William Holland and Senior Life Insurance Company (“Senior Life”) entered into an agreement (“Agreement”) authorizing Holland to sell Senior Life’s insurance products as an independent agent. Senior Life subsequently terminated the Agreement and notified Holland that it “suspended” payment of commissions to Holland pending an investigation of whether Holland had violated restrictive covenants contained in the Agreement. Holland then filed a complaint against Senior Life seeking injunctive relief and a dеclaratory judgment that the Agreement’s restrictive covenants are overbroad and thus, unenforceable.
1. Holland’s motion for judgment on the pleadings sought a declaratory judgment that: “(1) the non-solicitation and confidentiality provisions of the [Agreement] are unenforceable as a matter of law; and (2) the liquidated damages of the [Agreement] are void[.]” The motion also sought “a permanent injunction preventing Senior Life from attempting to enforce such provisions” and asked the trial court to order Senior Life to pay Holland all commissions that he is owed under the Agreement. After a hearing, the trial court denied the motion in a single sentence.
On appeal, Holland argues that the trial court erred in denying the motion for judgment on the pleadings because the Agreement contains several restrictive covenants that are overbroad and, thus, unenforceable and invalid under A. L. Williams & Assocs. v. Faircloth,
A motion for judgment on the pleadings is proper
where the undisputed facts that аppear from the pleadings establish that the movant is entitled to judgment as a matter of law. All well-pleaded facts are to be accepted as true. However, the trial court is not required to adopt a party’s legal conclusions based on those facts. In other words, the granting of a motion for judgment on the pleadings under OCGA § 9-11-12 (c) is proper only where there is a complete failure to state a cause of actionor defense. In considering a motion for judgment on thе pleadings, a trial court may consider exhibits attached to and incorporated into the pleadings, including exhibits attached to the complaint or the answer.
(Citations and punctuation omitted.) Lapolla Industries v. Hess,
Accordingly, in deciding whether Holland is entitled to judgment on the pleadings, the trial court must accept Senior Life’s well-pleaded allegations. See Kwickie/Flash Foods v. Lakeside Petroleum,
Holland contends that the trial court erred in denying his motion for judgment on the pleadings on the grounds that restrictive covenants, nondisclosure provisions, and forfeiture provisions of the Agreement are unreasonable, invalid and unenforceable. The reasonableness of a restrictive covenant is a question of law, which we review de novo. Murphree v. Yancey Bros. Co.,
[Rеstrictive covenants that are ancillary to employment contracts receive strict scrutiny, and are not blue-penciled. This is because it is generally true in an employer/employee relationship that the employee goes into a transaction such as this at a great bargaining disadvantage and does so in exchange for the opportunity to [be employed].4
(Punctuation and footnotes omitted.) Id. However, the Agreement contains a severability clause.
(a) Holland first contends that Section 5.5 of the Agreement, titled “Confidentiality,” is overly broad. That provision provides, in relevant part, that “[u]ntil this Agreement terminates and at all times thereafter, you will hold in the strictest confidence and not
certain confidential and proprietary information relating to our business, including, but not limited to, certain lists of or data relating to our Customers and Prospective Customers ... and certain other information relating to our services, marketing techniques, business methods or finances, which information is generally not known to the public.... [Senior Life] take[s] all reasonable stеps necessary to ensure that each and every component of the Confidential and Proprietary Information constitutes a “Trade Secret.”
Holland contends that the “Confidential and Proprietary Information” defined in Section 5.5 does not constitute a trade secret and, thus, that the confidentiality covenant is void because it does not contain a time limit.
The validity of a non-disclosure provision depends upon its reasonableness, which, in turn, hinges on two factors: (1) whether the employer is attempting to protect confidential information relating to the business, such as trade secrets, methods of operation, names of customers, personnel data, and so on; and (2) whether the restraint is reasonably related to the protection of the information.
(Punctuation and footnote omitted.) Physician Specialists in Anesthesia v. MacNeill,
OCGA § 10-1-761 (4) defines a “Trade Secret” as “information, without regard to form, including, but not limited to, technical or nontechnical data, ... a method, a technique, . . . financial data, financial plans, product plans, or a list of.. . potential customers or suppliers which is not commonly known by or available to the public----” (Emphasis supplied.) Although “a client list may be subject to confidential trеatment under the Georgia Trade Secrets Act, the information itself is not inherently confidential.” (Citations and punctuation omitted.) Crews v. Roger Wahl CPA, P.C.,
In Physician Specialists in Anesthesia, supra, this Court held that a fact question precluded summary judgment on plaintiff’s argument that a nondisclosure covenant was unenforceably over-broad because “the legitimacy of the need to maintain the confidentiality of such information is a question of fact whose resolution is for the court below.” (Punctuation and footnote omitted.) Id. at 408 (7). Similarly, here, we cannot conclude as a matter of law that the “Confidential and Proprietary Information” defined in Section 5.5 of the Agreement does not constitute a trade secret. Additional facts beyond those set forth in the relevant pleadings аre needed to determine whether the information defined as Senior Life’s “Confidential and Proprietary Information” is a legitimate trade secret or merely confidential information relating to its business. Compare Equifax Svcs. v. Examination Mgmt. Svcs.,
(b) Holland next contends that Section 5.7 of the Agreement, titled “General Remedies and Damages,” is unenforceable because the section includes an overbroad noncompete clause. We agree.
Section 5.7 provides a “formula” for determining liquidated damages as well as other damages that could be imposed if it is found that Holland violated “the terms of this Agreement[.]” That section further includes the following noncompete сlause:
Notwithstanding our proprietary interest in our Customers and Prospective Customers, we recognize that upon termination of this Agreement, certain of our Customers may choose to sever their respective relationship with us in favor of you or any person engaging you after the termination of this Agreement, without any direct or indirect solicitation by you in violation of the terms of this Agreement. As such, . . . you hereby agree that, with respect to any Customer of ours who completely or partially severs his/her relationship with us in favor of you . . . you shall pay us an amount equal to 100% of the commissions you earned (whether accrued or actually received) from us with respect to the Severing Customer during the twenty-four (24) month period immediately preceding the termination of this Agreement.
(Emphasis supplied.)
Generally, a restrictive covenant “may not validly preclude the employee from accepting unsolicited business from customers of his former employer.” Vulcan Steel Structures v. McCarty,
Because the Agreement contains a sеverability clause, the void restrictive covenant in Section 5.7 does not void the entire contract. See Capricorn Systems, supra at 428 (2) (d). Thus, the other contract terms survive the void terms of Section 5.7. However, the invalid restrictive covenant cannot be excised from Section 5.7 so as to preserve the liquidated damages provision also contained therein. See Johnstone, supra at 298 (1). Accordingly, we find that the trial court erred in denying Holland’s motion for judgment on the pleadings as it relates to the liquidated damages provision in Section 5.7.
Senior Life applied for a motion for preliminary injunction seeking an order requiring Holland to return Senior Life’s “ ‘leads,’ marketing materials and insurance applications,” and enjoining Holland and his sub-agents from using and distributing such information. The trial court granted Senior Life’s motion and ordered Holland to return the “Leads” and insurance applications to Senior Life.
When determining whether to issue an interlocutory injunction, the trial court must consider whether
(1) there is a substantial threat that the moving party will suffer irreparable injury if the injunction is not granted; (2) the threatened injury to the moving party outweighs the threatened harm that the injunction may do to the party being enjoined; (3) there is a substantial likelihood that the moving party will prevail on the merits of her claims at trial; and (4) granting an interlocutory injunction will not disserve the public interest.
(Citation and footnote omitted.) SRB Investment Svcs. v. Branch Banking & Trust Co.,
During the course of the Agreement, Holland would periodically obtain “Leads” from Senior Life by selecting a ziр code he wished to target and submitting an order for “Leads” to Senior Life. Senior Life would then design a marketing pamphlet and contract with another company to print and mail the pamphlet to prospective customers in the targeted geographic area. The pamphlet contained a pre-paid postcard that could be detached by an interested customer and mailed back to a post office box maintained by Holland. The printing company billed Senior Life directly for its services. Senior Life would recoup the cost of providing “Leads” from Holland. Holland would then sell and distribute the “Leads” to his sub-agents for the purpose of soliciting business.
Several provisions of the Agreement govern Holland’s use of the “Leads.” Section 2.1 of the Agreement provides that Holland “shall maintain accurate records and documentation regarding any ‘Leads’ (i.e., names of [Senior Life’s] Customers or Prospective Customers) that you receive from us or any other source.” Section 5.5 of the Agreement stated that Holland “recognize [s] that [Senior Life] devote [s] significant financial, human, and other resources to the development of our customer base, ‘Leads,’ and the general goodwill associated with our business[,]” and that the “Leads” constitute “Confidential and Proprietary Information” of Senior Life. Section 5.2 of the Agreement, titled “Marketing Materials and Procedures,” provides that Senior Life’s “name, product title, logos, trademarks and other аdvertising materials are and at all times shall remain” the property of Senior Life, and Holland “shall not use any materials in any manner which has not been approved in writing” by Senior Life. Section 5.2 further states that “Upon termination of this Agreement, [Holland] shall return, and [Holland] shall cause [his] Sub-agents to return, all . . . marketing and other materials” provided by Senior Life. (Emphasis supplied.) Section 5.5 (b) provides that “Upon our request,... or within thirty (30) days following . . . termination, [Holland] will deliver to [Senior Life] only and shall not retain for [Holland’s] or anybody else’s use, any and all ‘Leads,’records, files... and materials of any type . . . containing any Confidential and Proprietary Information.”
Senior Life’s senior vice-president, Nicholas Murray, testified via affidavit that after Senior Life terminated its Agreement with Holland, Holland refused to return Senior Life’s materials, including its “Leads” and insurance applications completed by prospective customers. Murray further stated that
After a hearing, the trial court granted Senior Life’s motion for a preliminary injunction. We find no merit in Holland’s assertion that the trial court abused its discretion in granting the preliminary injunction and ordering Holland to return all “Leads” obtained through Sеnior Life or the printing company during the time the Agreement was in force, as well as all insurance applications that were submitted to Senior Life.
The trial court held that it was “extremely likely” that Senior Life would prevail at trial on its claims that Holland breached the portions of the Agreement requiring Holland to return the “Leads” and other confidential and proprietary documents to Senior Life. Such a finding was not a manifest abuse of discretion where Holland does not dispute the validity of these provisions, and, as discussed above, the Agreement contains a severability clause. See Lee v. Environmental Pest & Termite Control,
We further find no manifest abuse of disсretion in the trial court’s finding that Senior Life will suffer irreparable injury unless Holland is restrained from using Senior Life’s “Leads” and insurance applications, and that an injunction serves the public interest. Holland has presented evidence that Senior Life did not enforce its policy of requesting all materials to be returned when other Senior Life employment agreements were terminated, and that there was a delay between the termination of the Agreement and Senior Life filing the motion for preliminary injunction. However, in the present case, Senior Life alleges that it has learned through discovery that Holland and his sub-agents falsified insurance applications in order to hide the replacement of Senior Life policies, engaged in the illegal process of “switching” and “cross-selling,” and lied to current policy holders by informing them Senior Life was going out of business. See Parker v. Clary Lakes Recreation Assn.,
Holland next argues that the preliminary injunction should be reversed because Senior Life has an adequate remedy at law. See, e.g., Allen, supra at 540 (8) (“[I]t is error to grant an injunction when the party seeking it has an adequate remedy at law”) (citation omitted). Senior Life argues that it would suffer significant harm beyond the threat of lost business and customers had the trial court not granted its motion. It contends that Holland’s continued use of the copied Senior Life insurance applications
Judgment affirmed in part and reversed in part.
Notes
Other plaintiffs in the suit include Holland Insurance Group, LLC and Global Premier Benefits, LLC. They were not parties to the Agreement.
See Pittman v. Harbin Clinic Professional Assn.,
Holland argues in his appellate brief that Sections 2.1 (j), 5.4, 7.4, 7.8 and 7.10 of the Agreement are overly broad and unenforceable. However, an examination of the appellate record fails to disclose that Holland presented these arguments before the trial court. Although the trial court’s order notеs that a hearing was held, there is no transcript in our appellate record. Issues not raised and ruled upon in the court below cannot be raised in this Court for the first time on appeal. Trop, Inc. v. City of Brookhaven,
We note that in 2011 the Georgia General Assembly amended OCGA § 13-8-53 to permit blue-penciling, providing that “a court may modify a covenant that is otherwise void and unenforceable so long as the modification does nоt render the covenant more restrictive with regard to the employee than as originally drafted by the parties.” OCGA § 13-8-53 (d). However, the amended Code section only applies to contracts entered into on or after May 11, 2011. Lapolla, supra at 262 (2), n. 4.
Section 9.6 of the Agreement, titled “Severability [,]” provides that “[t]he provisions of this Agreement shall be deemed independent and severable, and the invalidity or partial invalidity or unenforceability of any one provision shall not affect the validity or enforceability of the remainder of this Agreement.”