Goodwill Hunting: Enforcing Non-Competes in California M&A Transactions

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Originally published in the Orange County Business Journal, September 24-30, 2012.

In late August, a California appellate decision provided a useful primer on drafting non-competition covenants in California merger and acquisition transactions. In Fillpoint LLC v. Maas, the California Court of Appeals affirmed a judgment of the Orange County Superior Court holding unenforceable a non-compete in an employment agreement entered into as part of a business sale. The decision provides useful guidance for buyers in drafting non-competes to properly protect the goodwill of the acquired business in a manner that will withstand court scrutiny.

Non-competes in California -

California has a strong public policy protecting each person's right to pursue his or her chosen lawful occupation. This public policy is codified in California Business and Professions Code Section 16600 and provides that generally “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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