Wisconsin Business Law Blog : Waukesha, New Berlin, Oconomowoc Corporate & Real Estate Lawyer & Attorney

             In these tough times, lots of businesses have been closing. In fact, for the fist time in our many years of practice, we’re hearing clients tell us that there is not enough business for both them and their direct competition – that if things continue as they are, they will both go out of business. In fact, they’ve become somewhat friends talking about it. Then the idea comes to one of them: could I pay my competition something to get them to shut down? The answer generally lies in the federal antitrust

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For over 50 years, Wisconsin has been deciding cases related to covenants not to compete in working relationships under Wisconsin Stat. § 103.465. On July 14, 2009, in an opinion authored by Justice Michael J. Gableman, Wisconsin’s Supreme Court changed the way that statute will work, much to the benefit of employers. Here’s what they did.

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In a recent decision, Star Direct, Inc. v. Del Pra  www.wisbar.org/res/sup/2007ap000617.htm the Wisconsin Supreme Court determined that where an employment contract contains restrictive covenants which address separate specific interests of employers, the fact that one of those covenants is overbroad and therefore illegal does not necessarily render other covenants unenforceable.

The contract in that case contained provisions restricting the employee from engaging in business similar to that of the employer, restricting him from contacting past and present customers of the employer, and requiring the employee to hold certain information derived from the employer confidential.  The court determined that the covenant restricting the employee from engaging in similar business was overbroad, but that the other covenants addressed separate legitimate concerns of the employer which would remain enforceable.  Therefore, those covenants are divisible from the invalid covenant.

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The court battle between IBM and Dell over the employment of former IBM M&A chief David Johnson provides even more evidence that Noncompete Agreements are highly unique contracts that often lead to some highly unique arguments in litgation. It appears Mr. Johnson is arguing that because he “intentionally” signed the noncompete on the wrong line, it is not valid.  In other types of transactions (and maybe this one too) this type of admission would most likely lead to a misrepresentation, fraudulent inducement, or similar common law claim that could open up a party to significant liability.

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