BLOGS: Womble Non-Compete and Restrictive Covenants Blog

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Saturday, August 23, 2008, 11:21 PM

No Non-Competes Allowed (in California, that is)

As of August 7, 2008, you have a better chance of getting cast opposite Tom Cruise in the next Mission Impossible movie than in having your non-compete agreement enforced in California. In Edwards v. Arthur Andersen, the Court struck down a non-compete agreement signed by a former Arthur Andersen tax manager and rejected the Ninth Circuit's narrow-restraint exception. The Court reiterated that only non-competes that fit the statutory exceptions (e.g., those entered into ancillary to the sale of a business) are allowed. The Court noted that the statutory bar to restraints on trade (Section 16600) is unambiguous and stated that, "if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect." If you have employees in California, you need to read this opinion.

Thursday, August 14, 2008, 1:42 PM

Aramtel Gets Injunction from Maryland Court Prohibiting Competition in Iraq in Noncompete Case

By Todd
The Wall Street Journal is reporting that Aramtel Limited, investor and financier in wireless communications systems internationally, today announced the issuance of an order by the Circuit Court for Howard County, Maryland, prohibiting its business partner in a major Wireless Local Loop (WLL) operation in Iraq from participating in a competing wireless venture in that country, in violation of a non-competition agreement. The order follows an earlier civil judgment for Aramtel in a related matter for over $28 million and requires Dr. Faisal Fadul, currently an owner and CEO of the competing venture, to end his involvement in that company.

Our question is: how does Aramtel think its going to obtain compliance in Iraq with the Maryland court's order?

The injunction issued by Circuit Court Judge Timothy J. McCrone prohibits Dr. Faisal Fadul (also known as Dr. Faisal Khalil Abbas Al-Fadhul), his wholly-owned companies Dynacorp Ltd. and TeckTel Ltd., and their agents from directly or indirectly engaging in any competitive wireless telecommunications business activities in Iraq in violation of a non-compete agreement signed by Fadul on behalf of himself and these related entities. Aramtel is currently embroiled in litigation with Fadul over the ownership and operation of the WLL authorization in Iraq granted to VitalTel (Khat-Al-Hayawi). In July 2007, Aramtel obtained a confessed judgment for $28,371,302 plus interest and costs in a related matter from the court. The court later blocked an effort by Fadul to revoke the order, and Aramtel is currently seeking collection on the judgment.

Non-Competition Restriction
Aramtel entered an agreement with Fadul in 2006 under which it owns 50% of a company started by Fadul, VitalTel (Khat-al-Hayawi), through a newly-formed UAE holding company, Moutiny Limited. The agreement, among other things, prohibits Fadul directly or indirectly from engaging in any competing wireless telecommunications business activities in Iraq unless he does so in conjunction with Aramtel.

Aramtel alleges that after it sunk millions of dollars into the VitalTel (Khat-al-Hayawi) venture, by way of loans and direct investment, Fadul became a major owner and operator of a competing venture known as "Al-Nakheel" - without the knowledge and consent of Aramtel. (Al-Nakheel operates under the trade name "Ommnea" in Iraq.) In fact, Aramtel believes that Fadul fraudulently transferred the VitalTel (Khat-al-Hayawi) operating authority to this competing company (Al-Nakheel). Judge McCrone's order prohibits Fadul, his companies and agents from engaging in any competing activities in Iraq in violation of his non-compete covenant with Aramtel, and specifically forbids any further participation by Fadul in the Al Nakheel venture. Although the court has not yet heard all of the evidence to be presented, Judge McCrone already expressed the view that the case involves fraud.

Exclusive Equipment Vendor
The operating agreement between Aramtel and Fadul also provides that any equipment purchased for VitalTel (Khat-al-Hayawi), or any other venture in Iraq by these parties, must be obtained through equipment vendor TWS. Fadul did not purchase network equipment for Al-Nakheel from the agreed vendor. Rather, Fadul has admitted to the court that he bought equipment from competing vendor Huawei Technologies. The preliminary injunction bans Fadul from purchasing equipment from Huawei or other competing vendors.
The legal actions taken in this matter were brought under the provisions of the operative contracts which identify Maryland law as controlling in disputes. The preliminary injunction was issued by Judge McCrone in a suit brought by Aramtel for breach of contract by Fadul and his companies.
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