The more things change, the more they stay the same. This saying is evident in the Georgian non-compete clause, which was fundamentally revised in May 2011 when Georgia’s Restrictive Covenant Act (RCA) came into force. The RCA applies to restrictive covenant agreements entered into after May 2011, while Georgia’s well-developed common law applies to agreements entered into before that date. However, earlier common law issues continue to play a role in the Georgia courts’ interpretation of the RCA. One such issue is that a court cannot extend a non-compete clause beyond the terms set out in the agreement.
Last week, the Daneshgari v Patriot Towing Services appeals court looked at the court’s extension of a non-compete clause. In Daneshgari, Patriot Towing Services (PTS) acquired the assets of D&D Autow’s Inc., a full-service emergency towing company operated by Daneshgari, on June 22, 2016. As part of the purchase agreement, Daneshgari has agreed not to compete with PTS for a period of four years (OCGA §13-8-57 (d) (5) allows non-compete obligations of more than two years when selling business context non-compete) within a radius of 250 km from his address. Accordingly, the non-compete agreement ended on June 22nd, 2020.
Within a month of the sale, Daneshgari and the other defendants began operating another towing business. As a result, PTS filed a lawsuit against Daneshgari in 2018. The court issued an injunction against Daneshgari and the other defendants to prevent them from continuing to violate the non-compete clause. In spite of the court order, the defendant continued to violate the non-competition clause and PTS accordingly filed requests for contempt against the defendants. In August 2020, after the four-year non-competition clause had expired, the court held a contempt trial in which PTS attempted, among other things, to extend the non-compete clause. At the end of the hearing, the court found Daneshgari in contempt, proposed his response, issued a default judgment against him, and sentenced him to pay PTS legal fees. In addition, the order extended the injunction and prohibited Denshgari from violating the non-compete clause “pending further decision by that court”.
The appeal court overturned the appeal. The court initially recognized that the non-compete clause expired on June 22, 2020 under the terms of the agreement. It then reviewed the pre-existing Georgian law that rejected the idea that “justice allows a court to extend the time limit of a ban”. -Competitive agreement. “The court, based on cases resolved both before and after the passage of the RCA, vetoed the argument that if either party is sued for non-compete enforcement, the litigation itself will satisfy the terms Instead, she reiterated the argument that “courts should be reluctant to rewrite private contracts” and “[j]the judicial provision of a toll regulation would result in such a revision. “
Bottom line: Under the RCA, courts are expressly allowed to “modify” agreements that are too broad in order to make them enforceable. Courts are not allowed to change them to “make the federal government more restrictive. . . as originally designed by the parties. ”While the RCA expresses a fundamental change in the previous law, many of the guiding principles of the Georgian non-compete clause remain in force. And the reluctance of the Georgia courts to terminate or renew a written contract is one of them.