H&r Block Eastern Enter.S Inc v. Morris
| Citation | 606 F.3d 1285 |
| Decision Date | 17 May 2010 |
| Docket Number | No. 09-11184.,09-11184. |
| Parties | H&R BLOCK EASTERN ENTERPRISES, INC., Plaintiff Counter-Defendant Appellant Cross-Appellee,v.Vicki D. MORRIS, Defendant Counter-Claimant Appellee Cross-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
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J. Matthew Maguire, Jr., Balch & Bingham, LLP, Atlanta, GA, S. Jane Bruer, David M. Kight, James Loyd Gattis, III, Spencer, Fane, Britt & Browne, LLP, Kansas City, MO, for Plaintiff.
Vicki D. Morris, Atlanta, GA, pro se.
Appeals from the United States District Court for the Northern District of Georgia.
Before BLACK, MARCUS and HIGGINBOTHAM,* Circuit Judges.
This case arises from an employment agreement entered into between Vicki D. Morris, a tax professional, and H&R Block Eastern Enterprises, Inc. (Block), her former employer. The employment agreement included a non-competition covenant and a non-solicitation covenant. After Block informed her she was ineligible for rehire, Morris started Dreams Tax Service, Inc. (Dreams) and personally prepared returns for 47 former Block clients. Block filed suit against Morris, claiming she violated the terms of her employment agreement by soliciting Block's clients, providing tax-preparation services to Block's former clients, and soliciting and hiring Block's employees.
The district court denied Block's motion for summary judgment for breach of the employment agreement and held the non-competition covenant in the agreement was unenforceable under Georgia public policy, thus rendering the entire agreement unenforceable. Because there were no further issues to resolve with regard to Block's breach of contract claim, the district court entered judgment in favor of Morris. The district court granted Block's motion for summary judgment on Morris's counterclaims, which alleged (1) Block wrongfully terminated her, (2) Block interfered with her business relations, (3) Block breached its implied contract to hire her, (4) Block discriminated against her in violation of Title VII, and (5) Block defamed her. On appeal, Block contends the district court erred by concluding the restrictive covenants in the employment agreement were unenforceable under Georgia law. Morris, proceeding pro se, cross-appeals the district court's grant of summary judgment in favor of Block on her counterclaims.1
Block provides tax preparation and related services for individuals and companies nationwide. Block employed Morris as a seasonal tax preparer in its office at 5195 Old National Highway, College Park, Georgia, for the 2000-2005 tax seasons. Each of Morris's periods of employment was governed by a separate employment agreement. On or about November 15, 2004, Morris entered into an employment agreement (Agreement) with Block for the 2005 tax season. The Agreement contained restrictive covenants, including a non-competition covenant and a non-solicitation covenant.
Section 11(a) of the Agreement sets out the non-competition covenant, which states, for a period of two years following the expiration of the Agreement, or the resignation or termination of the employee:
Associate shall not, directly or indirectly, provide any of the following services to any of the Company's Clients: (i) prepare tax returns, (ii) file tax returns electronically, or (iii) provide any alternative or additional service or product that Associate provided or offered as an employee of the Company .... The restrictions contained in Section 11(a) are limited to (i) Associate's district of employment, and (ii) a twenty-five (25) mile radius as measured from the office to which Associate is assigned ....
Agreement, § 11(a). The Agreement defines “Company Clients” as “(i) every person or entity with whom Associate had contact because Associate prepared or electronically transmitted their federal or state tax return during the term of this Agreement, and (ii) every person or entity with whom Associate had contact because Associate provided or offered additional or alternative services or products to such person or entity as an employee of the Company during the term of this Agreement.” Agreement, § 11(a).
Section 11(b) of the Agreement sets out the non-solicitation covenant, which states for a period of two years following the expiration of the Agreement, or the resignation or termination of the employee:
Associate shall not, directly or indirectly, solicit or attempt to solicit any of the Company's clients for the purpose of providing (i) tax return preparation, (ii) electronic filing of tax returns, or (iii) any alternative or additional service or product that Associate provided or offered as an employee of Company.
On or after October 31, 2005, Morris received a generic letter from Block addressed “Dear Associate.” The letter welcomed Morris back to Block and invited her to attend an orientation for the 2006 tax season. On November 16, 2005, Morris attempted to attend the orientation but was prevented from doing so by Brenda Shirley, one of Block's office managers. Morris claims Shirley loudly berated her before escorting Morris out of the building. The next day, Morris received a phone call from KaSondra Smith, the Block manager in charge of the district in which Morris had worked. Smith informed Morris that Block was performing an internal audit of tax returns prepared by Morris. Morris subsequently received a letter from Smith notifying Morris she was not eligible for rehire until the audit process was complete. Finally, in December of 2005, Block informed Morris she was ineligible for rehire.
In January of 2006, Morris started Dreams. Dreams' office was located approximately 13.3 miles from the Block office. During the 2006 tax season, Morris's family members, friends, and former Block clients came to Dreams to have their tax returns prepared. Dreams prepared tax returns for 87 former Block clients, although Morris personally prepared only 47 of those returns. Morris claims she did not solicit the business of the former Block clients, directly or indirectly.
On June 2, 2006, Block filed suit against Morris, claiming inter alia, she violated the terms of her employment agreement by (1) soliciting Block's clients for the purpose of providing tax-preparation services, (2) providing tax-preparation services for former Block clients, and (3) soliciting and hiring Block's employees. Block sought damages, injunctive relief, interest, costs, and fees.
In response, Morris filed an answer and a counterclaim. In her counterclaim, Morris alleged (1) Block wrongfully terminated her, (2) Block interfered with her business relations, (3) Block breached its implied contract to hire her, (4) Block discriminated against her in violation of Title VII, and (5) Block defamed her.
On November 7, 2006, Block filed a motion for a preliminary injunction. After a hearing on December 22, the district court granted in part and denied in part Block's motion for a preliminary injunction. Ruling the non-competition and non-solicitation covenants in Morris's employment contract were reasonably limited, the district court enjoined Morris from violating them.
On July 7, 2008, Block filed motions for summary judgment on its claims and on Morris's counterclaims. On January 6, 2009, the district court granted summary judgment in favor of Block on Morris's counterclaims, but denied Block's motion for summary judgment on its breach of contract claim. The district court decided the non-competition covenant was unenforceable because it prevented Morris from accepting unsolicited business from former clients, and thus invalidated the non-solicitation covenant as well. In light of those rulings, the district court entered summary judgment in favor of Morris, but granted summary judgment to Block on all of Morris's counterclaims. This appeal and cross-appeal ensued.
The denial of a motion for summary judgment by a district court is reviewed de novo, applying the same standards the district court used. Ortega v. Bibb County Sch. Dist., 397 F.3d 1321, 1324 (11th Cir.2005). Summary judgment is proper when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c)(2).
The moving party bears the initial burden of showing there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 320-23, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the burden shifts to the non-moving party to “designate specific facts showing that there is a genuine issue for trial.” Id. at 324, 106 S.Ct. 2548 (quotations omitted).
A. The Restrictive Covenants
A restrictive covenant in an employment contract, whether a non-solicitation covenant or a non-competition covenant, is considered to be in partial restraint of trade and will be enforced only if it (1) is reasonable, (2) is supported by consideration, (3) is reasonably necessary to protect the restraining party's interest, and (4) does not unduly prejudice the interests of the public. W.R. Grace & Co. v. Mouyal, 262 Ga. 464, 422 S.E.2d 529, 531 (1992). Georgia courts apply strict scrutiny to restrictive covenants in employment contracts, and the reasonableness of the restraint is a question of law for determination by the court, “which considers the nature and extent of the trade or business, the situation of the parties, and all other circumstances.” Habif, Arogeti & Wynne, P.C. v. Baggett, 231 Ga.App. 289, 498 S.E.2d 346, 349-50 (1998) (quotations omitted). “A three-element test of duration, territorial coverage, and scope of activity has evolved as a helpful tool in examining the reasonableness of the particular factual setting to which it is applied.” Id. at 351 (quotations omitted).
A restrictive covenant in an employment contract cannot be “blue-penciled” if...
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