Opinion ID: 60490
Heading Depth: 2
Heading Rank: 1

Heading: Duration of the Competition Prohibition

Text: MedQuest argues that the district court should have extended the duration of the competition prohibition beyond its original, two-year period for two reasons: (1) the district court erred in interpreting the “Extension” provision to apply on a prohibition-by-prohibition basis because the provision’s unambiguous terms provide that if any prohibition is violated, the duration of all prohibitions must be extended; and (2) even if the district court correctly interpreted the “Extension” provision, the district court erred in determining that Woolum did not violate the competition prohibition when he participated in North Bay’s formation and startup. First, taking the arguments in reverse order, we conclude that Woolum did not breach the competition prohibition by participating in North Bay’s formation and start-up. MedQuest cites the unpublished, trial court memorandum in Tristate Courier & Carriage, Inc. v. Berryman, No. C.A. 20574-NC, 2004 WL 835886 at  9 (Del. Ch. Apr. 15, 2004), for the proposition that preparing to open a competing business during the non-compete period constitutes indirect competition. This is incorrect. In Berryman, the competing venture was open and running; the direct competition from the competing venture transformed the former employee’s 6 otherwise-legitimate start-up activity into indirect competition. Here, on the other hand, North Bay never opened, so MedQuest has not faced indirect competition from Woolum because it has not faced any competition at all. We reject MedQuest’s request to extend its non-competition agreement to cover merely preparing to compete. Second, we conclude that the district court did not abuse its discretion in applying the “Extension” provision on a prohibition-by-prohibition basis. Section 2 of the non-compete agreement contains the solicitation prohibition and the competition prohibition in separate subsections. Section 3, the “Extension” provision, states: “If [Woolum] violates the provisions of Section 2, [Woolum] shall continue to be bound by the restrictions set forth in Section 2 and the NonCompete Period shall continue until the expiration of a cumulative period of twenty four months after the cessation of the violation.” MedQuest urges a wooden reading of the second clause, noting that it states that the plural “restrictions” will be extended if the clause is triggered.1 Even if the “Extension” provision must, as a matter of law, be interpreted as 1 Medquest, however, ignores that applying that same wooden reading to the initial clause results in an extension only occurring where the plural “provisions” are violated. In other words, only if Woolum were to breach both the competition prohibition and solicitation prohibition would an extension occur. Thus, if the contract is unambiguous, its unambiguous meaning is that both prohibitions will be extended, but only where both prohibitions have been violated. Under this reading, the “Extension” provision would not apply because Woolum only violated the solicitation prohibition. 7 MedQuest urges and breach of one prohibition triggers extension of both prohibitions, it was well within the district court’s broad discretion to craft a morelimited equitable remedy—prohibition-by-prohibition extension—“to protect the interests of the parties.” Keener v. Convergys Corp., 342 F.3d 1264, 1269 (11th Cir. 2003). Woolum violated only the solicitation prohibition; it was sufficient to protect MedQuest’s interests to extend only that prohibition.2