Case Study Part II: Stonhard v. Carolina Flooring

In Stonhard, my clients worked for a commercial and industrial flooring company: A multi-national corporation. My clients generated less than .1% to Stonhard’s bottom line. This case presents a picture of a slippery slope, and in more ways than one.

While employed with Stonhard, my clients began a side-business putting epoxy coatings on residential garage floors; however, on a few occasions, they did smaller commercial jobs that their employer almost certainly would not have done; and one or two weekends they supervised a job for a competitor. It was discovered. They were fired. They were sued.

Each of them had a non-compete. However, the non-compete had no geographical limitation, which meant that my clients would be prohibited from opening up a flooring business anywhere in the world. Clearly overly broad: However, it took two years and thirty-five thousand dollars to get a court to rule. So, in most non-compete cases, even if the employee wins, they still lose.

How is that possible? First, the noncompete had a New Jersey choice of law provision. Judges tend to be more familiar with the common law of its jurisdiction, and so injecting another’s state’s law into the equation can cause a conservative judge to move even more cautiously. Not a good thing if you want a court to quickly declare a contract unenforceable. New Jersey seemed to have a more liberal standard for “blue penciling” a non-compete. Blue penciling refers to removing language from a non-compete to render what remains reasonable. Plaintiff argued that New Jersey law permitted a court to insert language as well as remove it.

The South Carolina Supreme Court decided whether re-writing the non-compete, assuming New Jersey law would permit it, violated the public policy of South Carolina. The Court held that our courts will not enforce a choice of law provision if application of such law would violate South Carolina’s public interest. Because rewriting a contract is something our courts have previously rejected, the Supreme Court ruled that the court could not pencil in a geographic limitation so as to render the non-compete reasonable and enforceable.

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