Granite Buick GMC, Inc. v. Ray

Summary

The South Dakota Supreme Court affirmed the denial of injunctive relief sought to enforce non-compete agreements against former employees who established a competing automobile dealership. The court held that Adam Ray’s covenant was fraudulently induced and that McKie Ford waived its right to enforce Scott Hanna’s covenant. The court therefore did not reach the parties’ remaining arguments concerning the other affirmative defenses.

Holdings

1. Parol or extrinsic evidence is admissible to prove fraud in the inducement, even when the contract is clear and unambiguous.
2. Ray established fraudulent inducement because the evidence supported the finding that Granite Buick made, without intending to perform, a promise that the covenant would be enforced only against an employee making a lateral move.
3. McKie Ford waived its right to enforce Hanna's noncompete agreement when its sole shareholder, with knowledge of Hanna's intention to open a competing dealership, unequivocally indicated that he would not come after Hanna.

Questions Presented

1. Whether parol or extrinsic evidence could be considered in evaluating Ray's affirmative defenses to enforcement of the noncompete agreement.
2. Whether Ray established fraudulent inducement sufficient to defeat enforcement of his noncompete agreement.
3. Whether Hanna established waiver sufficient to defeat enforcement of his noncompete agreement.
4. Whether the circuit court clearly erred in its factual findings supporting the affirmative defenses.

Disposition

affirmed