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Subject:
Non Compete Clause and Determining Damages
Category: Relationships and Society > Law Asked by: theredcloud-ga List Price: $50.00 |
Posted:
07 Oct 2004 12:15 PDT
Expires: 06 Nov 2004 11:15 PST Question ID: 411643 |
I am a memeber in an LLC. Our Operating Agreement consists of a strict non compete clause. It states that if one of members violates this clause, the partners could seek a restraining order to stop the violating business actvity, as well as seek damages. My question is: How does a judge detmermine damages? What is the process the judge goes through when making this determination? Thank you. |
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There is no answer at this time. |
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Subject:
Re: Non Compete Clause and Determining Damages
From: ipfan-ga on 07 Oct 2004 13:57 PDT |
It depends a great deal on the state in which you live and that state's case law regarding non-compete clauses. But in general, damages for breach of contract are determined by the value of the opportunity that was lost by the plantiff as a result of defendant's (your) breach. For example, if you breach the non-compete and as a result the LLC is deprived of $10,000 in revenue, that's how much the damages would be. Damages cannot, however, be speculative and must be supported by evidence. In other words, the LLC must show that it actually suffered quantifiable losses as a direct and proximate result of your breach. |
Subject:
Re: Non Compete Clause and Determining Damages
From: ipfan-ga on 07 Oct 2004 14:04 PDT |
Query: does the operating agreement have a liquidated damages clause? Many times when damages are difficult to quantify (like these would be, I imagine), the parties agree in the contract that in the event of breach the damages are already determined to be some dollar amount, called "liquidated damages." If that's the case, then all the judge needs to do is find that you did breach the contract by competing, and then he/she simply awards plaintiff the amount of the liquidated sum stated in the contract as damages. |
Subject:
Re: Non Compete Clause and Determining Damages
From: expertlaw-ga on 10 Oct 2004 10:02 PDT |
(Assuming the clause was otherwise valid, the judge would also have to find that the amount designated in a liquidated damages clause was reasonable. That is to say, a liquidated damages clause is supposed to approximate what actual damages would be, as opposed to being a punitive provision.) |
Subject:
Re: Non Compete Clause and Determining Damages
From: ipfan-ga on 11 Oct 2004 08:18 PDT |
Yes, and this is why most liquidated damages clauses contain language that says, in substance, "The parties agree that this liquidated sum is a fair, fully negotiated approximation of damages to [party A] occasioned by [party B's] breach, and further agree that such liquidated sum is imposed in lieu of quantification of actual damages and is not imposed as a penalty or other forfeiture." |
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