2013 Ohio 4961
Ohio Ct. App.2013Background
- Berk Enterprises (Berkley Square division) sells imported plastic cutlery; Polivka was hired as a sales rep (late 2007) and signed a confidentiality/non‑solicit/non‑compete agreement.
- Polivka was an at‑will employee who later signed two commission plan documents in 2010 after Berk changed its pay scheme.
- Berk misapplied the commission formula for early 2010, underpaying Polivka; he later sued for unpaid commissions and Berk sued him for breaching the non‑compete after he formed R & G Packaging, LLC in June 2010 and resigned in July 2010.
- After resigning Polivka contacted three former customers and accumulated inventory; two emails from a broker asking Polivka for quotes were sent in Dec. 2010 (one copy inadvertently went to Berk).
- Trial court found Berk owed Polivka $14,078.57 but also found he violated the non‑compete (ongoing for five months) and enjoined him from competing for one year; the court delayed payment and interest on the commission judgment until the non‑compete period elapsed.
Issues
| Issue | Berk (Plaintiff) Argument | Polivka (Defendant) Argument | Held |
|---|---|---|---|
| 1. Whether Berk’s payroll error was a material breach excusing enforcement of the non‑compete | Berk: Error was inadvertent and compensable; did not excuse covenant | Polivka: Failure to pay under original commission plan was material breach; covenant unenforceable | Held: Not a material breach; Berk’s error was not bad faith, did not excuse covenant |
| 2. Whether Polivka violated the non‑compete by forming R & G, contacting customers, obtaining inventory, and providing quotes | Berk: These steps showed active competition/solicitation during the one‑year period | Polivka: He merely prepared to compete; no sales or inducements during the restricted year; emails were quote requests, not solicitations | Held: No breach — preparation and inquiries alone did not violate the covenant; evidence failed to show actual solicitation or sales during the year |
| 3. Whether the non‑compete lacked consideration because Polivka didn’t re‑sign when compensation plans changed | Berk: Non‑compete attached to at‑will employment; continued employment is sufficient consideration | Polivka: Changes to pay required fresh consideration | Held: Covenant supported by consideration — continued at‑will employment satisfied Lake Land standard |
| 4. Whether Berk could withhold payment and delay interest until the non‑compete period passed | Berk: Delay ensured compliance with covenant before paying commissions | Polivka: No lawful basis to withhold payment or defer interest where no proven breach | Held: Because no covenant breach was proven, Berk must immediately pay unpaid commissions with prejudgment and post‑judgment interest (remand for entry ordering payment) |
Key Cases Cited
- Lake Land Employment Grp. of Akron, LLC v. Columber, 101 Ohio St.3d 242 (2004) (continued at‑will employment is adequate consideration for a noncompetition agreement)
- Foster Wheeler Envirsponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d 353 (1997) (contract interpretation: give ordinary meaning to words absent clear contrary indication)
- Jackson v. State Farm Fire & Cas. Co., [citation="461 F. App'x 422"] (6th Cir.) (material breach can excuse noncompetition enforcement)
- Desai v. Franklin, 177 Ohio App.3d 679 (2008) (trial court must award prejudgment interest on prevailing contract claims)