No. 2017-0318

Katherine E. Hedges
An associate at Hage Hodes in Manchester practicing civil litigation and corporate law.

Oct. 23, 2018
Reversed and remanded.

  • The Court decided whether a noncompetition agreement was transferred to the buyer as part of an asset purchase agreement and whether the company purchasing those assets had standing to enforce such an agreement.

 

The Supreme Court considered whether the dismissal for lack of standing of a complaint for breach of contract and tortious interference with contractual relations was proper. The defendant, Kenneth Morris worked for a company called Atronix Sales, Inc. for a number of years and handled many of the largest and most important accounts for the company. He signed a noncompetition and nonsolicitation agreement during his employment. Later, the company’s assets, including the name Atronix Sales, Inc., was sold to a new company.

Morris left his employment with the new Atronix Sales, Inc. in 2016 to work for a competitor. The new Atronix Sales, Inc. brought claims against Morris and his new employer for violations of the noncompetition and nonsolicitation agreement. The defendants filed a motion to dismiss, arguing that the plaintiff lacked standing to enforce the noncompetition and nonsolicitation agreements because they were not transferred to the new entity as part of the asset purchase agreement (APA). On appeal, the plaintiff challenged only the ruling as to the noncompetition agreement. The Court interpreted the APA, noting that although the contract required Delaware Law to apply, Delaware Law is substantially similar to New Hampshire Law.

The APA did not contain an explicit reference to the transfer the agreements with Morris, but the plaintiff contended that they were assigned as part of a “catch-all” provision that generally assigned all contracts to the new company. The defendants argued that because Morris was offered employment with the new company outside of the APA, agreements relating to his employment were not transferred. The Supreme Court found that the restrictive covenants were not contained in Morris’ employment agreement. These agreements were entered into separately from his employment agreement with the old Atronix Sales, Inc. Because they were separate agreements, they were part of the old company’s going concern and goodwill and were transferred as part of the APA.

Because the trial court had not ruled on the issue, the Supreme Court declined to decide the separate question of whether the noncompetition agreement could only have been assigned with the employee’s consent. For the same reason, the Court declined to rule on the question of whether the agreement only required Morris to refrain from competing with the old company because that parent company still existed, and it was the entity named in the noncompetition agreement rather than Atronix Sales, Inc.

 

Christopher H.M. Carter (orally and on the brief) and Kimberly M.R. Sullivan (on the brief), Hinckley, Allen & Snyder, Manchester, for the plaintiff. Jonathan M. Shirley, Devine Millimet & Branch, Manchester, for defendant Scott Electronics, Inc. Brian W. Leahey (orally and on the brief), Tyngsborough, MA and Daniel R. Tenczar (on the brief), Tyngsborough, MA, for defendant Kenneth Morris.