Background
Ollin Star, LC, an Iowa-based recruiting firm, brought a diversity breach-of-contract action in the Southern District of Iowa against Clemens Food Group, LLC and Country View Family Farms, LLC. The dispute centered on a non-compete covenant the parties had entered into. The district court (Judge Rebecca Goodgame Ebinger) granted summary judgment in favor of the defendants, finding the non-compete covenant unenforceable under Iowa law.
Ollin Star appealed, asking the Eighth Circuit to reverse the adverse summary judgment ruling. The appellate court reviewed the district court’s decision de novo.
The Court’s Holding
The Eighth Circuit affirmed the district court’s grant of summary judgment in a per curiam unpublished opinion. Applying Iowa law, the court agreed that the non-compete covenant was unenforceable. The panel relied on Ag Spectrum Co. v. Elder, 865 F.3d 1088 (8th Cir. 2017), which held that a non-compete provision between a seller and an independent contractor was unenforceable where it was not reasonably necessary to protect the seller’s business, disproportionately burdened the contractor, and where the public interest did not strongly favor enforcement.
The court adopted the district court’s reasoning in full, citing the traditional Iowa multi-factor test for restrictive covenants set forth in Lamp v. American Prosthetics, Inc., 379 N.W.2d 909 (Iowa 1986) (en banc). Finding no grounds to disturb the summary judgment, the Eighth Circuit affirmed.
Key Takeaways
- Under Iowa law, a non-compete covenant involving an independent contractor must be reasonably necessary to protect the restricting party’s legitimate business interests to be enforceable.
- A restrictive covenant that disproportionately burdens an independent contractor weighs against enforcement, even in a commercial (non-employment) context.
- Iowa courts apply a multi-factor balancing test to non-compete provisions, and failure to satisfy that test will render the covenant unenforceable as a matter of law, supporting summary judgment for the party resisting enforcement.
Why It Matters
This decision reinforces that Iowa’s restrictive covenant doctrine applies skeptically to agreements with independent contractors, not just employees. Businesses that rely on non-competes with contractors — including recruiting firms and others in the staffing and agricultural sectors — should ensure such covenants are narrowly tailored and genuinely necessary to protect specific business interests, or risk having them invalidated at the summary judgment stage.
Although the opinion is unpublished and therefore has limited precedential value, it reaffirms the Eighth Circuit’s consistent application of the Ag Spectrum framework and Iowa’s Lamp factors, providing useful guidance for practitioners advising clients on the enforceability of restrictive covenants under Iowa law.