Montana Supreme Court Affirms Enforcement of Covenant Not to Compete

The Montana Supreme Court has affirmed a trial court injunction enforcing a covenant not to compete in a business buy-sell agreement, confirming once again that it is far more willing to enforce covenants against sellers of businesses than against former employees. In Friedman v. Lasco, 2016 MT 115, Aaron and Constance Lasco had sold Spirit Quest Archery, Inc., in Kalispel to the Friedman family for $600,000. The buy-sell included a covenant by Lascos not to compete within 100 air miles for five years. The covenant was “intended to protect and govern all assets (included the goodwill portion) of the Corporation….” However, after the sale, Aaron went to work at Sportsman & Ski Haus in Kalispel, and within a year, Sportsman had expanded its archery business substantially and promoted itself as a professional archery shop. Friedmans sued and asked for a preliminary injunction, which the district court granted, in part because of the likelihood that Lasco could not pay a monetary judgment. Recognizing that Lasco said he would be deprived of gainful employment and probably faced bankruptcy if the covenant was enforced, the Court nonetheless held that the covenant not to compete was valid under MCA § 28-2-704, the exception for restraints on trade where the consideration includes business goodwill. The Court affirmed the injunction enforcing the non-compete, something it has not done against a former employee in more than 20 years.

–Tom Singer

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