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Non-Competes Not Neccesarily Assignable When Company Sold


Symphony Diagnostic Services No. 1. Inc. d/b/a MobileEx USA v. Greenbaum - U.S. District Court for the Western District of Missouri, Central Division


Facts:  Kimberly Greenbaum ("Greenbaum") began working as a mobile x-ray technician for Ozark Mobile.  Greenbaum subsequently executed a covenant not to compete with Ozark that contained a term of two years and a one hundred mile radius of a particular area.  Another employee, Josephine Tabanag ("Tabanag") began working for Ozark as a mobile x-ray technician and signed a similar covenant not to compete when she began employment. 

Several years later, Ozark was sold to MobileX USA.  Both Greenbaum and Tabanag were offered positions with MobileX.  However, at the time of sale, Greenbaum and Tabanag did not contemporaneously consent to the assignment of their covenants not to compete.  Shortly after the sale of Ozark, both Greenbaum and Tabanag accepted positions at Biotech X-ray.  

Mobile subsequently filed suit against both Greenbaum and Tabanag on the grounds that they breached their covenants not to compete.  Greenbaum and Tabanag both filed for summary judgment on the grounds that they did not consent to the assignment of their non-competes.

Holding:  The District Court agreed with Greenbaum and Tabanag and held that employment contracts, including non-compete and confidentiality agreements, are not assignable without consent.  As the facts demonstrated in this case, Mobile failed to get contemporaneous consent at the time of the asset sale with Ozark.  Given this lack of consent from Greenbaum and Tabanag, the Court held that the covenants not to compete did not transfer and were not assignable to Mobile, as the new employer.

Judgment:  The District Court granted Greenbaum and Tabanag's motion for summary judgment on the grounds that since they did not give their contemporaneous consent to the assignment of their covenants not to compete when their employer sold its assets to a new company, the covenants not to compete were not enforceable by the new employer. 

The Takeaway:  Employers (and especially those who are buying the assets of another company), do not automatically assume that everything transfers over.  In this instance, this case serves as an example that just because an asset sale occurs, that does not necessarily mean that covenants not to compete transfer to the new company as well.  Tread lightly and review everything first...not everything is a given and automatically transfers when one company buys the assets of another. 

Majority Opinion Judge:  Judge Gaitan, Jr.

Date:  March 16, 2015

Opinion:  www.noncompetereport.com/files/2015/03/Symphony-Diagnostic-Services-No.-1-Inc.-v.-Greenbaum.pdf

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