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Our Blog Reality Check: Costs of Noncompetes: Action vs. Inaction

Reality Check: Costs of Noncompetes: Action vs. Inaction

I have found myself explaining to prospective clients more and more: “Even if you win, you lose.” The cost of defense of a noncompete lawsuit can vary greatly and costs in South Carolina will generally be less than in New York. But, I would think that $10,000 to $20,000 would be normal for my clients. I have been successful for a client that paid me $2500, but that is rare. I have had one case resulted in $40,000 in fees, and I undercharged by about $25,000 (meaning that the legal expenses incurred should have been $65,000). A $100,000 to defend a contentious noncompete case is not out of the question, although it would not be typical. But, even so, noncompetes act as a new business tax, and lawyers are the tax collectors.

There have been cases where opposing counsel’s fees have come to light, and I can honestly say that I have found that larger firms bills are about twice what I have billed my clients.

I have found a couple of strategies that help, particularly in state court: I have been more successful in getting quick resolutions for a reasonable fee when my clients take the initiative. For a flat fee, I will file a declaratory judgment asking the court to declare a non-compete void. I choose the two or three clearest arguments with the least factual dispute. I file a motion for summary judgment 30 days after initiating the action, and in Greenville County, can probably get a 1 hour hearing in 60-90 days. Prepare an affidavit. Make the arguments. Wait 10 to 15 days for a decision.

(Note: The flat fee depends on the complexity of the case, but generally I can get a quick up or down vote on a non-compete for $10,000 or less. My experience is that lost income resulting from a non-compete can be $25,000 to $50,000 a year for some employees. Consider 2 or 3 years. And then, it is unlikely that your market value has kept up with inflation since your noncompete. So, the cost benefit of spending $20,000 to beat a noncompete can often be easily rationalized if you are focused on value not just cost. Of course, each case and client is different.)

So, it is important to find out the costs of action. But, what are the costs of inaction? You should make your decision based upon the value that representation offers. At minimum, it is usually worth a consultation ($265) with an attorney to get help doing a cost-benefit of beating your non-compete.

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