Neil N. Lapidus, et al., Appellants,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-1656

Neil N. Lapidus, et al.,
Appellants,

vs.

Lurie LLP,
Respondent.

Filed June 18, 2018
Affirmed
Cleary, Chief Judge

Hennepin County District Court
File No. 27-CV-15-17320

Michael V. Ciresi, Roberta B. Walburn, Barry M. Landy, Michael A. Sacchet, Ciresi
Conlin LLP, Minneapolis, Minnesota (for appellants)

William Z. Pentelovitch, Martin S. Fallon, John T. Duffey, Masl on LLP, Minneapolis,
Minnesota (for respondent)

Considered and decided by Halbrooks, Presiding Judge; Cleary, Chief Judge; and
Rodenberg, Judge.
U N P U B L I S H E D O P I N I O N
CLEARY, Chief Judge
Appellants Neil N. Lapidus and Unde rCliff LLC (Lapidus) challenge the
enforcement of noncompete agreements resulti ng in an award of damages to respondent

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Lurie LLP (Lurie) as well as the forfeiture of his right to future post-retirement payments,
arguing that: (1) the district court applied the wrong legal standard in evaluating the
agreements; (2) the agreements are unreasonable and overbroad; and (3) remedy provisions
of the contract are unenforceable. We affirm.
FACTS
Lurie is a Minneapolis-bas ed accounting firm founded in 1940. Neil Lapidus is a
certified public accountant licensed in Minnesota who formed UnderCliff LLC, a Florida
limited liability company, shortly after retiring from Lurie.
Lapidus joined Lurie in 1978, eventua lly becoming a named partner during his 36
years at the firm. In 2005, Lurie entered a Fourth Restated Partnership Agreement (the
Fourth Agreement). At that time, Lapidus was the firm’s administrative partner and played
a central role in drafting the new agreement. The Fourth Agreement was created after the
noncompete provisions of the previous agreement were not enforced at arbitration against
a former Lurie employee who went to work for a competitor. All partners, including
Lapidus, signed the Fourth Agreement.
The Fourth Agreement includes a retirement- benefits section, which sets out the
purpose of the program and the manner in which payments would be calculated and
distributed. The post-retirement benefits included a payout of each partner’s Accrual Basis
Capital Account, monthly payments of “Re tirement Benefits” for up to ten years, and
de minimis monthly payments of retirement benefits each year after the ten-year period.
The primary component of “Retirement Bene fits” is the partner’s “Total Deferred
Compensation.” The Fourth Agreement provides that a partner’s “Total Deferred

3
Compensation” is calculated by multiplying his aver age annual earnings by three. All
Retirement Benefits are paid out of Lurie’s current and future cash flow and are not funded
by profits withheld from, or income deferred by, partners. The receipt of the monthly post-
retirement payments during the ten-year peri od after retirement is linked to the retiring
partner’s compliance with noncompete provisions through forfeiture clauses.
Section 17 of the Fourth Agreement cont ains covenants not to compete or solicit
employees. The first of these provisions, 17.1(a), provides that a partner will not:
Directly or indirectly re nder any Professional Services
to any clients who were serviced by the Partnership during the
two years immediately prior to th e withdrawal or retirement.
“Professional Services” means th e performance of any of the
services being provided by th e Partnership or any of its
divisions or subsidiaries and without limiting the generality of
the foregoing, specifically incl udes those services listed on
Exhibit 2 and any other servi ces which the Partnership may
provide in the future, but is not yet providing on the date of
execution of this Agreement.

Exhibit 2 is titled the “Family of Services” doc ument and covers 112 services that Lurie
provides. The addition of the Family of Services document is the primary difference
between the previous partnership agreement and the Fourth Agreement. The inclusion of
the Family of Services document was intende d to address the vagueness issues of the
previous agreement by providing a list of specific services, rather than using catchall terms.
In the event that a partner breaches the former client noncompete, section 17.2(a)(i)
provides that:
Such breaching Partner hereby irrevocably waives the
right to receive any payout of any amounts payable under
Articles 11 through 14 (incl uding, without limitation, the
accrual basis Capital Account and any Deferred

4
Compensation). Howeve r, such Partner sha ll continue to be
entitled to the payout of the cash basis portion of the Partner’s
Capital Account. . . . Partner acknowledges that such waiver is
not a penalty but is a good fa ith estimation of liquidated
damages considering that the am ount of such waiver accrues
over time during the Partner’s tenure with the Partnership and
this parallels the damage that the Partner’s competition would
cause. . . . The Partners respectfu lly request that if this matter
ever goes to litigation that th e court respect this good faith
business decision and understand that the Partnership would
never have agreed to pay accr ual basis Capital Account and
Deferred Compensation in these amounts if the Partnership
believed that there was any likelihood that a court would refuse
to enforce these liquidated damages.

Section 17.2(a)(ii), the liquidated-damage s provision, provides that a breaching
partner “shall pay to the Partnership (as a purc hase price for clients) for a period of five
years 25% of the fees earned, directly or i ndirectly, by the former Partner or the former
Partner’s firm from work for such clients rendered in violation of Section 17.1(a).”
The next noncompete provisi on at issue, 17.1(b), provides that a partner will not
“[p]rovide Professional Services within 50 miles of any office of the Partnership
maintained on the date the person ceased to be a Partner.” In the event that a former partner
breaches the geographic noncompete, section 17.2(b) provides the same remedy for the
breach of the former client noncompete.
In addition to these provisions, section 17.3(e) extends the prohibition on rendering
professional services to former clients and provides that:
If at any time during the term the Partnership is paying
accrual basis capital or deferred compensation, a former
Partner directly or indirectly renders any Professional Services
to any clients who were serviced by the Partnership during the
two years immediately prior to the withdrawal or retirement,

5
that former Partner shall forfeit any and all rights to receive any
remaining payments from the Partnership.

Lapidus played a central role in drafting the noncompete and forfeiture provisions of the
Fourth Agreement and recommended its adoption to the rest of the partnership.
Per the mandatory retirement provision of the Fourth Agreement, Lapidus was
required to retire on April 30, 2014. To prepare for his retirement, he began transitioning
his business to other partners. Lurie created a list of client relationships that needed to be
transitioned from Lapidus to others. The process was not completed by his retirement date
and Lapidus received an extension through December 31, 2014 to complete the transition.
Under the terms of the Fourth Agreement, Lapidus was to receive approximately $11
million in monthly installments over the next ten years.
After his retirement, Lapidus provided services to Border Foods, Delaget, and Twin
City Fan as a consultant thro ugh UnderCliff LLC. When Lu rie learned that Lapidus was
serving in a supervisory role at Border Foods, Lurie made multiple requests for Lapidus to
provide a list of his duties and responsibilitie s at Border Foods to ensure that its
independence as an auditor was not compromised. Lapidus eventually informed Lurie that
his roles and responsibilities were to “coordina te the accounting and financial functions
with their director of financial operations and their third party business processing group”
and “special projects as set forth by the shareholders with no financial authority or decision
making responsibility.”
Lurie investigated the extent of Lapidus’ s role at Border Foods and learned that
Lapidus formed UnderC liff LLC and entered into a cons ulting agreement with Border

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Foods, effective January 1, 2015. The agreement stated that UnderCliff LLC would
“provide consulting and adviso ry services” and “may render certain financial advisory
services, but it shall not be engaged to re nder, nor shall it render, public accounting
services, which services shall continue to be provided by the public accounting firm [Lurie]
through independent CPA’s.”
Lapidus completed an internal control project for Border Foods and Delaget for the
purpose of “evaluating and improving the busin ess office procedures and policies at
Delaget as it related to Border.” Both “internal control” a nd “business process
improvement” are services listed in the Family of Services document incorporated into the
Fourth Agreement. Lapidus also assisted Border Foods in its search for a new Director of
Financial Operations and supervised the ne w hire through an onboarding process—two
services provided by Lurie to its clients. Additionally, Lapidus provide d direction on
accounting and financial matters, directed accounting and fina ncial personnel, consulted
on operations-related matters, and monitored financial reports of Border Foods, all services
that Lurie provides to its clie nts. After learning of these activities, Lurie sent Lapidus a
notice-of-breach letter, alleging that his work with Border Foods violated their agreement.
Lapidus continued to provide professional services to Border Foods after being served with
the underlying lawsuit.
Prior to Lapidus’s retirement, a part owner of Twin City Fan contacted Lurie to see
if Lapidus could help with their family office. Lurie stated that it had no issue with Lapidus
working in the family office, so long as it was related solely to family finances and not to
Twin City Fan. Lurie later learned that Lapidus assumed a significant role in the Twin City

7
Fan business, a role that compromised Lurie’ s independence, requiring Twin City Fan to
engage a different accounting firm for its 2015 and 2016 audits.
Lurie filed suit against Lapidus and UnderCliff LLC in October of 2015. A seven-
day trial was held in November of 2016. In April of 2017, the district court found that
Lapidus’s conduct with Bord er Foods, Delaget, and Twin City Fan breached the
noncompete clauses in sections 17.1(a), 17.1(b) and 17.3(e) and that, because of Lapidus’s
breach, Lurie no longer had to make future payments to Lapidus or UnderCliff LLC under
the Fourth Agreement. The district court entered a judgment for money damages in favor
of Lurie in the amount of $2,210,819.23 plus $179,743.76 for the post-retirement payments
made to Lapidus since the first breach of the agreement (1/1/15), with interest, and ordered
Lapidus to pay Lurie 25% of all amounts paid to him or UnderCliff LLC by Border Foods
or Delaget for a period of four years (between 12/31/15 and 12/31/19), and Twin City Fan,
“or any other Lurie client” over a period of five years (between 12/31/14 and 12/31/19) for
services rendered. In August of 2017, the district court denied motions for a new trial and
amended findings of fact, conclusions of law and order for judgment made by Lapidus and
UnderCliff LLC. This appeal follows.
D E C I S I O N
I. The district court’s application of the “business transa ction standard” was
harmless error.

At trial, Lapidus argued that the noncompete provisions should be evaluated in the
context of an employment relationship betwee n Lurie and Lapidus and that the district
court should apply the test articulated in Bennett v. Storz Broadcasting Co., 270 Minn. 525,

8
534, 134 N.W.2d 892, 899 (1965 ). The district court made extensive findings related to
the Bennett test, but stated that the “business transaction standard” applied to the
agreement. The district court concluded that because of the relationship between Lurie and
Lapidus, the noncompetes at issue “arose in th e context of a business transaction and not
in the context of an employment relationship” because “[t]here are no issues of unequal
bargaining power or o ppressive circumstances” in the agreement. (Emphasis omitted).
Appellant contends that this was an error as a matter of law, requiring reversal. We
disagree.
“We review a district court’s application of the law de novo.” Harlow v. Minn.
Dep’t of Human Servs. , 883 N.W.2d 561, 568 (Minn. 2016 ). To prevail on appeal, an
appellant must show both error and prejudice resulting from the error. Midway Ctr. Assocs.
v. Midway Center, Inc. , 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975). Here, Lapidus
has established error, but fails to establish prejudice resulting from that error.
In general, restrictive covenants limit one’s right to work and earn a livelihood and
are therefore “looked upon with disfavor, cautiously considered, and carefully scrutinized.”
Bennett, 270 Minn. at 533, 134 N.W.2d at 898. Minnesota law recogn izes two types of
noncompete provisions: those arising out of employment contracts and those arising from
the sale of a business. In the context of a noncompete arising out of an employment
relationship:
[T]he test applied is whether or not the restraint is necessary
for the protection of the business or good will of the employer,
and if so, whether the sti pulation has imposed upon the
employee any greater restraint than is reasonably necessary to
protect the employer’s business, regard being had to the nature

9
and character of the employm ent, the time for which the
restriction is imposed, and the te rritorial extent of the locality
to which the prohibition extends.

Id. at 534, 134 N.W.2d at 899. This approach is used in an e ffort to protect “the average
individual employee who as a result of his unequal bargaining power may be found in
oppressive circumstances.” Id. at 535, 134 N.W.2d at 899.
For noncompetes arising out of the sale of a business, the grounds for imposing a
stricter test are not generally present, and noncompete agreements are subject to a more
lenient examination. B & Y Metal Painting, Inc. v. Ball, 279 N.W.2d 81 3, 816 (Minn.
1979). In the context of the sale of a business, reasona bleness is determined by a three-
step test:
First, whether the restriction exceeds the protection necessary
to secure the goodwill purch ased; second, whether the
restriction places an undue ha rdship on the covenantor; and
third, whether the restriction has a deleterious effect on the
interests of the general public.

Bess v. Bothman, 257 N.W.2d 791, 795 (Minn. 1977).
Here, the district court blurred the lin es between the two tests and erroneously
applied the “business transaction standard,” stating that because “Minnesota courts
generally show greater deference to the deci sions made by sophisticated parties to enter
into restrictive covenants in connection w ith business transacti ons” unless “there is
evidence of unequal bargaining power or oppressive circumstances,” noncompete
agreements “are subject to less scrutiny.” Th ere is no precedent allowing a district court
to apply the Bennett test with “less scrutiny” when the noncompete agreement arises out of
an employment context, regardless of an em ployee’s sophistication or bargaining power.

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However, any error in applying the “business transaction standard” was harmless because
the record establishes that the district court closely scrutinized the noncompetes in
accordance with Bennett. The district court made extensive findings on the factors of the
Bennett test and properly considered the presence or absence of unequal bargaining power,
Lapidus’s sophistication, and his status within the co mpany when evaluating the
reasonableness of a noncompete agreement. The district court made extensive findings
related to the absence of unequal bargaining po wer: discussing Lapidus’s status as a part
owner of the company; his position on the firm’s executiv e committee and as
administrative partner during the adoption of the Fourth Agreement; and Lapidus’s
participation in developing and recommending the adoption of the Fourth Agreement.
This court must ignore a harmless error. Mi nn. R. Civ. P. 61. Here, the error was
harmless because the substantive law applie d by the district court reflected the same
structure and policy considerations of the Bennett test: whether the noncompetes protected
legitimate business interests and whether the restrictions were “reasonable” and “no
broader than necessary” to protect those interest s. The district court properly considered
Lapidus’s role in the company over the years and his direct role in drafting the agreement.
II. The district court’s determination that the noncompete provisions were
reasonable was not clearly erroneous.

Lapidus argues that these provisions are unreasonable because they do not serve
legitimate business interests a nd are not properly tailored in scope and duration. The
district court found that the noncompetes in sections 17.1(a), 17.1(b) and 17.3(e) are
reasonable and necessary to protect Lurie’s leg itimate business interests. It is not within

11
the scope of our review “to make the essentia lly factual finding of whether the covenant
[not to compete] was reasonable.” Klick v. Crosstown State Bank of Ham Lake, Inc., 372
N.W.2d 85, 87-88 (Minn. App. 1985). Accordingly, we will not set aside a district court’s
determination regarding whether a covenant not to compete is reasonable unless those
findings are clearly erroneous. Id. at 88.
“[R]estrictive covenants are enforced to th e extent reasonably necessary to protect
legitimate business interests. Legitimate in terests that may be protected include the
company’s goodwill, trad e secrets, and confidential information.” Medtronic, Inc. v.
Advanced Bionics Corp., 630 N.W.2d 438, 456 (Minn. App. 2001) (citation omitted). “The
validity of the contract in each case must be determined on its own facts and a reasonable
balance must be maintained between the in terests of the employer and the employee.”
Bennett, 270 Minn. at 535-36, 134 N.W.2d at 899-900. “If the court finds the covenant to
be necessary, it must consider the reasonablen ess of the scope of the covenant” and the
covenant “must not impose any greater restric tion on the employee than is necessary to
protect the employer’s business.” Dynamic Air, Inc. v. Bloch, 502 N.W.2d 796, 799 (Minn.
App. 1993). When examining the reasonableness of a noncompete, district courts consider
“the nature and character of the employment, the nature and extent of the business, the time
for which the restriction is imposed, the terr itorial extent of the covenant, and other
pertinent conditions.” Id.
A. Legitimate business interests
The district court found that the noncom pete provisions in sections 17.1(a) and
17.3(e) served Lurie’s leg itimate business interests in protecting its good will and

12
confidential information and that the noncom pete provision in 17.1(b) protected its
confidential information.
The protection of good will is a legitimate business interest “[w]here the services
have been of such a character that the employee’s name carries with it the good will of the
employer’s business.” Menter Co. v. Brock , 147 Minn. 407, 410, 180 N.W. 553, 554
(1920). “The fact that the good will of patients or custom ers belongs to the employer
entitled him to require an employee, within reasonable limits . . . not to make improper use
of the opportunity his employment has gi ven him to acquire that good will.” Granger v.
Craven, 159 Minn. 296, 303, 199 N.W. 10, 13 (1924). It is undisputed that Lapidus built
strong and longstanding relationships with many clients—including Border Foods,
Delaget, and Twin City Fan—during his time at Lurie. These relati onships with clients
carried the sort of good will described in Brock and Granger. The record supports the
district court’s finding that the former-c lient noncompete provisions served Lurie’s
legitimate business interest in protecting its good will.
The district court found that all three noncompetes are enforceable to protect Lurie’s
confidential information. The district cour t did not make specific findings about the
confidential information Lapidus retained, but found that while Lapidus was administrative
partner at the firm, he was responsible for: “(a) managing the business and affairs of Lurie;
(b) supporting Lurie’s managing partner and other Lurie partners; and (c) administering
and managing Lurie’s relationships with its legal counsel, banks, health insurance carriers,
and professional liability insurance carriers” as well as “guiding the direction of the firm.”
The protection of confidential information is a legitimate busine ss interest where the

13
former employee had access to or knowledge of “information not readily ascertainable
by . . . competitors” and intended to be kept “in house.” Roth v. Gamble-Skogmo, Inc., 532
F. Supp. 1029, 1030 (D. Minn. 1982). “[T]he compe titive advantage of having such
knowledge dissipates slowly” and may justify a longer temporal restriction on competition.
Id. at 1032. Here, Lapidus’s former position as administrative partner and as a member of
the executive committee, combined with his decades-long tenure as a partner, demonstrate
that he had access to, and direct knowledge of, the sort of confidential information Lurie
has a legitimate business interest in protecting. The record supports the district court’s
finding that all three noncompete provisions served Lurie’s legitimate interest in protecting
its confidential information.
B. Scope
Lapidus asserts that the provisions are overbroad in scope. The district court found
that each provision was reasonable in scope a nd necessary to protect Lurie’s legitimate
interests. The district court’s determination is supported by the record and is not clearly
erroneous.
As to all of the noncompe te provisions, Lapidus argues that they restrict
noncompetitive activity. We disagree. The district court found that the noncompete
provisions restricted “a former partner from rendering Professional Services to a Lurie
Client in any capacity, including as a direct employee.” (Emphasis omitted). Lapidus
argues that this is not “competition” within the meaning of a noncompete. “Competition”
is defined as “[t]he struggle for commercial advantage; the effort or action of two or more
commercial interests to obtain the same business from third parties.” Black’s Law

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Dictionary 344 (10th ed.) (2014). Lurie set out its commercial interests in the list of
professional services in the Family of Serv ices document. Lapidus gained a commercial
advantage over Lurie when he performed multip le services offered by Lurie for a Lurie
client. Lapidus competed.
The district court found that the former client noncompete provisions are reasonable
in terms of scope and duration. The distri ct court found that these provisions were
necessary to protect Lurie’s confidential inform ation and good will. We agree. The first
former client noncompete found in sectio n 17.1(a) restricts La pidus from rendering
professional services to Lurie clients, who we re clients within the two years prior to his
retirement, for a term of two years. The s econd former client noncompete is found in
section 17.3(e) and extends the term of the restriction on rendering professional services to
former clients for the ten years during wh ich Lapidus was to receive post-retirement
payments from Lurie.
When evaluating whether a temporal restriction is reasonable, courts examine “the
nature of the employee’s work, the time n ecessary for the employer to train a new
employee, and the time necessary for the cust omers to become fam iliar with the new
employee.” Overholt Crop Ins. Serv. Co., Inc. v. Bredeson, 437 N.W.2d 698, 703 (Minn.
App. 1989). In Overholt, the contract at issue prohibited the former employee from
“soliciting any business from customers he pe rsonally serviced while employed” and
covered a “two-year period immediately fo llowing the terminati on of the employment
relationship.” Id. at 700. The court found the restri ction to be reasonable, emphasizing

15
evidence of the training received by the former employee, his five-year term employment,
and his close contact and good relationships with customers. Id. at 702-04.
Here, the restrictions are broa der than those at issue in Overholt, but the supreme
court has previously held that an “active solicitation” clause is not required where “one has
conducted a business in the same area for many years an d has built a sizeable clientele.”
Haynes v. Monson , 301 Minn. 327, 330, 224 N.W.2d 482, 484 (1974). Under those
circumstances, “[s]olicitation by mere reputation and past business practices is more than
sufficient.” Id. Here, the nature and extent of Lapi dus’s client relationships and the time
it would take for a different Lurie partner to assume that relationship weigh in favor of the
temporal restrictions. Moreover, unlike in Overholt, Lapidus was being compensated for
his compliance with the former client noncompete during the ten-year term. Lapidus was
due to receive substantial m onthly payments totaling appr oximately $11 million for the
ten-year term of the former-client noncompete. While the ten-year term is relatively long,
it was not unreasonable for Lurie to expect Lapidus to adhere to the terms of the agreement
while he continued to receive approximately $90,000 per month in exchange for his
continued loyalty.
The district court found th at the geographic noncompete was pr operly limited in
scope and duration to protect Lurie’s legitim ate business interests. We agree. The
geographic noncompete restricted Lapidus from “rendering professional services” within
50 miles of the Lurie offices, for a two-year term. The district court found that this
provision was necessary to protect Lurie’s confidential information. As discussed above,
the competitive advantage of the extens ive in-house knowledge Lapidus possessed

16
“dissipates slowly,” and broader restrictions have been held to be reasonable where such
knowledge is at issue. Roth, 532 F. Supp. at 1032. In Roth, the noncompete provision at
issue was an agreement between an employer and its former chief executive officer. Id. at
1030. The agreement provided that Roth would receive substantial monthly payments over
a term of five years and that he woul d refrain from seeking employment with any
competing business in the employer’s market territory. Id. at 1031. The employer’s market
territory spanned over six states. Id. Roth sought to have the agreement declared
unenforceable prior to any breach of the terms of the agreement. Id. at 1032. There, the
federal court determined that the noncompete was enforceable, in part because of Roth’s
extensive knowledge of the employer’s business and his “access to the long range plans of
the company” and the fact that “such knowledge dissipates slowly.” Id.
Here, the geographic noncompete is less restrictive in geographic scope and shorter
in duration than that in Roth. And while it extends to the provision of professional services
generally, the two-year term and 50-mile restriction are not unreasonable given the nature
of Lapidus’s extensive knowledge and information about Lurie’s external relationships and
internal processes.
Accordingly, we conclude that the district court did not clearl y err in determining
that the noncompete provisions were reasonable and necessary to protect Lurie’s legitimate
business interests in protecting their confidential information and good will.

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III. The remedies provided for the breach of the noncompete provisions are
enforceable.

Lapidus argues that the remedies of the Fourth Agreement providing for the
forfeiture of his future post-retirement paymen ts and the payment of 25% of his earnings
from competitive activities are disproportionate and unenforceable penalties. We disagree.
“A contract’s construction and its legal effect are questions of law for the court” and
“[t]his court need not defer to the [district] court’s determ ination of a legal question.”
Lakeview Terrace Homeowners Ass’n v. Le Rivage, Inc., 498 N.W.2d 68, 72 (Minn. App.
1993). We conclude that s ection 17.2(a)(ii) is an en forceable liquidated-damages
provision1 and that sections 17.2( a)(i), 17.2(b), and 17.3(e) are valid forfeiture-for-
competition clauses.
First, we address the liquidated damages provision of section 17.2(a)(ii). Minnesota
courts have “long regarded provisions for liq uidated damages as prima facie valid on the
assumption that the parties in naming a liquidated sum intended it to be a fair compensation
for an injury caused by a breach of contract and not a penalty for nonperformance.” Gorco
Constr. Co. v. Stein , 256 Minn. 476, 481, 99 N.W.2d 69, 74 (1959) (footnote omitted).
Liquidated-damages provisions will not be enfo rced unless “‘(a) the amount so fixed is a
reasonable forecast of just co mpensation for the harm that is caused by the breach, and
(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate

1 Lapidus argues that the liquidated-damages cl ause of section 17.2(a)(ii), combined with
the forfeiture provisions, is an unenforceable double damages provision. Lapidus did not
raise this argument below and therefore we need not reach it here. See Thiele v. Stich, 425
N.W.2d 580, 582 (Minn. 1988).

18
estimation.’” Id. at 482, 99 N.W.2d at 74-75 (quotin g Restatement (First) of Contracts
§ 339) (1932)). A provision for stipulated da mages is an unenforceable penalty if the
damages “are so great as to bear no reasonabl e relation to the amount of actual injury
suffered by the breach.” Stanton v. McHugh , 209 Minn. 458, 461, 296 N.W. 521, 522
(1941). “The controlling factor, rather than in tent, is whether the amount agreed upon is
reasonable or unreasonable in the light of the contract as a whole, the nature of the damages
contemplated, and the surrounding circumstances.” Gorco, 256 Minn. at 482, 99 N.W.2d
at 74. “[W]hen the measure of damages . . . is susceptible to defi nite measurement, we
have uniformly held an amount greatly disproportionate to be a penalty.” Id. at 483, 99
N.W.2d at 75.
Section 17.2(a)(ii) provides that a former partner who violates the former client
noncompete must pay 25% of all fees earned from work for former clients for a period of
five years. The district court found that the harm suffered by Lurie as a result of Lapidus’s
breach was “difficult, if not impossible, to quantify” because Lurie lost the opportunity to
grow its relationships with its clients. The scope of Lurie’s lost opportunity is indeed
difficult to quantify because th at lost opportunity may c ontinue to affect Lurie’s
relationships with clients that Lapidus servic ed for years to come. Further, the provision
requires the payment of 25% of the fees received by Lapidus from former clients,2 linking
the measure of damages directly to the am ount of compensation Lapidus earns from the

2 Lapidus maintains that he has not received any compensation for any services rendered
to Border Foods, Delaget, or Twin City Fan.

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breach of the noncompete prov isions. Accordingly, we c onclude that the liquidated-
damages provision in section 17.2(a)(ii) of the Fourth Agreement is valid and enforceable.
Turning to the forfeiture provisions, we recognize that “forfeitures under covenants
against competition are not favored and those claiming them must sh ow that the equities
are on their side.” Harris v. Bolin , 310 Minn. 391, 393, 247 N.W.2d 600, 602 (1976).
Where a contract provides a forfeiture, “the provision will be strictly construed.” Naftalin
v. John Wood Co., 263 Minn. 135, 148, 116 N.W.2d 91 , 100 (1962) (quotation omitted).
Forfeitures will not be enforced when “great injustice would be done” and when the party
“seeking the forfeiture is adequately protected without the forfeiture.” Hideaway, Inc. v.
Gambit Invs. Inc. , 386 N.W.2d 822, 824 (Minn. Ap p. 1986). Forfeitures will only be
enforced “where the right to such forfeiture is plain.” Id.
Here, the language in section 17.3(e) is plain: a partner “forfeit[s]” retirement
payments if he “renders any Pr ofessional Services” to former Lurie clients. Section 17.2
is less clear, providing that the partner “irrevocably waives” the benefits in the event that
he “breaches” the former client noncompetes. The provisions restrict the same conduct
(rendering professional services to former clients) and provide the same remedy for breach
(surrender of the right to future post-retirement payments). Read together, these provisions
establish Lurie’s right to forfeiture.
Lapidus argues that enforcement of the forfeiture provisions is improper because it
results in the forfeiture of a vested retirement benefit, relying on Harris. There, the court
found that the noncomp ete agreement and forfeiture clau se were unenforceable because
they were “not limited as to time, harm to the employer, or geographical area.” Harris,

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310 Minn. at 395, 247 N.W.2d at 603. Here, as discussed above, the noncompete
provisions are properly limite d in scope and necessary to protect Lurie’s legitimate
business interests. Further, Harris involved the forfeiture of funds that consisted of
portions of the employee’s profit- sharing plan that were “not a gratuity but constitute[d]
deferred compensation for services rendered.” Id. at 393, 247 N.W.2d at 602. Here, unlike
in Harris, the post-retirement payments do not co me from funds that were deferred or
otherwise withheld from Lapidus while he wa s a partner at Lurie. Rather, the post-
retirement payments provide consideration for Lapidus’s continued loyalty and compliance
with his noncompetes.
Additionally, Lurie would no t be adequately protecte d without the forfeiture
provisions. The liquidated-damages provision serves to protect Lurie’s lost revenue
resulting from competition by former partners during the two-year term. The forfeiture
provisions, on the other hand, serve to prot ect the viability of Lurie’s post-retirement
payment program as a whole. The district court found that Lurie’s post-retirement
payments are unfunded and paid out of its current and future cash flow and that competition
from former partners disrupts Lurie’s ability to fund the post-retirement payment program.
The forfeiture provisions ensure that a partner cannot both compete with the company and
receive the post-retirement payments meant to secure their loyalty.
Finally, enforcement of the fo rfeiture provisions will not re sult in great injustice.
Lapidus controlled wh ether he would cont inue to receive m onthly post-retirement
payments of approximately $90,000 from Lu rie and refrain from rendering professional
services to former clients or render professi onal services to former clients and forfeit his

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right to those monthly payments. Under the Fourth Agreement, an agreement which he
developed and recommended for adoption, he could not do both.
Affirmed.