While you were married, you and your ex were running a family business together. You win the business in your divorce, but your ex now opens a competing business right next door and is siphoning away customers from you.
Sound like an episode of Two and a Half Men? What’s a business owner to do?
Well according to a recent Massachusetts decision, a Probate Court judge can order the ex-spouse to not compete against you.
Here’s what happened: a husband and wife ran a feed and grain store while they were married. The wife’s a veterinarian. In their divorce, the judge awards the business solely to the husband.
The story gets a little sketchy from there: the trial judge found that the husband’s landlord then evicted his business from the premises. Then, the wife, with the help of her parents, opened up a competing feed and grain store in the exact same location.
In the divorce, the husband asked the judge to prohibit his ex-wife from running the competing business arguing that the value of the family business awarded to him was being diminished by the ex-wife’s activities. But, the judge refused the request.
The Appeals Court cried “foul!” They held that a divorce court judge can order an ex to not compete in the family business. The reasoning has to do with the ‘good will’ of the business which is considered a valuable asset in the going concern. If the judge awards a family business to one spouse, then the judge can make an order that will protect the value of that business by prohibiting the other spouse from directly competing against it – a non-compete agreement.
Of course, such an order has to be reasonable and no broader than necessary to protect the good will, which means that the non-compete can’t be so strict and over reaching that it prohibits the ex from making a living.
This case is a first of its kind in Massachusetts and some divorce lawyers find the decision shocking. However, if you’re awarded the family business in a divorce, you’ll be happy to know that it’s possible to prevent the ex from opening up right next door to you.