Eastern Section Applies Rule of Reasonableness to Limit (Expired) Noncompete Agreement
In Money & Tax Help, Inc. v. Tom Moody, the Eastern Section Court of Appeals looked to the rule of reasonableness for non-compete agreements. The rule allows a court to hack down an unreasonable covenant not to compete until it is narrow enough to be enforceable. The agreement in Moody prohibited the defendant from working or being associated with a tax return business within 50 miles of Knoxville for three years. The Court of Appeals scaled back the non-compete, construing it to last three years, but only prohibit the defendant from performing services for persons who were the plaintiff’s clients when the defendant left.
This was a bit of a hollow victory for the defendant. By the time of the Court's ruling, the three years had already expired, and the plaintiff's damages were based only on that same client list.