In a 17 May 2011 article, Crain’s Chicago Business reported that Sears Holdings Corporation sued its erstwhile Senior Vice President Nicholas P.M. Coe to enjoin him from working for its perceived direct competitor, Limited Brands, Inc. Mr. Coe ran Sears’ Lands’ End business unit. At Limited Brands, Inc. Mr. Coe serves as CEO of Bath & Body Works Brand Management Inc.
According to Crain’s, Mr. Coe had previously filed his own suit seeking to invalidate the non-compete provision on the usual legal grounds of being unreasonable and overly broad. What is interesting about Mr. Coe’s non-compete provision is that Limited Brands, Inc. apparently was listed as a company for which he could not work for at least a year.
Three things to note from this exchange of lawsuits over a non-compete provision: A) An executive should consult an attorney to analyze his non-compete agreement for potential breach prior to his accepting a new position; B) Executives and their new employers are now more willing to challenge non-compete provisions through litigation; and C) Spurned old employers often will seek to enforce non-compete agreements through litigation.
Whether a non-compete agreement will be upheld depends heavily on which state’s law applies to the contract and the factual circumstances of the particular employment situation.
Meanwhile, Sears lost $170 million in the first quarter of 2011. This amount translates into a loss of $1.58 per share.