Non-Compete Agreement / Covenant Not to Compete

Our firm’s Illinois non-compete agreement litigation lawyers were pleased to note a ruling by the First District Court of Appeal that a doctor may not bring a lawsuit against his former business partner for breaching a non-compete agreement. Bisla v. Parvaiz, No. 1-07-1647 (Ill. 1st., Feb. 21, 2008), arose out of a soured employment arrangement between Dr. Virenda Bisla and Dr. Akhtar Parvaiz, both doctors in Chicago. Bisla hired Parvaiz as an employee in 1998, under an agreement specifying that Parvaiz would have the opportunity to become a 50% partner in Bisla’s medical company after three years, if he met certain criteria. It also specified that Bisla would provide medical insurance for Parvaiz and his family, and malpractice insurance in Indiana for Parvaiz.

Neither type of insurance was provided to Parvaiz, according to the First District. And when the three years in the agreement had passed, Bisla did not offer Parvaiz a 50% share of the company, as agreed. Instead, he offered Parvaiz a 45% share, spread over five years, and presented him with a new employment contract and stock purchase agreement. Bisla told Parvaiz that it was in his best interests to sign these papers, but Parvaiz refused because they did not comply with the original employment agreement. He continued working for Bisla’s company for the next five years, but believed that they were using an oral contract since the first employment contract had expired.

The next year, Bisla’s company was temporarily dissolved by the State of Illinois for nonpayment of a filing fee. Bisla did not tell Parvaiz about the dissolution, which automatically terminated their employment agreement. However, in 2005, Parvaiz began working for a competing medical company. When Bisla found out, he demanded a share of the proceeds, then fired Parvaiz and eventually brought a lawsuit seeking to stop him from competing. Parvaiz countered that he believed the agreement was over. The trial court agreed, finding that their agreement was invalid because the employment agreement was breached by both the temporary dissolution and Bisla’s refusal to make Parvaiz a partner. It denied the injunction Bisla sought against Parvaiz, and Bisla appealed.

As Chicago business trial attorneys with substantial experience in disputes involving shopping centers, our firm was interested to see a recent Fourth District Court of Appeal decision allowing a shopping center to go through with its lease despite a restrictive covenant in a land sale by its predecessor. In Regency Commercial Associates v. Lopax, 4-06-0332 (May 4, 2007), the appeals court upheld the trial court’s ruling that the business at issue was not covered by the covenant, and that starting the lease while the case was still pending did not bar it from requesting a declaratory judgment.

Regency Commercial Associates, LLC and Lopax, Inc. are companies that own neighboring parcels of land in Savoy, Ill. The prior owner of Regency’s land, Arbours Development Limited Partnership, sold Lopax its land, which Lopax then leased to a Kentucky Fried Chicken franchisee. The sales contract between Lopax and Arbours restricted Arbours from allowing another “fast-food restaurant … or restaurant facility whose principal food product is chicken[.]” It also lists the types of businesses allowed, which include “casual dining.” Regency later purchased Arbours’ rights under the contract.

When Regency wanted to lease to a Buffalo Wild Wings restaurant, it negotiated with Lopax, arguing that the restaurant is “casual dining” and not fast food. Lopax disagreed, saying it believed the contract restricts any restaurant that primarily serves chicken. Regency filed for declaratory judgment, asking the court to find that Buffalo Wild Wings is not fast food and that the covenant restricts only fast-food restaurants that primarily sell chicken. Finding that there was a genuine issue of material fact to try, the court denied Lopax’s motion to dismiss.

Articles Posted in Non-Compete Agreement / Covenant Not to Compete

Material Breach of Contract Invalidates Covenant Not to Compete, Illinois First District Rules

Restrictive Covenant Does Not Apply to Shopping Center Lease, Fourth District Decides