NationsRent has filed a lawsuit against one of its former managers for opening a rental business that competes directly against the company, allegedly violating the manager's employment contract.
Clifton Sheffield, who sold his Sheffield Equipment Co. business to the Fort Lauderdale, Fla.-based consolidator in September 1998 for a cash payment and $1.5 million in promissory notes, then joined NationsRent's management team as area manager for its North Florida operations. NationsRent contends that when Sheffield left the company in March 2000, he remained subject to a 5-year noncompetition provision in his employment contract.
The lawsuit accuses Sheffield of soliciting John Sheffield and three other NationsRent employees to leave the company and join him at his new enterprise, Florida Contractor Rentals, a Volvo franchise.
The lawsuit contends that Sheffield, instead of pursuing his claims under the notes through the bankruptcy process, is trying to circumvent the process by opening a rental business that competes directly with NationsRent, in violation of his employment contract and asset-purchase agreement. The company also accuses Sheffield of interfering with the bankruptcy process and violating the automatic stay provisions of the bankruptcy code by directly soliciting NationsRent employees and customers on behalf of his new business. The lawsuit contends that Sheffield is violating the rights of other NationsRent creditors by attempting to unwind the asset purchase agreement and recapture the business he sold to NationsRent, thus pressuring the company to pay him ahead of other creditors.
Sheffield, however, disputes that notion. “The only reason I went back into business is because NationsRent defaulted on its payments since September 2001 and owes me $1.7 million,” Sheffield told RER. “If I was wealthy, or if I got all the money I was owed, I would have honored my noncompete agreement. But I have a family and this is the only business I’ve ever been in, going back to 1975, so I had to return to work. I’m not trying to compete against or hurt NationsRent, or get ahead of other competitors. I just need to make a living.” NationsRent also filed a lawsuit against John Sheffield. Clifton Sheffield, however, disputes NationsRent's claim that he recruited his brother. “NationsRent fired him simply because he is my brother and they claimed he might go back to work for me someday,” Sheffield said. “They claim it was a conflict of interests.”
The U.S. Bankruptcy Court in Wilmington, Del., has set a hearing date of April 26.
