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Judges differ in non-compete agreement case

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In a legal dispute regarding a non-compete agreement, the Indiana Court of Appeals judges disagreed as to whether the agreement could be enforced if the former employee's clients voluntarily left and contacted him to continue to be their accountant.

At issue in Craig P. Coffman and Coffman Proactive CPA Services, LLC v. Olson & Co., P.C., No. 53A04-0804-CV-190, is whether Olson & Co. had a protectable interest that could be enforced by a non-compete provision in an employment agreement and whether the trial court erred by voiding the liquidated damages provision in the agreement and calculating the damages award.

Craig Coffman worked as CPA for Olson & Co. and signed a confidential non-disclosure and client proprietary agreement that said upon termination of his employment with the company he couldn't contact or work with Olson clients for 24 months. If he did so, he would liable to Olson for two times the client's most recent 12-months billings with Olson if he informed the company of the violation of the agreement; if Coffman failed to inform Olson, he would be liable for three times the amount.

Coffman left the company to form his own. After he left, he was contacted by his former clients at Olson who wanted to retain him as their accountant. Coffman didn't notify or compensate Olson.

Olson filed suit against Coffman in which the trial court concluded Olson established a legitimate interest that may be protected by a covenant not to compete - the names and addresses of Olson's clients to which Coffman gained an advantage by representing them while at Olson. The trial court found the liquidated damage clause to be a penalty and unenforceable and awarded Olson nearly $80,000 based on fees Olson received from its former clients that now worked with Coffman.

The majority concluded the agreement wasn't unreasonable because Coffman had gained an advantage through representative contact with Olson's clients. Olson structured its business in a way that clients only dealt with their accountant and the agreement protected Olson's goodwill, business reputation, and client contacts against potential vulnerability if an accountant left, wrote Judge James Kirsch. The majority didn't find Coffman's argument persuasive that the agreement didn't apply to his situation because the clients had already left Olson and some even hired other accountants before contacting him.

The majority affirmed the trial court's award to be within the scope of the evidence and a reasonable determination of the damages award.

Judge Terry Crone disagreed, believing once a client voluntarily ceased doing business with Olson, any goodwill the company enjoyed with respect to those clients ceased to exist, as did any protectable interest. Absent a legitimate protectable interest, the agreement is unenforceable, he wrote, and absent actual damages, there's no basis for awarding liquidated damages.

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  1. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  2. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  3. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  4. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

  5. "No one is safe when the Legislature is in session."

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