The Virginia Business Litigation Blog
When a noncompete sentence trails off into an incomplete clause, is fixing it a permissible typo correction or an instance of “blue-penciling” that Virginia law does not allow? The Court of Appeals considered this issue last month in C&A Scientific Co. v. Yu. In the course of invalidating a departing shareholder’s noncompete agreement, it clarified that the rule against blue-penciling does not apply to the remedy known as reformation. A party asking a court to delete a defective clause from a restrictive covenant is actually asking for reformation, not blue-penciling. The remedy is only available, however, upon clear and convincing proof of what the parties actually intended. Not every scrivener’s error will qualify for judicial correction. Where the record does not reveal what the botched clause was supposed to say, there is nothing to reform toward and the noncompete will usually fail.
The dispute grew out of a falling-out between two cousins. Sam Xiang’s family founded C&A Scientific, a wholesaler of scientific and educational supplies, and Xiang brought in his cousin Kenny Yu in 2017 to help rescue the then-struggling company. Yu succeeded in overseeing a substantial increase in gross revenue and he was given a 30% stake under a shareholder agreement that contained a noncompete provision that ended mid-thought. It barred a departing shareholder, for one year after conveying his shares, from being “employed, concerned, or financially interested, either directly or indirectly, in the same or a similar business as that conducted by the Corporation, or compete with the Corporation for a one-year period following the date the departing Shareholder conveys his or her shares if any customers of the same, similar, or competing business.” (Emphasis added). The sentence stopped there.
After the relationship soured, Yu sold his shares back and later formed a competing venture, CoreAmp, Inc. After C&A warned a customer to refrain from conducting business with Yu, Yu and CoreAmp sued for tortious interference, and C&A counterclaimed for breach of the noncompete. At trial, the Fairfax County Circuit Court invalidated the noncompete on two grounds: (1) that the dangling conditional clause rendered it unintelligible, and (2) that it was overbroad in function and geographic scope. C&A appealed.
On appeal, C&A conceded that Virginia does not permit blue-penciling (the practice of deleting offending words from an overbroad covenant to salvage the remainder) but argued that the incomplete clause was a mere 
scrivener’s error, the remedy for which is simply to delete it, leaving behind “a fully complete non-competition clause with no impact on the parties’ bargain.”
The Court of Appeals rejected the argument. It drew a distinction between blue-penciling, which is governed by legal principles specific to restrictive covenants, and the correction of a scrivener’s error, which is governed by general principles of contract construction. Correcting scrivener’s errors, the court held, is a form of reformation. (See Westgate at Williamsburg Condo. Ass’n v. Philip Richardson Co., 270 Va. 566, 575 (2005) (“The correction of a scrivener’s error is a court-sanctioned action reforming a contract or other document.”)). Reframing the requested relief as typo-deletion rather than blue-penciling therefore did not free C&A from the demanding evidentiary showing that reformation requires.
Reformation to correct a scrivener’s error is available only where the parties’ intention was identical at the time of contracting but the writing failed to capture it. The proponent must prove not merely that a mistake occurred but what correction should be made, by evidence that “leaves no reasonable doubt upon the mind of the court.” (See Temple v. Va. Auto. Mut. Ins. Co., 181 Va. 561, 569 (1943)). The court must be able to say with confidence that it knows what the parties really intended. Because the scrivener’s-error doctrine is a narrow exception to the settled rule that courts may not rewrite agreements or add terms, it is construed narrowly. Here, no such evidence existed. The court observed that the incomplete clause, “if any customers of the same, similar, or competing business”, could have been completed in several materially different ways, each with a different effect on the covenant’s scope. For example, the customers might have been ones who “are customers of the Corporation,” or “were customers of the Corporation,” or “are solicited by the departing Shareholder,” or “are diverted from the Corporation.” On the record below, the court simply could not know which the parties intended. Without that knowledge, the provision could neither be reformed into an intelligible sentence nor pared down by deleting the clause as a scrivener’s error.
Notably, the court declined to resolve whether Virginia law categorically forbids blue-penciling a restrictive covenant. Because C&A disclaimed any reliance on blue-penciling and rested entirely on scrivener’s-error reformation, the court had no occasion to decide the point, and it expressly left open “whether those rulings are correct under Virginia law.” The court also went on to hold, as an independent basis for affirmance, that the covenant was fatally overbroad in function and geographic scope even if the offending clause were excised.