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Delaware Court Refuses to Imply Non-Compete Against Ex-Member of LLC


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1/1/2016
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Occasionally, in rendering an opinion, the courts provide true gems worthy of quotation. Here's one  from a January 13, 2014 opinion coming out of the Delaware Chancery Court:

"A lie can be an insidious thing. It can destroy friendships and business 
relationships. It can also be the basis for a successful lawsuit, where it is in aid of 
fraud or conceals actionable wrongdoing. But sometimes a lie, no matter how 
morally problematic, is just a lie. This case, as pled, involves such a lie."

I just love it.

In this case, the plaintiffs’ alleged that [the defendant] withdrew from the parties' LLC, and lied about his intention to open a competing Italian grocery in order to deceive the Plaintiffs and to induce their reliance on his misrepresentations, a lie in which [the defendant's] brother, Frank, participated; and that under cover of this lie, the brothers brought that competing entity into existence. 

In dismissing the complaint, and with it, plaintiffs' claims for breach of contract, breach of fiduciary duty and violation of a noncompete, however, the Court stated as follows:
 
"The Plaintiffs’ allegations are best characterized as, in effect, 
an attempt to replicate the non-compete agreement that the parties failed to include 
in their LLC agreement; a deficiency that the Plaintiffs, because of changed 
circumstances, now regret."
 
Ouch. 

Basically, the Court was unwilling to infer or imply a noncompete agreement when the parties never agreed to it in the first instance.



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