Moore v. Midwest Distribution, Inc., 76 Ark. App. 397, 65 S.W. 3d 490 (Ark. Ct. App. 2002) FACTS:
Appellee (Midwest Distribution, Inc.), who is in the business of setting up cigarette product displays, contracted to hire appellant (Moore) in 2001 to work at its Fort Smith office. Upon accepting employment, appellant signed an employment contract, a “Service work for Hire Agreement” with appellee that contained a non-compete agreement – in which appellant agreed that for one year following the termination of employment, he would not compete or provide services in substantially similar areas. The crux of this non-compete is that it specifically delineates the scope of the non-compete to Arkansas, Illinois, Iowa, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, Texas, and any other state that appellee has business within. Some time later, appellant terminated his employment with appellee and retained new employment with Jay Godwin in a substantially similar field (a violation of his non-compete with appellee). As a result of the violation of the non-compete agreement, appellee petitioned the trial court for a temporary and permanent injunction and damages. The trial court granted the temporary injunction. Appellant is now appealing this decision.
In what circumstances will a covenant not to compete be upheld?
The Appellate Court ruled in favor of appellant and held that (1) the covenant not to compete does not protect a legitimate interest of appellee; and (2) the geographical scope of the agreement is unreasonably broad.
In order for a covenant not to compete to be enforceable, three requirements must be met: (1) the covenatee must have a valid interest to protect; (2) the geographical restriction must not be overly broad; and (3) a reasonable time limit must be imposed.
Covenants not to compete that arise out of a employment relationship are only upheld by courts in cases where the covenatee provided special training...
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