Monday, July 17, 2006

Maryland Court Issues Preliminary Injunction Enforcing Non-Competition Agreement Ancillary to Business Contract

In Corporate Healthcare Financing Inc. v. BCI Holdings Co. the United States District for the District of Maryland issued a preliminary injunction enforcing a restrictive covenant that two businesses had entered ancillary to a business contract. The non-competition agreement states that the parties agreed not to solicit each other's customers. Although not an employment case, the Court for the most part applied the law as it has developed in the employment law context.

An interesting part of the opinion discussed the so called "blue pencil" rule. Under the rule, which I discussed here and here, some Courts have claimed to have broad authority to revise an otherwise overbroad non-compete agreement to make it enforceable. Judge Blake noted that there is some doubt about the extent of the Court's blue pencil authority:

Finally, even if the court does find that the covenant is unreasonable in one or more respects, there is an open question whether Maryland law would allow it to enforce the covenant only partially. If limiting enforcement of the covenant . . . could not be accomplished by merely deleting words in the provision, such a change might not be permissible under the traditional "blue-penciling" doctrine. . . . If, however, the "flexible" approach is valid under Maryland law, at least under the specific facts of this case, then such limited enforcement might be permissible. . . (citations ommitted)

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