255 P.3d 1058
Colo.2011Background
- Lucht's Concrete Pumping, Inc. (Colorado corporation) sues Tracy Horner, a former at-will employee, and Everist Materials, LLC over a 2003 noncompetition agreement.
- Horner resigned in March 2004 and began working for Everist three days later, directly competing with Lucht's in the mountain region.
- Horner signed a noncompetition agreement April 15, 2003, promising not to solicit employees/customers for 12 months and to keep trade secrets confidential.
- Trial court granted summary judgment against Lucht's on lack of consideration; bench trial favored Horner and Everist on other claims.
- Court of Appeals held that continued at-will employment, after signing the covenant, cannot constitute consideration for a post-hire agreement.
- Colorado Supreme Court reverses, holding forbearance from terminating an existing at-will employee constitutes adequate consideration for a noncompetition agreement; case remanded to assess reasonableness of the covenant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is continued at-will employment after signing a noncompete adequate consideration? | Lucht's contends forbearance from termination provides consideration. | Horner/Everist argue continued employment offers no new consideration. | Yes; forbearance constitutes adequate consideration. |
| Does the forbearance analysis apply equally to post-hire agreements as to initial hiring? | Continued employment under negotiation can serve as consideration. | No distinction should be drawn between initial and post-hire promises. | No distinction; continued at-will relationship can support post-hire covenants. |
| Must noncompetition agreements be reasonable in duration/scope, and can the matter be remanded for reasonableness? | Reasonableness is part of enforceability. | Reasonableness must be evaluated; lack of consideration was dispositive below. | Remand to assess reasonableness and proceed consistent with the opinion. |
| Is there a requirement that consideration be expressly cited in the contract? | Consideration can be inferred from continued employment. | Explicit citation is unnecessary but noted. | Consideration may be inferred; not required to be expressly stated. |
Key Cases Cited
- Continental Air Lines, Inc. v. Keenan, 731 P.2d 708 (Colo. 1987) (continuation of at-will employment constitutes consideration for termination procedures)
- Freudenthal v. Espey, 45 Colo. 488 (Colo. 1909) (any benefit or detriment at contract formation constitutes consideration)
- W. Fed. Sav. & Loan Ass'n of Denver v. Nat'l Homes Corp., 167 Colo. 93 (Colo. 1968) (peppercorn-type consideration suffices; not require value assessment)
- Coors Brewing Co. v. Floyd, 978 P.2d 663 (Colo. 1999) (continuation of at-will employment is adequate consideration)
- Kuta v. Joint Dist. No. 50(J), 799 P.2d 379 (Colo. 1990) (continuation of at-will relationship as consideration; distinction from preexisting contractual duties)
