Facts
- Southeast Medical Products, Inc. (SMP) employed William C. Williams under an employment agreement containing a covenant not to compete.
- An addendum executed in August 1989 modified the covenant, stating it was effective “for a period of two (2) years effective the date of this addendum.”
- Williams’s employment ended in August 1989.
- Under the addendum’s terms, the noncompete period ended in 1991.
- In 1997, Williams began activities that SMP alleged competed with SMP’s business.
- SMP sued Williams and, in Count Four, alleged breach of the covenant not to compete; SMP attached the employment agreement and the August 1989 addendum as exhibits to the complaint.
- Williams moved to dismiss Count Four for failure to state a cause of action, arguing the attached addendum showed the covenant had expired before the alleged 1997 competition.
- The trial court dismissed Count Four with prejudice, concluding the covenant expired in 1991.
Issues
- Whether a claim for breach of a covenant not to compete is subject to dismissal when the complaint’s attached exhibits unambiguously show the covenant expired before the alleged competitive conduct.
- Whether, on a motion to dismiss, the plain language of an exhibit attached to the complaint controls over contrary or inconsistent allegations in the pleading.
Decision
- The appellate court affirmed the dismissal with prejudice of Count Four.
- The court held the August 1989 addendum unambiguously limited the noncompete covenant to two years from the addendum’s date, expiring in 1991.
- Because the alleged breach occurred in 1997, the complaint failed to state a cause of action for breach of the covenant not to compete.
- The court applied the rule that an attached exhibit is part of the pleading, and when an exhibit negates the claim, the exhibit’s plain terms control and can support dismissal.
Legal Principles
- On a motion to dismiss, factual allegations are taken as true, but documents attached as exhibits are treated as part of the pleading for all purposes.
- If an attached exhibit’s plain language negates the cause of action, the exhibit controls over inconsistent allegations and may justify dismissal for failure to state a claim.
- A noncompete breach claim fails as a matter of pleading when the operative contract documents attached to the complaint show the restrictive period ended before the alleged competitive conduct.
Conclusion
The court affirmed dismissal of the noncompete count because the plaintiff’s own attached addendum fixed a two-year restrictive period beginning in August 1989, making a 1997 breach allegation legally insufficient; attached exhibits that negate a claim control at the motion-to-dismiss stage.