Picker Intern., Inc. v. Parten

• Decision Date: 11 July 1991
• Docket Number: No. 90-7756,90-7756
• Citation: 935 F.2d 257
• Parties: 1991-1 Trade Cases 69,495 PICKER INTERNATIONAL, INC., Plaintiff-Appellant, v. Daniel W. PARTEN, individually and d/b/a PPX Imaging; John Parten, d/b/a PPX Imaging, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 257

935 F.2d 257

1991-1 Trade Cases 69,495

PICKER INTERNATIONAL, INC., Plaintiff-Appellant, v. Daniel W. PARTEN, individually and d/b/a PPX Imaging; John Parten, d/b/a PPX Imaging, Defendants-Appellees.

No. 90-7756.

United States Court of Appeals Eleventh Circuit.

July 11, 1991.

Waller, Landsden, Dortch & Davis, Joseph A. Woodruff, Nashville, Tenn., for plaintiff-appellant.

Balch & Bingham, Alan T. Rogers and Stephen E. Whitehead, Birmingham, Ala., for Daniel W. Parten.

Engel, Hairston & Johanson, P.C., William B. Hairston, III and William B. Hairston, Jr., Birmingham, Ala., for John Parten.

Appeal from the United States District Court for the Northern District of Alabama.

Before JOHNSON and COX, Circuit Judges, and MORGAN, Senior Circuit Judge.

JOHNSON, Circuit Judge:

Picker International, Inc., plaintiff in the case below, appeals the district court's grant of directed verdicts in favor of John Parten, Daniel Parten, and PPX Imaging on claims of breach of a covenant not to compete, breach of a confidentiality agreement, and fraud.

I. BACKGROUND OF THE CASE

Picker International, Inc., ("Picker"), appellant in this case, is a New York corporation with its principal place of business in Ohio. Picker manufactures, sells, installs, and services radiological diagnostic equipment such as angiocons, i.e., machines which provide moving images of the human circulatory system. Picker maintains a field office in Birmingham through which it services most of the Picker equipment in Alabama.

John Parten worked as a "field service engineer," or repairman, at Picker from 1959 until 1988 with the exception of a three-and-a-half year period during which he worked elsewhere. In the spring of 1988, Picker decided it needed to reduce its work force in the Birmingham office and asked John Parten to take early retirement. He retired in June 1988. His son, Daniel Parten, also worked in equipment repair at Picker. Daniel Parten began working at Picker in 1982. At the time he was hired, he executed an "Employee Invention and Confidential Information Agreement." ¹ Later, in April 1984, he also signed a "Service Engineer Confidentiality Agreement." ² As part of his duties at Picker, Daniel Parten serviced the angiocon at the University of Alabama at Birmingham ("UAB"). He worked at Picker for approximately six years, quitting in September 1988.

During the summer of 1988, after John Parten was unable to find employment with another medical equipment service company in the Birmingham area, he decided to start his own business. On July 18, he placed his name on UAB's vendor list. On August 2, he submitted a bid to UAB for a one-year service contract on the angiocon to begin in September 1988 for $50,400. Picker's bid was $61,526. John Parten was awarded the contract. On September 1, John and Daniel Parten formed a partnership called "PPX Imaging." On September 2, Daniel Parten resigned from Picker and went to work with his father at PPX. On September 6, Daniel Parten went through an exit interview with his supervisor at Picker and signed the "Termination Agreement" portion of "Employee Invention and Confidential Information Agreement" he had executed in 1982, certifying that he had returned to Picker all price lists, blueprints, manuals and other materials which Picker had entrusted to him. His supervisor signed a "termination checklist" in which he acknowledged receipt of all Picker tools and other property in Daniel Parten's possession.

On October 31, 1988, after becoming aware that Daniel Parten was working on the UAB angiocon, corporate counsel for Picker wrote to Daniel Parten, charging him with disclosing confidentialities and violating the covenant not to compete contained in the 1984 agreement. The counsel demanded written assurance from Daniel Parten that he would not violate his agreements with Picker in the future. Daniel Parten wrote a letter on November 10 to Picker's counsel, stating that he intended to abide by the agreements. He then informed UAB that he could not personally service the angiocon. Nevertheless, he continued to service it.

When PPX's one-year contract with UAB expired in August 1989, both Picker and PPX placed bids. Picker bid $45,000; PPX bid $47,880. Despite Picker's lower bid, UAB awarded the contract to PPX at the request of a UAB radiology professor who had been displeased with Picker's service but pleased with PPX's. Following loss of the bid, Picker filed suit in district court against Daniel Parten, John Parten, and PPX, premising jurisdiction on diversity. Picker sought injunctive relief and damages, alleging breach of Daniel's agreements and fraud. In August 1990, the parties filed cross motions for summary judgment which were later denied. The case proceeded to trial in September 1990. At the conclusion of the evidence, the court granted the defendants' motions for directed verdicts. Picker now appeals.

II. ANALYSIS

The standard by which this Court reviews a district court's disposition of a motion for directed verdict was articulated in Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969) (en banc):

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence--not just that evidence which supports the non-mover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable [persons] could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded [persons] in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict and judgment n.o.v. should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question. However, it is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses. (footnote omitted).

A federal court sitting in diversity applies the substantive law of the state in which it sits, including that state's choice of law. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Alabama's law of conflicts applies the lex loci contractus and lex loci delicti. Morris v. SSE, Inc., 912 F.2d 1392, 1396 (11th Cir.1990). Because the agreements were entered into in Alabama and the alleged fraud occurred in Alabama, Alabama law governs the substantive issues of the case.

A. Covenant not to Compete

Contracts restraining employment are disfavored in Alabama by statute; such agreements are potentially void. Nationwide Mut. Ins. Co. v. Cornutt, 907 F.2d 1085, 1087 (11th Cir.1990). See Ala.Code Sec. 8-1-1(a) (1984) ("Every contract by which anyone is restrained from exercising a lawful profession, trade or business of any kind otherwise than is provided by this section is to that extent void."). "Nevertheless, Alabama courts will enforce a non-compete agreement if it (1) falls within a statutory exception to the general prohibition, and (2) is reasonably limited as to territory, duration and subject matter." Nationwide, 907 F.2d at 1087 (footnotes omitted). The applicable statutory exception in the case at bar is section 8-1-1(b), which provides that "an agent, servant or employee may agree with his employer to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a specified county, city or part thereof so long as the ... employer carries on a like business therein." The validity of the covenant not to compete in the case at bar thus turns upon the second criteria outlined in Nationwide, i.e., whether the covenant is "reasonably limited as to territory, duration and subject matter." See Nationwide, 907 F.2d at 1087.

The district court, in granting the defendants' motion for directed verdict, found Chavers v. Copy Prods. Co., Inc., 519 So.2d 942 (Ala.1988), to be "a gray horse case or spotted cow case, meaning it's exactly like the case that is before the Court now." (R2:8). In Chavers, a photocopier technician and repairman left Copy Products Company in Mobile to enter a new business venture with his father. The new business provided maintenance, repair, and supply services to copier owners. Chavers' employment contract with Copy Products Company contained a covenant not to compete which provided that Chavers could not engage in any business similar to that of Copy Products Company within a seventy-five-mile radius of any Copy Products Company operation for a period of two years after termination. Copy Products Company had operations throughout southern Alabama, northwest Florida, and parts of Mississippi. The Alabama Supreme Court found this covenant void because it in effect operated as a "blanket" prohibition against Chavers' "working in any capacity in the copier service industry in a wide geographical area, due to the extensive scope of Copy Products' operations." Id. at 944. The court emphasized that working people "cannot be prevented from plying their trades by blanket post-employment restraints." Id. at 945.

The propriety of the district court's ruling in regard to the non-competition covenant in the case at bar thus hinges upon whether the covenant was such a blanket prohibition, as it was in Chavers, that no reasonable juror could help but find in favor of the Partens. The two cases are...