Q: What happens if a shareholder with a noncompete agreement forces to open a direct competition right next to us?
We found out that one of the shareholders was secretly planning to leave the company and start a direct competition literally two blocks away from us. There is a shareholder agreement that everyone signed that has a noncompete clause which prohibits shareholders to be involved in a competition for three years after leaving/selling the interest in the company.
So what happens if she ignores the agreement and forces to open up a competition. Can the court stop her from opening up the store?
A: Yes, one always has a right to litigate a valid issue. The question did not state whether any dispute concerning the contract was to be arbitrated instead of litigated. For purposes of my answer, I presumed there was no such provision in the agreement. The issues that a court will look to are whether the duration of the non-compete is reasonable and whether the restrictive area agreed to is reasonable.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
