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Beit Midrash Series P'ninat Mishpat

Chapter 202

The Picture of Competition – part I

345
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Case: The defendant (=def) photographs weddings and events. A few years ago he sought to expand his business and offered the plaintiff (=pl), a beginner photographer, to be a manager and partner, on condition of pl’s commitment not to compete with him in the future. Pl refused but did start working for def as a hired photographer. Months later, def again asked pl to be his partner, and they started the arrangement on a trial basis. Over the next two years, pl played a dominant role in the business, especially in terms of dealings with clients and suppliers. The relationship soured when def bought, against pl’s advice, expensive equipment that complicated the work, and soon thereafter pl started working on his own. Def lost money and closed the business, blaming pl’s competition in a saturated market. Pl is suing def for pay that was due to him from the time he worked with def, and def is counter-suing, claiming that money pl received was based on false pretenses, as pl had committed not to compete with def. Pl said that the second time the matter of not competing did not come up, whereas def is sure it did and says that anyway it was clear from the past that this was a condition of his. Def also claims that as a partner in the business, pl should assume some of the business’ losses.
P'ninat Mishpat (576)
Various Rabbis
201 - Transparency in Window Making
202 - The Picture of Competition – part I
203 - Expert Witnesses – part I
Load More

Ruling: [Last time we concluded that def had to prove that he made the partnership conditional on future non-competition, which he did not succeed in doing.]
Def cannot demand money for training pl. Pl improved his photographical skills "on the job," which is normal for workers and does not obligate an employee to pay his employer, as def still gained from pl’s existing expertise.
Regarding def’s claim that pl’s competition effectively closed def’s business, the Shulchan Aruch (Choshen Mishpat 156:5) says that one cannot prevent another from opening a competing business. On the other hand, it is forbidden to take actions to attract set customers from an existing business (Chatam Sofer V, CM 79). Therefore, if def would continue his business, it would be forbidden (perhaps as a Torah-level prohibition) for pl to offer his services to people whom he met through his work for def (see Bemareh Habazak V, 120-121).
Pl left the business legitimately, as there were professional disagreements and there are no signs of trickery. There also was not an objective reason that forced def to close his business. Rather, the feeling that pl betrayed him caused def to react in a way that led to closure; def could have avoided it.
Had def continued with the business, some of the customers for whom he works should have been directed back to def. However, since def closed the business, he cannot claim damage from the fact that former clients now employ pl. However, beit din feels that pl should realize that his gain from his association with def continues. Therefore, beit din urged pl to withdraw his suit for back pay, which pl agreed to do.
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