This appeal arises from a claim made by Lapolla Industries, Inc. that a competing business, Premium Spray Products, Inc., and Maclean Hess (on behalf of Premium) hired, or were attempting to hire, five former employees of Lapolla in violation of noncompete covenants in employment agreements between Lapolla and the former employees. In response to Lapolla’s demand letter that Premium and Hess cease this activity with respect to the former employees, or face legal action for alleged tortious interference with the employment agreements, Premium and Hess filed a declaratory judgment action against Lapolla seeking a declaration that they were not tortiously interfering with Lapolla’s contractual relations with the former employees because the noncompete covenants in the agreements were void and unenforceable.
The trial court entered an order granting a motion by Premium and Hess for a partial final judgment on the pleadings as to Count 2 of the complaint (which sought a declaratory judgment as to the noncompete covenants), and pursuant to OCGA § 9-11-54 (b) the
1. Lapolla and Kramer contend that, because Premium and Hess were not parties to the employment agreements between Lapolla and the former Lapolla employees, they had no standing to seek a declaratory judgment with respect to the noncompete covenants in the agreements.
A superior court is authorized under OCGA § 9-4-2 (a) and (b) to enter a declaratory judgment “to declare rights and other legal relations of any interested party’ petitioning for a declaration “in cases of actual controversy’ under subsection (a), and in “any civil case in which . . . the ends of justice require that the declaration should be made” under subsection (b). The declaratory judgment statute is liberally construed; applies where a legal judgment is sought that would control or direct future action; and requires under subsection (a) or (b) the presence in the declaratory action of a party with an interest in the controversy adverse to that of the petitioner. Famble v. State Farm Ins. Co.,
We find under the circumstances of this case that the requirements for application of the declaratory judgment statute have been met. Similar circumstances were present in Enron Capital & Trade Resources Corp. v. Pokalsky,
2. Lapolla contends that the trial court erred in granting a declaratory judgment on the pleadings as to Count 2 declaring as a matter of law that the noncompete covenants contained in the employment agreements between Lapolla and its former employees were void and unenforceable.
[A] motion for judgment on the pleadings is authorized where the undisputed facts that appear 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.
Novare Group v. Sarif,
In the present case, the complaint for declaratory judgment alleged that all five of the Lapolla former employees at issue had noncompete covenants in their employment agreements with Lapolla
The Non-Compete language for each employee is set forth as follows:
During the Employment Period and for a period of two (2) years after the termination of Employee’s employment with [Lapolla] for any reason (collectively the “Restriction Period”), the Employee shall not, either directly or indirectly, for himself or any third party, anywhere within North America: (a) engage in or have any interest in any activity that directly or indirectly competes with the business of [Lapolla] or any of its affiliates as conducted at any time during the Employment Period, including without limitation, accepting employment from or providing consulting services to any such competitor, owning any interest in or being a partner, shareholder or owner of any such competitor, (b) solicit, induce, recruit, or cause another person in the employ of [Lapolla] or its affiliates or who is a consultant or independent contractor for [Lapolla] or its affiliates to terminate his employment, engagement or other relationship with [Lapolla] or its affiliates, or (c) solicit or accept business from any individual or entity which shall have obtained the goods or services of, or purchased goods or services from, [Lapolla] or its affiliates during the two year period immediately prior to the end of the Employment Period or which otherwise competes with or engages in a business which is competitive with or similar to the business of [Lapolla] or any of its affiliates, (d) call on, solicit or accept any business from any of the actual or targeted prospective customers of [Lapolla] or its affiliates (the identity of and information concerning which constitute trade secrets and Confidential Information of [Lapolla]) on behalf of any person or entity in connection with any business competitive with the business of [Lapolla], nor shall the Employee make known the names and addresses of such customers or any information relating*260 in any manner to [Lapolla’s] trade or business relationships with such customers, other than in connection with the performance of Employee’s duties under this Agreement.2
In response to the complaint, Lapolla and Kramer filed an answer which admitted that the letter attached to the complaint was a true and correct copy of the letter sent by Lapolla. The answer also attached as an exhibit a copy of one of the five employment agreements at issue (Ozier’s agreement) which contained the exact “non-compete” covenants referred to in Lapolla’s letter as “the Non-Compete language for each employee.”
Lapolla and Kramer argue for the first time on appeal that the trial court erred by ruling on the motion for judgment on the pleadings because the court should have allowed discovery with respect to the employment agreements with the former employees. Lapolla contends for the first time on appeal that it “does not have a copy of the complete agreements and never had an opportunity to seek them in discovery.” According to Lapolla, it attached a copy of Ozier’s employment agreement to its answer merely as an example of an agreement containing the “non-compete” language contained in its letter to Premium and Hess, and was forced to “trust that the remaining agreements were identical.”
As stated above, the record shows to the contrary that Lapolla conceded in its answer that the letter it sent to Premium and Hess (attached to the complaint) set forth in “the Non-Compete language for each employee,” and Lapolla’s answer attached as an exhibit an employment agreement containing the same “non-compete” language set forth in the letter. Moreover, Lapolla’s subsequent motion to dismiss or stay the proceedings also conceded that the pleadings set forth the “non-compete” language contained in all the agreements. Lapolla’s motion states:
All of the facts are taken from Plaintiffs’ Complaint, documents attached to Plaintiffs’ Complaint, and the Agree*261 ments between Lapolla and its former employees referenced in Plaintiffs’ Complaint and attached to Defendants’Answer. This Court is permitted to refer to the Agreements because they are part of the pleadings in this case, and are central to Plaintiffs’ claims.
In the same motion, Lapolla again refers to the letter it sent to “Hess and Premium advising them that the Former Employees were acting in competition with Lapolla in violation of the Agreements.” Finally, Lapolla’s Brief on Appeal recognizes that
Lapolla entered into employment agreements (the “Agreements”) with its now-former employees, including Ted Med-ford, Troy Herring, Carl McKettrick, Vincent Majewski, and Moody Ozier (the “Former Employees”), all of which contained covenants not to compete (the “Restrictive Covenants”).
In support of this statement in its appellate brief that all five employment agreements contained the “non-compete” covenants, Lapolla’s brief cites in the record to the “non-compete” language contained in the employment agreement attached as an exhibit to its answer.
Nothing in the record shows that Lapolla or Kramer sought or was denied the opportunity for discovery with respect to Lapolla’s employment agreements with its former employees. Rather, the record shows that, in responding in the trial court to the motion for partial judgment on the pleadings, Lapolla conceded that the “non-compete” language set forth in the pleadings was the same in all five of its employment agreements with its former employees. “Issues never raised at trial will not be considered for the first time on appeal.” Amerireach.com v. Walker,
In ruling on the motion for judgment on the pleadings, the trial court properly considered the exhibits attached to the complaint and the answer as establishing the language set forth in the “non-compete” covenants contained in the employment agreements between Lapolla and its five former employees. The trial court also correctly ruled under applicable Georgia law that the restrictive covenant considered by the court was void and unenforceable on its face.
Because the pleadings show that the restrictive covenants at issue arise out of employment agreements, the trial court correctly applied “strict scrutiny’ in its consideration of restrictions on competition contained in the covenant. Gordon Document Products v. Service Technologies,
Although facts may be necessary “to show that a questionable restriction, though not void on its face, is, in fact, reasonable,” a covenant containing sufficiently indefinite restrictions “[can]not be saved by additional facts” and is “void on its face.” Koger Properties v. Adams-Cates Co.,247 Ga. 68 , 69 (2) (274 SE2d 329 ) (1981); see also Uni-Worth Enterprises v. Wilson,244 Ga. 636 , 640-641 (261 SE2d 572 ) (1979) (affirming grant of interlocutory injunction when the enforceability of restrictive covenants “was a legal question which could be determined by looking solely to the language of the restrictive covenant”).
Global Link Logistics v. Briles,
But the rule that unenforceable noncompete covenants will not be severed or “blue-penciled” does not apply equally to all types of covenants restricting competition. As to the five restrictive covenants set forth in the “non-compete” language at issue in the present case (see note 2, supra), the nonseverability rule applies to three of those covenants: the covenant restricting employment with a Lapolla competitor (subparagraph (a)), the covenant restricting solicitation of business from entities doing business with or competing with Lapolla (subparagraph (c)), and the covenant restricting solicitation of Lapolla customers (set forth in a portion of subparagraph (d)). Sunstates Refrigerated Svcs. v. Griffin,
In ruling on the motion for declaratory judgment on Count 2, the trial court considered the restrictive covenant set forth in subparagraph (a) of the “non-compete” language. The covenant set forth in subparagraph (a) provides that the former Lapolla employees shall not
engage in or have any interest in any activity that directly or indirectly competes with the business of [Lapolla] or any of its affiliates as conducted at any time during the Employment Period, including without limitation, accepting employment from or providing consulting services to any such*264 competitor, owning any interest in or being a partner, shareholder or owner of any such competitor.
This language contains no reasonable limit on the kind, character, or scope of work restricted and effectively restricts the former employees from working for a Lapolla competitor in any capacity. A noncompete covenant is too broad and indefinite to be enforceable where it contains no limit on the work restricted and effectively prohibits an employee from working for a competitor in any capacity. McNease v. Nat. Motor Club of America,
Accordingly, the trial court correctly found that the pleadings show the restrictive covenant set forth in subparagraph (a) was void on its face and unenforceable as a matter of law. Under the nonseverability rule, the trial court also correctly found that the restrictive covenant set forth in subparagraph (c), and the covenant restricting solicitation of Lapolla customers (as set forth in a portion of subparagraph (d)) are also unenforceable as a matter of law.
3. Lapolla and Kramer contend that the trial court erred by refusing to grant their motion to dismiss the action on the basis that the employment agreements contain forum selection clauses requiring that “venue for any action brought hereunder shall be exclusively in Harris County, Texas.”
The employment agreements also contain choice of law clauses which provide that they “shall be governed by and construed in accordance with the laws of the state of Texas.” Accordingly, if enforced together, the forum selection and choice of law clauses in the employment agreements would require that the present action be brought before a Texas court applying Texas law. The record shows that Premium is a Georgia corporation with its principal place of business in Georgia, and that Hess is a Georgia resident. Lapolla is a Delaware corporation with its principal place of business in Texas, and Kramer is a resident of Texas. The trial court denied the motion to dismiss and refused to enforce the forum selection and choice of law clauses on the basis of Georgia public policy.
The enforceability of the forum selection clauses is a procedural issue which, under the rule of lex fori, requires application of the law of Georgia (where suit was filed), even though the employment agreements also contain choice of law clauses requiring application of Texas substantive law. Brinson v. Martin,
As set forth in Division 2, supra, the lack of any limit on the scope of the restricted work rendered the noncompete covenant considered by the trial court unenforceable under Georgia law, and Georgia law
In support of their contention that the trial court should refuse to enforce the forum selection and choice of law clauses, Premium and Hess made the necessary showing that a Texas court would likely apply Texas law to enforce the covenants in a manner contrary to applicable Georgia public policy. Carson,
Judgment affirmed in part and reversed in part.
Notes
Although the trial court inadvertently referred to Count 1 of the complaint in the order and partial judgment, it is undisputed that the court actually ruled as to the noncompete covenants set forth in Count 2. In addition to the claim for a declaratory judgment brought by Premium and Hess against Lapolla related to the noncompete covenants (Count 2), the suit, as amended, includes separate claims for declaratory judgments brought by Hess against Lapolla seeking declarations that Hess (also a former Lapolla employee) was not violating nonsolicitation and nondisclosure covenants in his employment agreement with Lapolla because those covenants were also void and unenforceable (Counts 3 and 4). The suit also names as a defendant Douglas Kramer, the president and chief executive officer of Lapolla, and includes a count brought by Hess against Kramer alleging defamation (Count 1). This appeal concerns the trial court’s rulings on Count 2 on the noncompete covenants. The claims set forth in Counts 1, 3, and 4 of the complaint remain pending in the trial court.
This language, referred to by the parties and the trial court as “non-compete” covenants, sets forth five covenants restricting activity by Lapolla’s former employees. Subparagraph (a) restricts engaging in competition with Lapolla; subparagraph (b) restricts solicitation of current Lapolla employees, consultants, or independent contractors; subparagraph (c) restricts solicitation of business from entities which purchase goods or services from Lapolla or which otherwise compete with or are similar to Lapolla; and a portion of subparagraph (d) restricts solicitation of Lapolla customers. The fifth covenant, which is also set forth as part of subparagraph (d), restricts disclosure of Lapolla’s trade secrets and confidential information. The above language setting forth these restrictive covenants is collectively referred to in this opinion as the “non-compete” language or covenants.
By this claim, Lapolla contends for the first time on appeal that, if discovery showed that the employment agreements contained “non-compete” covenants that were ancillary to the sale of a business to Lapolla, the trial court would have applied a lower level of scrutiny than the “strict scrutiny” applied to covenants ancillary to employment contracts, and would have blue-penciled the covenants to sever over-broad or illegal provisions. See Jenkins v. Jenkins Irrigation,
The 2011 act revising Georgia law related to restrictive covenants in contracts (OCGA § 13-8-50 etseq.) does not apply to contracts entered into before May 11,2011. Ga. L. 2011, p. 399, § 5; Holton v. Physician Oncology Svcs.,
Lapolla makes no argument on appeal that these restrictive covenants are valid under Georgia law.