Tom Hemmendinger was one of four speakers addressing a broad-ranging discussion of both national and Rhode Island commercial law developments during the past year. The half-day program on November 13th was attended by several dozen attorneys at the Rhode Island Bar Association’s Law Center and streamed live as a webinar for additional participants.
One critical take-away from the program was the need for careful drafting of contracts. Two recent Rhode Island court decisions provide crucial insight into best practices for non-competes and buy-sell agreements.
In the case involving non-competition agreements with key employees, the employer sold its business, and the new owner sought to enforce non-competes. However, a Superior Court Justice held it was not assignable to the new owner, so the non-compete was not enforceable. This issue has not come up in a published Rhode Island case before this year. Employers are well advised to be sure their non-competes are assignable.
In the case involving the buy-sell agreements among business owners, a shareholder agreement was found to protect only the original shareholders. When a new shareholder came along, she did not have right to enforce the agreement and, in this instance, buy out the original shareholders. Business owners should think carefully about making these agreements generally applicable to all and future shareholders. New shareholders should confirm that the existing buy-sell agreements cover them.
Thomas Hemmendinger was joined by colleagues Steven Weise of Proskauer Rose (Los Angeles), Edwin Smith of Morgan Lewis & Bockius (Boston and New York), and Patrick Guida of Duffy & Sweeney (Providence).