SW Legal studies in Business

Lost Profits Proper Damages for Violation of Non-Compete Agreement
Description

Utah high court held that if a non-compete agreement is violated, the proper measure of damages is lost profits, not the remedy of restitution or unjust enrichment.

Topic Contracts
Key Words

Non-Compete Agreement; Breach; Damages

C A S E   S U M M A R Y
Facts

Mantz worked for TruGreen, quit, and went to work for Mower Brothers, a competing lawn care company. Other TruGreen employees followed Mantz to Mower. The employees had signed non-compete and non-solicitation agreements with TruGreen. It sued Mower, Mantz and others for violating the agreements they had also signed. The federal district court certified a question to the Utah high court, asking it what the proper measure of damages is in such a case.

Decision

Question answered. The purpose of contract damages is to compensate the non-breaching party for actual injury sustained, so that the non-breaching party may be restored, as nearly as possible, to the position it was in prior to the injury. The proper measure of damages for breach of a covenant not to compete is the non-breaching party’s lost profits proven to a reasonable estimate of damages; however, the non-breaching party may use profits of the defendant if shown to correspond in whole or in part with the loss of the non-breaching party. Restitution and unjust enrichment are remedies found in quantum meruit and are not appropriate in cases regarding a breach of a non-competition agreement, as they are used only when no express contract is present.

Citation

TruGreen Companies v. Mower Brothers, Inc., ---P.3d--- (2008 WL 4977320, Sup. Ct., Utah, 2008)

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