U.S. Court Declines Enforcing BP Non-Compete Against Virginia Gas Station

Tuesday, July 27th, 2010 | Noncompete Litigation, Noncompetition Litigation

On July 15, 2010, the U.S. District Court for the Eastern District of Virginia ruled in the case of BP Products N.A. v. Stanley that British Petroleum’s covenant not to compete with a Virginia gas station was overly broad, and therefore unenforceable.  BP included the contested provision in the deed of a gas station it sold to the defendant, Telegraph Petroleum Properties, LLC (Telegraph), owned by Charles Stanley.  The non-compete provision restricts the property owner from selling gasoline, lubricants, and other chemicals or repairing automobiles unless the property is operated as a BP branded service station.  Stanley informed BP in April of 2009 that their fuel was too expensive and that he would purchase a competitor’s fuel. 

In granting summary judgment to Stanley, Judge Brinkema applied the Merriman calculus, stating “In considering the enforceability of restraints on trade, Virginia courts have typically focused on the reasonableness of the restraint . . . .” and whether or not it injures the public by its effect on trade.  Merriman v. Cover, 104 Va. 428, 51 S.E. 817, 819 (1905).  The non-compete provision fails both prongs of Merriman, because it unreasonably restricts Stanley from repairing automobiles, a market where BP does not compete, and “its language chills, and in fact, in this case, entirely halts, the competitive sale of goods to the public.”  Rather than removing the offensive language in the provision, the court ruled the entire non-compete provision unenforceable.  Click here for the full opinion.

Mr. Scott Oswald and Mr. Jason Zuckerman, principals at The Employment Law Group® law firm, wrote an article on non-compete litigation.

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