94 1783 La.App. 1 Cir. 3/3/95, Cellular One, Inc. v. Boyd

• Court: Court of Appeal of Louisiana
• Writing for the Court: Before LOTTINGER; SHORTESS
• Citation: 94 1783 La.App. 1 Cir. 3/3/95, Cellular One, Inc. v. Boyd, 653 So.2d 30 (La. App. 1995)
• Decision Date: 03 March 1995
• Parties: 94 1783 La.App. 1 Cir

Page 30

653 So.2d 30

94 1783 La.App. 1 Cir. 3/3/95

CELLULAR ONE, INC. v. John Brent BOYD.

CELLULAR ONE, INC. v. Hamilton J. LEMOINE.

Nos. 94 CA 1783, 94 CA 1784.

Court of Appeal of Louisiana First Circuit.

March 3, 1995.

Rehearing Denied May 2, 1995.

John Tharp, Baton Rouge, and Daniel Lund, New Orleans, for Cellular One, Inc.

Michael McKay, Baton Rouge, for Affordable Cellular & Beepers, Inc.

Dawn Guillot, Baton Rouge, for John Brent Boyd.

Joseph Greenwald, Baton Rouge, for Hamilton J. Lemoine.

Before LOTTINGER, C.J., and SHORTESS and CARTER, JJ.

[94 1783 La.App. 1 Cir. 2] LOTTINGER, Chief Judge.

This is an appeal by defendants from the granting of a preliminary injunction enforcing a noncompetition agreement executed between plaintiff and defendants.

FACTS

John Boyd and Hamilton Lemoine were employed as sales representatives for Cellular One from 1989 to 1993. During the course of their employment, they signed several noncompetition and nondisclosure agreements. When Boyd and Lemoine left the employment of Cellular One in December of 1993, they had executed identical noncompetition agreements which became effective on September 1, 1993. ¹

Upon leaving Cellular One both defendants went to work for Affordable Cellular, an authorized agent of Bell South Mobility. Cellular One filed this suit for injunctive relief asserting that Boyd and Lemoine were in violation of the noncompetition agreement. Cellular One sought to prevent the defendants from competing against it in the cellular telephone business and from soliciting the business of Cellular One's customers in the parishes of East Baton Rouge, West Baton Rouge, Ascension, and Livingston. The suit also sought protection against disclosure of confidential information.

Following the hearing on the preliminary injunction, the trial court enjoined defendants from engaging in the radio telephone service business in the parishes of East and West Baton Rouge, Ascension, and Livingston, for a period of two years. The court further enjoined defendants from directly soliciting any Cellular One customer to transfer or purchase radio telephone services or equipment. The court also ordered that should any customer of Cellular One initiate contact with defendants, said customer shall be referred back to Cellular one and not to any other radio telephone service. The trial court then suspended that portion of the injunction which prohibited the defendants from engaging in the radio telephone service business.

Defendants appeal, asserting that the trial court erred in:

1. enforcing a noncompetition clause in an employment [94 1783 La.App. 1 Cir. 3] at will agreement because the agreement lacks mutuality of obligation and the agreement fails to provide sufficient consideration for the employee;

2. failing to find that circumstances involving economic threats were sufficient to constitute duress;

3. failing to rule that the agreement provided for stipulated damages;

4. finding that the noncompetition clause was sufficient to meet the requirements of La.R.S. 23:921; and

5. granting a preliminary injunction because no evidence was set forth that defendants in fact violated the confidentiality or nondisclosure clauses of the agreement.

THE NONCOMPETITION AGREEMENT

The contract at issue in this suit contains several provisions which purportedly comprise the noncompetition agreement. These provisions are:

III. Commissions and Other Incentives

D. Non-Competition Payments (NCPs):

NCPs are payable for the term listed below even if the eligible Sales Representative leaves the employment of the company. The main exception to this statement is if the former Sales Representative is employed by or is contracted with any Radio/Telephone Service of Baton Rouge Cellular One during the time period that the NCP payments are due as per the Employee Handbook. In the event that the Sales Representative is employed by or is contracted with a Radio/Telephone Service, all NCPs are forfeited by the Sales Representative. The Sales Representative also forfeits all NCPs earned during his/her employment at Cellular One.

....

VIII. Direct Sales Non-Competition Payments (NCPs)

NCPs are payable at 3% for 3 years for those accounts having monthly bills over $50 per month. This includes access and airtime. The 3 years is based from the date of the start of the original contract.

Terms & Conditions: (Eligibility Requirements)

....

6.) Should the Direct Sales Rep leave or be terminated, Cellular One will continue to fulfill its obligation to the employee, but only for as long as the former employee does not engage in business or employment with another [94 1783 La.App. 1 Cir. 4] Radio/Telephone Service entity. Also, should any customer cancel, any retractions the former employee might have qualified to receive will be applied to the noncompetition payment.

....

NON-COMPETITION AGREEMENT

I agree to refrain from carrying on or engaging in a radio telephone service business similar to that of Cellular One, Inc. and/or from soliciting customers of Cellular One, Inc. within the parishes of East Baton Rouge, West Baton Rouge, Ascension and Livingston for a period of two years from separation of employment with Cellular One, Inc.

THE STATUTORY PROVISION

Louisiana has consistently had a strong public policy against noncompetition contracts which prohibit employees from competing with a former employer. Orkin Exterminating Company v. Foti, 302 So.2d 593, 596 (La.1974). Prior to 1989, La. R.S. 23:921 permitted noncompetition agreements only if the employer incurred significant or extensive expenditures in the training of the employee or the advertisement of the business. Id. at 597. In 1989, the legislature amended La.R.S. 23:921 and replaced this single exception. However, the public policy disfavoring noncompetition agreements is still reflected in subsection (A) of the amended statute 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.

One of the exceptions to this general prohibition is contained in subsection (C) which states:

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.

[94 1783 La.App. 1 Cir. 5] Subsection (G) lists remedies available to an employer when a former employee breaches a noncompetition agreement.

Any agreement covered by Subsections B, C, D, E, or F of this Section shall be considered an obligation not to do, and failure to perform may entitled the obligee to recover damages for the loss sustained and the profit of which he has been deprived. In addition, upon proof of the obligor's failure to perform, and without the necessity of proving irreparable injury, a court of competent jurisdiction shall order injunctive relief enforcing the terms of the agreement.

In amending section 921, the Louisiana Legislature expanded the use of noncompetition agreements. The legislature recognized that employers have a right to protect their business investment provided they comply with the exceptions contained in the statute.

COMPLIANCE WITH LA.R.S. 23:921

In assignment of error four, defendants allege that the agreement does not meet the requirements of La.R.S. 23:921(C). Defendants assert that the agreement does not adequately define the geographical location or time limitation within which the noncompetition agreement would apply. They further assert that there is no adequate definition of the business from which they are allegedly prohibited from competing.

To be valid, a noncompetition agreement may limit competition only in a business similar to that of the employer, in a specified geographic area and for up to two years from termination of employment. Public policy requires that the provisions of noncompetition agreements be strictly construed in favor of the employee. See Pelican Publishing Company v. Wilson, 626 So.2d 721 (La.App. 5th Cir.1993); Comet Industries, Inc. v. Lawrence, 600 So.2d 85 (La.App. 2nd Cir.), writ denied, 604 So.2d 1002 (La.1992). Accordingly, noncompetition agreements which fail to specify the "parish or parishes, municipality or municipalities, or parts thereof" wherein the employer carried on a similar business are unenforceable. Comet Industries, Inc., 600 So.2d at 87. Similarly, contracts seeking to extend noncompetition agreements beyond the two year statutory limit are null and void. Allied Bruce Terminix Companies, Inc. v. Ferrier, 93-0561 (La.App. 1st Cir. 3/11/94); 634 So.2d 44.

[94 1783 La.App. 1 Cir. 6] In this case, the contract prevents the defendants from "engaging in a radio telephone service business similar to that of Cellular One, Inc." in the parishes of East Baton Rouge, West Baton Rouge, Ascension and Livingston, for a period of two years after employment termination. The language used in the agreement to define plaintiff's business tracks the statutory language of La.R.S. 23:921(C). This language adequately defines the business from which the defendants are prohibited from competing. Further, the geographic and time limitations are clearly specified in the contract and comply with the statutory guidelines.

For these reasons, we find that the noncompetition agreement meets the requirements of La.R.S. 23:921(C) and accordingly, this assignment of error is without merit.

MUTUALITY AND CAUSE

In assignment of error one, defendants assert that noncompetition agreements should be unenforceable in...