April 26, 2013

Venable Defeats Non-Compete Claim on Behalf of Employee; Court Finds Non-Compete Covenants Invalid

3 min

Los Angeles, CA (April 26, 2013) – Venable attorney Richard Frey won a complete of dismissal yesterday in an employment dispute that would have enforced non-compete covenants in the Superior Court of California, Los Angeles County, on behalf of his client, Robert Corenson.  Mr. Corenson previously owned Corenson & Associates and in 1998, USI of Southern California Insurance Services Inc. (USI) purchased the business and Mr. Corenson simultaneously joined USI as an employee.

The court found that the noncompete covenants that plaintiffs’ were attempting to enforce were invalid and did not comply with California law because they were overly broad.  On Thursday, April 18th, the court agreed and sustained defendants’ demurrer without leave to amend. This was the third time a judge had considered this issue in the case.

The Stock Purchase Agreement between USI and Corenson & Associates contained a broad covenant not to compete with the intention of preventing Mr. Corenson from engaging in the insurance business for three years after the termination of his employment with USI.  The broad nature of the covenant, however, would have prevented Mr. Corenson from engaging in any business that provided services related to the services provided by USI. Corenson & Associates was primarily engaged in benefits insurance in contrast to the services provided by USI which included insurance, risk management, financial management, employee benefits, and asset management in several insurance categories.

Mr. Corenson terminated his employment with USI in January of 2013 and moved to Venbrook Insurance Services LLC at which point USI sought a temporary restraining order and preliminary injunction to enforce the covenant not to compete.  The court first denied the request for a temporary restraining order, and recently denied the request for a preliminary injunction as well as a request to re-write the overly broad covenant to make it enforceable.

“The Court’s decision in this case is particularly significant because the demurrer was sustained without leave to amend,” said Richard Frey. “The court agreed with defendants that the noncompete was plainly overbroad and more of the causes of action could be amended to change the result.”

“I am very pleased with this outcome,” said Robert Corenson. “It is a victory for my clients.   My thanks to both Venbrook and Venable for their stellar support.”

Mr. Frey is a partner in Venable’s Los Angeles office.


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