September 02, 2005
The Long Arm of Georgia Law
A recent 11th Circuit ruling raises concerns for counsel who draft and enforce non-compete agreements. In Palmer & Cay, Inc. v. Marsh & McLennan Companies, Inc., an employee and shareholder of a national insurance brokerage firm signed two agreements with non-solicitation covenants. The covenants prohibited the employee from accepting unsolicited business from former clients of the employer. The employee thereafter moved to Georgia and became president of a competitor company. The former employee sought a declaration that the agreements were unenforceable in Georgia, which applies strict scrutiny to non-compete agreements.
The District Court declared the non-solicitation covenants unenforceable in Georgia, and held that they could not be blue-penciled. The 11th Circuit went further: it vacated the District Court’s judgment to the extent it was limited to Georgia, rendering the covenants unenforceable even in states outside of Georgia that are more friendly toward such covenants.
This case raises concerns that one state’s public policy concerning non-competes can be imposed upon other states. To avoid this result, counsel for employers might draft the agreements with forum selection clauses choosing states that are more friendly toward non-competes.
[Meredith R. Miller]
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