for payment. What do we do?
Submitted: 3 years ago.
Category: Business Law
Expert:  Dimitry K., Esq. replied 3 years ago.
Thank you for your question.

When did the consultant stop representing your company, or is the consultant still officially working with you? Have you contacted the consultant about the possible breach?
Customer: replied 3 years ago.

Thank you for the response. Please find below the details:

 

a) Our firm (in the state of GA) and her firm (in the state of WI) has a Master

Services Agreement in place. It says: ES and the undersigned Supplier agree as

follows:

1. Engagement

  • This agreement will apply whenever the Supplier furnishes consulting services to ES or its clients. The specifics to the nature of the services to be performed, products to be delivered, if any, duration, rate, start date etc. will be set forth in the Work order. The supplier is responsible for all expenses incurred by its employees, unless specified in the individual Work order.

2. Terms

• This agreement shall continue for a term of one (1) year after the date first

entered above, unless terminated sooner as set forth herein, and will be

automatically renewed for like terms unless either party servers written notice

of its intent to terminate this agreement.

 

3. Covenant not to compete

  • The Supplier agrees not to compete with ES in providing staffing or services in any capacity (either directly or indirectly) to Clients introduced to the Supplier by ES for a period of one (1) year from the date of introduction or one (1) year from the last day of services provided, whichever is later. During this period, the Supplier will not directly or indirectly, or in any capacity, compete or attempt to compete with ES to provide services to the Client, or in any way hamper ES's efforts to render quality services to the client:

A. By soliciting any Client of ES with whom the Supplier had dealings with or on

behalf of ES as part of this agreement
B. By soliciting business at the same location at which Supplier is providing

services on ES's behalf
C. By soliciting, hiring, assisting in soliciting or hiring, or offering employment to

any employee of ES or client, or by including any personnel of ES or Client to

leave the services of ES or the Client, as the cause may be.

  • The provisions of this Restrictive Covenant shall be construed as an agreement independent of any other provision contained herein and shall be enforceable in both law and equity, including by temporary or permanent restraining orders, notwithstanding the existence of any claim or cause of action by the Supplier against ES whether predicted on this agreement or otherwise.
  • If any provision of this Restrictive Covenant is held to be unenforceable because of its scope, duration or area of its applicability or otherwise, the Court making the determination will have the power to modify the scope duration area, or all of them, and the provision will then apply in that modified form.

b) Timeline & Events:
1. Work Order Start Date: 06/29/2009
2. Work Order End Date: 12/31/2010
3. As per the non-compete clause in the agreement, not to offer services (direclty

or indirectly) until 1/1/2012
4. She has worked on our contarct until 12/31/2010
5. However on 12/27/2010 she chose to represent another firm (our competitor)

and let them submit her profile to our Client. Our Client has confirmed it.
6. We have not yet contacted the consultant about the possible breach. Waiting

on legal advise
7. One of her invoice (for services offered in Nov 2010) is due for payment on

1/8/2011.

Expert:  Dimitry K., Esq. replied 3 years ago.
Thank you for your follow-up.

Ultimately you will need to do two things in this situation. First, you can attempt to reach out to the consultant directly, point out the "non compete" agreement, and threaten litigation unless she pulls out from representation.

If she fails to do so, you go to step two. You retain a business law attorney, fire off a "cease and desist" letter to the consultant, carbon copy the competitor on the letter, and give 14 days to leave the project. If that still fails to deter the consultant, file for breach of contract, punitive damages, and for whatever provisions you put into the contract that the party would owe should a breach take place. The reason you want to also notify the competitor is should they continue to utilize the services of the consultant, they may become a co-defendant due to possible insider information and breach of confidentiality. The "CC" on the letter should move them to terminate the consultant anyway.

Good luck.

Edited by Dimitry Alexander Kaplun on 1/4/2011 at 10:32 PM EST
Customer: replied 3 years ago.

Thank you for the reply. You have not mentioned about releasing her pending payments. One invoice for services offered in Nov 2010 is due for payment on 1/8/2011 and the last invoice for services offered in Dec 2010 is due on 2/8/2011.

 

Please clarify:

1. As of today, the client has not completed the hiring process of the consultant thru

the competition firm. The approximate value of this extension contract is $175,000.

Whether the Consultant gets engaged or not thru the competition firm, can we still

claim breach of non-compete as she chose to represent another firm while being

on our contract on 12/27/2010?

2. If we can claim breach of contract, can we put a hold on the above mentioned

invoice payments, until this issue is resolved?.

3. If we can hold the payments, how do we address it properly to her?

4. In case if we cannot hold the payments, is there a time limit and/or any restrictions

in pursuing this issue with her.

Expert:  Dimitry K., Esq. replied 3 years ago.

Thank you for your follow-up.

 

You cannot withhold the funds because they are not directly related to the possible breach. . Those funds you must return or you yourself will be liable for breach.

 

From reading the section of the non compete you posted, there is enough to file simply for attempting to breach the terms. It is just that you injuries (and hence, damages) would be limited.

 

Good luck!

 

 



Edited by Dimitry Alexander Kaplun on 1/5/2011 at 12:37 AM EST
Customer: replied 3 years ago.

Thank you. As you said, we will send her payments. This week or next week she should be hired by the comeptition firm. After she gets hired should we proceed with your advice as mentioned earlier by following the two step (1st step: reach out to the consultant directly on non-compete and 2nd step: Hire a Business attorney and fire off "cease and desist" letter) process?

 

Please confirm and I will accept your answer. On another note, during next few weeks if I post a new question here, will you be able to answer? Thank you again for your quick response!.

Expert:  Dimitry K., Esq. replied 3 years ago.
Thank you for your patience, and sorry for the delay--I had a family emergency to attend to.

Yes, you have it exactly right. First attempt to resolve the issue without resorting to counsel. It will end up being cheaper for everyone concerned, and you don't have to pad the attorney bills. Only if the consultant proves unreasonable and frankly silly do you need to retain an attorney and then go to war.

If you wish to have me answer directly, please post your questions "For Dimitry..." I will then be notified that you are seeking me out, and I will be able to respond personally.

Good luck.

Edited by Dimitry Alexander Kaplun on 1/5/2011 at 1:59 AM EST
Dimitry K., Esq., Attorney
Category: Business Law
Satisfied Customers: 37479
Experience: Run my own successful business/contract law practice.
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