812 F. Supp. 2d 771
S.D. Miss.2011Background
- Asbury Arkansas purchased Gray-Daniels Ford via Asset Purchase Agreement containing a 50-mile non-compete and time limits; Daniels remained with Gray-Daniels until late 2010.
- Daniels then began employment with Usry Enterprises (Joe Usry Chrysler Jeep Dodge) within the restricted area within one year of termination.
- Plaintiffs Asbury MS Gray-Daniels and Asbury Arkansas allege Daniels violated Section 11.11 of the APA and file suit in January 2011 seeking injunctive and other relief.
- The APA requires New York law governing interpretation and modification; written amendments only, with no oral modification recognized under NY law.
- Defendants argue New York law should not apply; plaintiffs contend the contract has a reasonable relation to New York and the choice should be honored.
- The court grants a preliminary injunction, applying New York law to evaluate contract-based theories and enforce the non-compete.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law governs APA modification | New York law governs; substantial relation to NY arising from negotiations, drafting, and board approval. | Mississippi has stronger contacts; NY law should not apply. | New York law applies; reasonable relation found and Mississippi public policy not violated. |
| Whether plaintiffs have likelihood of success on the contract claim | APA non-compete is clear, enforceable, and Daniels violated within 50 miles for the required period. | Oral modifications, waivers, or later agreements nullify the clause. | Plaintiffs show substantial likelihood of success; non-compete is valid and violated. |
| Irreparable harm from Daniels' breach | Breach causes loss of goodwill and unquantifiable damages; irreparable injury per contract terms. | Harm could be remedied by damages; no irreparable harm shown. | Irreparable harm shown; injunctive relief warranted. |
| Balance of harms and public interest | Enforcement protects contract, goodwill, and business; public interest favors upholding valid contracts. | Injunction would harm Daniels' ability to earn a living; limited effect within terms. | Plaintiffs' interests outweigh defendants'; public policy favors enforcement. |
| Scope and duration of injunction | Maintain full 1-year duration within 50 miles as stated in APA. | Blue-pencil or narrower scope could be appropriate. | Injunction matches the APA terms (one year, 50 miles) without modification. |
Key Cases Cited
- Ticor Title Ins. Co. v. Cohen, 173 F.3d 63 (2d Cir. 1999) (reasonableness of restraints and irreparable injury considerations for injunctions)
- Janvey v. Alguire, 628 F.3d 164 (5th Cir. 2010) (preliminary injunction standard; likelihood of success and other factors)
- Woods-Tucker Leasing Corp. v. Hutcheson-Ingram Development Co., 642 F.2d 744 (5th Cir. 1981) (choice-of-law when a contract designates a state; reasonable relation test)
- Superfos Invest., Ltd. v. FirstMiss Fertilizer, Inc., 809 F. Supp. 450 (S.D. Miss. 1992) (reasonable relation and contract choice-of-law analysis)
- Kennedy v. Metro. Life Ins. Co., 759 So. 2d 362 (Miss. 2000) (ambiguous non-compete language; public policy concerns in enforcement)
- Boardman v. United Servs. Auto. Ass'n, 470 So. 2d 1024 (Miss. 1985) (public policy considerations in applying foreign law to contracts)