Legal Dopers: Question re Non-Competition Clauses

Factual Questions
1

This isn’t homework, and I have no particular dog in the fight aside from liking one of the parties better than the other. This is not a request for legal advice, and none of you are my lawyer. :wink: I’m iffy on which forum this would be in, as it seems like it would have a fairly concrete answer but will boil down to opinion until it’s actually litigated or settled. If it’s inappropriate, please feel free to move it.

Brock Lesnar negotiated a release from his WWE contract. I’m not entirely certain on the date, but his last match with them was at Wrestlemania, in Spring 2004.

The non-competition clause he’s under has been reported in the various dirtsheets, which tend to reasonably accurate, as preventing him from appearing as a wrestler for any promotion in the world (there’s a very popular Japanese wrestling market in which Lesnar, as an enormous American, would fit nicely as a traditional gaijin heel) or from competing in mixed martial arts until June 30, 2010. This strikes me as impermissibly broad for several reasons.

[ul][li] The Japanese promotions don’t market to the United States and thus seem to fall outside “competition.” Japanese wrestling mostly enters the American market in the form of bootlegged tapes, although there are, I believe, some resellers in the States who deal in legit Japanese DVDs. Thus, WWE isn’t protecting itself by preventing Brock from working for a Japanese promotion, although WWE does make occasional tours to and sell merchandise in Japan.[/li][li] The restriction on MMA competition goes beyond Lesnar’s job responsibilities in WWE. He was never involved in genuine competition, only worked/fixed matches.[/li][li] The time restriction seems extremely long. It’s not relevant to my knowledge, but most WWE releases involve 90-day non-competition clauses. Lesnar will likely make an argument that the restriction will ruin his image as a young lion (really the only character he had), although I don’t find that persuasive considering the character evolution inherent in pro wrestling and that most wrestlers change characters many times over the course of a career.[/ul][/li]
Lesnar reportedly commenced litigation. My working understanding, which I’ve pieced together from a few FindLaw articles, is that if the court finds the clause unenforceably restrictive, it will likely blue-pencil it to limit the length, the geographical restriction, the job-duties restriction or some combination of those. I also saw a few articles indicating that anything over a year or so tends to raise eyebrows. If that’s true, is it likely that Lesnar will prevail? What are the likely measures the court will take for reduction?

2

Not enough information.

It depends on which state’s laws govern the contract. (Which may be determined by a clause in the contract itself, or if there is no such clause, by the “locus” of the contract.)

Generally speaking, covenants not to compete are regarded as contracts in partial restraint of trade, and as such are viewed with disfavor by the courts. This means that they must be drafted narrowly, to protect the employer from unfair competition. A clause which is overly broad as to length, time, and/or the type of employment activities banned may be found invalid.

The courts in some states will “blue pencil” an overly-broad non-compete clause (that is, they will narrow its terms and enforce it as revised). In other states, the courts will not take it upon themselves to rewrite an overly-broad clause, but will strike the clause from the contract altogether.

Regarding the specifics of your question, the courts of my own state have held that a geographic restriction must have some relationship to the geographic territory in which the employee operated for the former employer. Thus, if Brock Lesnar wrestled worldwide, or was marketed worldwide by WWE it is conceivable that a worldwide restriction (limited in time and as to scope of prohibited activities) might be deemed valid. On the other hand, if Lesnar never wrestled in Japan and the WWE was never marketed in Japan, the WWE would have a harder time arguing that a restrictive covenant preventing Lesnar from working there is reasonable.

A six-year prohibition would seem to me to be at the outer edges (or perhaps beyond) what a court would regard as valid, though I believe there are examples of restrictive covenants of that length being enforced. More typical would be a 2 or 3 year restriction.

One factor in some states is whether the parties specifically negotiated the terms of the covenant not to compete. It sounds like this clause was negotiated as part of a buy-out, and as such might be viewed more favorably by the court (i.e. more likely to be enforced) than a clause which was presented as a non-negotiable part of an employment contract at the outset of employment.

In a similar vein, in my state, covenants not to compete which are part of a sale of a business are viewed more favorably (and are more likely to be enforced even when broadly worded) than covenants which are part of an employment contract. A buyout of an employment contract seems to me analogous to the sale of a business in this regard at least, since the parties were negotiating from a more equal position than would be the case in an initial contract of employment.

Sorry. Not much help there. Too many variables for a definitive answer. (And a definitive answer is never available in these sorts of cases anyway, unless there is a case in the jurisdiction at hand which dealt with a virtually identical clause in virtually identical circumstances. If there is no such precedent, the court has a lot of leeway in deciding what is reasonable.)

3

Thanks for raising some other issues! Gives me something to think about.

4

Nice job, Spoke. I agree with your analysis. (Or, said another way, what you say would be correct in my state, too.)

The point you make about the restriction being specifically negotiated (as part of a buy out) could be crucial. Even with that, though, a judge may have a hard time finding that the employer has a protectible interest in preventing the employee from working overseas (Japan, in the OP’s example), unless the WWE has a Japanese market.