Stuart C. Irby Co., Inc. v. Tipton, No. 14-1970 (8th Cir. 2015)
Annotate this CaseTipton, Gilbert, and Padgett worked for Treadway, under agreements that contained a noncompete provision: when you leave Treadway’s employ, for whatever reason, you will not compete with Treadway … by soliciting or accepting business from Treadway’s customers within your territory … for at least one (1) year after leaving; and . . . you will not solicit the employment of any Treadway representatives for at least one (1) year after leaving. Irby bought Treadway with an assignment of Treadway’s contracts, in 2012. Tipton, Gilbert, and Padgett became Irby employees, keeping essentially the same benefits and seniority. In 2013, the three left Irby to work for Wholesale. Tipton apparently spoke to Gilbert and Padgett about the move in advance. Irby sued, asserting claims for breach of fiduciary duty, breach of contract, civil conspiracy, and tortious interference with a contract. The district court granted summary judgment and awarded the defendants in excess of $200,000 in attorneys’ fees and costs. The Eighth Circuit reversed, finding genuine disputes of material fact about whether Wholesale recruited and hired Tipton, Gilbert, and Padgett so that they would solicit or accept business from Irby customers in their former territory within one year.
Court Description: Gruender, Author, with Wollman, Circuit Judge, and Gritzner, District Judge] Civil case - Contracts. In action involving former employees' convenants-not-to-compete, the district court erred in granting summary judgment for defendant Tipton on plaintiff's claim that he breached his fiduciary duty by recruiting two fellow employees to go to work for plaintiff's competitor as plaintiff presented sufficient evidence to create a genuine issue as to whether Tipton's actions constituted recruitment; the court predicts that the Arkansas Supreme Court would follow the majority rule that a covenant not to compete can be assigned to a successor employer; since the covenants could be assigned, plaintiff had a right to enforce them in the same manner as the predecessor, and the covenants were enforceable for one year after the employees resigned; there were a number of issues of material fact as to whether the covenants were enforceable under Arkansas law, and the district court erred in concluding they were unenforceable because they were overbroad, did not protect valid interests and lacked a reasonable geographic limitation; based on the foregoing, the district court erred in granting defendants summary judgment on plaintiff's claim they engaged in a civil conspiracy to violate Tipton's fiduciary duty and on plaintiff's claim for tortious interference with a contract; defendants' award of attorneys' fees vacated.
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