Bfs Retail and Commer. Operations v. Smith
| Decision Date | 12 February 2007 |
| Docket Number | No. M2006-00163-COA-R3-CV.,M2006-00163-COA-R3-CV. |
| Parties | BFS RETAIL AND COMMERCIAL OPERATIONS, LLC v. Charles SMITH. |
| Court | Tennessee Court of Appeals |
Robert E. Boston, Andrew S. Naylor, Rebekah J. Stephens, Nashville, Tennessee, for the appellant, BFS Retail and Commercial Operations, LLC.
Charles W. McElroy, Dudley M. West, Nashville, Tennessee, for the appellee, Charles Smith.
WILLIAM C. KOCH, JR., P.J., M.S., filed a separate concurring opinion.
National retail tire and automotive service corporation filed action against district manager for violation of corporation's covenant not to compete after manager resigned and accepted new position with corporation's competitor. Trial court granted manager's motion for summary judgment, finding that manager had not violated the non-compete agreement since manager's new position was located outside the geographic location in which he was previously employed by corporation. Corporation appealed. Finding that the provisions of the contract are not, as a matter of law, limited to a geographic component, we reverse.
Mr. Charles Smith began working for Bridgestone Firestone Retail & Commercial Operations ("BFRC"), a corporation owning and operating over 2,000 retail tire and automotive service stores nationwide, in October 1989 as a retail associate in Maryland. Mr. Smith thereafter relocated to Pittsburgh, Pennsylvania in 1990, where he spent the remainder of his career with BFRC. While in Pittsburgh, Mr. Smith first worked as a service manager then as an assistant manager, before being promoted to store manager in 1991. Mr. Smith became BFRC's assistant district manager of the Pittsburgh district in 2001 and district manager in 2003. As district manager of the Pittsburgh district, Mr. Smith was responsible only for the performance of the stores located within his district.
As a condition of promotion, BFRC required that Mr. Smith sign an employment agreement containing a covenant not to compete which prohibited Mr. Smith, for a period of eighteen months after termination, from competing with BFRC with respect to its "Company Business" in any "area where [he] worked or had responsibilities". On March 7, 2005, Mr. Smith gave two weeks notice of his resignation and of his intent to accept a new position with BFRC's competitor, Tire Kingdom, as the regional director of sales in South Carolina. Mr. Smith's new position required direct responsibility for twenty-six stores in South Carolina and one store in Georgia, as well as indirect supervisory responsibility for twenty-four stores in Charlotte, North Carolina and four stores in Tallahassee, Florida.
On March 9, 2005, BFRC filed an action against Mr. Smith, seeking to enjoin Mr. Smith from working for Tire Kingdom. BFRC obtained an ex parte restraining order preventing Mr. Smith from commencing his new job but after a preliminary injunction hearing on April 8, 2005, the trial court denied BFRC's motion for a preliminary injunction. Mr. Smith filed a motion for summary judgment on September 15, 2005, arguing that he had not breached his non-compete agreement with BFRC since he was not working for a competitor in the same geographic location as he was employed by BFRC. The trial court granted Mr. Smith's motion on November 22, 2005, finding that (1) Mr. Smith did not breach his non-compete agreement by working for Tire Kingdom in a geographic location outside the Pittsburgh district; and (2) even if the non-compete agreement protected against Mr. Smith's infringement of BFRC's substantive rights, the non-compete provision was overly broad as a matter of Tennessee law. BFRC appealed.
Pursuant to Rule 56 of the Tennessee Rules of Civil Procedure, summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." The court must take the strongest legitimate view of the evidence in favor of the non-moving party, resolve all reasonable inferences in favor of that party, discard all countervailing evidence, and if there is a dispute as to any material fact, summary judgment cannot be granted. Byrd v. Hall, 847 S.W.2d 208, 210-11 (Tenn.1993). Because summary judgment involves only questions of law and no factual disputes, no presumption of correctness attaches to the lower court's decision and the judgment is reviewed using a pure de novo standard. Cowden v. Sovran Bank/Central South, 816 S.W.2d 741, 744 (Tenn.1991).
The interpretation and construction of a plain and unambiguous written contract is a question of law for determination by the court. Williamson Co. Broad. Co., Inc. v. Intermedia Partners, 987 S.W.2d 550, 552 (Tenn.Ct.App.1998). It is the duty of the court to enforce the contract according to its plain terms, Eleogrammenos v. Standard Life Ins. Co., 177 Tenn. 328, 149 S.W.2d 69 (Tenn.1941), and the language used in the contract must be taken and understood in its plain, ordinary and popular sense. Guardian Life Ins. Co. of Am. v. Richardson, 23 Tenn.App. 194, 129 S.W.2d 1107, 1116-17 (Tenn.Ct.App.1939). However, "the cardinal rule for interpretation of contracts is to ascertain the intention of the parties and to give effect to that intention as best can be done consistent with legal principles." Petty v. Sloan, 197 Tenn. 630, 277 S.W.2d 355, 360 (Tenn. 1955). Courts may determine the intention of the parties "by a fair construction of the terms and provisions of the contract, by the subject matter to which it has reference, by the circumstances of the particular transaction giving rise to the question, and by the construction placed on the agreement by the parties in carrying out its terms." Penske Truck Leasing Co L.P. v. Huddleston, 795 S.W.2d 669, 671 (Tenn.1990).
In the present case, the trial court determined that the covenant not to compete in Mr. Smith's employment agreement was plain and unambiguous and that the contract did not prohibit Mr. Smith from working for Tire Kingdom as the regional director of sales in South Carolina. The covenant not to compete specifically provided in pertinent part:
12. POST-EMPLOYMENT:
NO COMPETITION WITH THE COMPANY'S BUSINESS
For a period of eighteen (18) months following your departure from the Company, unless your termination is due to an involuntary reduction of force you agree not to:
(a) enter into or engage in any business which competes with the Company's Business;
...
(e) For purposes of subparagraphs (a) through (d) only, the Company's Business includes only those areas where you worked or had responsibilities at the time of your separation from the Company or at any time during the five (5) year period prior to your separation. (Emphasis added).
The trial court found that the language of the non-compete agreement, when given its plain and ordinary meaning, limited the geographic or territorial area in which Mr. Smith could work after his separation from BFRC. Since Mr. Smith limited his employment with BFRC to the Pittsburgh district and his position with Tire Kingdom included responsibilities primarily in South Carolina, the trial court found that Mr. Smith did not breach his non-compete agreement by working for Tire Kingdom in a geographic location outside the Pittsburgh district.
However, BFRC argued that the non-compete agreement was not intended to geographically limit Mr. Smith's post-employment opportunities but rather, limit the substantive field of responsibilities encompassed in Mr. Smith's work for BFRC. According to BFRC, the BFRC districts do not operate in a vacuum and thus, business information and trade knowledge is shared nationally. BFRC alleged that it allowed Mr. Smith access to confidential business information via BFRC's intranet system, including core operation principles, management strategies, economic forecasts, marketing initiatives, and economic performance data, on a nationwide scale during his employment at BFRC. Therefore, simply limiting Mr. Smith's post-employment initiatives to geographical regions would fail to fully protect BFRC's proprietary rights. Instead, BFRC claims that the non-compete agreement prohibited Mr. Smith from entering into or engaging in the "research, development, manufacture, marketing, sale and distribution of tires" for a period of eighteen months following his departure from BFRC since those were the functional areas for which he was employed by BFRC.
It is well established that in interpreting a contract, the court should consider the entire contract, Cocke Co. Bd. of Highway Comm'rs v. Newport Util. Bd., 690 S.W.2d 231, 237 (Tenn.1985), and the "situation involving the parties, the nature of the business in which they are engaged and the subject matter to which the contract relates." Stovall v. Dattel, 619 S.W.2d 125, 127 (Tenn.Ct.App.1981). "No single clause in a contract is to be viewed in isolation; rather, the contract is to be `viewed from beginning to end and all its terms must pass in review, for one clause may modify, limit or illuminate another.'" Frizzell Constr. Co., Inc. v. Gatlinburg, L.L.C., 9 S.W.3d 79, 85 (Tenn.1999) (quoting Cocke County Bd. of Highway Comm'rs v. Newport Utils. Bd., 690 S.W.2d 231, 237 (Tenn.1985)).
In rejecting the argument of BFRC that the restriction of competitive employment by Mr. Smith during the eighteen months following his resignation was not limited as a matter of law to a geographical limitation, the trial court held:
The Court rejects the arguments made by BFRC that paragraph 12(e) of the Employment Agreement does not constitute a geographical limitation, and that the non-compete provisions apply without regard to territory, limited only by the substantive fields of responsibilities encompassed in Mr. Smith's work for BFRC. In...
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