Georgia Supreme Court to Review Appellate Decision in Atlanta Bread

ATLANTA (Blue MauMau) — The Georgia Supreme Court ruled this week that it will review the appellate court decision in the case of Atlanta Bread Company v. Sean Lupton Smith. David French, president of the International Franchise Association's government relations division, said in a release, "This case is important to preserving the franchise model because the lower court’s ruling, if allowed to remain as is, could render unenforceable the in-term restrictive covenants in the vast majority of franchise contracts for businesses operated in Georgia, including many of the most well-known and respected franchises in the world."

At the trial level, the court applied a very strict standard to in-term covenants and ruled that the Atlanta Bread non-compete was unenforceable. The Georgia Court of Appeals affirmed the trial court’s ruling. The IFA believed that the lower court was mistaken in evaluating the in-term restrictions under standards more appropriately applied to post-term limits. After it filed its first "friend-of-the-court" brief, the Georgia Appeals Court ruled to strike it on technical issues, saying IFA's central argument was based on the brief's attached documents, which were not part of the record. And secondly, that the remaining arguments rehash existing arguments, and circumvent the court's limitations on the number of pages, burdening the court and parties with a redundant brief.

But last July IFA filed another amicus brief requesting that the Supreme Court consider a review of Georgia's appellate court ruling that the non-compete restriction in the franchise agreement didn't align with Georgia law because it was too broad. In an interview, French said that the court "erred in crafting a novel interpretation of the reasonableness standard for in-term covenants not to compete.” But because the restriction did not have a territorial limit, the judge stated that the franchisee would have been in violation regardless of the location of his competing unit.  She added, "Nor did it restrict what the franchisee could do for the competition, so he could not have been so much as a janitor with a competing coffee shop."

Randy Edwards, Kilpatrick Stockton, representing Lupton-Smith, opposed Atlanta Bread's petition to the higher court, saying, "Atlanta Bread is, literally, the author of its own misfortune. Rather than even attempting to comply with Georgia Law, Atlanta Bread drafted and now seeks to take advantage of a restrictive covenant that has no territorial limit and that contains an overly broad and vague scope of restricted activity." Without a territorial limit, Edwards said the restriction is void and unenforceable under any level of scrutiny.

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Related reading:

• Appeals Court strikes IFA's amicus brief on non-compete clause (Franchise Times)
• Atlanta Bread Legal Fight Heats up (Franchise Times)
• Franchise Community Awaits Amicus Decisions on Appeal
• IFA Files Amicus Curiae in Georgia Court of Appeals