Recently a friend sent me an article which reported on legal action taken against the Wellington Masters. Not only is this a legal issue that I'll comment on (see below, where others have declined) but it also involves a relevant issue in New Jersey: the non-compete clause.
Some background: Less than a month ago, attorneys for the organizers of WEF (although technically WEF is a subsidiary, I will refer to them as WEF here for clarity) filed a Complaint against Stadium Jumping (SJ). The issue is the Wellington Masters hosted about a mile away from WEF show grounds, which according to WEF is in violation of a settlement agreement between the two parties dating back to 2007 whereby WEF was given these USEF competition dates. The agreement also included a "non compete clause" which generally restricts one party from participating in a competetive activity within a certain geographic area and for a certain amount of time. In this case, WEF is attempting to enforce a non-compete clause limiting Stadium Jumping from partaking in a competitive activity within 225 miles until the year 2037. Note that because this was a settlement agreement reached between the parties, both agreed to the terms voluntarily. On the other hand, this is a not a court order, so parts of the agreement could be held unenforceable by the court.
When asked about this dispute Bill Maroney stated that he would not comment on the enforceability of non-compete clauses. If you ask me, that speaks volumes, because by bringing up enforceability he has indirectly commented on non-compete clauses possibly being unenforceable.
Just recently, lawyers in New Jersey have grappled with non-compete clauses. Non-compete clauses may be found unenforceable as unreasonable or against public policy. Usually, a court will not uphold an overly restrictive non-compete, and in some states (like California) they are completely unenforceable. States like Utah and Hawaii have passed laws restricting non-compete clauses, while federally and in New Jersey efforts to regulate non-competes have not been successful. In states without restrictions a non-compete is only unenforceable if overly restrictive or unreasonable. A very general example: it would be against public policy to restrict a cardiologist from working within 200 miles until 2055 from another cardiologist in a rural area where there are a shortage of health care providers. Even if that cardiologist happens to take a couple patients from the other doctor, the greater good is served by providing health care providers to the pubic and the 200 miles will be held unreasonable and overly restrictive. The court may remedy the inequities presented by a non-compete by limiting the geographic distance or shortening the amount of time, to say 25 miles and 3 years.
Its also worth noting that many people will include a non-compete in a settlement agreement or employment contract even if they aren't sure it is enforceable. (Take a look at your employment contract, it may include a non-compete!) By doing so, an employer (or in this case, WEF) really has nothing to lose because they can go to court and try and enforce it if the provision is ever violated. On the other hand, the employee or the party held to that agreement risks being dragged into court for violating the provision. Both parties face racking up legal fees, and both risk losing.
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As far as this particular non-compete clause goes, it seems possibly excessive to me. Although there really is no public policy argument here (i.e. horse shows don't save lives like cardiologists do, although I know some people that would argue with that) the distance of 225 miles suggests that WEF would stand to lose competitors to any show put on by SJ within 225 miles of Wellington. That I find hard to believe. All of Florida is only 361 miles wide and 447 miles long. I'm almost certain there is another horse show somewhere within 225 miles of Wellington that WEF doesn't even know or care about.
Although 225 miles may be a lot, on the other hand operating a show 1 mile away is very close and doesn't exactly help any argument SJ may make with respect to the distance being unreasonable. It should be noted, however, that the Masters was allowed to take place due to a recent USEF rule change exempting the old mileage rule in areas where there is a market for more competitions due to concentration of competitors. The reasoning behind this rule change, I imagine, was to allow competitors access to nearby competitions in instances when conditions are crowded, and the existing competition does not stand to incur a substantial loss of competitors due to another competition nearby. This is important as far as damages may go, discussed below.
Additionally, the time frame the parties agreed to in 2007 was 30 years (at which time they probably would have met to re-negotiate in 2037). Although I can't say if that is a per se "restrictive" time frame, I would bet the majority of enforceable non-competes cover a range of 1 to 10 years, for the simple reason that circumstances surrounding business operations and clientele change over time. Perhaps SJ has something up their sleeve in this regard, as roughly 9 years have gone by since the parties entered into the agreement.
Although 225 miles may be a lot, on the other hand operating a show 1 mile away is very close and doesn't exactly help any argument SJ may make with respect to the distance being unreasonable. It should be noted, however, that the Masters was allowed to take place due to a recent USEF rule change exempting the old mileage rule in areas where there is a market for more competitions due to concentration of competitors. The reasoning behind this rule change, I imagine, was to allow competitors access to nearby competitions in instances when conditions are crowded, and the existing competition does not stand to incur a substantial loss of competitors due to another competition nearby. This is important as far as damages may go, discussed below.
Additionally, the time frame the parties agreed to in 2007 was 30 years (at which time they probably would have met to re-negotiate in 2037). Although I can't say if that is a per se "restrictive" time frame, I would bet the majority of enforceable non-competes cover a range of 1 to 10 years, for the simple reason that circumstances surrounding business operations and clientele change over time. Perhaps SJ has something up their sleeve in this regard, as roughly 9 years have gone by since the parties entered into the agreement.
Finally, in most civil cases a party bringing suit (in this case WEF which is trying to enforce the non-compete) must show it's damages, even in a breach of contract case. That means WEF is going to have to demonstrate the amount of exhibitors and money it lost due to the Masters operating about 1 mile away for a single weekend in February. I don't know what the entries were like at either show that weekend, but I know the Masters was a very limited number of select classes offered at the highest levels (a World Cup Qualifier, a Grand Prix and a Welcome Stake). My guess is that WEF's loss of competitors for this one weekend to the Masters is a drop in the bucket compared to the revenue it brings in over the course of WEF week 4. Meaning, I don't think they will be able to demonstrate a significant amount of damages, especially in light of relevant reasoning behind the recent relaxation of the USEF mileage limitations.
In any event, some people have argued that non-compete clauses are bad to for the economy because they restrict services and employment positions from consumers and potential employees. Others find them unduly burdensome and overly restrictive without any legislative cap in place because it forces each agreement to be reviewed by the court on a case-by-case basis. It will be interesting to see what the court has to say about this non-compete clause, or if the parties will settle the matter on their own before it gets that far.
If you have any thoughts you would like to share please leave me a comment!
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