The VLW Blog

Noncompete cases always seem to generate a great deal of interest when we feature them in the paper.

This week, we got a case that has a new twist. It was decided by Virginia Beach Circuit Judge Joe Canada.

The case involves three guys who partnered to start a martial arts studio.

Their cooperative agreement featured a clause that required two of them to pay a penalty for breaching the agreement with the third. If the two guys started their own martial arts school, without giving the third guy an opportunity to participate, they agreed to pay him $15,000.

Not surprisingly, the two guys did just that and the third guy sued, seeking $750,000.

Judge Canada found that while the clause did not neatly fit the definition of a noncompete clause, it nonetheless was valid and enforceable as a covenant not to compete.

To get a free copy of the full-text opinion in Miran v. Merullo, Today’s Top Opinion, please visit the Virginia Lawyers Weekly home page,
www.valawyersweekly.com .

In the March 3 issue of Virginia Lawyers Weekly, we reported an interesting twist in a doctor’s noncompete case out of Winchester Circuit Court.

The case is General Surgery Specialists v. Bowers.

A judge held that a noncompete prohibiting a surgeon from practicing in Winchester and Frederick County was reasonable in its terms. But the court said the noncompete was unenforceable because it violated the federal Stark Law as the surgeon, a provider under federal Medicare and Medicaid programs, also received payments under a hospital physician recruitment agreement.

According to information provide by the court, on a joint motion by the parties, the court entered a final order today in which Winchester Circuit Judge Jay Wetsel vacated the findings and conclusions in his Feb. 11 opinion, and dismissed the case as settled.

Last year, VLW reported a Richmond federal court decision that highlighted the difference between a noncompete in the sale of a business, versus an employment contract noncompete.

In Western Insulation LP v. Moore, U.S. District Judge James R. Spencer awarded nearly $1 million in damages to a Henrico County insulation company that alleged the business sellers, a married couple, breached the sales contract’s restrictive covenant.

The buyers alleged the sellers leased office and warehouse space and two pickup trucks to their former COO to set up a competing business, and helped the COO with bank financing.

Spencer enforced the sales contract’s seven-year noncompete that covered California and the metropolitan Phoenix area, where the sellers had been operating their business.

In its per curiam unpublished opinion released last month, the 4th Circuit upheld the enforceability of the covenant. The panel also agreed the wife committed a breach by entering into the guaranties and related agreements, and the husband by hiring two former employees.

But the appellate court vacated the damage award, saying neither the valuation of the noncompete promises at $250,000, nor the buyer’s evidence of lost profits, supported the damage award.

In addition to vacating the damage award, the 4th Circuit also reversed the district court’s denial of injunctive relief to the disappointed buyer.