The Supreme Court of Ohio reconsidered and reversed in part its May 24, 2012 decision, Acordia of Ohio L.L.C. v. Fishel (Acordia I), that a surviving company in a merger may not be able to enforce employees’ noncompete agreements if the agreements failed to contain an assignment clause. The Court issued a partial correction of the lead opinion in Acordia I because the opinion was based on a misreading of precedential case law regarding the survivorship of a company post-merger.
In Acordia of Ohio L.L.C. v. Fishel (Acordia II ) [pdf], the Court reaffirmed the long-standing rule that employee noncompete agreements transfer by operation of law to the surviving company after merger. Reversing their decision in Acordia I, the Court held that Acordia may enforce the employee noncompete agreements as if it had stepped into the shoes of the original contracting companies, provided that the noncompete agreements are reasonable under the circumstances of the case. An assignment clause was not needed for the surviving company to have the power to enforce the noncompete agreements, because an absorbed company in a merger becomes a part of the resulting company following a merger.
Acordia II is consistent with Ohio’s previous precedent that a surviving company in a merger steps into the shoes of the company merged out of existence and that by operation of law, and in the absence of explicit contract language to the contrary, the surviving company is vested with all agreements, including noncompete agreements.
For more information on essential provisions to enforce noncompete agreements or the court’s decision, see the Alert published by Squire Sanders.