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Judging by the factual narrative provided by the Court of Appeals of the State of Georgia, no one can really contend - while maintaining a straight face - that the defendants in Daneshgari v. Patriot Towing Services did not richly deserve to get slapped with contempt of court and sanctions for their brazen violation of multiple court orders. 

But when the trial court's orders directed the defendants to continue to abide by the terms of a noncompete well after the term of the noncompete had actually expired,  that was a step too far, said the appeals court.

What Happened in Daneshgari v. Patriot Towing Services

In June 2016, Patriot Towing Services, LLC, agreed to acquire the full-service emergency road service and towing company owned and operated by Daneshgari and Zotti Khosrow. As part of the sale, Daneshgari and Zotti agreed to a four-year noncompete provision. Notwithstanding an initial temporary restraining order that had been issued by the trial court immediately following the filing of the lawsuit by Patriot in 2018, the defendants continued to violate the TRO, and even flouted a second order that was issued a year later in 2019, as a result of which the court held the defendants in contempt of court that ultimately led to Daneshgari's imprisonment until he paid a $20,000 fine, representing Patriot's attorneys' fees incurred in bringing the second motion to secure his compliance.

At the conclusion of its hearing on Patriot's second motion for contempt against the defendants in August 2020 - well after the noncompete period lapsed under the terms of the agreement - the trial court found Daneshgari in contempt, struck his answer, entered a default judgment, and ordered him to pay Patriot's attorneys fees.

On appeal, defendants (wisely) did not take issue with this part of the ruling.

But then the trial court went further.

The court issued an order enjoining Daneshgari from violating the noncompete provision “until further order of this Court.”

And that's where the appeals court stepped in.

What the Appeals Court Held

In reversing the trial court's extension of the noncompete agreement, the appeals court stated as follows:

"In this case, it is undisputed that, under the purchase agreement’s explicit terms, the noncompete provision expired on June 22, 2020. Nonetheless, in its two September 3 contempt orders, the trial court extended its June 26, 2018 order, indefinitely enjoining the defendants from violating the noncompete provision. But in doing so, the court essentially rewrote the parties’ contract exactly as our Supreme Court has proscribed ...

"[W]hile we certainly understand PTS’s (and the trial court’s) frustration with the defendants’ willful violation of an agreement they entered into voluntarily, we do not agree with its contention that adhering to our Supreme Court’s directive that “[c]ourts do not make contracts for the parties”  significantly impairs a trial court’s contempt power ... Given these circumstances, the trial court abused itsdiscretion in indefinitely enjoining the defendants from violating the noncompete provision beyond its June 22, 2020 expiration.  Accordingly, we reverse that aspect of the trial court’s September 3, 2020 contempt orders."

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer
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