FleetCor Technologies, the global transportation conglomerate, has been sued for violating contract terms related to its acquisition of Hotel Connections (renamed TA Connections by FleetCor) in 2018. The lawsuit, filed by Flagler Holdings VI Beta Inc. and Ken Shanley in Delaware Court, alleges Airline Accommodations Solutions, LLC and Fleetcor Technologies Operating Company, LLC specifically violated the non-compete provisions that are part of the purchase agreement. The exact terms of the agreement are confidential, but the lawsuit claims that FleetCor’s actions have resulted in serious and ongoing professional and economic damages for Shanley. Additionally, violating a non-compete agreement can have long-term negative effects on shareholder value and corporate credibility.
Can a Seller Sue a Buyer for Violating a Non-Compete Agreement?
The short answer is, yes – but it is uncommon. Non-compete agreements are often used to protect a business buyer from loss of value by preventing the seller from immediately going into competition with the buyer. Typically, a non-compete agreement includes restrictions on future actions by the seller against using confidential business process information – customer lists, for example – or trade secrets of the business being sold or sharing such information and secrets with others. The restrictions cannot be overbroad and are usually. defined by time, geography, or tangible assets, though they can also apply to intellectual properties.
What is unusual in this court filing is that it is the seller, Flagler Holdings VI Beta, Inc and Ken Shanley, who are suing the buyer, Fleetcor Technologies Operating Company, LLC for breaching the non-compete agreement. Since the details of the actual filing are confidential, we can only assume in this case, due to the extraordinary nature of the claim, that Shanley’s allegations are specific and damaging enough to justify the action taken.
This will be an interesting case to follow as it wends its way through the court system.