Amanda Howard Real Estate, LLC v. Lee

• Docket Number: 1210193
• Decision Date: 30 June 2023
• Parties: Amanda Howard Real Estate, LLC v. Clair Lee and JRHBW Realty, Inc.
• Court: Alabama Supreme Court

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Amanda Howard Real Estate, LLC v. Clair Lee and JRHBW Realty, Inc.

No. 1210193

Supreme Court of Alabama

June 30, 2023

Appeal from Madison Circuit Court (CV-19-000067)

PARKER, CHIEF JUSTICE.

Amanda Howard Real Estate, LLC ("Howard Real Estate") appeals a partial summary judgment in favor of Clair Lee and JRHBW Realty, Inc. ("RealtySouth"), in Howard Real Estate's suit to enforce a noncompete agreement against Lee. The Madison Circuit Court ruled that the noncompete agreement was void because it was not signed by both parties as required by statute. We affirm the judgment because none of Howard Real Estate's arguments establish that it satisfied the statutory signatures requirement.

I. Facts

Lee began working for Howard Real Estate in 2010. In 2017, Howard Real Estate promoted Lee to Director of Sales. As part of that promotion, in January 2017, Lee signed "Addendum 1," entitled "Director of Sales Employee Job Description and Compensation." Addendum 1 contained a detailed description of Lee's duties and compensation. Two weeks later, Amanda Howard, chief executive officer of Howard Real Estate, signed Addendum 1 on behalf of Howard Real Estate.

Six months later, in July 2017, Lee signed a document entitled "Employment Position Agreement" ("the Position Agreement"). The Position Agreement stated that it "consists of this Position Agreement and its two addendums." The Position Agreement provided that "[Lee] will perform the job duties in Addendum 1" and that "[Lee] agrees to the covenants in Addendum 2." The same day, Lee signed "Addendum 2," entitled "Confidentiality and Noncompete Agreement." Addendum 2 contained detailed confidentiality, noncompetition, and nonsolicitation sections. The noncompetition section provided that, for two years after the termination of the Position Agreement, Lee would not be employed by any other entity engaged in the real-estate business in Madison County and certain other north Alabama counties ("noncompete provision"). No representative of Howard Real Estate signed the Position Agreement or Addendum 2 at that time.

In May 2019, Lee resigned from Howard Real Estate. Later the same day, Howard signed the Position Agreement and Addendum 2. Three days later, Lee began working for RealtySouth as the managing broker for its new Huntsville office.

Howard Real Estate sued Lee and RealtySouth in the circuit court, alleging, among others, claims of breach of contract and civil conspiracy, based partly on the noncompete provision. Howard Real Estate sought damages and a permanent injunction.

Lee and RealtySouth each moved for a summary judgment. Among other arguments, Lee and RealtySouth contended that the noncompete provision was unenforceable because it did not comply with § 8-1-192, Ala. Code 1975. That statute provides: "In order to be valid, any contract or agreement executed pursuant to this article [(Title 8, Chapter 1, Article 10, entitled "Restrictive Covenants")] shall be reduced to writing, signed by all parties, and be supported by adequate consideration." (Emphasis added.) Lee and RealtySouth emphasized that no representative of Howard Real Estate signed Addendum 2 until after Lee had resigned.

The court granted Lee's and RealtySouth's summary-judgment motions as to Howard Real Estate's breach-of-contract and civil-conspiracy claims to the extent that those claims were based on the noncompete provision. The court ruled that the noncompete provision did not comply with § 8-1-192 and therefore was void. The court denied the motions as to all other aspects of Howard Real Estate's claims. The court certified its order for permissive appeal under Rule 5(a), Ala. R. App. P., and certified the following question of law: "Does ... § 8-1-192 void a noncompete agreement that was signed by the employee[] but was not executed by the employer, where the employee and the employer signed other employment agreements that defined their employment relationship, following which the employee received the benefits of employment?" This Court granted Howard Real Estate permission to appeal.

II. Standard of Review

In a permissive appeal, we limit our review to the trial court's certified question of law, which we review de novo. Mid-Century Ins. Co. v. Watts, 323 So.3d 39, 43 (Ala. 2020).

III. Analysis

Section 8-1-190(a), Ala. Code 1975, provides: "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." Section 8-1-190(b) then lists six categories of restrictive covenants that are "allowed to preserve a protectable interest." One of those categories is covenants in which "[a]n ... employee of a commercial entity ... agree[s] with such entity to refrain from carrying on or engaging in a similar business within a specified geographic area so long as the commercial entity carries on a like business therein, subject to reasonable restraints of time and place." § 8-1-190(b)(4). However, § 8-1192 provides: "In order to be valid, any contract or agreement executed pursuant to this article shall be reduced to writing, signed by all parties, and be supported by adequate consideration." (Emphasis added.)

Although no representative of Howard Real Estate signed Addendum 2 containing the noncompete provision (until after Lee resigned), Howard Real Estate contends that § 8-1-192's signatures requirement was nevertheless satisfied in three ways. First, Howard Real Estate contends that Howard's signature on Addendum 1 in January 2017 satisfied the signatures requirement because Addendum 1 was part of the same transaction as Addendum 2. Second, Howard Real Estate argues that it performed its obligations under Lee's employment agreement. Third, Howard Real Estate asserts that Lee cannot repudiate part of her employment agreement while claiming the benefits of that agreement.

Before noncompete agreements were governed by statute in this State, Alabama common law disfavored contracts in restraint of trade on the basis that they were generally against public policy. See American Laundry Co. v. E. &W. Dry-Cleaning Co., 199 Ala. 154, 159, 74 So. 58, 60 (1917) ("Contracts in restraint of trade are in themselves, if not shown to be reasonable, bad in the eye of the law. [¶] Whatever restraint is larger than the necessary protection of the party with whom the contract is made is unnecessary and void, as being injurious to the interest of the public, on the ground of public policy."); Smith v. Webb, 176 Ala. 596, 600, 58 So. 913, 915 (1912) ("[T]he law does not look with favor upon restrictions against competition ....").^[1] In 1923, the Legislature enacted Alabama's first statute regarding noncompete agreements. See § 6826, Ala. Code 1923; Shelton v. Shelton, 238 Ala. 489, 492, 192 So. 55, 57 (1939) (noting that § 6826 was "new to the Code of 1923"). That statute provided: "Every contract by which any one is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided by the next two sections, is to that extent, void." § 6826. The next two sections provided exceptions for sales of businesses and dissolutions of partnerships. §§ 6827-28. In 1931, the Legislature added an exception for employee noncompete agreements. Ala. Acts 1931, Act No. 647.

Thereafter, the noncompete-agreement statutes remained substantively unchanged and were combined into one section in the 1975 Code. See Title 9, §§ 22-24, Ala. Code 1940; former § 8-1-1, Ala. Code 1975. Notably, the statutes carried forward the common law's disfavor toward noncompete agreements. See Pitney Bowes, Inc. v. Berney Off. Sols., 823 So.2d 659, 662 (Ala. 2001) ("In adopting § 8-1-1, the Legislature has declared the public policy of this state against noncompete agreements."); Construction Materials, Ltd. v. Kirkpatrick Concrete, Inc., 631 So.2d 1006, 1009 (Ala. 1994) ("Section 8-1-1 expresses the public policy of Alabama disfavoring contracts in restraint of trade ...."). Therefore, Alabama courts narrowly applied the statutory exception for employee noncompete agreements. See Construction Materials, 631 So.2d at 1009 (holding that § 8-1-1's employee-noncompete-agreements exception did not apply, "in light of our public policy against restraints of lawful trade and our correspondingly strict construction of" the exception); Pitney Bowes, 823 So.2d at 665-66 (Harwood, J., concurring specially) ("[W]e are dealing with 'fundamental public policy,' and we are therefore required to employ 'strict construction' in interpretating the 'agent, servant, or employee' exception contained in § 8-1-1(b) ...."); Michael Edwards et al., The Enforceability of Covenants Not to Compete in Alabama, 65 Ala. Law. 41, 42 (2004) ("Consistent with the [Alabama Supreme C]ourt's general attitude toward post-employment restraints, Alabama courts have narrowly construed the employer-employee exception contained in ... § 8-1-1(b).").

In 2015, the Legislature enacted §§ 8-1-190 through -197 to replace § 8-1-1 and to clarify the law regarding noncompete agreements. See Act No. 2015-465, Ala. Acts 2015; §§ 8-1-190 to -197 & Ala. cmts.; Will Hill Tankersley et al., Alabama Enacts Major Revision of Alabama Code 8-11, 76 Ala. Law. 384 (2015). This new statutory scheme continues to embody the common law's posture of disfavor toward contracts in restraint of trade. As noted above, the current statutes provide that such contracts are "void," subject to certain exceptions, including an exception for employee noncompete agreements. § 8-1-190. Accordingly, we continue to apply that exception narrowly in favor of competition, including the new requirement that the "contract or agreement" must be "signed by all parties...