Kansas Lawsuit Notes
Taken from the copies of the court documents.
SRCM Alleges
1. Mike Shell had an agreement not to compete with Brite, and that agreement is transferable to IT. Therefore, the company Shell owns, IMS is forbidden to compete with SRCM
2. The non-compete agreement is valid for one-year from the time Mike Shell was terminated by Brite (10/30/97) and SRCM has incurred monetary damages due to breach of that contract.
3. Other former employees of IT had agreements not to compete. IMS knew this, but intentionally induced these employees to breach their covenants and join IMS, causing IT monetary damages.
4. IMS has violated the non-compete, and are wrongfully diverted customers from IT. IMS has wrongfully caused customers to terminate or discontinue their business relationship with IT and cause IT monetary damages.
IMS Responds
1. Shell had a non-compete with Brite, but that agreement was not transferred or assigned to IT as part of the Asset Purchase Agreement. The agreement was not automatically transferred, as the Asset Purchase was not a reorganization, merger or consolidation and since Brite continues to conduct substantial properties other than those transferred, IT cannot be considered a successor to the business of Brite.
2. The non-compete is not valid, and therefore there are no damages.
3. IT has no restrictive covenants with the employees hired by IMS, and any agreements with the IT employees are unenforceable as an improper restraint of trade.
4. There was no non-compete to violate. The customers who switched to IMS initiated the contact themselves as they were dissatisfied with services or performance or did not want to do business with IT.
Judge Rules
1. Dismisses SRCM allegations #1 and #2.
2. Dismisses SRCM allegation #4 as it relates to prospective business relationships, and grants the plaintiff 30 days to amend allegation #4 to contend that IMS induced IT's customers to breach their contracts with IT.
My Analysis of the SRCM Kansas lawsuit
Looks like SRCM has lost this one.
1. The facts match Pluvia and IMS's assertions about the case
2. If the Shell non-compete is ruled invalid, it is unlikely that lower level employees would be covered by a non-compete covenant that would apply.
3. Proving IMS induced customers to breach contracts with IT seems very difficult. Especially since SRCM has already disclosed (in the 10K) that most if not all of the contracts were non-transferable and terminable at will.
I should get the Michigan lawsuits next week.
Regards,
Archer
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