SpeakerCraft co-founder and former president Jeremy Burkhardt has sued SpeakerCraft, and its parent company Nortek for attempting to enforce an invalid non-competition agreement and restrict his right to work. Having resigned from SpeakerCraft in April 2012, Burkhardt is now seeking to return to the industry he helped build over the last 25 years and has found Nortek illegally standing in the way.
“I gave Nortek 10 prime years of my life and worked hard to make SpeakerCraft the best performing brand in its portfolio,” Burkhardt says. “They made it difficult for me to remain with SpeakerCraft last year, and also want to limit my ability to compete. They can’t have it both ways.”
After selling SpeakerCraft to Nortek subsidiary Linear Corporation in 2003, Burkhardt agreed to remain the president of SpeakerCraft and continue to build the company, where he generated millions of dollars of profit for Nortek during his tenure. As part of the transaction, Burkhardt agreed to sign a non-compete and invest $1 million back into Nortek to show his commitment. The non-compete would remain in effect for five years or, if Linear Corporation had hired him, then for three years after Burkhardt terminated his employment from Linear Corporation. However, Burkhardt signed an employment agreement with SpeakerCraft, Inc., and Linear never employed him.
In 2009, notwithstanding millions in profit from SpeakerCraft, the management of Nortek decided to bankrupt the parent company and subsidiaries. In the bankruptcy, SpeakerCraft, Inc. ceased to exist and Burkhardt’s $1 million investment disappeared. To induce him to run the newly formed company, SpeakerCraft, LLC, the chairman of Nortek promised to repay the $1 million over time. Burkhardt contends that Nortek deliberately failed to live up to this promise and reneged on the payment after its former chairman stepped down.
Now Nortek is trying to use the expired non-competition agreement to stop Burkhardt from working, and it refuses to agree that it has expired.
“One of three things is true,” Burkhardt asserts,”1) The non-compete expired in 2008, five years after Linear bought SpeakerCraft, 2) the non-compete expired in 2009, when my employment with SpeakerCraft, Inc. ended, or 3) The non-compete is completely invalid under California Law. California law is tough and it was a poorly drafted agreement by Nortek.”
In California, non-competes are considered invalid as a matter of public policy, which strongly favors open competition. The only exception narrowly carves out non-competes in the context of acquisitions, and then only if reasonably limited to competition with the buyer.
“Nortek is making a mistake trying to prohibit my competing with them. Their case does not hold water and the longer they drag this out, the more likely they are going to suffer in the market as more of the facts of this case become public,” Burkhardt says. “They like to bully the little guy, but I won’t let them bully me.”
Lawsuit details can be found at the Orange County Court’s website(https://www.occourts.org/), case ID# 30-2012-00610919-CU-NP-CJC.