## Facts

- Data Management, Inc. employed James H. Greene and Richard Van Camp and required each to sign an employment agreement containing a covenant not to compete.
- The covenant barred the employees, for five years after termination, from competing with Data Management anywhere in Alaska or being associated with any similar business in Alaska without written consent.
- After their employment ended, Data Management alleged Greene and Van Camp began providing computing services to some of Data Management’s customers.
- Data Management sued for breach of the covenant and sought a preliminary injunction to stop Greene and Van Camp from rendering computing services to twenty-one named individuals.
- The superior court initially granted a preliminary injunction.
- The superior court later granted summary judgment for Greene and Van Camp, ruling the covenant was not severable and therefore wholly unenforceable.
- Data Management appealed.

## Issues

1. Whether an overly broad covenant not to compete may be judicially modified to make it enforceable.
2. Whether any judicial modification is conditioned on the employer proving the covenant was drafted in good faith.

## Decision

- The Alaska Supreme Court rejected the trial court’s categorical treatment of the noncompete as wholly unenforceable solely because it was overbroad and nonseverable.
- The court adopted a “reasonable modification” approach: courts may alter an overbroad noncompete to render it enforceable if it was drafted in good faith.
- The court placed the burden on the employer to prove good-faith drafting.
- The court remanded for the superior court to determine (1) whether Data Management drafted the covenant in good faith and, if so, (2) whether the covenant can be reasonably modified and enforced.

## Legal Principles

- An overbroad covenant not to compete may be enforced as modified if the covenant can be reasonably altered and was drafted in good faith.
- If a reasonable alteration would make the restriction lawful, the court should alter and enforce it unless the covenant was not written in good faith.
- The employer bears the burden of proving good faith in drafting the restraint.
- Courts should evaluate reasonableness and potential modification by considering factors such as time and geographic scope limits, the employee’s customer relationships, access to confidential information, proportionality of employer benefit to employee burden, and whether the restriction effectively bars the employee’s means of support.
- Courts should neither automatically void every overbroad noncompete nor mechanically “blue-pencil” by deletion only; instead, they may reshape terms to protect legitimate employer interests while avoiding unlawful restraint, subject to the good-faith limitation.

## Conclusion

The Alaska Supreme Court held that overbroad employee noncompetes are not automatically void, and may be judicially modified and enforced when the employer proves the covenant was drafted in good faith; the case was remanded for findings on good faith and the feasibility of reasonable modification.


Data Mgmt., Inc. v. Greene, 757 P.2d 62 (Alaska 1988)