In a very fact-sensitive case, the Court of Appeals of Indiana affirmed the trial court's judgment that defendant Weigel did not breach an employment agreement's non-solicitation and non-compete clauses. The defendant was trained to perform dent removal work for automobile dealerships, individuals, and others, and signed an agreement - as a contractor - with a third party agreeing not to solicit his employer's clients and not to compete with his employer in a limited geographic area for a period of two years after termination of the agreement.
A number of years later, defendant wrote to his employer terminating the agreement and arguing that the existing contract was void. He immediately began servicing on his own the same customers for whom he had provided services while working for his former employer. The trial court reasoned that the employer had not offered the defendant any marketing or additional experience in the paintless process for a few years, the employer had not provided him with any clients for the last few years of the employment relationship, the employer never entered into any other contracts with subsequent contractors and/or employees in an attempt to continue the paintless dent removal business after the defendant terminated his relationship with the employer, and the employer never made a demand upon the defendant to perform the obligations of the agreement during the period of the two years that the covenants were in effect.
More than three years after the defendant's termination letter, plaintiff brought the breach of contract action against him (pursuant to a bankruptcy settlement, the plaintiff acquired the defendant's agreement and sought injunctive relief and damages against defendant). The trial court determined that plaintiff had no interest sufficient to permit enforcement of the restrictive covenants based on the above factors. The court reasoned that the employer "cannot stand idly by for three years and then assert a claim for the disgorgement of all [the defendant's] profits." In essence, the employer had acquiesced to the defendant's conduct.
Since covenants not to compete are in restraint of trade, they are not favored by the law. They will be enforced only if reasonably necessary to protect a legitimate interest of the employer, not unreasonably restrictive on the employee, and not against public policy. In affirming the lower court's judgment, the Court of Appeals held that the employer, and thus the plaintiff as assignee of the employment agreement, could not assert a claim for damages after it did nothing for three years after the alleged breach and essentially ceased all operations when the defendant terminated the agreement. There was no ongoing business, no good will to protect, and, thus, no damages as a result of defendant's actions.
Press-A-Dent, Inc. v. Weigel, 2006 WL 1716866 (Ind. App., June 21, 2006).
