Ohio Court Issues Significant Non-Compete Decision: Damages for a Breach are the Payor’s Lost Profits, Not the Amount of Consideration

The usual measure of monetary damages for violation of a covenant not to compete, even where the violator was paid a discreet sum for the covenant, is the amount that puts the injured party in the same position it would have been in if the contract had been performed.  Briggs v. GLA Water Management, 2014 Ohio 1551 (Ohio App., Apr. 11, 2014).  

Summary of the Case

In November 1999, Briggs sold GLA, an industrial water treatment company he owned, to Hamrick, a long-time and high-ranking GLA employee.  Briggs executed a covenant not to compete with GLA in Ohio, Indiana or Michigan for 15 years.  As consideration for the covenant, the company promised to pay him $3,500 per month from January 2000 through December 2014.  Hamrick guaranteed GLA’s promises to make these payments.  After a few years, payments for the non-compete allegedly stopped.  Briggs sued GLA and Hamrick for breach of contract.  GLA counterclaimed, asserting that Briggs had violated the non-competition covenant and demanding damages equal to the contractual consideration for it.  A jury determined that both GLA and Briggs breached their contracts, awarding approximately $119,000 to Briggs and $354,000 to GLA.  The trial court entered judgment for GLA in the amount of the difference, approximately $235,000.  On appeal, the judgment was reversed.  The appellate court held that GLA was not entitled to damages because it produced no evidence that Briggs’ breach injured the company. 

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