Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mo.: Breach of contract claim arising from failed acquisition attempt not dismissed on antitrust grounds, (Feb 20, 2014)

By Jeffrey May, J.D.

In a breach of contract action arising out of a waste disposal company’s unconsummated acquisition of a competitor, the federal district court in St. Louis has refused to decide on a motion to dismiss that the antitrust laws barred the complaining competitor’s claim against the potential acquirer for violations of their non-solicitation agreement (Christian Disposal, L.L.C. v. WCA Waste Corp., February 19, 2014, Sippel, R.).

Christian Disposal, L.L.C. (CDC) alleged that WCA Waste Corporation breached a non-solicitation clause contained in a “Confidentiality & Non-Disclosure Agreement” that the companies entered into as they contemplated the acquisition. WCA breached the non-solicitation clause by soliciting one of CDC’s existing customers, according to CDC.

In its motion to dismiss, WCA contended that the non-solicitation clause at issue was unenforceable because it violated federal and state antitrust laws. WCA suggested that the non-solicitation clause represented a division of customers between competitors at the horizontal level and was therefore a per se violation of the Sherman Act.

The rule of reason and not the per se rule would apply, the court ruled, since the non-solicitation clause appeared to be a necessary ancillary to the parties’ agreement to provide confidential information for use in due diligence related to the potential acquisition. However, given the fact-specific nature of determining whether the agreement violated the Sherman Act, the court decided that it would not be appropriate to resolve the issue of the reasonableness of the alleged restraint on a motion to dismiss.

For the same reasons, the court refused to decide whether the non-solicitation clause violated Texas antitrust law. Under the Texas Covenant Not to Compete Act, courts consider two questions when determining the enforceability of a covenant not to compete: (1) whether there was an otherwise enforceable agreement and, if so, (2) whether the covenant not to compete was ancillary to or part of that agreement. There was no question that the agreement was “otherwise enforceable.” Further, the non-solicitation clause supplemented the confidentiality agreement, and a company’s confidential information was an interest worthy of protection. In any event, the court concluded that it would be premature to consider whether the clause violated Texas law at the motion to dismiss stage of litigation.

This is Case No. 4:13 CV 2255 RWS.

Attorneys: M. Quinn Murphy (Summers Compton Wells LLC) for Christian Disposal, L.L.C. Francis X. Neuner, Jr. (Spencer Fane Britt & Browne LLP) for WCA Waste Corp.

Companies: Christian Disposal, L.L.C.; WCA Waste Corp.

Cases: Antitrust MissouriNews