Mark A. Wright, Jason A. Dunham, Gregg R. Anderson and Sonic Systems, Inc. appeal an interlocutory injunction issued against them after the trial court determined that four restrictive covenants contained in employment contracts signed by Wright and Dunham were enforceable. For reasons which follow, we affirm in part and reverse in part.
The trial court issued an order enforcing the restrictive covenants contained in the employment contracts and barring Wright and Dunham from “further violating” them. The order also enjoined Anderson and SSI from “interfering with PIC’s contracts with Wright and Dunham and with Wright and Dunham’s fiduciary obligations owed to [PIC].”
1. ‘Whether the restraint[s] imposed by the employment contract [are] reasonable is a question of law for determination by the court.”
W. R. Grace & Co. v. Mouyal,
Wright, Dunham, Anderson, and SSI enumerate as error the trial court’s determination that each of the four covenants is enforceable. The covenants are not dependent upon one another, and one may stand even though the others fall. See
Lane Co. v. Taylor,
2. The first of the four covenants is a covenant not to compete. “Covenants not to compete in employment contracts are enforceable if they are reasonable in terms of duration, territorial coverage, and the scope of activity precluded, considering the legitimate business interests the employer seeks to protect and the effect on the employee.”
Chaichimansour v. Pets Are People Too &c.,
Although the specific scope of Wright’s and Dunham’s duties for PIC is in dispute, PIC does not allege that Wright and Dunham acted as shareholders, partners, or principals. Because the covenant contains a prohibition on activities beyond those Wright and Dunham performed for PIC, the covenant is overbroad and unenforceable.
Harville v. Gunter,
The covenant not to compete at issue here is distinguishable from other covenants not to compete which we have previously held enforceable because they are narrowly tailored in the scope of activities prohibited. For example, in
Sysco Food Svcs. &c. v. Chupp,
3. The second covenant is a covenant not to solicit customers. It provides that for one year Wright and Dunham cannot “for the purpose of attempting to provide Consulting Services . . . call upon, contact or solicit . . . any person or entity (Restricted Customers), which during the twelve (12) month period immediately prior to the Termination Date, was both (i) a customer of [PIC], and (ii) was a person or an entity to which [Wright or Dunham] marketed, promoted, distributed or sold Consulting Services on [PIC’s] behalf.” The territory for the covenant is defined as “any place of business of a Restricted Customer at which or to which place of business [Wright or Dunham] marketed, promoted, distributed or sold Consulting Services on [PIC’s] behalf during the year prior to the Termination Date.”
The covenant not to solicit customers is written in the conjunctive. Its scope is narrowly tailored to reach only a person or entity who was both a customer of PIC and a person or entity to which Wright or Dunham marketed, promoted, distributed or sold consulting services on PIC’s behalf during the year prior to the termination date. Our Supreme Court upheld the enforceability of an even broader non-solicitation clause in W. R. Grace & Co. v. Mouyal, supra at 468 (2). In Mouyal, the restrictive covenant deemed enforceable by the Supreme Court provided: the “former employee is prohibited from post-employment solicitation of employer customers which the employee contacted during his tenure with the employer.”
It is true that “
‘a
prohibition against doing business with
any
of
an employer’s customers, whether or not a relationship existed between the customer and the former employee, is overbroad.’ [Cit.]” (Emphasis in original.)
American Software USA v. Moore,
In seeking injunctive relief, PIC offered evidence that Wright had solicited three PIC customers: Bremco, Inc., Brown & Root, Inc., and John Brown Engineering Company. The record shows that PIC operated a specialized business which provided skilled craftsmen to certain industrial customers which have boilers, turbines, heat exchangers and other heavy machinery and equipment. PIC places these skilled craftsmen on a temporary contract basis with its customers. Less than a week after Wright resigned, he became president of SSI Technical Services, Inc., a subsidiary of Sonic Systems, Inc. Sonic Systems, Inc. owns both SSI Technical Services, Inc. and Craft Support Services, Inc. According to Wright, SSI Technical Services specializes in providing professional technical contract personnel to industries, a business not unlike the one he quit. Dunham also became employed with SSI Technical Services after he left PIC.
Wright and Dunham contend the non-solicitation covenant is overbroad and unenforceable because they were mere “telemarketers” who contacted all of PIC’s customers, but lacked any substantive contact with these customers. Notwithstanding Wright’s testimony to the contrary, the record shows that when he resigned from PIC in August 1997, his duties included more than mere telemarketing. By Wright’s own admission, while still employed by PIC Crafts, Inc., he marketed PIC’s services to Bremco and also “sold” (placed) craft personnel with Bremco. It is undisputed that after Wright left PIC, he had direct contact with Bremco and according to his affidavit, he “facilitated Bremco’s. conduct of business with Craft Support Services, Inc., a separate corporation by which I am not employed.” But as noted above, although Wright is not an employee of Craft Support Services, he is the president of another
The vice president of PIC Process Services Corporation, Jerry Jennings, testified that in July 1997, Wright and he visited Brown & Root, a customer of PIC in Houston. Again, this contact refutes Wright’s assertion that he was merely a telemarketer. Jennings testified that after Wright left PIC the next month, the Brown & Root file was missing. Jennings testified that he had personal knowledge that Wright had solicited business from Brown & Root within two weeks of his resignation. According to Jennings, Wright also contacted John Brown Engineering Company, another customer that Wright had not only solicited but also managed programs for while he was the Director of PIC Crafts, Inc.
The record also shows that Dunham, who resigned from PIC on the same day as Wright, was also more than a mere telemarketer. While employed with PIC, Dunham was manager for client services for PIC Crafts, Inc.
Given the complexity of the respective corporate structures and the disputed evidence as to Wright’s and Dunham’s job responsibilities, both before and after they left PIC, the facts are confusing at best and conflicting at worst. “Where, as here, there exist conflicts regarding material issues of fact, [the Supreme Court] will not interfere to control the discretion vested in the trial court in granting an interlocutory injunction. [Cits.]”
Norfolk Southern R. Co. v. Dempsey,
4. The third covenant is a nondisclosure provision which requires Wright and Dunham to keep confidential “[a]ll documents, building plans and blueprints, records, techniques, business secrets and other information . . . which have or will come into [the employee’s] possession during [employment with PIC which] shall be deemed to be confidential and proprietary to [PIC].” Business secrets are defined as “including, but not limited to, such matters as costs, profits, blueprints, markets, sales, products, product lines, key personnel, pricing policies, operational methods, procedures, customers, customer lists, customer needs, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public.” It is undisputed that this nondisclosure covenant does not include a time limitation.
A nondisclosure clause with no time limit is unenforceable as to information that is not a trade secret. See
U3S Corp. of America v. Parker,
In defining trade secrets, the legislature included “information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public.” OCGA § 10-1-761 (4). This information must (1) derive economic value,
Where a business makes a reasonable effort to maintain the secrecy of its customer lists and other trade secrets, then a trial court does not abuse its discretion in granting an interlocutory injunction under the Trade Secrets Act.
DeGiorgio v. Megabyte Intl.,
Here, PIC’s verified complaint asserted, “Defendants have taken lists and other confidential information from the office of PIC.” This allegation is supported by testimony from two officials. PIC’s vice president testified that “[a]fter Wright resigned from PIC, I searched for a Brown & Root, Inc. file that Wright and I created. . . . The Brown & Root file contained sensitive and confidential information regarding PIC, including its price structure. That file always was kept in Wright’s office. That file is now missing.”
PIC’s director of staffing testified that he kept the sole original list of PIC’s craftsmen. To perform his job duties, Wright was provided a copy of that list. The director testified, without contradiction, that when PIC searched for the list after Wright’s departure, this search for Wright’s copy of the list proved unsuccessful.
In light of the evidence that PIC attempted to maintain the confidentiality of this information, the trial court did not abuse its discretion in protecting PIC by issuing a temporary restraining order as
to the confidentiality of this information.
Avnet, Inc. v. Wyle Laboratories,
5. The fourth covenant prohibits Wright and Dunham from “contacting] or encouraging] another to contact any person who is, at that time, and was, during the term of this Agreement, an employee, agent or contractor of [PIC] in a managerial, sales, representative or skilled capacity for the purpose or with the intent of enticing him or her away from the employ of [PIC] for any reason” for a period of one year. Because we find this covenant reasonable in scope and duration, we uphold the trial court’s finding that it is enforceable.
The covenant PIC seeks to enforce is of a duration allowed by Georgia law. In
Lane Co.,
supra, this Court enforced a covenant prohibiting employees from hiring or attempting to hire for another employer any employee of their former employer or directly or indirectly causing any such employee to leave his employment in order to work for another for a period of one year. See id. at 360. More recently, we upheld a similar covenant restricting employee solicitation for two years after termination.
Sunstates Refrigerated Svcs. v. Griffin,
6. Wright, Dunham, Anderson, and SSI also enumerate as error the trial court’s injunction of SSI and Anderson. Even though PIC never argued that Wright and Dunham owed it a fiduciary duty, and the trial court never asked the parties to brief the issue, the trial court ruled sua sponte in its one-page order that SSI and Anderson were enjoined from “interfering with PIC’s contracts with Wright and Dunham and with Wright and Dunham’s fiduciary obligations” owed to PIC.
The burden of proving a fiduciary relationship is on the party seeking to establish the existence of the relationship.
Allen,
supra at 537. Here PIC has made no effort to establish the existence of a
Judgment affirmed in part and reversed in part.
Notes
On cross-examination, Wright admitted that he used the services of Rick Walton, a former client of PIC, to obtain all the craftsmen for his present company. Walton, a skilled craftsman who formerly was assigned by PIC Crafts, Inc. to various customers of PIC, confirmed that he was employed by Craft Support Services.