Comedy Club Update

As mentioned in a previous blog entry, the U.S. Court of Appeals for the Ninth Circuit held in Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277 (9th Cir. 2009), that an in-term (during the term of the contract/relationship) covenant not to compete governed by California law was enforceable to the extent that it did not foreclose competition in a substantial share of a business, trade, or market. 

The Court overturned an arbitrator’s ruling that permitted a nationwide in-term covenant not to compete as a “manifest disregard of the law.” The Court relied on an apparent variant of the Ninth Circuit’s “narrow restraint” doctrine and older California state law authority to support a watered-down version of the covenant not to compete. 

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