Non-Compete possible lawsuit

Short Description:
My question is, can a non-compete lawsuit be filed against me under the conditions:

1) That, I work for company C without signing any contract.
2) Company C has a non-compete contract with Company B.
3) I form my own company, resign from Company C and sign a contract with CompanyB.

I worked for more than 4 years with a company C in Massachusetts. Four years ago company C had sent me to a State project in NY. There were two sub contractors in between. Company C had a contract with company B, and Company B had a contract with Company A. Company A is the main vendor to the NY Client.

I never signed a contract with my employer (ie company C). I was never made aware of any non compete contract between company C and company B. I have never seen contract between company C and B.

In April, 2002 I formed a small company of my own. In August, 2002 I resigned from company C and signed a corporation to corporation contract with company B. I have signed a non-compete contract with Company B. When I left company C, then at that time company B owed a large amount of money to company C. Probably, five to six months of invoices were not paid by company B.

Now, company B has filed for Chapter 7 bankruptcy (liquidation). Seeing my importance in the NY Clients project, Company A is bringing me direct to its company. Soon I will be signing a contract with company A.

But recently I got an indication from my ex-employer (company C) that he wants to file a complaint against me for violating the non-compete law. I believe, my employer was living by a hope that company B will someday pay him his money. But now company B is shutting down so he is trying to come after me.

My question is, can a non-compete lawsuit be filed against me under the conditions:

1) That, I did not sign a contract with my employer (company C)
2) But Company C had a non compete contract with subcontracting company B.

1 answer  |  asked Nov 10, 2002 01:39 AM [EST]  |  applies to New York

Answers (1)

David M. Lira
Non-Competes: Suing vs. Winning

Can your ex-employer sue you based on a non-compete theory? Yes. The fact is that, in the U.S., anyone can sue anyone else for anything. The issue is never whether you can be sue, because the answer always is that you can. The issue is whether your ex-employer can win.

Can your ex-employer win a lawsuit against you based on a non-compete theory? Probably not. I have to equivocate my answer because I don't know what you did for your ex-employer; I don't know the nature of your ex-employer's business; and I don't know exact what your ex-employer might say you did wrong. In addition, I am assuming New York law applies. Although I would be fairly sure tha Massachusetts would be more or less the same, there nonetheless still could be critical differences that may change my answer.

Even if you signed an agreement with your ex-employer that included a non-compete clause, there is still a good chance that your ex-employer would not be able to succeed in lawsuit against you, because NY court generally disfavor non-compete clauses in employment agreements. Without a signed agreement, your ex-employer's chances of succeeding are considerably lower.

I cannot see how your ex-employer can hold you to a contract which may contain a non-compete in a business agreement, but which you never signed.

There is no such thing as a "non-compete law" under New York law. At most, New York law may grant your ex-employer protection if you had done something like steal highly proprietary information which was necessary to make you competitive with your ex-employer. That seems highly unlikely to me.

If your ex-employer tries to sue you because you have started to compete against your ex-employer, it is possible that you may have certain rights under laws which are designed to protect competition.

If your ex-employer sues you, DO NOT just ignore the lawsuit because of the answers you have gotten here. You must respond to the formal court papers that your ex-employer may serve on you. Failure to do so may result in your becoming liable in a situation in which the law would not otherwise hold you liable.

posted by David M. Lira  |  Nov 11, 2002 4:57 PM [EST]

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