Earlier this year, the Ohio Supreme Court, in a 4-3 opinion, held that a resulting, post-merger company could not enforce the employee noncompete agreements of the company it acquired in the merger. Upon a motion for reconsideration, the court determined, in a 6-1 opinion, that portions of its earlier opinion were “erroneous” and “require correction.” Acordia of Ohio, LLC v. Fishel, No. 2011-0163 (Ohio Oct. 11, 2012). The court found that it had misapplied earlier precedent when it reasoned in its initial opinion that the absorbed company ceased to exist following the merger and, therefore, its noncompete agreements with its employees were unenforceable absent express language in the contracts assigning the company’s rights to successors. In its modified opinion, the court held that the absorbed company is not completely erased from existence, but instead becomes part of the resulting post-merger company. Thus, the court concluded, the resulting company had stepped into the shoes of the absorbed company, and could enforce its noncompete agreements, notwithstanding the absence of any “successors and assigns” language in the contracts.
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Ohio Supreme Court reverses itself on post-merger non-competes
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