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Employment contract not included in assets transferred to new entity, therefore noncompete clause is not enforceable

The court held that defendant-Krebs's employment contract was not assigned to plaintiff-GLEI, and that even if it was, under its express language, the initial unauthorized assignment relieved Krebs of all liability and obligations arising under the contract (including those related to the restrictive covenant). Thus, it reversed the trial court's order granting GLEI summary disposition and remanded for entry of an order granting Krebs summary disposition. In 1999, Krebs entered into the contract with a separate corporate entity, GLE, which was dissolved in 2003. The restrictive covenant gave Krebs the option of either not practicing ophthalmology in a given region for 2 years "after the termination of his employment or paying GLE the greater of 40% of the gross receipts attributable to Krebs in his last year of employment with GLE or $200,000." The contract also contained a "Prohibition Against Assignment" clause limiting GLE's ability to assign the contract. GLE later assigned all of its assets to its only shareholder, S, who in turn executed a separate assignment transferring a list of assets received under the GLE assignment to the shareholders of another P.C. In 2001, that P.C. changed its name to GLEI. The court first noted that "Krebs's employment contract was arguably not included in GLE's 1999 asset assignment" to S. The assignment from GLE to S "transferred all 'right, title and interest' to 'any and all assets' of GLE. The parties did not identify GLE's existing employment contracts as 'assets' under the agreement." Referencing a dictionary definition of "asset," the court noted that "Krebs's employment contract did not have an identifiable monetary value and could not be applied to the payment of debts." Thus, GLEI did not show that the employment contract was included in the assets transferred by GLE to S, and later by S to GLEI. If the contract was never assigned to GLEI, GLEI had "no standing to assert a breach of contract claim against Krebs under the 1999 contract Krebs entered with GLE." Further, even if GLE assigned the contract to S, "the assignment was expressly prohibited by the employment contract." S, "as the individual shareholder of GLE at the time of the 1999 assignment, was not a 'P.C., limited liability company or partnership, or general partnership.' The employment contract provided that an unauthorized assignment by GLE relieved Krebs of all liability and obligations under the contract." The contract language was clear and unambiguous.


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