To all of our accounting friends out there who are considering leaving their current employer, taking some clients, and competing in the face of a noncompete agreement……PLEASE READ THIS RECENT FEDERAL CASE FROM MISSOURI!

The case, decided this week by the Eighth Circuit Court of Appeals, is Mayer Hoffman McCann, PC v. Thomas Barton, et al., and it is a doozy!

In sum, several CPAs employed by Mayer Hoffman McCann, PC (MHM) left the firm and started their own accounting firm. All of the departing accountants had signed a noncompete agreement which provided they would not “directly or indirectly, solicit, attempt to solicit,
take away, attempt to take away, or otherwise interfere with [MHM’s] relationship with any customer (including any customer in [MHM’s] data base).”

Here is where the “almost too stupid to believe” part starts. On the effective date of their resignation from MHM, the departing employees sent a “Valued Clients” letter to individuals/companies they had worked with while employed with MHM advising of their departure from MHM and further stating:

“It is my hope that you will join me at our new firm. In order to make the
transition at this time I am providing you with a termination letter to end
your relationship with (the old company) and an engagement letter to begin a new
relationship with (the new company). It is imperative that we receive these letters
back as soon as possible.”

Guess What? The departing CPAs got hammered by the court. An injunction was entered prohibited the departing CPAs from working with/for MHM’s clients and awarded MHM $1,369,921 in liquidated damages. In my opinion the liquidated damage award was improper and excessive but I just don’t think the court could see past the obvious and blatant conduct by the departing employees.

This decision has many interesting issues specific to the accounting profession and is mandatory reading for everyone in the accounting profession dealing with a noncompete issue.

Dan Frith
Dan Frith

Dan Frith has over 25 years of experience representing individuals and families in cases of medical malpractice throughout Virginia. He has been named "Best Medical Malpractice Attorney" by Roanoker Magazine and is a member of the Million Dollar Advocates Forum. To speak with Dan, contact him by email at dfrith@frithlawfirm.com.