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Non-Compete Agreements Cannot be "Reasonable-ized" by Court--Even with the Parties' Consent

Yesterday, the Supreme Court stiffened its stern treatment of non-compete agreements. At issue in Beverage Systems was a non-compete clause that allowed the trial court to modify its geographic scope if the court determined the original scope was unreasonable. The trial court, however, declined to shrink the agreement’s scope--even after finding it unreasonable. The Court of Appeals reversed, noting that the parties had expressly empowered the trial court to modify the agreement. Tailoring was appropriate, the COA held, because it “makes good business sense and better protects both a seller’s and purchaser’s interests in the sale of a business . . . . in a rapidly changing economy.”

But The Supreme Court rejected the COA’s premise. Because “parties cannot contract to give a court power it does not have,” the parties could not authorize the trial court to modify the agreement. “Allowing litigants to assign to the court their drafting duties as parties to a contract would put the court in the role of scrivener," the Court held. "We see nothing but mischief in allowing such a procedure.”

So it seems that court-may-modify clauses in non-compete agreements are now unenforceable in North Carolina.

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume VI, Number 79

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About this Author

Jesse Schaefer, Business Litigation Attorney, Womble Carlyle, Landlord Issues Lawyer
Associate

Jesse is an attorney in the Business Litigation practice group of Womble Carlyle’s Raleigh office. He represents clients in all manner of business controversies, including: contract disputes, landlord/tenant issues, foreclosures, trust enforcement, tort claims, bankruptcy hearings, employment litigation, Public Records Act requests, and judgment enforcement. His experience extends from pre-trial litigation matters to trial. He looks forward to building his appellate practice as well.

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