The South Carolina Supreme Court Speaks Out on Non-Compete Agreements

In response to a certified question, the Court in Stonhard, Inc. v. Carolina Flooring Specialists, Inc., held that a non-compete agreement that contains another state's choice-of-law provision cannot be reformed (or "blue penciled") to include a geographic limitation that is enforceable in South Carolina. To be enforceable in South Carolina, a non-compete agreement must be reasonably limited as to time and territory. In Stonhard the non-compete agreement at issue did not contain a geographical limitation of any kind, but a choice of law provision said that New Jersey law applied. Because New Jersey allows blue penciling, the plaintiff argued that the Court should reform the agreement by adding an enforceable geographic limitation. The Court declined to do so on the basis that although New Jersey's blue penciling law allows a court to rewrite unreasonable provisions, it does not allow a provision to be written into a covenant when such a provision never previously existed. The Court added that even if another state's law did allow a non-existent provision to be added to a contract, the application of such a law would violate the public policy of South Carolina.

(Contributed by Sandi R. Wilson)