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Iowa Court Awards Attorneys' Fees to Employer that Established Enforceability of Non-Compete Agreement, Despite the Contention that No Breach Was Proved

June 2013

By: Joseph H. Laverty, Esq.

In Sutton v. Iowa Trenchless, L.C., the Iowa Court of Appeals upheld an award of attorneys' fees to an employer that successfully established enforceability of its non-compete agreement, even though the employer did not actually prove a breach of the covenant. The agreement in question prevented a former employee from competing within a 350-mile radius around Des Moines, for seven years, and provided for recovery of attorneys' fees. Four years after leaving Iowa Trenchless, the former employee filed an action to void the non-compete as unenforceable. Iowa Trenchless counterclaimed that the agreement was enforceable and that the former employee was breaching it. The court found that the agreement was valid and enforceable, but that Iowa Trenchless did not prove any damages, and therefore could not succeed on its counterclaim for the breach. Because Iowa Trenchless did not prove a breach of the agreement, the former employee asserted that it was not entitled to attorneys' fees.

The attorney fee provision in the agreement reads, "If I, Michael Jon Sutton, violate this non-compete agreement, Iowa Trenchless, L.C., may seek injunctive relief and/or any other remedy allowed by law, and collect from me reasonable attorneys' fees and costs incurred in enforcing the terms of this non-compete agreement." The court held that Iowa Trenchless was entitled to recover attorneys' fees for its expenses in defending the enforceability of the agreement, but not for those expended in trying to prove a breach.

This case demonstrates that Iowa courts are willing to enforce non-compete agreements and award attorney fees for their enforcement in a court of law. As always, success depends on a well drafted agreement and experienced legal counsel.

If you would need assistance with a covenant not to compete agreement please feel free to call Attorney Joseph H. Laverty at (563) 333-9102, email jolaverty@wesselssherman.com, or contact any of the other attorneys at Wessels Sherman.