Communication Technical Systems, Inc., (CTS) began providing computer programming services for Gateway 2000, Inc., (Gateway), in July 1994. Rickey Densmore, a programmer for CTS, worked on the Gateway account in Chicago for two weeks before transferring to Gateway’s South Dakota production site. In September, Gateway entered into an agreement with CTS called the “Agreement Not to Recruit,” in which Gateway promised not to hire, solicit, or recruit any CTS employee while CTS was working on the Gateway account, nor for a one-year period after CTS ceased working on the account.
In December, Densmore expressed his dissatisfaction with CTS to a Gateway employee, who suggested that Densmore talk to Gateway’s legal counsel about possibly being hired by Gateway. Densmore talked to Gateway counsel, but they refused to discuss the possibility, citing the “Agreement Not to Recruit.” On December 15, Gateway gave CTS proper 30-day notice of its intent to terminate CTS’s services. On January 20, 1995, Densmore resigned from CTS to begin his own consulting firm, Corinium Consulting, Inc. Densmore contacted Gateway, stating that he was now free to program for Gateway and was free of any restrictions imposed by the “Agreement Not to recruit.” Three days later, Gateway hired Densmore’s firm for a five-month programming job.
Section 53-9-8 of the South Dakota statutes states: “Every contract restraining exercise of a lawful profession, trade, or business is void to that extent ..” Section 53-9-11 provides an important exception; however, that allows noncompete covenants. CTS brought this suit against Densmore for breach of the “Agreement Not to Recruit.” How should the court rule on CTS’s claim, and why?