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South Carolina Supreme Court Holds that Courts May Not "Blue-Pencil" Non-Competes

    Client Alerts
  • May 28, 2010

This week, the South Carolina Supreme Court reversed a trial court for inappropriately "blue-penciling" the parties' non-compete by reducing the scope of the agreement's geographic restriction.

In Poynter Investments, Inc. v. Century Builders of Piedmont, Inc., the plaintiff, a Greenville-based home remodeling company, moved for a preliminary injunction to enforce the non-compete that Rector signed when he sold his business to Poynter. According to Poynter, Rector was violating the non-compete by continuing to offer home remodeling services to customers in and around Greenville County.
The non-compete at issue contained three cascading geographic restrictions. First, it prevented Rector from competing anywhere within a 75-mile radius of Poynter's main office. Second, if that provision were held to be overbroad, it restricted Rector from competing in Greenville County and any of its adjoining counties. Third, if both prior provisions were held to be overbroad, it prohibited Rector from competing in Greenville County.

Without explanation, the trial court granted Poynter's motion for a preliminary injunction but only enjoined Rector from competing "within Greenville County, South Carolina and within an area encompassing fifteen miles in any direction from [Poynter's main office]." On appeal, Rector argued that the injunction should be dissolved because the Court improperly rewrote or "blue-penciled" the parties' geographic restriction.

The Supreme Court agreed, holding that "restrictions in a non-compete clause cannot be rewritten by a court or limited by the parties' agreement, but must stand or fall on their own terms." In 2005, the Court had held that it could not insert a geographic restriction to save an otherwise reasonable non-compete, and this decision confirms that South Carolina courts likewise may not narrow an overbroad restriction to render a non-compete enforceable.

Unfortunately, the Court did not have occasion to address whether parties may provide cascading restrictions like the ones in the non-compete at issue. Arguably, such restrictions are enforceable because South Carolina courts are generally amenable to severing unenforceable portions of an otherwise enforceable agreement. At the same time, a South Carolina court could conclude that lengthy cascading restrictions do not constitute a good faith effort to draft a reasonable limitation on the agreement's scope. Either way, the Poynter case serves as a reminder that, in South Carolina, employers must think seriously about the reasonable scope of any non-competes they draft because South Carolina courts will invalidate, rather than modify, restrictions that are deemed overbroad.