Palmetto Mortuary Transport v. Knight Systems, Inc.

Knight Systems, Inc., owned and operated by Buddy Knight, engaged primarily in the mortuary transport business until 2007. Knight Systems entered into an asset purchase agreement with Palmetto Mortuary Transport, Inc., a business owned by Donald and Ellen Lintal. Pursuant to the agreement, Knight Systems sold various tangible assets, goodwill, and customer accounts (including body removal service contracts with Richland County, Lexington County, and the University of South Carolina) to Palmetto in exchange for a purchase price of $590,000. The agreement also contained an exclusive sales provision that obligated Palmetto to purchase body bags at specified discounted prices from Knight Systems for ten years, and a non-compete clause. At issue in this case was a Richland County-issued request for proposal (RFP) seeking mortuary transport services from a provider for a period of five years. At that time, Palmetto still held the services contract with Richland County as a result of the Agreement. Palmetto timely submitted a response to the RFP. One day before responses to the RFP were due, Buddy accused Palmetto of breaching the agreement by buying infant body bags from other manufacturers in 2008. After this telephone conversation, Buddy consulted with his attorney and submitted a response to the RFP. After the RFP deadline passed, Buddy contacted an official at the Richland County Procurement Office, seeking a determination that Knight Systems be awarded the mortuary transport services contract because it was the only provider of odor-proof body bags required by the RFP. Although Palmetto asserted its response to the RFP contained the lowest price for services and had the highest total of points from the Richland County Procurement Office, Richland County awarded Knight Systems the mortuary transport services contract for a five-year term. Palmetto filed a complaint against Knight, asserting claims for breach of contract, breach of contract accompanied by a fraudulent act, and intentional interference with prospective contractual relations. A special referee ruled in favor of Palmetto, and Knight appealed. Knight argued the special referee erred in failing to find: (1) the geographic restriction in the parties' covenant not to compete was unreasonable and void; (2) the Covenant's territorial restriction was unsupported by independent and valuable consideration; (3) the Covenant was void as a matter of public policy; and (4) the Covenant became void after any breach by Palmetto. The Supreme Court found that the Covenant's 150-mile territorial restriction was unreasonable and unenforceable. Accordingly, the Court reversed and remanded for further proceedings. View "Palmetto Mortuary Transport v. Knight Systems, Inc." on Justia Law