## Facts

- Primary Investments, LLC (formerly Primary Prep Academy, LLC) owned and operated a childcare facility; its members/managers were Marguerite O’Brien and her two daughters.
- N & N Holdings, LLC negotiated to buy the childcare business’s assets, and the parties executed an Asset Purchase Agreement (APA) on March 20, 2008.
- The APA identified Primary Investments as the seller and N & N Holdings as the buyer; the O’Briens did not sign the APA in their individual capacities.
- The APA included a noncompetition clause providing that “neither [the seller] nor its agents” would solicit clients for one year and would not open a childcare facility within 10 miles of the sold business.
- After closing, N & N Holdings owned the assets and Wee Tender Care III, Inc. operated the childcare facility.
- In 2010, the O’Briens formed East Cobb Children’s Academy, LLC and opened a new childcare center within 10 miles.
- The buyers and operator sued for breach of the noncompetition clause and injunctive relief; defendants counterclaimed for rescission of the APA based on fraud or mutual mistake.
- The trial court granted partial summary judgment for plaintiffs on breach of the noncompete and granted summary judgment against defendants on rescission.

## Issues

1. Whether the APA’s noncompetition clause, binding the seller and its “agents,” imposed enforceable noncompete obligations on the O’Briens and their new LLC when the O’Briens signed only in a representative capacity and were not named as contracting parties.
2. Whether defendants produced sufficient evidence of fraud or mistake to avoid summary judgment on their rescission counterclaim.

## Decision

- The Court of Appeals affirmed in part and reversed in part.
- It reversed the grant of partial summary judgment imposing noncompete breach liability on defendants.
- It affirmed summary judgment for plaintiffs on defendants’ rescission counterclaim.

## Legal Principles

- LLC members/managers who sign a contract solely in a representative capacity are not personally bound absent clear, express language imposing individual obligations or a separate personal commitment.
- Contract language referring to an entity and its “agents” does not, without more, create an independent personal covenant binding those agents as nonparties.
- Restrictive covenants are enforced according to their clear terms; courts will not expand a noncompete to bind individuals who did not plainly agree to be bound.
- Rescission for fraud requires evidence of a material misrepresentation (or actionable concealment), reasonable reliance, and resulting injury; conclusory allegations or matters discoverable through diligence are insufficient at summary judgment.
- Rescission for mutual mistake requires a mutual mistake of fact sufficient to justify undoing the bargain; disagreement about a contract’s effect or post hoc dissatisfaction does not establish mutual mistake.

## Conclusion

The court held that the APA’s noncompete clause did not unambiguously impose personal noncompetition duties on the LLC’s members who signed only for the LLC, so summary judgment on noncompete breach liability was improper, but defendants failed to show evidence supporting rescission for fraud or mutual mistake, so summary judgment denying rescission was proper.


Primary Invs., LLC v. Wee Tender Care III, Inc., 323 Ga. App. 196 (2013)