Legal Question in Business Law in California

Re: non compete agreements?

Yes

Re: non compete agreements?

The relevant law here is Business & Professions Code Section 16601.

The basic answer is that if the purchasing company is still operating the Pest Control Business, then the selling company is in violation of the non-compete agreement.

Of course, these things are rarely that simple, so if you are bringing or defending legal action, you should consult with a local attorney.

Re: non compete agreements?

Short answer: Probably yes. This would depend upon further factual detail and looking at the actual non-competition clause in the agreement. An attorney can provide you with a more specific answer after reviewing the documents and asking you some questions. Of the lawyers answering your question, Mr. Selik is in San Diego, Mr. Meyer is in Alameda, and I am in Fresno. Usually non-competition clauses are enforceable as long as they are not overly restrictive. For example, not permitting the pest business to re-open in the same area the business was previously operating simply protects your investment in purchasing the company. In comparison, trying to say the previous owners of a small, local company couldn't work for any pest control company in the state for many years, would unnecessarily restrict their ability to continue with their traditional livelihood. The law tends to balance these interests in analyzing the applicability of restrictions on competition after a business sale.

Re: non compete agreements?

If it violates the contract, you could sue. Non-competes between companies are more enforceable than against ex-employees. Consult with local counsel to discuss.

Re: non compete agreements?

The previous four answers cover the basic subject quite well, but there is one possible issue none of the answers seems to address. Your facts could be read as though to say the non-compete clause is in a separate written document which was not part of the general business-sale contract, but maybe was added as an afterthought.

Is so, whether it can be enforced or not requires looking at the basic contract to see what it says about amendments, and how they can be made. Generally, a written contract can be modified by a following written contract. See Civil Code section 1698(a).

The enforcement of non-compete clauses in business-sale contracts depends upon the notion that part of what the buyer is paying for is the goodwill of the business (defined as the expectation of future public patronage), and by competing the seller is unfairly undermining the value of the goodwill for which he was paid. Here, your facts make it clear that part of what you bought and paid for was "the route," and if the seller is going after his old customers on the route, or a logical extension of it, that would violate a typical non-compete clause and could be the basis of a successful lawsuit.