Assurance Data, Inc. v. Malyevac
747 S.E.2d 804
Va.2013Background
- ADI and Malyevac entered into an Agreement containing non-compete, non-solicitation, non-disclosure, and return-of-confidential-information provisions.
- Paragraph 5 restricts competition within 50 miles for 6 months post-termination; paragraph 12 prohibits soliciting Company Customers for 12 months after termination; paragraph 10 governs confidential information disclosure; paragraph 17(b) requires return of confidential information and related items.
- ADI alleged Malyevac violated these provisions by competing, engaging in prohibited activities, and failing to return confidential information.
- Malyevac demurred, arguing the restraints are overbroad and unenforceable as a matter of law.
- Circuit court sustained the demurrer, concluding the restraint provisions were unenforceable and dismissed the case without leave to amend.
- Appeal challenged the circuit court’s use of a demurrer to decide enforceability on the merits and sought remand for trial on the restraints' reasonableness.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May a demurrer address enforceability of restraints on competition on the merits? | ADI: demurrer tests pleading sufficiency, not enforceability merits. | Malyevac: demurrer may determine unenforceability as a matter of law. | No; demurrer cannot decide merits of enforceability. |
| Can evidence be presented to prove restraints are reasonable and necessary? | ADI: evidence should be received to show reasonableness and safeguards. | Malyevac: court may deem restraints unenforceable without evidence. | Evidence must be considered; demurrer cannot foreclose it. |
| Were the circuit court's conclusions that the non-compete and non-solicitation provisions are overbroad correct as a matter of law? | ADI: overbreadth cannot be decided on demurrer; restraint may be reasonable case-by-case. | Malyevac: provisions are overbroad and unenforceable on their face. | Incorrect to decide enforceability on demurrer; merits must be considered with evidence. |
Key Cases Cited
- Concerned Taxpayers v. County of Brunswick, 249 Va. 320 (1995) (demurrer tests legal sufficiency, not merits)
- Dunn, McCormack & MacPherson v. Connolly, 281 Va. 553 (2011) (demurrer tests legal sufficiency; not merits)
- CaterCorp, Inc. v. Catering Concepts, Inc., 246 Va. 22 (1993) (permits considering pleadings with proof to follow)
- Modern Environments, Inc. v. Stinnet, 263 Va. 491 (2002) (restraints on competition require context-specific evaluation)
- Home Paramount Pest Control Cos. v. Shaffer, 282 Va. 412 (2011) (balance function, geographic scope, duration in restraint analysis)
- Simmons v. Miller, 261 Va. 561 (2001) (consideration of restraint’s reasonableness within context)
- Omniplex World Servs. Corp. v. US Investigations Servs., Inc., 270 Va. 246 (2005) (employer bears burden to show restraint not overly harsh)
- Renner v. Stafford, 245 Va. 351 (1993) (predecessor on restraints and pleading standards)
- Breeding v. Hensley, 258 Va. 207 (1999) (public policy and reasonableness in restraints)