Paragon Technologies, Inc. v. InfoSmart Technologies, Inc.
312 Ga. App. 465
| Ga. Ct. App. | 2011Background
- Paragon Techs., Inc. and InfoSmart Techs., Inc. entered an independent contractor agreement to supply IT staffing services to Paragon's client GTA.
- The contract included a 12-month non-interference covenant preventing InfoSmart and its personnel from offering services to GTA during the project and for 12 months after its completion or termination.
- The contract provided Paragon ownership of all IP delivered/purchased/created under the agreement and contained indemnity/hold-harmless provisions favorable to Paragon.
- InfoSmart provided staffing services under the contract from March 2007 through April 5, 2010; GTA later terminated Paragon’s contract and began engaging InfoSmart directly.
- In May 2010 InfoSmart sued Paragon for unpaid invoices; Paragon counterclaimed for interference with business relationship, breach of contract, and attorney fees; the trial court granted summary judgment for InfoSmart on the counterclaims, finding the covenant unenforceable as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of the restrictive covenant in an independent contractor agreement | Paragon argues it should not be subjected to strict scrutiny. | InfoSmart contends the covenant is enforceable under applicable standards. | Covenant unenforceable; subject to strict scrutiny; not reasonable in time, scope, or territory. |
Key Cases Cited
- Swartz Investments v. Vion Pharmaceuticals, 252 Ga.App. 365, 556 S.E.2d 460 (2001) (restrictive covenants in contracts for services by independent contractors treated like employee covenants)
- Jenkins v. Jenkins Irrigation, 244 Ga. 95, 259 S.E.2d 47 (1979) (independent contractor covenants subject to strict scrutiny)
- Atlanta Bread Co. Intl. v. Lupton-Smith, 285 Ga. 587, 679 S.E.2d 722 (2009) (restrictive covenants must be reasonable as to time, scope, and geography)
- Waldeck v. Curtis, 261 Ga.App. 590, 583 S.E.2d 266 (2003) (prohibition on accepting unsolicited business can be unreasonable)
- Advance Technology Consultants v. RoadTrac, LLC, 250 Ga.App. 317, 551 S.E.2d 735 (2001) (one-sided covenants and consideration concerns support strict scrutiny)