Richard Berry & Assoc., Inc., v. Bryant: Brokerage's Noncompete Clause Ruled Unenforceable

A Louisiana court has considered whether a brokerage could enforce a noncompete clause in its independent contractors' agreement against former salespeople.

Richard Berry & Associates, Inc. ("Brokerage") included in its independent contractor agreement ("Agreement") a noncompete clause. The noncompete clause ("Clause") stated that the independent contractor was prohibited from offering real estate services nor contacting customers of the brokerage within a specified geographic area for a two year period after the termination of the independent contractor agreement.

A group of salespeople ("Group") left the Brokerage and began offering their services in violation of the Clause. The Brokerage brought a lawsuit against the Group, seeking an injunction to prevent them from violating the Clause. The trial court rejected the Brokerage's temporary restraining order request, and the Brokerage appealed.

The Court of Appeal of Louisiana, Fifth Circuit, affirmed the trial court. The court looked at the legal standards for the enforceability of noncompete clauses. Louisiana has a statute which sets forth the requirements for a noncompete clause, and case law further limits the enforceability of such clauses. Louisiana case law delineates that the public policy of the state does not favor these clauses and so these clauses are enforceable only to prevent a former employee from starting his/her own business in competition with a former employer.

Applying these legal principles to this case, the court ruled the noncompete clause was unenforceable as written, since it prevented the salespeople from offering any real estate services for two years within the specified geographic area. The court rejected the Brokerage's argument that the public policy of the state only applied to employees, not independent contractors. The court stated that the statute described both employees and independent contractors, and so there was no reason to limit the application of the State's public policy to only employees. Thus, the court ruled affirmed the trial court's ruling that the noncompete clause was unenforceable.

Richard Berry & Assoc., Inc., v. Bryant, 845 So. 2d 1263 (La. Ct. App. 2003).