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FiveStarLaw
FiveStarLaw, Attorney
Category: Business Law
Satisfied Customers: 36512
Experience:  25 years of experience helping people like you.
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I purchased a business in 2011

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I purchased a business in 2011 and received both in the purchase agreement and then separately a non compete agreement from the previous owners of the business. Three of the owners continued to work for me; then one owner quit and went to work for our main supplier. At the same time his wife, best friend and child (all former employees of the business) started a Competing Business. The competing business began calling on my clients and clients that were specifically handled by the previous Owner who left the business. We sent them a cease and desist letter but they continue to compete. They have taken several Clients from us resulting in about $200,000k in lost revenue. The owner received about $350k at closing and signed the non compete. I still have a note to him for about $60k. This is in Texas and in Texas the wife and husband own half of what each other owns. What are my chances of suing and winning this? The Non-Compete is for 5 years, and is limited to the San Antonio area and adjoining counties.

Submitted: 11 months ago.
Category: Business Law
Expert:  FiveStarLaw replied 11 months ago.

Hello,

Thank you for directing your question to me. I will do whatever I can to answer your questions!

Your facts indicate that the former owners have clearly breached the contract of sale and noncompete agreement. If the facts you have stated are indisputable, you have an excellent chance of prevailing in an action against the former owners. Once you prevail you would typically be entitled to lost profits, punitive damages due to the intentional nature of their acts and injunction to prevent further violations of your agreement

My best suggestion is that you retain local counsel immediately. Your counsel will likely suggest that you stop making payments under the $60,000 note and commence action

I would be glad to continue our conversation and respond to any follow-up questions that you may have.

Customer: replied 11 months ago.

Ok, For Clarity. The former owner does not own the business his wife does. His wife, best friend and daughter all used to work for me and they do not have a non compete. He leaves my business, becomes a sales rep for a major supplier of mine. At the same time his wife opens the new business. We have an email from one of our clients stating that (1) his wife called on them and mentioned that her husband was no longer with my company and that they could beat our price. (2) we have another client who stated that the former owner specifically called on her and tried to sell an item for his wifes new business. We also have evidence on the clients website showing were the former owner made a donation and listed himself as a member of his wifes business. I am concerned since this is not "his" business that he has effectively gotten around the non-compete and that since this is not his business i will not have a case.

Expert:  FiveStarLaw replied 11 months ago.
I apologize for the delay. I do not know why I am just now receiving your question.

I have not reviewed your noncompete agreement to determine whether it extends to companies under the former owners control regardless of how titled. Most non-competes would include such language.That said, even without such language, you appear to have a very strong argument that since Texas is a community property state, the new business is an asset of the prior owner and therefore covered by the noncompete

I would be glad to continue our conversation and respond to any follow-up questions that you may have.
Customer: replied 11 months ago.

Here is the non-compete agreement, please let me know if you feel it is still strong enough to pursue action.


 


NONCOMPETITION AND NONSOLICITATION AGREEMENT




  1. In connection with the purchase by Henson Patriot Limited Company (“Purchasers”) of the 100% Stock, Assets and Goodwill of American Color Labs of Texas, Ltd. (the “Business”), and as consideration in part therefore, prior to the fifth anniversary of the termination of the Closing, American Color Labs, LLC, Maria Gardiner, Cordell Gardiner, Andrew Medina, Jimmy Huepers, and Greg Green. (“Sellers”), their operators, and their successor(s) shall not, either directly or indirectly, either as employee, employer, consultant, advisor, agent, principal, partner, stockholder, corporate officer, director, or in any individual or representative capacity, engage, consult with, advise or otherwise participate in any business that is in competition in any manner whatsoever with the Business within Bexar County, Texas, and the counties contiguous to Bexar County.




  1. Further, Seller shall not, during such period and within such prohibited area, divulge, communicate, use to detriment of Purchasers or assigns of for the benefit of any other person or person, or misuse in any way, any confidential information or trade secrets processes or other technical data.




  1. In connection with the purchase by Purchasers and as consideration in part therefore, prior to the fifth anniversary of the Closing, Seller, its operators, and its successor(s) shall not, either directly or indirectly, either as employee, employer, consultant, advisor, agent, principal, partner, stockholder, corporate officer, director, or in any individual or representative capacity, solicit any employee of Purchasers, or any employee of Business retained by Purchasers after the Closing Date, to leave employment with Purchasers. Furthermore, within that same period, Seller agrees not to solicit or approach, or cause to be solicited or approached, with regard to any services or products provided by the Business as of the Closing Date, any person who, as of December 31, 2010 or at any subsequent time through the time of Closing, was a customer, client or supplier of the Business, or had been a customer, client, or supplier of the Business in the preceding calendar year.





  1. It is expressly agreed that the consideration for the covenants contained herein, is the compensation paid for the purchase of the Ownership Interests of Seller in the Business by Purchaser. It is further agreed that any agreement containing prohibitions against non-competition and non-solicitation, whether contained herein or executed separately, is for the primary purpose of protecting the goodwill of the Business.



5 Injunctive Relief. The Parties agree that irreparable harm shall be presumed in the event of any breach of this Agreement, and further agrees that in connection with any such breach, damages would be difficult if not impossible to ascertain, and the faithful observance of all terms of this Agreement is an essential. In light of these considerations, the Parties agree that any court of competent jurisdiction may immediately enjoin any breach of this Agreement, upon the request of Buyer, specifically releases Buyer from the requirement of posting any bond in connection with temporary or interlocutory injunctive relief, to the extent permitted by law.


6. Modification of Agreement by Court. The Parties agrees that if any provision
of this Agreement or the application thereof is held invalid, the invalidity shall not
affect other provisions or applications of the Agreement which can be given effect
without the invalid provisions or applications and to this end the provisions of the
Agreement are declared to be severable. The Parties further agree that if any court or
tribunal refuses to enforce the restrictive covenants contained herein, neither this
Agreement nor any part thereof, shall be void, and that the particular restriction deemed
to be unreasonable or unenforceable shall be reduced or otherwise modified by such
court or tribunal, but only to the extent necessary to permit its enforcement and only in
such court's jurisdiction. The Parties further agree that if any provision cannot be
reduced or modified to make it reasonable and/or permit its enforcement,
that provision shall then be severed from this Agreement and the remaining provisions


shall be interpreted in such a way as to give maximum validity and enforceability to this


and enforceability to this Agreement




7. Modification of Agreement by the Parties. This Agreement may not be changed,


modified, released, discharged, abandoned, or otherwise terminated, in whole or in part


except by written instrument executed by both parties.




8. Governing Law. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of Texas without regard to choice-of-law principles thereof.


9. Forum Selection. The Parties agree that any judicial proceeding related in any way to


this Agreement, shall be brought exclusively in the state or federal courts of the State of
Texas.


 


10. Headings. The paragraph headings in this Agreement are for purposes of convenience
only and shall not limit or otherwise affect any of the terms hereof.


 


11. Attorneys' Fees and Costs. The Parties agree that in the event of a dispute arising under


or related in any way to this Agreement, the non-prevailing party shall pay all costs and


expenses, including reasonable attorneys' fees, that may arise or accrue from
enforcing this Agreement, obtaining an interpretation of any provision of this Agreement,
or in pursuing any remedy provided by applicable law whether such remedy is pursued or
interpretation is sought by mediation, arbitration, the filing of a lawsuit, an appeal, and/or
otherwise.


 


12. Entire Agreement. This Agreement constitutes the entire agreement between Buyer and
Sellers and supersedes all prior agreements and understandings, whether written or oral,
between them.


 


13. Voluntary Agreement. The parties acknowledge that each has had an opportunity to
consult with an attorney or other counselor concerning the meaning, import, and legal
significance of this Agreement, and each has read this Agreement, as signified by their
respective signatures hereto, and each is voluntarily executing the same after, if sought,
advice of counsel for the purposes and consideration herein expressed.


 


14. Counterparts. This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will constitute one and the
same agreement.


 


15. The terms used herein shall have the same definitions as set forth in the Offer to Purchase
Agreement between Seller and Purchasers dated December 28, 2010.





IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date and year first above written.

Expert:  FiveStarLaw replied 11 months ago.
Yes I do. See this paragraph - I added the bold:

"In connection with the purchase by Purchasers and as consideration in part therefore, prior to the fifth anniversary of the Closing, ..... Furthermore, within that same period, Seller agrees not to solicit or approach, or cause to be solicited or approached, with regard to any services or products provided by the Business as of the Closing Date, any person who, as of December 31, 2010 or at any subsequent time through the time of Closing, was a customer, client or supplier of the Business, or had been a customer, client, or supplier of the Business in the preceding calendar year."
FiveStarLaw, Attorney
Category: Business Law
Satisfied Customers: 36512
Experience: 25 years of experience helping people like you.
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