Ceramic & Metal Coatings Corp. v. Hizer
Decision Date | 31 January 2000 |
Docket Number | No. A99A2069.,A99A2069. |
Court | Georgia Court of Appeals |
Parties | CERAMIC & METAL COATINGS CORPORATION v. HIZER et al. |
OPINION TEXT STARTS HERE
Parks, Chesin & Miller, Allan L. Parks, Jr., Mary A. Walser, Atlanta, for appellant.
William G. Leonard, Atlanta, for appellees.
Ceramic & Metal Coatings Corporation (CMC) appeals from the trial court's order denying its request for injunctive relief and granting defendant James Hizer's motion for partial summary judgment. The issue on appeal is whether the trial court correctly determined that the restrictive covenant not to compete contained in Hizer's employment agreement with CMC was overbroad and therefore unenforceable. Because we agree that the noncompete clause was overbroad as to territory and scope of activities, we affirm.
This case arose when Hizer quit his job as a sales representative at CMC. Hizer had worked for the company, which makes centrifugal pumps, for 26 years. When efforts to renegotiate the terms of his employment failed, Hizer quit the company and set up a competing business. CMC filed suit for injunctive relief and damages. The trial court denied CMC's motion for a temporary restraining order and granted Hizer's motion for summary judgment, finding the restrictive covenant was overbroad and, therefore, unenforceable.
The restrictive covenant at issue provided as follows:
Georgia courts have traditionally applied close scrutiny to employment contracts containing restrictive covenants and have upheld them only when the covenant is strictly limited in time, territorial effect, and activities prohibited. Beckman v. Cox Broadcasting Corp., 250 Ga. 127, 129, 296 S.E.2d 566 (1982).
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. III, 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. Whether the restraint imposed by the employment contract is reasonable 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 the other circumstances. 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.
(Citations and punctuation omitted.) W.R. Grace & Co. v. Mouyal, 262 Ga. 464, 465(1), 422 S.E.2d 529 (1992).
Applying this three-element test to the agreement before us, we find two clauses of the contract are unreasonably overbroad. 1. The covenant is overbroad in terms of territorial coverage. CMC claims that the territory referred to in the agreement is all of Georgia and Florida. But, the undisputed evidence is that Hizer sold to customers in only five counties in Florida and no more than three counties in Georgia. Although this Court will accept as prima facie valid a covenant which restricts the employee from doing business in the territory in which he was employed, the Court "will not accept as prima facie valid a covenant related to the territory where the employer does business where the only justification is that the employer wants to avoid competition by the employee in that area." (Punctuation omitted.) Rollins Protective Svcs. Co. v. Palermo, 249 Ga. 138, 140, 287 S.E.2d 546 (1982). Moreover,
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