Charlie Chaplin in Modern Times
Andrew Archer sold a wholly-owned company to Bulldog Holdings. Part of the deal, from Archer’s perspective, was that Bulldog Holdings would continue to sell machines that included Archer’s retained intellectual property and Bulldog would be obligated to pay royalties back to Archer upon sale of the machines. Another part of the deal, of value to Bulldog Holdings, was Archer’s promise not to compete with the business that Bulldog bought from Archer.
As it turns out, after the sale, Bulldog sold no Archer machines and apparently has no intention of selling any.
Now Archer wants out of the non-compete and wants money to make up for his disappointed expectation of an income stream from Bulldog’s sales of Archer’s machines.
Bulldog seeks dismissal of many of Archer’s claims. The case is pending before U.S. District Court Judge Patrick J. Schiltz (D. Minn.). (Here is Archer’s response to Bulldog’s arguments for dismissal.)
Notably, Archer does not make a claim of fraud. From the allegations, one might have conjured up a story in which Bulldog “tricked” Archer by getting him to commit to a non-compete and induced him by creating a mistaken impression that Bulldog would continue to peddle Archer IP. However, as all civil litigators know, the pleading standard for fraud is a high, sometimes impassable, hurdle. Maybe that’s why Archer’s lawyers did not go the fraud route.
We’ll see how Judge Schiltz cracks this nut but, from where we sit in the peanut gallery, Archer’s position does not seem very strong. Bulldog simply made no promise to sell Archer machines with Archer IP. It did pay a significant amount of money for the asset purchase, though, and for the Archer’s agreement not to compete.
Finally, Archer argues that Mr. Archer, personally, received no consideration for the transaction because his wholly-owned company, Archer, got the money for the sale, not Mr. Archer himself. Therefore, he argues, the non-competition agreement is void for “lack of consideration.” We’ve not researched this argument but it seems to be quite a stretch. As Bulldog points out, such a reading of the asset purchase agreement would make the non-compete illusory.