Data Management, Inc. v. Greene

757 P.2d 62 (Alaska 1988).

Dawson, p. 179


Facts: The plaintiff fired two employees.  The defendants tried to perform computer services and the plaintiff moved to enjoin them from doing so based on a five-year non-competition agreement the defendants signed.  The trial court struck down the non-competition agreement as too broad.  The plaintiff appealed.


Issue: Which approach should the court take in dealing with overly-broad covenants?


Rule: There are three approaches to overly-broad covenants:


1.     Strike down the offending clauses in full as unenforceable.

2.     Make the clause enforceable by selectively striking “words” and “parts”.

3.     “Reasonably” alter the covenant to make it enforceable, if it is found to have been written “in good faith”.


Analysis: The trial court adopted the first approach, but the majority approach is the third one, and that is the one adopted by this court.  The court basically argues that we shouldn’t throw the baby out with the bathwater.


Conclusion: The court remands the case for more information about the plaintiffs’ good faith and whether the contract could be altered to make the covenant reasonable.


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