ALW Marketing Corp. v. Hill

• Decision Date: 09 July 1992
• Docket Number: No. A92A0663,A92A0663
• Citation: 422 S.E.2d 9,205 Ga.App. 194
• Parties: , 1993-2 Trade Cases P 70,434 ALW MARKETING CORPORATION et al. v. HILL.
• Court: Georgia Court of Appeals

Page 9

422 S.E.2d 9

205 Ga.App. 194, 1993-2 Trade Cases P 70,434

ALW MARKETING CORPORATION et al. v. HILL.

No. A92A0663.

Court of Appeals of Georgia.

July 9, 1992.

Reconsiderations Denied July 27, 1992.

King & Spalding, Frank C. Jones, Michael E. Ross, and Leticia D. Alfonso, for appellants.

Gambrell, Clarke, Anderson & Stolz, Irwin W. Stolz, Jr., Seaton D. Purdom and Page, Scrantom, Harris & Chapman, William G. Scrantom, Jr., for appellee.

BIRDSONG, Presiding Judge.

ALW Marketing Corporation (ALW) and Massachusetts Indemnity & Life Insurance Company (MILICO) appeal the grant of Joe D. Hill's motion to dismiss all counts of appellants' complaint against Hill for breach of certain covenants in an employment contract, for violation of the Georgia Trade Secrets Act, OCGA § 10-1-760 et seq., the Uniform Deceptive Trade Practices Act, OCGA § 10-1-371 et seq., and for common law unfair competition, for unjust enrichment, and for conversion.

Hill formerly was a Regional Vice President (RVP) of ALW, which is a sales force of independent contractor agents for the sale of MILICO term life insurance. In connection with his employment, Hill was required to execute three "agreements" spanning 80 pages or more, including supporting or appended documents and certifications of other agents as to the rather complex ALW "hierarchy." However, of these numerous agreements, appellants rely upon only one of them, the "A.L. Williams Agreement for Independent Business of Regional Vice President."

As RVP, Hill supervised and monitored four "down-line" agents and received an overriding commission on all policies sold by these lower level agents. On November 8, 1990, Hill became associated with another insurance agency. Appellants ALW and MILICO alleged Hill retained and used trade secrets and other confidential information acquired from appellants during his association with them, including policy cards, lists of actual or potential policyholders and lists of other members of the ALW sales force; that he gained a great competitive advantage over appellants from this knowledge and use of plaintiffs' trade secrets and confidential information; that he induced or attempted to induce policyholders to terminate or replace their MILICO insurance policies with policies of his new employer or principal; that he pirated or attempted to pirate members of appellants' sales force and induced some to breach their agreements with appellants; that as a result of all these acts by Hill, appellants suffered loss of goodwill and other irreparable harm to their business; that Hill traded unfairly on appellants' goodwill and reputation; that he was unjustly enriched at appellants' expense by replacing MILICO policies and pirating sales agents; and that he converted to his own use appellants' contractual relations and property rights in proprietary information including customer lists.

Enumerations 1-3 concern the dismissal of appellants' complaint as to the covenants alleged violated: a non-replacement covenant, a non-pirating covenant, and a non-disclosure covenant. First, appellants assert that the parties' agreement stipulates that the covenants are reasonable as to Hill, and the trial court was required to accept this and all other allegations in the complaint as true, with all doubts to be resolved in appellants' favor even though unfavorable constructions are possible, according to the law on motions to dismiss (see Morgan v. Ga. Vitrified Brick, etc., Co., 196 Ga.App. 779, 780, 397 S.E.2d 49). Second, appellants assert that the trial court could not dispose of the complaint on the basis of the pleadings per OCGA § 9-11-12 as to a motion to dismiss, because it could not determine the validity of post-employment restrictive covenants except by examining the reasonableness of each covenant in " 'the particular factual setting to which it is applied,' " (emphasis deleted) per National Teen-Ager Co. v. Scarborough, 254 Ga. 467, 469, 330 S.E.2d 711. Third, appellants assert that the substantive law on restrictive covenants would uphold the validity of these covenants in this case if appellants were allowed to develop the evidence beyond the pleadings. Appellants rely on the rule that a motion to dismiss may not be granted unless it appears to a certainty that the non-moving party would not be entitled to relief under any set of facts he could prove in support of his claim. Bourn v. Herring, 225 Ga. 67, 70, 166 S.E.2d 89. Held:

1. Appellee's motion to dismiss the appeal is denied.

2. The trial court found that the covenants are overbroad and void as a restraint of trade because the RVP could not know under the agreement how long the covenants would last or when they begin. The trial court reasoned that the prohibition of activity as to each covenant is specified to be "at any time during the term of this agreement"; and the "term" of the agreement depends upon the "effective date," which is described as "such date as MILICO may designate in a bulletin distributed by it to Agents.... Such designation shall be binding upon RVP regardless of whether RVP has or receives actual notice." The trial court concluded that if no notice of a change in the effective date is required to be sent to the RVP, then the "term" can be triggered at any time without notice, which makes it impossible for the RVP to know under the agreement how long covenants will last or when they will start.

We agree with the trial court's conclusion that this provision is uncertain and unreasonable and is a void restraint of trade. Moreover, we find that the prolixity and the uncertainty of the language of the non-replacement covenant particularly, defeat the entire agreement, being such as to result in differing analyses as to its meaning and significance and such as to result in no very certain meaning in any case.

(a) The reference to a covenant taking effect "during the term of this agreement" appears only in the non-replacement covenant, and for a specified period of time "thereafter," three years. The other two covenants do not state that they apply "during the term of this agreement," but they apply to the "post-termination period" which is two years as to the anti-pirating covenant, and four years as to the non-disclosure covenant. According to the contract definition of "effective date," all of the covenants are uncertain as to their "effectiveness." The contract defines "term of the agreement" as follows: "The term of this agreement shall begin as of the later of (i) the effective date or (ii) the date of acceptance by the General Agent at its principal office and shall continue until this agreement is terminated in accordance with its terms, provided that this agreement shall remain in force for a period of at least thirty (30) days after date of acceptance by the General Agent. RVP's right to conduct RVP's business of Regional Vice President and all of RVP's authority, privileges, and licenses pursuant to this agreement shall terminate upon termination of this agreement. This agreement shall automatically and without notice terminate upon the death of RVP or upon termination of RVP's Trademark License Agreement with the General Agent."

The trial court correctly concluded that the uncertainty as to the "term of the agreement" renders the non-replacement covenant void. The "term of the agreement" is not necessarily the period of RVP's association with ALW and MILICO; it does not necessarily begin when the RVP began his association with ALW and MILICO, nor end when the association is terminated. It is a variable term, the meaning of which is not certain and not ascertainable at any given time. The "effective date" is uncertain depending on whether ALW issued a "bulletin" of which RVP did not have notice; therefore, the "term of the agreement" is uncertain, and the restriction on replacement of policies for "three years thereafter " is uncertain. The applicability of the non-replacement provision three years "thereafter" cannot be inferred to mean "after termination," because it refers to "three years [after the term of the agreement]," which may depend upon an uncertain "effective date" of which the employee/agent may have no notice, or which may change without notice.

In this light, the period of each of the three covenants is uncertain, since they provide for restrictions during the two, three and four years "after termination of this agreement." Since "termination of the agreement" is not necessarily the same thing as "termination of the RVP's employment," it cannot reasonably be determined by the employee or a court at any time whether, and to what extent, any of these provisions applies.

(b) Moreover, the trial court correctly concluded that at least the third contingency in the "non-replacement" covenant is overbroad and incapable of reasonable ascertainment. This...