DJR Associates, LLC v. Hammonds
241 F. Supp. 3d 1208
N.D. Ala.2017Background
- ChemStation (Alabama franchise) employed Terry Hammonds in Georgia; Hammonds signed a 2012 Confidentiality and Non‑Solicitation Agreement while working in Georgia. The agreement includes confidentiality, employee non‑solicit, and a two‑year post‑employment non‑compete/nonsolicit across AL, MS, and GA (from Macon northward).
- In late 2015 Hammonds prepared a business plan, emailed ChemStation proprietary documents to his personal account, and solicited potential investors. He resigned January 11, 2016, then formed SPI Chemicals (GA) on January 12, 2016.
- After leaving, Hammonds/SPI contacted and did business with several former ChemStation customers in Georgia (e.g., Harrison Poultry, Fieldale Box Wash, Gourmet Culinary Solutions). ChemStation alleges Hammonds retained and used confidential information and solicited customers/employees.
- ChemStation filed suit and moved for a preliminary injunction seeking to (a) enjoin use/retention of confidential information, (b) enjoin competition with ChemStation customers generally, and (c) enjoin solicitation of ChemStation employees. A hearing was held and the court considered choice‑of‑law between Alabama and Georgia.
- The court concluded Georgia law governs enforceability of the non‑compete/nonsolicit provisions (because Georgia has the materially greater interest as to that issue), while Alabama law governs the confidentiality provision (Alabama has the greater interest in protecting confidential information of its businesses). The court granted a tailored preliminary injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which state's law governs enforceability of the non‑compete covenant? | ChemStation: contract selects Alabama law; apply Alabama law to enforce covenant nationwide. | Hammonds/SPI: contract formed and performed in Georgia; Georgia law applies and voids broad non‑compete. | Georgia law applies to the non‑compete (§187 analysis): Georgia has materially greater interest; Alabama choice cannot override conflict‑of‑law rules. Court refuses to enforce non‑compete within GA. |
| Which state's law governs enforceability of the confidentiality covenant? | ChemStation: Alabama law applies and protects confidential info; injunction warranted. | Defendants: (implicit) Georgia law should govern overall contract. | Alabama law applies to confidentiality; ChemStation likely to succeed and confidentiality injunction granted. |
| Whether ChemStation is likely to succeed on merits (breach/use of confidential information)? | ChemStation: Hammonds downloaded and emailed proprietary data and used it to quote/serve customers — likely breach and use of confidential info. | Hammonds: denies intent/contests scope; claims some customer contacts initiated by customers. | Court: substantial likelihood ChemStation will succeed that confidential information was retained/used; injunction against any retention/use granted. |
| Scope of preliminary injunction (geographic reach and bond) | ChemStation: seeks broad injunction and waiver of bond. | Defendants: opposed enforcing covenant in GA; did not press bond requirement. | Court: issues tailored injunction — bars business with ChemStation customers at facilities in Alabama (until Jan 11, 2018 or final judgment) and bars any retention/use of confidential info anywhere; no bond required. |
Key Cases Cited
- Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139 (Sup. Ct.) (injunction is extraordinary relief; consider less drastic remedies)
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (Sup. Ct.) (standard for injunctive relief requires likelihood of irreparable harm and balance of equities)
- Odebrecht Const., Inc. v. Secretary, Fla. Dep’t of Transp., 715 F.3d 1268 (11th Cir.) (four‑factor preliminary injunction test)
- Cardoni v. Prosperity Bank, 805 F.3d 573 (5th Cir.) (issue‑specific §187 analysis for choice of law; separate treatment of confidentiality, non‑compete, nonsolicit)
- Cherry, Bekaert & Holland v. Brown, 582 So.2d 502 (Ala. 1991) (Alabama will not apply foreign law if contrary to Alabama public policy on covenants not to compete)
- Ormco Corp. v. Johns, 869 So.2d 1109 (Ala. 2003) (prima facie showing of employee competition in violation of valid non‑compete raises rebuttable inference of irreparable harm)
- Crump Ins. Servs. v. All Risks, Ltd., 315 Ga. App. 490 (Ga. Ct. App.) (restrictive covenants that bar accepting unsolicited business from former employer’s customers are unenforceable under Georgia law)
- Lapolla Indus., Inc. v. Hess, 325 Ga. App. 256 (Ga. Ct. App.) (Georgia rejects blue‑pencil severability for strict‑scrutiny non‑competes; unenforceable covenants not severed)
- Blalock v. Perfect Subscription Co., 458 F. Supp. 123 (S.D. Ala.) (endorses Restatement §187 approach in choice‑of‑law for contractually chosen law that conflicts with forum policy)