CENTRAL ADJUSTMENT BUREAU, INC. V. INGRAM, Supreme Ct. of TN, 1984. 678 S.W.2d 28 by JohnMValentine


CENTRAL ADJUSTMENT BUREAU, INC. V. INGRAM, Supreme Ct. of TN, 1984. 678 S.W.2d 28. History: CAB brought suit in Chancery Court seeking compensatory and injunctive relief saying Defendants were liable in tort and for breach of the non-competition covenants Chancellor awarded Plaintiff $80,000.00 in damages for breach of covenants and for trots of unfair competition and breach of duty of loyalty Court of Appeals reversed Chancellor on issue of covenant not to compete (covenants are unenforceable for lack of consideration and b/c they’re unreasonably broad in their geographic and time limitations); affirmed Defendants liability in tort Facts: Plaintiff-Employer CAB is a TX corporation (home office in Dallas) qualified to do business in TN as a collector of past-due debts; one of its 25 branches is in Nashville; Defendants are former employees who left CAB in 1979 to form Ingram & Associates, a company that competed directly w/CAB Ingram initially refused to sign covenant not to compete (offered a week after he began work), but signed it two weeks later b/c he would be fired otherwise; Goostree signed covenant after he began work; Bjorkholm signed convenant three weeks after beginning work Issue(s): Whether future employment of an at-will employee constitutes consideration for a non-competition covenant. Holding: Court of Appeals judgment as to all defendants is reversed; judgment of Chancellor is affirmed Analysis: Generally, restrictive covenants in employment contracts will be enforced if they are reasonable (consideration and territorial and time limits) under the particular circumstances—a covenant signed prior to, at same time of, or shortly after employment begins is part of the original agreement and is supported by adequate consideration Performance under a contract not signed at beginning of employment supplied the mutuality and consideration necessary to make the contract binding The requirement that consideration for a non-competition covenant be reasonable remains; another factor affecting reasonableness is the circumstances under which an employee leaves Receiving additional benefits, like defendants’ promotions, above and beyond continued employment, which they would not have received had they not signed the covenants

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