In May 2013, the Missouri Court of Appeals handed down a significant decision regarding the meaning of the term "adequate consideration" relating to the enforceability of non-compete agreements. In Jumbosack Corp. v. Buyck, the Court of Appeals ultimately reversed the trial court's grant of summary judgment in favor of former Jumbo Sack employee Bob Buyck. In 2004, Buyck's employer required him as a condition of continued employment to sign a three year non-compete agreement. By the beginning of 2009, the terms of Buyck's employment agreement had changed so drastically that he decided to resign. Thereafter, Buyck obtained employment with InterBULK USA, LLC, a Jumbo Sack competitor.
Jumbo Sack obtained a temporary restraining order that prevented Buyck from working for InterBULK in violation of the non-compete agreement. Buyck filed a motion for summary judgment, arguing that the non-compete agreement was not enforceable against him because his continued employment at Jumbo Sack did not constitute "adequate consideration" for the agreement. The trial court agreed, finding that Jumbo Sack's non-compete agreement was not enforceable against Buyck for lack of adequate consideration. The Court of Appeals, however, reversed and remanded. While acknowledging that non-compete agreements require the support of adequate consideration, the court found that relevant Missouri case law demonstrated that continued at-will employment constitutes consideration for a non-compete agreement when the employer allows the employee to have continued access to its protectable assets and relationships.
Relying on Missouri case law, the court in Jumbosack found that Buyck received adequate consideration for the non-compete agreement. The court determined that continued access to Jumbo Sack's new and existing customers, as well as continued at-will employment, salary, and commissions, constituted requisite consideration.
Buyck argued that access to Jumbo Sack's customers did not constitute consideration under the circumstances because Jumbo Sack did not have a protectable interest in its customer relationships. The court disagreed and found that customer lists need not be secret in order for a non-compete agreement to be enforceable. Instead, the court relied on past precedent and found that courts consider the quality, frequency, and duration of the employee's customer contacts in determining whether those contacts are important enough to require the protection of a non-compete agreement. Based on these factors, the court determined that a material question of fact existed so as to render the trial court's grant of summary judgment to be in error.
Determination of the enforceability of Missouri non-compete agreements involves a rigorous analysis and application of a myrid of factual and legal circumstances. Even though Missouri law tends to favor the ability of parties to contract freely, the decision in Jumbosack certainly makes even more definitive that contractual consideration is simply not one of the most compelling arguments available to challenge the enforceability of a non-complete agreement under Missouri law.
Most importantly, non-compete agreements still must be reasonable in time and scope. In other words, a non-compete agreement must be "no more restrictive than is necessary to protect the legitimate interest of the employer." Healthcare Servs. Of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610 (Mo. Banc 2006). In general, the reasonableness requirement means that the non-compete agreement must be "narrowly tailored geographically and temporally." Id. It is also important to note that non-compete agreements "are not enforceable to protect an employer from mere competition by a former employee." Id. Ultimately, non-compete agreements are only enforceable "to the extent that they protect the employer's trade secrets or customer contacts." Id. Seemingly, the non-complete agreement at issue was not tightly written and there were a number of readily apparent questions as to its ultimate enforceability. Just based on the facts presented by the court of appeals there were obvious questions of material breach and reasonableness questions as to enforceability. Focusing on consideration for the contact appeared to beyond the most obvious areas of concern.
If you are seeking review of non-compete agreement, have been issued a cease and desist letter or seek to enforce and protect company interests, please do not hesitate to contact the firm at (314)645-4100. Our firm's established non-compete practice allows for us to meaningfully counsel on what is enforceable and what issues may be raised in a challenge to a particular non-complete agreement.