Hulcher Services, Inc. appeals from an adverse declaratory judgment voiding a noncompetition restrictive covenant with Daniel J. Keating, a former employee, and his new employer, R. J. Gorman Railroad Company, LLC. We affirm the determination of the trial court that the covenants as to territory, work capacity, and solicitation of customers were flagrantly overbroad and unreasonable under Georgia law for the following reasons.
Keating began work with Hulcher in 1984 in Illinois. However, until December 2, 1998, Hulcher had not required for Keating an employment agreement with a noncompete provision.
Hulcher is in the business of performing emergency disaster remediation services for railroads and industries with rail siding and rail yards in the lower 48 states, Canada, and Mexico. Although Keating began work for Hulcher in Illinois, from 1994 until 1997 he worked in Memphis, Tennessee, doing work only in parts of Tennessee and of Kentucky; then, until he left in 1999, he worked for Hulcher as Senior Division Manager in Atlanta, Georgia. He had
responsibility for the entire states of Georgia and Florida but did not work in areas of these states without main rail lines.
The noncompete provision prohibited Keating from working for three years in all of Florida, Georgia, Illinois, Ohio, or Tennessee in any capacity.
On June 1, 1999, Keating left Hulcher and went to work for Corman, a direct competitor. Initially, Keating worked in Kentucky and then Minnesota until March 2000 when he was transferred to Atlanta.
On March 7, 2000, Corman instituted this declaratory judgment action against Hulcher to have the covenant voided. On April 10, 2000, Hulcher moved to dismiss the action on the grounds that Corman lacked standing. On April 25, 2000, Keating was joined in the action. However, on April 7, 2000, Hulcher filed suit against Keating in the 367 Texas District Court, obtaining an ex parte restraining order without service on any party to enforce the covenant. This Texas suit was subsequently removed to the United States District Court for the Eastern District of Texas. On May 16, 2000, the United States District Court is reported to have issued an interlocutory injunction against Keating. However, on May 17, 2000, the trial court below conducted a final hearing and entered a final judgment, finding the covenant unenforceable as a matter of Georgia public policy,
1. Hulcher contends that the judgment should be vacated because of the interlocutory federal injunction. We do not agree.
The federal district court in this diversity jurisdiction case and the Superior Court of Fulton County have concurrent subject matter jurisdiction as separate and independent jurisdictions so that the same cause of action can be maintained between the same parties over the same issues at the same time. See
Inter-Southern Life Ins. Co. v. McQuarie,
Further, the trial court in this case has entered final judgment
on the issues between the parties, while the Texas federal district court has only issued an interlocutory injunction, which is “merely pendente lite relief” and which is a long procedural journey from a final judgment and affirmance by the United States Court of Appeals for the Fifth Circuit in that jurisdiction. See
GTE Sylvania, Inc. v. Consumers Union &c.,
A case of actual controversy still exists, because the federal district court has rendered no final judgment as an adjudication on the merits that delineates the rights of the parties, but only its interlocutory order that places the plaintiffs under a real and present threat of contempt. Such Texas action clearly demonstrates that Hulcher treats these issues as a real controversy and would not hesitate to seek the sanction of contempt. See OCGA § 9-4-2 (a);
Calvary Independent Baptist Church v. City of Rome,
2. Plaintiff contends that the trial court erred in applying Georgia law rather than Texas law as specified in the contract. We do not agree.
The contract was executed in Texas. However, it was not to be performed in Texas, but in Georgia: it did not involve a covenant not to compete in Texas, but in other states, including Georgia; Keating never worked in Texas, but worked in Georgia; he was not personally subject to the jurisdiction of a Texas court, but was a resident in Georgia at the time the litigation commenced and the last time he worked for Hulcher; and the contract was to be enforced in Georgia. Texas has no nexus with Keating and
Generally, Georgia will follow a forum selection clause in an employment contract. See
Iero v. Mohawk Finishing Products,
Georgia conflicts of law will not follow a contractual selection of law of a foreign state where such chosen law would contravene the public policy of Georgia against certain unlawful covenants not to compete. See
Nasco, Inc. v. Gimbert,
This case is distinguishable from
Iero v. Mohawk Finishing Products,
supra at 671, because first, that case was a forum selection clause; and, second, in that case the plaintiff failed to carry the burden of showing how the application of New York law would be contrary to the public policy of Georgia and that “enforcement of his employment contract would be unreasonable under the circumstances.” Id. at 671; see also
Carnival Cruise Lines v. Shute,
3. Plaintiff contends that the trial court erred in evaluating the restrictive covenant solely on its face and without considering the nature of the industry and Keating’s high level managerial position when it determined whether the covenant was reasonably limited to protect Hulcher’s legitimate business interests. We do not agree.
The affidavit of Keating and the affidavit of Frank Given, vice president of Hulcher, clearly state the nature of Hulcher’s business, Keating’s employment history with it, Keating’s personal relationship with clients, and the level of knowledge that he had acquired.
The trial court’s judgment of May 22, 2000, neither explicitly nor implicitly indicates that the trial court did not consider all of the evidence in the record. Therefore, this Court must presume “that the [trial court] performed [its] duty by considering the evidence and making a finding from it, where the issue is one for such determination.”
Sessions v. Oliver,
The territorial limitations were Florida, Georgia, Illinois, Ohio, and Tennessee. Given testified that such restricted territory covered where Keating had worked in the past and developed relationships; where Keating had close relationships with railroad personnel who could give him business; and where the principal eastern railroads, CSX and Norfolk Southern, have their main concentration of track-age. Given never testified that either CSX or Norfolk Southern was Hulcher’s exclusive client or that Gorman did not also do work for these railroads in these states in the past. Thus, neither the clients nor the territory in the covenant was exclusively Hulcher’s. By Hulcher’s strategically selecting these states, no east-west or north-south mainline railroad east of the Mississippi could operate without passing through this territory, and there was no need to specifically include each contiguous state, except to exclude rail yards and sidings.
While a contract in general restraint of trade or which tends to lessen competition is against public policy and is void (1983 Ga. Const., Art. Ill, Sec. VI, Par. V (c); OCGA § 13-8-2), a restrictive covenant contained in an employment contract is considered to be in partial restraint of trade and will be upheld if the restraint imposed is not unreasonable, is founded on a valuable consideration, and is reasonably necessary to protect the interest of the party in whose favor it is imposed, and does not unduly prejudice the interests of the public.
(Citation and punctuation omitted.)
W. R. Grace & Co. v. Mouyal,
supra at 465. “A covenant not to compete, being in partial restraint of trade, is not favored in the law, and will be upheld only when strictly limited in time, territorial effect, the capacity in which the employee is prohibited from competing and when it is otherwise reasonable.” (Citations and punctuation omitted.)
Beckman v. Cox Broadcasting Corp.,
supra at 129. To determine the reasonableness of a restrictive covenant, courts examine the covenant’s terms regarding time, territory, and scope of activity.
American Gen. Life &c. Ins. Co. v. Fisher,
In this case, the area restricted as to competition exceeds the area within which Keating worked for Hulcher. While this Court will accept as prima facie valid a territory where the employee worked and the employer does business, a territory that is only where the employer does business but the employee did not work is overly broad on its face, absent strong justification for such protection, other than the desire not to compete with the former employee.
Rollins Protective Svcs. Co. v. Palermo,
However, a restriction against doing business with any actual or potential customers of the employer located in a specific geographic area in which the employee had not actually done business is over-broad and unreasonable.
W. R. Grace & Co. v. Mouyal,
supra at 465; see also
Chaichimansour v. Pets Are People Too,
As to the restrictions on solicitation of Hulcher’s clients or
employment of its employees, there is no restriction as to territory so that the restriction applies to all of North America, which is unreasonable because Keating had no contact with customers or employees outside his work area sufficient to establish a relationship with them. See
W. R. Grace & Co. v. Mouyal,
supra at 465;
Sanford v. RDA Consultants,
5. Hulcher contends that the trial court erred in finding that the restrictions were overly broad and unreasonable as to the scope of activity. We do not agree.
The Georgia courts have found that a former employer does not need a restrictive covenant that prohibits work for a competitor in any capacity in order to protect its legitimate interests, because a reasonable restriction sets forth with specific particularity those activities related to the employer’s business in which the employee was trained by the employer or worked for the employer, thereby protecting the employer’s interests from competition in that regard only
Howard Schultz &c., Inc. v. Broniec,
In this case, Keating is prohibited from working for a competitor in any capacity, either directly or indirectly, and from owning, managing, operating, controlling, being employed or connected with in any capacity any business similar to railroad derailment services and emergency response hazardous material remediation businesses conducted by Hulcher.
Sanford v. RDA Consultants,
supra;
Ceramic &c. Coatings Corp. v. Hizer,
supra. Thus, he is prohibited from employ
ment in any capacity for a competitor or management and ownership in a competitor. Under Georgia law, this violates Georgia public policy because it is anti-competitive, and the restriction is broader than necessary to protect Hulcher. See
Puritan-Churchill Chem. Co. v. Eubank,
6. Hulcher contends that the trial court erred in ruling that the nonsolicitation provision was overly broad and unreasonable. We do not agree.
The nonsolicitation of Hulcher’s customers is not limited to those with whom Keating had a relationship and Hulcher had as actual customers as opposed to potential customers, but also extends to any customer in North America. Such provision in territory and scope is overly broad and unreasonable, rendering it unenforceable. Such nonsolicitation covenant must be limited to those customers within the specific territory where plaintiff actually worked for a reasonable business need for protection to arise; however, in this case, the need is absent where the actual customers are scattered across North America and Keating had no relationship
Judgment affirmed.