Articles Posted in Business & Corporate Law

This past May, the Indiana Court of Appeals ruled on a breach of a non-compete agreement case addressing whether a former employee’s covenant not to compete with his past employer was enforceable under Indiana law and determined the proper measure of damages for a breach of this agreement.

Coffman, an employee of Olson & Co., an accounting firm (“Olson”), signed a non-compete Agreement in 2005, which specified that in the event of termination of employment, he would not directly or indirectly compete for Olson’s clients in the firm’s geographical area for a period of two years. The Agreement did not restrict employees from seeking accounting jobs elsewhere. The Agreement specified that if Coffman chose to provide accounting services for any of Olson’s clients during the two year period following termination of employment, he must pay Olson an amount equal to two times the amount of that client’s most recent twelve month billings. He must also notify the firm of his relationship with these clients in writing, and if Coffman failed to notify Olson of his intent to perform services for prior employees, the amount due to Olson shall be three times that client’s most recent twelve month billing.

Coffman terminated his employment with Olson on September 1, 2006 and formed his own accounting Limited Liability Company soon after. Seventeen of his clients terminated their relationship with Olson and hired Coffman to perform accounting services. Coffman did not notify or compensate Olson, and Olson soon thereafter filed suit alleging breach of the non-compete agreement.
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Recently, the Indiana Supreme Court decided that a business that loses customer traffic due to a State highway expansion project is not entitled to compensation.¹ In State of Indiana v. Kimco of Evansville, Inc., the State took, by eminent domain, a strip of land in front of a shopping center to expand a state highway.² As a result, southbound drivers could not longer access the shopping center through one of the main entrances and the shopping center lost the ability to widen or change the main entrance in the future.³ The State paid the shopping center for the strip of land, but refused to compensate the shopping center for “consequential damages” resulting from the reduced customer flow.⁴

The Court held that under Indiana law, the physical taking of the strip of land and the State’s “coincident roadway improvements” were two distinct governmental actions.⁵ In this case, the reduction in customer traffic to the shopping center did not qualify as a taking.⁶ The Court acknowledged a compensable taking would have occurred had the state project highway completely eliminated all points of access to the shopping center.⁷ However, in this case, the highway project did not eliminate access to the main entrance for northbound drivers and there was another access point for southbound drivers.⁸ Finally, the Court explained that commercial property owners do not have property rights in the “free flow of traffic” past their properties nor do they have a right to “unlimited access” to adjacent property at any point along a State highway.⁹ Thus, the State’s “coincident roadway improvements” that reduced customer flow and revenues to the shopping center did not constitute a compensable taking.¹⁰

Erin Casper Borissov was an associate (now partner) at Parr Richey Frandsen Patterson Kruse LLP, with offices in Indianapolis and Lebanon practicing in the areas of energy and telecommunications law and corporate law.