Clarity is Key when Drafting Non-Compete Agreements

Author:  Mike Sandner

A common hurdle to clear when drafting non-compete agreements between business owners or sales and service professionals is to define the territory in which the non-compete agreement is to control.  Although a variety of methodologies exist to address this issue, such as zip codes, sales, territories, Counties, and mileage limitations, the latter is quite often most typical.  However, how exactly is mileage to be calculated or interpreted?

A recent Appellate decision recently addressed this very issue.  Typically, when crafting non-compete agreements for my clients, I have always used a “as the crow flys” or mileage radius to define a restricted territory.  The issue in Ginn vs. Stonecreek Dental Care, 2015-Ohio-4452, was whether a non-compete agreement that has specified an exclusive territory “within 30 miles” of the acquiring dentists practice location was to be measured in that fashion, or in driving distance.

After working under the agreement for some period of time, the selling dentist eventually resumed practice approximately 30 miles away from Dr. Ginn.  The distance from Dr. Ginn to Dr. Martin’s new office was less than 30 miles when measured in a straight line, but over 30 miles when traveling by car.

After proceeding through a trial, the jury found that Dr. Martin was in violation of the 30 mile restrictive covenant.  On appeal, the Court looked at the language used by the parties and held that the ordinary meaning of the term “within” applied when discussing distance requirements; meaning a straight line distance as opposed to driving distance.  Dr. Martin’s argument that the parties had no meeting of the minds as to the contemplation of the definition of “within 30 miles” was not adopted by the Court of appeals, which found the phrase “within 30 miles” plain and unambiguous on its face.

The case serves as an illustration of the care and attention that must be taken when drafting non-compete agreements to insure that your intentions are preserved in the memorialized agreement.

If you have any questions or comments, concerning a non-compete agreement to which you are a party, or need assistance in the preparation of a document for sales or service professionals, or as part of a business acquisition, please do not hesitate to contact Michael W. Sandner at 937-223-1130 or msandner@pselaw.com .

AUTHOR: Mike Sandner
msandner@pselaw.com