The provisions of Mich.Comp. Law § 445.761 prohibiting covenants not to compete has been in effect, unchanged since 1905. It has been rigorously enforced by the courts. In E.W. Smith Agency, Inc. v. Sanger, 350 Mich. 75, 79, 85 N.W.2d 84 (1957), the court considered whether a contractual provision "precluding defendant from engaging in soliciting insurance, in certain territory, for a period of 3 years in competition with plaintiff following the termination of his employment, contravened" § 445.761. The Sanger contract was geographically limited to Wayne County while Muma's has no geographical restriction.
Ran, on the other hand, contends that the clause he agreed to amounts to an unenforceable non-compete provision. Ran relies primarily on E.W. Smith Agency, Inc. v. Sanger, 350 Mich. 75, 85 N.W.2d 84 (1957). Sanger involved a non-compete agreement whereby an insurance underwriter agreed not to engage in the same or similar line of business in Wayne County for a period of three years after leaving the employ of the plaintiff, which the Michigan Supreme Court ruled was an unenforceable promise under Michigan law pursuant to § 445.761.
Therefore, the transfer would not be for a valuable consideration as required by M.S.A. 28.66. In E.W. Smith Agency, Inc. v. Sanger, 350 Mich. 75, 85 N.W.2d 84 (1957), the Michigan Supreme Court unanimously refused to enforce a restrictive covenant which would have prohibited the defendant, an insurance salesman, from competing with plaintiff insurance agency, his former employer. To avoid the effect of M.S.A. 28.61, plaintiff argued that M.S.A. 28.66 was controlling because of a provision in the employment contract which gave plaintiff the right to purchase the defendant's rights in expiration, renewal and prospect records arising from insurance sold by him during his employment.