Coffee System of Atlanta v. Fox, 25757
| Decision Date | 09 July 1970 |
| Docket Number | No. 25757,25757 |
| Citation | 226 Ga. 593,176 S.E.2d 71 |
| Parties | , 1970 Trade Cases P 73,380 COFFEE SYSTEM OF ATLANTA v. Lionel FOX et al. |
| Court | Georgia Supreme Court |
Syllabus by the Court
1. A restrictive covenant entered into as a part of or ancillary to a contract of employment which is limited as to the geographic area in which competitive activity is prohibited, and limited as to the time within which competition is prohibited is not void unless unreasonable in other respects.
2. Such a contract, which prohibits competition by the employee with the employer for a period of one year after the termination of the employment and in an area limited to 13 named counties within this State, is, on reason and authority, a valid and binding contract as respects geographic area and duration.
3. Where the contract is reasonably limited as to time and space, a restriction which at most only prevents the employee from soliciting customers and accounts of the employer in the territory covered by the contract for the time covered thereby is not void.
4. The trial court erred in sustaining the motion to dismiss and in dismissing the complaint.
Joseph U. McDow, Atlanta, for appellant.
Skinner, Wilson & Beals, Robert E. Born, D. Kent Beals, Atlanta, for appellees.
The appeal here is from the final judgment and order dismissing the complaint for failure to state a claim upon which relief can be granted. Coffee System of Atlanta sued Fox and Intercontinental Coffee Service Plan seeking damages and a temporary and permanent injunction against the continued violation of a restrictive covenant entered into between Fox and the plaintiff as a part of an employment contract. Under the contract, Fox was employed by Coffee System, Inc., as a senior sales representative 'to offer, on its behalf, its 'Coffee System' service, and to sell its replacement kits, within' the territory of Fulton, DeKalb, Cobb and ten other named counties in the State of Georgia. The trial court issued a temporary ex parte restraining order on the 7th day of January, 1970. On January 26, 1970, the matter came on for a hearing on the question of whether the temporary injunction should be granted, and at that time the defendant Fox filed a written motion to dismiss the complaint for failure to state a claim. The judge, before whom the matter was heard, passed an order, which, insofar as is pertinent, reads: 'After hearing argument of counsel for defendant and plaintiff, * * * it appearing that the restrictions in the contract under consideration * * * are uncertain, indefinite, unreasonable, and impose upon the employee greater limitations than are necessary for the protection of the employer, they are therefore illegal, unenforceable, null and void * * * Therefore, it is hereby ordered, adjudged and decreed that the complaint be, and it is hereby, dismissed for failure to state a claim upon which relief can be granted.'
The material and relevant parts of the contract sued on provide that Fox 'agrees to use his best efforts to the exclusion of all other employment, in order to promote and solicit sales of the company's coffee system service in the aforesaid territory, and to perform any and all other services reasonably required by company in connection with the merchandising of such service * * * (He) agrees that, for the term of this agreement and for one (1) year following the termination hereof, he will not, directly or indirectly in any capacity, solicit or accept orders of business located within the area assigned to (him) during any part of the two (2) year period immediately preceding the termination of his employment for any program, service, equipment or product similar to or competitive with the business of company from any organization or individual which or who has been a customer of the company during any part of the two (2) year period immediately preceding termination of his employment, or who or which was actively solicited as a customer by company during the period of this agreement * * * That he will not, during the term of his employment, and for a period of one year thereafter divulge to anyone other than an authorized employee of employer, and after the term of his employment will not use any information or knowledge relating to sales prospects, business methods and/or techniques which were acquired by him during the term of his employment.'
1. Among those contracts which are against public policy and which cannot be enforced are contracts in general restraint of trade. Code § 20-504. However, Orkin Exterminating Co., of South Georgia v. Dewberry, 204 Ga. 794, 802, 51 S.E.2d 669. 'A contract concerning a lawful and useful business in partial restraint of trade and reasonably limited as to time and territory, and otherwise reasonable, is not void.' Nelson v. Woods, 205 Ga. 295(1), 53 S.E.2d 227, and cits.
2. An examination of the decided cases on restrictive covenants reveals that this court has customarily considered three separate elements of such contracts in determining whether they are reasonable or not. These three elements may be categorized as (1) the restraint in the activity of the employee, or former employee, imposed by the contract; (2) the territorial or geographic restraint; and (3) the length of time during which the covenant seeks to impose the restraint. It has been said that no better test can be applied to the question of whether a restrictive covenant is reasonable or not than by considering whether the restraint ...
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