SWAT 24 Shreveport Bossier, Inc. v. Bond

• Decision Date: 29 June 2001
• Docket Number: No. 2000-C-1695.,2000-C-1695.
• Citation: 808 So.2d 294
• Parties: SWAT 24 SHREVEPORT BOSSIER, INC. v. Robbie BOND.
• Court: Louisiana Supreme Court

808 So.2d 294

SWAT 24 SHREVEPORT BOSSIER, INC. v. Robbie BOND.

No. 2000-C-1695.

Supreme Court of Louisiana.

June 29, 2001.

Bryce J. Denny, Cook, Yancey, King & Galloway, Shreveport; Scott Zimmer, Shreveport, Counsel for Applicant.

Tommy K. Cryer, Shreveport, Counsel for Respondent.

KIMBALL, Justice.¹

We granted a writ of certiorari to resolve a split among the circuit courts of appeal regarding the proper interpretation and application of La. R.S. 23:921, relating to noncompetition agreements. For the reasons that follow, we interpret the limited exception found in § 921(C) to the general nullity of such agreements to apply only to those agreements in which the employee agrees to refrain from carrying on or engaging in his own business similar to that of the employer. Because the language in the noncompetition agreement presented in this case goes beyond this limited exception, it is unenforceable. The judgment of the court of appeal affirming the trial court's refusal to grant an injunction in favor of the former employer is therefore affirmed, and the case is remanded to the trial court for further proceedings.

FACTS AND PROCEDURAL HISTORY

Plaintiff, SWAT 24 Shreveport-Bossier, Inc. (SWAT), is a construction company specializing in insurance restoration work following disasters such as fires, floods, and hail storms. As a licenced contractor, SWAT provides both immediate, twenty-four hour emergency repair, and subsequent restoration of the home to its former condition.

SWAT first employed defendant, Robbie Bond, in September 1992, as a carpenter helper. Bond received periodic promotions and, in January 1998, he was promoted to production manager.² In connection with this promotion, Bond entered into an Employment Agreement with SWAT that specified the term of the agreement and Bond's duties, compensation, and benefits. Additionally, the Agreement contained a "Non-Competition" clause that provided:

In exchange for giving him confidential and proprietary information or trade secrets to be used in his employment, Employee covenants and agrees that during his employment and for a period of two (2) years following the termination of his employment for whatever reason, he will not, within the parishes of Caddo, Bossier, Webster, Claiborne, Lincoln, Union, Jackson, Ouachita, Desoto, Red River, Sabine, Bienville, Winn, Caldwell parishes of Louisiana and the municipalities of Shreveport-Bossier, Coushatta, Monroe, Louisiana and East Texas and Southern Arkansas:

a. Directly or indirectly, engage in competition with SWAT 24 Shreveport[-]Bossier, Inc., or serve as an officer, employee, director, agent or consultant of any business, which is in direct or indirect competition with SWAT 24 Shreveport-Bossier, Inc.

b. [R]equest or cause any employee of SWAT 24 Shreveport-Bossier, Inc., to terminate his or her employment with SWAT 24 Shreveport-Bossier, Inc., (unless such actions are within the Employee's authority as SWAT 24 Shreveport-Bossier, Inc.); or

c. Offer to employ, employ, or enter any business relationship with any employees employed by [SWAT 24] during Employee's employment.

The Agreement was signed by Bond, William J. Cowley, former Chief Operating Officer of SWAT, and a notary.

On June 19, 1998, Bond wrote a letter to SWAT stating that he resigned his employment with SWAT effective that day. SWAT subsequently discovered that Bond went to work for National Restoration Services (NRS), another construction company working in the same area. On August 14, 1998, SWAT filed a petition for damages and preliminary and permanent injunctive relief, alleging that Bond violated the terms of the Agreement's noncompetition clause. Bond filed a reconventional demand, which included claims for unpaid wages, overtime hours, bonuses and equipment costs.

On March 18, 1999, the trial court held a hearing on SWAT's request for injunctive relief. The parties stipulated to the admission of the Agreement, Bond's deposition, and Bond's resignation letter to SWAT. In addition to these stipulations, the trial court heard testimony from Cowley and Bond regarding the nature of SWAT's business and Bond's position with SWAT. The trial court subsequently denied SWAT's request for injunctive relief.³ The trial court found that Bond worked as a production manager at both SWAT and NRS. The trial court began its analysis by noting that La. R.S. 23:921 generally prohibits noncompetition agreements except in limited circumstances as provided for in the statute. The court then, relying on the case of Summit Institute for Pulmonary Medicine & Rehabilitation, Inc. v. Prouty, 29,829 (La.App. 2 Cir. 4/9/97), 691 So.2d 1384, found that the language of the Agreement's noncompetition clause went beyond the limited exception provided by La. R.S. 23:921(C) in that it prohibits the employee's employment in any capacity with other employers in the field. The court concluded that because the noncompetition provision in the Agreement prohibited Bond from becoming an employee of a competitor, that provision was null and void.

The court of appeal affirmed the judgment of the trial court. 33-328 (La.App. 2 Cir. 5/10/00), 759 So.2d 1047. The court of appeal, also relying on its previous decision in Summit, held that the language of the noncompetition clause went beyond the limited exception provided by La. R.S. 23:921(C), because it prevented the defendant's employment in any capacity with other employers in the same field. The court recognized that this conclusion was in conflict with those of other circuits considering similar issues; however, it determined that its more narrow interpretation of the statute remained valid. Finally, the court of appeal found that when it deleted the portions of the Agreement that were in conflict with the provisions of the statute, the Agreement was left with no language to prohibit the conduct complained of by SWAT. The court of appeal therefore affirmed the trial court's judgment denying injunctive relief to SWAT.

This court granted certiorari to resolve an apparent split among the circuits of the courts of appeal regarding the proper interpretation of La. R.S. 23:921(C). Swat 24 Shreveport Bossier, Inc. v. Bond, 00-1695 (La.9/29/00), 769 So.2d 1217.

LAW AND DISCUSSION

Louisiana has long had a strong public policy disfavoring noncompetition agreements between employers and employees. Louisiana Smoked Products, Inc. v. Savoie's Sausage & Food Products, 96-1716, p. 11 (La.7/1/97), 696 So.2d 1373, 1379. Thus, the longstanding public policy of Louisiana has been to prohibit or severely restrict such agreements. Id. This public policy is expressed in La. R.S. 23:921(A)(1), which provides:

Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void.

Louisiana's strong public policy restricting these types of agreements is based upon an underlying state desire to prevent an individual from contractually depriving himself of the ability to support himself and consequently becoming a public burden. See McAlpine v. McAlpine, 94-1595, p. 11 (La.9/5/96), 679 So.2d 85, 91. Because such covenants are in derogation of the common right, they must be strictly construed against the party seeking their enforcement. Hirsh v. Miller, 249 La. 489, 187 So.2d 709, 714 (1966); Turner Professional Services, Ltd. v. Broussard, 99-2838, p. 3 (La.App. 1 Cir. 5/12/00), 762 So.2d 184, 185.

The exceptions to this provision are specifically enumerated by the statute and provide for employer/employee relationships, corporation/shareholder relationships, partnership/partner relationships and franchise/franchisee relationships. The statute defines the limited circumstances under which a noncompetition clause may be valid in the context of each of these relationships. The exception at issue in the instant case is provided for by Subsection (C), which reads:

Any person, including a corporation and the individual shareholders of such corporation, who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment. An independent contractor, whose work is performed pursuant to a written contract, may enter into an agreement to refrain from carrying on or engaging in a business similar to the business of the person with whom the independent contractor has contracted, on the same basis as if the independent contractor were an employee, for a period not to exceed two years from the date of the last work performed under the written contract.

La. R.S. 23:921(C) (emphasis added).

The issue presented in this case is whether the noncompetition clause found in the Agreement between SWAT and Bond, which provides that for two years following termination of his employment, Bond will not directly or indirectly engage in competition with SWAT or serve as an employee of any business which is in direct or indirect competition with SWAT within specified parishes, fits within the narrow exception to the nullification of contracts restraining anyone from exercising a lawful profession, trade, or business. SWAT argues that the court of appeal's interpretation of the statute, requiring the former employee to be engaging in his own business in order for the exception found in Subsection (C) to apply, is erroneous. SWAT contends the court of appeal's narrow construction creates distinctions that ignore common business practices and thwarts the legislature's purpose in enacting the exceptions to La. R.S. 23:921(A). SWAT concludes that the Agreement clearly and...