Your Non-Compete May Be Binding – Even After Death

Death non-compete noncompetition Alabama Employment Law
Non-competition agreements that are part of the sale of a business can be binding even after the death of the person is who is supposed to refrain from competition.

The old saying goes:  Nothing in life is certain but death and taxes.  Well, the Alabama Supreme Court just made sure that your non-competition agreement is certain — even after you die.  See Boyd v. Mills, No. 1190615, 2021 WL 1589331 (Ala. Apr. 23, 2021). At first blush, this seems like a ridiculous premise:  How can I compete with anybody after I’m dead????

On closer examination, it looks like the Supreme Court was just trying to reach a fair result.  In 2006, Thomas Batey sold his company, Batey & Sanders, to John Boyd for $2,136,631.62.  Boyd was supposed to pay that amount in 120 equal monthly payments starting on December 1, 2006.  Unfortunately, Batey died in April 2013 before the purchase price was paid-off.  Boyd continued to make payments to Batey’s estate until December 2013.  When he stopped, he still owed three years’ of payments totaling $640,989.36.  Boyd claimed that he didn’t have to pay the remainder because the non-competition agreement was a personal services agreement by Batey (the service being a lack of competition).  Since Batey’s death meant he could no long provide that service, Boyd thought he shouldn’t have to pay.

The Supreme Court addressed one issue:  “whether the buyers’ obligation under the noncompete survived Batey’s death.”  Thus, the real issue was not whether Batey was competing, but whether the buyer (Boyd) was still required pay.  And, under the particular facts of this case, the Court found that Boyd should continue payments even after Batey’s death.  In particular, the Court relied upon a decision from Georgia which held:  “when a noncompetition agreement ancillary to the sale of a business does not also require the seller to affirmatively provide services to the buyer, the essential benefit to the buyer is purchasing the business’s goodwill (as opposed to the seller’s expertise) … [s0] the seller’s death does not deprive the buyer of his benefit.”

So, upon closer examination, the Batey case is not focused on competition as much as doing-the-right-thing.  The main thing that Boyd bought in the transaction was the goodwill of Batey’s business.  He shouldn’t get that goodwill at a steep discount simply because of Batey’s death.

The Court left-open the possibility that it could reach a different result in a case where a non-competition agreement was connected to employment or specific skills of the seller.  So, there might be a more-important lesson to learn from the Batey case:  Parties negotiating a non-competition agreement with installment payments should include a provision that clearly states the obligations of the parties if either dies.