McGlinchey Commercial Law Bulletin
When will my non-compete agreement end?Read Time: 6 mins
McGlinchey’s Commercial Law Bulletin is a biweekly update of recent, unique, and impactful cases in state and federal courts in the area of commercial litigation. We’re pleased to expand our Commercial Law Bulletin from its previous coverage of Ohio case law to include additional areas in McGlinchey’s footprint.
Partition of Personal Property
Mundy v. Golightly, 8th Dist. Cuyahoga No. 110382, 2022-Ohio-83
In this appeal, the Eighth Appellate District affirmed the trial court’s decision, agreeing that the plaintiff’s action for partition of personal property could not be maintained as she failed to allege how the defendant acquired his ownership interest in the dog at issue.
The Bullet Point: In Ohio, a plaintiff cannot bring a claim for partition of personal property where joint ownership of the property was acquired solely by means of cohabitating. Stated differently, Ohio law does not provide a means by which courts may simply divide property between unmarried, cohabitating individuals. That being said, a person seeking partition of personal property acquired during cohabitation may bring an action “where the facts of joint ownership are based upon something in addition to or other than cohabitation.”
King v. Emergency Med. Transport, Inc., 5th Dist. Stark No. 2021CA00057, 2022-Ohio-123
In this appeal, the Fifth Appellate District reversed and remanded the trial court’s decision, finding that reasonable minds could differ as to whether the paramedics were on a personal errand that removed them from the scope of employment or whether the circumstances kept them within the scope of employment since there was a benefit to their employer.
The Bullet Point. Under the doctrine of respondeat superior, an employer is vicariously liable for the torts of its employees based upon the principle of the agency relationship. However, there are limits to an employer’s vicarious liability for the negligence of its employees. One limit is that the tort of the employee must be committed within the scope of employment. The Ohio Supreme Court has previously characterized the scope of employment as when the employee’s act “can fairly and reasonably be deemed to be an ordinary and natural incident or attribute of the service to be rendered or a natural, direct, and logical result of it.”
Another limit to an employer’s vicarious liability is the nature of the employee’s conduct when the tortious act is committed. Generally, “[c]onduct is within the scope of employment if it is initiated, in part, to further or promote the [employer’s] business.” “Ordinarily, an act committed by an employee when he is off duty is not within the scope of employment” except when “the employee has a duty to perform in furtherance of the [employer’s] business after working hours and performs that duty, causing injury to a third party.” As such, Ohio courts resolve the question of whether an employer is vicariously liable for its employee’s negligence by analyzing both the nature of the conduct of the employee at the time of the alleged negligent act and the terms of employment between the employer and employee and how they impacted the actions of the day.
Piercing Corporate Veil
United States Bank Natl. Assn. v. MMCO, LLC, 8th Dist. Cuyahoga No. 110246, 2021-Ohio-4605
In this appeal, the Eighth Appellate District affirmed in part, reversed in part, and remanded the trial court’s decision, finding that the trial court did not err in piercing the corporate veil and agreeing that the defendants were alter egos of each other and that the individuals controlled the entities in such a way as to commit fraud, an illegal act, or a similarly unlawful act that caused harm to Medical Mutual.
The Bullet Point: It is well-settled principle in Ohio law that shareholders, officers, and directors of a corporation are generally not liable for the debts of the corporation. That being said, shareholders do not hold absolute immunity from liability for the actions of their corporations and Ohio law will permit piercing of the corporate veil when a shareholder misuses the corporate form as a shield from liability for their own misdeeds.
Known as the “Belvedere Test,” the Ohio Supreme Court established a three-prong test to determine whether to pierce the corporate veil: “(1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own; (2) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an illegal act or a similarly unlawful act against the person seeking to disregard the corporate entity; and (3) injury or unjust loss resulted to the plaintiff from such control and wrong.” As the appellate court explained, the first prong of the Belvedere Test is essentially the “alter ego doctrine.” When determining whether an individual and corporation are indistinguishable for purposes of the first prong, Ohio courts may consider factors including, “(1) whether corporate formalities were observed; (2) whether corporate records were kept; (3) whether corporate funds were commingled with personal funds; and (4) whether corporate property was used for a personal purpose.”
Nominal Offer of Judgment
Miami v. Bencomo, No. 3D21-762 (Fla. 3d DCA Jan. 19, 2022)
The Third District determined that a trial court abused its discretion in determining an offer of judgment was made in bad faith solely on the fact that the offer was nominal.
The Bullet Point: A reasonable basis for a nominal offer of judgment under Florida Statute § 768.79 exists where the undisputed record strongly indicates the defendant had no exposure in the case. A finding of bad faith cannot be made merely because the offer was nominal. Instead, a trial court’s finding of bad faith must be supported by competent, substantial evidence. In this case, the trial court found the appellant’s offer of judgment was made in bad faith solely because the offer was nominal, with no other evidence of bad faith presented to the trial court.
The Third District ruled the trial court abuses its discretion because the finding of bad faith was unsupported by competent, substantial evidence. The Third District noted the nominal offer was made in good faith because the only record evidence established the appellant had a reasonable basis to conclude that any exposure against it would be nominal, as the underlying claims arose from actions of an off-duty police officer for which the appellant was protected by sovereign immunity. Therefore, the Third District reversed and remanded with instructions for the trial court to determine reasonable fees and costs.
Alonso-Llamazares v. Int’l Dermotology, No. 3D20-0985 (Fla. 3d DCA Jan. 19, 2022)
The Third District ruled that a non-compete provision was in effect because the express language of the employment agreement showed that the parties intended the non-compete provision to survive the agreement’s expiration.
The Bullet Point: A non-compete provision in an employment agreement will remain in effect even after the agreement expires if the language of the agreement expressly provides that the non-compete survives expiration or termination. In this case, the appellant signed an employment agreement with the appellee which contained a non-compete agreement that specifically stated the parties would continue to be bound by the terms of an employment agreement for nearly two years after the agreement expired. The appellant continued to work for the appellee after the employment agreement expired, and he was ultimately terminated nearly two years after the expiration.
The issue in this case was whether the non-compete provision was triggered by the agreement’s expiration or upon the appellant’s termination of employment with the appellee. The appellant argued that in order for the non-compete provision to survive expiration, the agreement must have expressly stated that its terms apply if the employee continues to work for the employer after the expiration of the agreement. The Third District rejected this argument, holding that the language of the agreement made clear the parties contemplated continued employment by the appellant. Additionally, the Third District found that if the parties had intended for the non-compete provision to survive only as measured from the expiration of the agreement, they would have used a phrase other than “expiration or termination” in the survival provision of the agreement.
Valledor v. Decky, No. 3D20-1341 (Fla. 3d DCA Jan. 19, 2022)
The Third District Court of Appeals dismissed an appeal because a partial default judgment expressly contemplates additional judicial labor and is therefore not a final, appealable order.
The Bullet Point: An order is not final, and therefore not appealable, if the issue remains open and additional judicial labor is required. In this case, the appellants appealed four trial court orders relating to a partial judicial default entered against them. The Third District determined none of the challenged orders were appealable final orders, holding: (1) partial default judgment on liability is not appealable until the conclusion of the case because it neither disposes an entire case as to any party nor disposes a separate and distinct cause of action; (2) an order denying a motion to vacate a partial default judgment is not reviewable because it is not directed toward a final order; and (3) an order vacating an erroneously entered order is not final and appealable where it merely leaves in place a partial default judgment that, by its own terms, is not appealable. The Third District therefore dismissed the appeal because it lacked appellate jurisdiction to review any of the challenged orders.