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Signed contract with company. Successor of interest company now suing me. Can I dismiss suit?

New York, NY |

I signed a non - compete contract as a contractor with startup company A incorporated in DE . Midway through our working period , I was told that the company was changing names , to company B , incorporated in CA . I was then terminated . I'm the defendant in a breach of contract suit . The contract clause reads : " 9 . Neither Party will assign or transfer any rights or obligations under this Agreement [ . . . ] , except that either party may assign this Agreement without such consent to its successor in interest by way of merger , acquisition , or sale of substantially all of its assets . " I'm of the belief that since it's a startup , there was no formal merger , acquisition's or Rosales of any assets , so is that clause enforceable and the suit dismiss able ?

In response to the comments so far, the rest of the 1-page agreement details the specifics of the non-compete, and I'm fairly certain it's not relevant. If possible I'd like to hear opinions on whether contracts can be challenged under which circumstances related to issues with a 'successor of interest'. Can the owner of the company create a new company (with a new EIN), change the name in all business communications, and still expect all contracts to be valid (between myself and them, but I suppose, with all clients and vendors as well?)

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Attorney answers 3

Best Answer
Posted

My colleagues are correct. Although you highlight important clauses in the contract, these clauses must be read in the context of the language in the rest of the contract to properly construe its meaning. Additionally, there can be no definitive answer on whether clause 9 applies absent perusal of the contract or other agreement between company A and company B as to their relationship, whether merger, acquisition, sale of substantially all assets, or something else.

Those issues aside, your non-compete may not be enforceable for other reasons. Assuming New York law applies to your case, the courts here do not favor these types of agreements. Courts will generally not enforce these agreements unless they are reasonable in their scope, limited in their time, and geographically limited to ensure the protection of the business' legitimate competitive interests. Knock out any one of those elements, and your non-compete may be a non-issue.

My advice is that if you are being sued, you should see an attorney to ensure the best possible defense is interposed to protect your interests in this claim.

Good luck with your case.

The author of this posting is licensed to practice law in the State of New York. He specializes in litigation matters relating to personal injury, construction accidents, auto accidents, slip and fall, dog bite, contract litigation, property litigation, civil rights, ERISA, and Social Security matters in federal, state and local courts, with a focus on courts in Staten Island, Manhattan, Brooklyn, Queens and the Bronx. This posting is intended as general information only, is not provided as legal advice in connection with any specific case, and should not be construed to create an attorney-client relationship.

Posted

An attorney would have to read the entire agreement and review all the facts to accurately answer this question. You should schedule a consultation with a business litigation attorney.

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Posted

Hi,

I could try to parce this out and stab at what I think are relevant aspects, but the simple truth is, and as my colleague noted, the agreement will need to be reviewed as well as all the facts and circumstances.

I too am in NY and offer a free phone consult so feel free to contact me if you care to discuss in more detail and in private.

Best regards,
Frank
Natoli-Lapin, LLC
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