A recently filed action in state court in Duluth, Minnesota illustrates the problems that can arise when a business divorce goes wrong. The case involves EmpowerMX, a Duluth-based maker of software for airlines. EmpowerMX filed a lawsuit against its founder, Barry Sinex, alleging that Sinex intended to violate the non-compete provision in his separation agreement with the company.

Sinex argues that the provision is unenforceable, not for the typical reasons relating to the geographic scope covered by the agreement or the activities proscribed, but instead because of a provision in the agreement that states that the non-compete provision becomes null and void if “holders of common stock are paid less than $1 per share for their stock.” Sinex’s claim is that the company has not been managed properly since his departure and that the value of the shares is now less than $1.

The company counters by arguing that the non-compete provision is rendered null only in the event that shares are actually sold for less than $1 in connection with a “sale, merger, consolidation or other significant change in ownership of the company.” EmpowerMX obtained a temporary restraining order against Sinex on or shortly after filing the complaint on December 17, 2007.