The Court of Appeals horsed around a bit today in a case involving a local carriage operator’s non-compete agreement. The Court’s opinion in Sugar Creek Carriages v. Hat Creek Carriages, et al.—authored by Judge Frank Clement—is available here.
In 2017, Sugar Creek Carriages—a horse-drawn carriage company based in Nashville—filed a lawsuit seeking to force a former employee to “pony up” $2,500 in liquidated damages for breaching a non-compete contract. Sugar Creek also sought several thousand bucks from Hat Creek Carriages—its former employee’s new employer—for procurement of breach of contract as well. The employee was ultimately dismissed from the case, so the lawsuit proceeded on the procurement of breach of contract claim alone.
Unfortunately for Sugar Creek Carriages, its claim proved to be a bit much. Under Tennessee law, “[t]o establish a claim for procurement of breach of contract, a plaintiff must prove seven elements:
(1) There must be a legal contract;
(2) The wrongdoer must have knowledge of the existence of the contract;
(3) There must be an intention to induce its breach;
(4) The wrongdoer must have acted with malice;
(5) There must be a breach of the contract;
(6) The act complained of must be the proximate cause of the breach of contract; and
(7) There must have been damages resulting from the breach of the contract.”
Thus, even if all other elements are met, a defendant cannot be saddled with liability for procuring a breach of contract if the contract itself is legally void.
Here, Sugar Creek Carriages’ former employee had indeed signed a non-compete clause before switching companies. As a general matter, though, covenants not to compete are disfavored under Tennessee law both because they are in restraint of trade and because there is a strong public interest in having financially stable citizens who are not deprived of their right to earn a living. However, if there is a legitimate business interest to be protected, and if the non-compete agreement is reined in by reasonable time and territorial limits, then non-compete clauses are generally enforceable under Tennessee law. Additional factors that determine whether a non-compete clause can be enforced include:
(1) the consideration supporting the covenant;
(2) the threatened danger to the employer in the absence of the covenant;
(3) the economic hardship imposed on the employee by the covenant;
(4) whether the covenant is inimical to the public interest; and
(5) whether the time and territorial limits must be no greater than necessary to protect the business interest of the employer.
In the case at hand, Sugar Creek contended that its non-compete clause was enforceable because it had “a protectable business interest in the specialized and unique training” that it had provided its former employee. As far as protecting that interest, however, Sugar Creek put the cart before the horse by simultaneously advertising to the public at large that “anybody is welcome to pay to attend [its horse-drawn carriage] driving school”—not just its employees—and by stating further that anyone who did so would immediately be “prepared to start [their] own horse-drawn carriage business.”
Consequently, Sugar Creek’s central argument that it had provided “specialized and unique training” to its former employee turned out to be lame, and the Court of Appeals quickly put it out to pasture. Specifically, the Court explained:
“[Sugar Creek’s] advertisement for the same training program explicitly invites members of the public to compete with it.
Assuming the specialized training [Sugar Creek] provided . . . is protectable as a matter of law, the Noncompete Agreement fails to protect that interest because it attempts to shut the barn door well after the horses have bolted. As a consequence, the Noncompete Agreement is unenforceable . . ., which is also fatal to [Sugar Creek’s] claim for procurement of breach of contract.”
Thus, after roughly a year of legal jockeying, the case has finally come to a close. The Court of Appeals’ unanimous decision has officially forced Sugar Creek off of its high horse, and now unbridled by any fear of liability, Hat Creek Carriages can hit the hay.
 Buddy Lee Attractions, Inc. v. William Morris Agency, Inc., 13 S.W.3d 343, 354-55 (Tenn. Ct. App. 1999) (citing Dynamic Motel Mgmt., Inc. v. Erwin, 528 S.W.2d 819, 822 (Tenn. Ct. App. 1975)). See also Tenn. Code Ann. § 47-50-109.
 Hasty v. Rent-A-Driver, Inc., 671 S.W.2d 471, 472 (Tenn. 1984).
 Murfreesboro Medical Clinic, P.A. v. Udom, 166 S.W.3d 674, 678 (Tenn. 2005).
 Id. See also Allright Auto Parks, Inc. v. Berry, 219 Tenn. 280, 409 S .W.2d 361, 363 (1966).