Business/Commercial Litigation Injunctive Relief Is Granted In Enforcing Non-Competition Clause In Sale Of Business

The purchasers of a business were entitled to injunctive relief enforcing the terms of a non-competition clause, because the provision was unambiguous and reasonable in terms of time and geographic area. The court upheld an attorney fee award against the seller on appeal.

Defendants purchased a beer distributorship from Yingling’s Thrifty Beverage, Inc,(“Thrifty”). The sole stockholders of Thrifty at the time of the sale were Patricia Prin and Joanne Bast. The only one who signed the sale agreement was Bast. After the sale to defendants, Prin and Bast purchased another beer distributorship approximately 3.6 miles from the former Thrifty distributorship. At issue in this proceeding was the effect of a no-competition clause in the sale agreement signed by Bast and defendants. That clause precluded the seller from competing directly with the business within a ten mile radius for a ten year period.

Plaintiffs filed this declaratory relief action to declare the no-competition clause unenforceable as to them. Defendants filed an answer which contained a counterclaim for injunctive relief in terms of the no-competition clause, and seeking damages for plaintiffs’ alleged breach of the sale agreement. Following a non-jury trial, the court granted injunctive relief against Bast, because she was the only plaintiff who was a signatory to the sale agreement with defendants. The trial court concluded that defendants failed to prove their claim for damages, but the court awarded defendants their attorney fees. Bast and defendants cross-appealed.

Bast argued on appeal that the trial court erred in determining she was bound by the no-competition clause, because no consideration was exchanged and the clause was overly broad. The court found that Bast was clearly bound by the terms of the purchase agreement, including the no-competition provision. As a 50 percent stockholder, Bast personally benefited from the proceeds of the sale to defendants. The court found nothing patently unreasonable about the scope of the clause, because it was adequately limited in terms of time and geographic area. Therefore, the court concluded that injunctive enforcing the no-competition clause for a ten year period was appropriate.

Defendants were entitled to an award of attorney fees, because they prevailed on their claim for injunctive relief as to the no-competition clause. The trial court properly calculated the amount of the attorney fee award by comparing the relief sought by the number of parties involved.

Reference: Prin v. Bob’s Beer & Soda, Inc., PICS Case No. 17-1786 (C.P. Adams, Oct. 30, 2017), Pennsylvania Law Weekly, 40 PLW 1152, December 12, 2017

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