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Matlick v. Morrow

A-7035-97T2 (N.J. Super. App. Div. 1999) (Unpublished)

EMPLOYER-EMPLOYEE; NON-COMPETITION—An employer can forfeit its right to enforce a restrictive employment covenant if it is in material breach of the agreement, including a breach of its implied covenant of good faith and fair dealing.

An otolaryngologist employed another otolaryngologist with the apparent hope that their relationship would develop into a partnership. The employment agreement contained a restrictive covenant prohibiting the employee from practicing that speciality in one county and four specified municipalities in a second county for a two-year period following termination of the agreement. In an action by the employer to enforce the restrictive covenant, the lower court found that the employer had forfeited that right to enforce the covenant because of its material breach of the employment agreement, in particular by conduct that violated the covenant of good faith and fair dealing inherent in every contract. The lower court also concluded, as an alternative rationale, that even if the covenant were otherwise enforceable, it was subject to the three-prong test prescribed by Karlin v. Weinberg, 77 N.J. 408 (1978). The Appellate Division refused to upset the lower court’s fact finding and found no fault with the lower court’s legal reasoning.


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