Appellate Court Holds That Non-Compete Agreement Assigned Pursuant to Bankruptcy Court Order is Enforceable by Assignee

Courts are divided on the enforceability by an assignee of a non-compete covenant relating to personal services where the covenant does not state whether it is assignable and the employee does not consent to the assignment.

 

Status of the case.  A non-compete agreement signed by an employee of TSG, Inc., purported to be effective for two years after his termination and to be applicable to the whole of North America.  Subsequently, TSG, Inc. was adjudicated a bankrupt.  The trustee in bankruptcy assigned the agreement to TSG Finishing, a solvent, wholly-owned operating subsidiary of TSG, Inc., and the employee went to work for the subsidiary.  He had the same job title, and performed essentially the same tasks, as before.  Two years later, he resigned and accepted a similar position with a competitor.  The subsidiary sued him and moved for entry of a preliminary injunction.  The motion was denied, but the appellate tribunal reversed, remanded, and directed the trial court to enter the injunction. 

 

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