Convergys Corp. v. Keener

• Decision Date: 19 May 2003
• Docket Number: No. S03Q0400.,S03Q0400.
• Parties: CONVERGYS CORPORATION v. KEENER.
• Court: Georgia Supreme Court

582 S.E.2d 84

276 Ga. 808

CONVERGYS CORPORATION v. KEENER.

No. S03Q0400.

Supreme Court of Georgia.

May 19, 2003.

Reconsideration Denied July 11, 2003.

Callaway, Bruan, Riddle & Hughes, P.C., Savannah, Dana F. Braun, for appellant.

Hunter, Maclean, Exley & Dunn, P.C., Wade W. Herring, II, Colin A.B. McRae, Savannah, for appellee.

THOMPSON, Justice.

James A. Keener sued his former employer, Convergys Corporation (Convergys) in a diversity action in the United States District Court for the Southern District of Georgia. Keener sought a declaratory judgment that a nondisclosure and noncompetition agreement he had executed with Convergys was overbroad and unenforceable under Georgia law; an injunction preventing Convergys from enforcing the agreement; and damages for tortious interference with his employment at one of Convergys' competitors. Convergys counterclaimed for an injunction enforcing the agreement; alternatively, for restitution of the consideration paid to Keener; and for attorney fees. Although the agreement contained a choice of law selection clause declaring that it be governed by the law of the state of Ohio, the district court refused to give effect to that provision on the basis that the application of Ohio law would contravene the public policy of Georgia. Concluding that the agreement is unenforceable under Georgia law, the district court granted Keener summary judgment, permanently enjoined Convergys from enforcing the agreement, and dismissed Convergys' counterclaim.

Convergys appealed to the United States Court of Appeals for the Eleventh Circuit, which certified the following question of Georgia law to this Court: Whether a court applying Georgia conflicts of laws rules [must] follow the language of Restatement (Second) Conflict of Laws § 187(2) and, therefore, first must ascertain whether Georgia has a "materially greater interest" in applying Georgia law, rather than the contractually selected forum's law, before it elects to apply Georgia law to invalidate a non-compete agreement as contrary to Georgia public policy. Because the Restatement (Second) Conflict of Laws has never been adopted in Georgia, and because we continue to refuse to enforce contractual rights which contravene the policy of Georgia, we answer in the negative.

In 1984 Keener began working for Convergys' predecessor company Cincinnati Bell Information Systems (CBIS), an Ohio corporation, and remained employed with CBIS through its evolvement into what is now Convergys. In 1995 Keener executed the nondisclosure and noncompetition agreement with CBIS as a condition of his continued employment, and he was granted stock options as consideration for the agreement. The agreement contained time, subject matter and geographic restrictions, as follows:

Employee agrees for two years following termination of employment for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable), not to engage in any business offering services related to the business of the Company at the time of termination in any capacity which requires or utilizes the skill, training or knowledge acquired by Employee while employed by the Company, whether such capacity be as a principal, partner, joint venturer, agent, employee, salesperson, consultant, director or officer, where such position would involve Employee in any business activity in competition with the Company or in any business that provides billing and/or customer care systems to third parties engaged in the communication business (including wireless, wireline and cable communication businesses). This restriction will be limited to the geographical area where the Company is doing business at the termination of employment or to such other geographical area as a court shall find reasonably necessary to protect the goodwill and business of the Company.

In 2001 Keener voluntarily left Convergys and relocated to Georgia to accept a position with H.O. Systems, a competitor of Convergys, located in Savannah. Later that year, while Keener was making a sales call for H.O. Systems, he happened to cross paths with a Convergys salesperson. That day, Keener received a call from Convergys' legal department reminding him of the noncompetition agreement. Subsequently, both Keener and H.O. Systems received letters demanding that Keener cease his employment with H.O. Systems. Eventually, Keener and H.O. Systems terminated their employment relationship by mutual agreement.

The issue presented by this appeal was squarely before this Court in Nasco, Inc. v. Gimbert, 239 Ga. 675(2), 238 S.E.2d 368 (1977). There, an employer brought suit in Georgia, seeking injunctions and damages against a former employee based upon noncompetition, nonsolicitation, and nondisclosure covenants in an employment agreement. The agreement specified that it would be construed according to Tennessee law. However, the trial court applied the law of Georgia and refused to enforce the covenants, granting summary judgment to the employee defendant. An appeal was taken to this Court. After first ascertaining that there were significant contacts with the State of Georgia, such that the choice of our law was neither arbitrary nor constitutionally impermissible, see Allstate Ins. Co. v. Hague, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981), this Court affirmed, holding that:

The law of the jurisdiction chosen by parties to a contract to govern their contractual rights will not be applied by Georgia courts where application of the chosen law would contravene the policy of, or would be prejudicial to the interests of, this state. [Cits.] Covenants against disclosure, like covenants against competition, affect the interests of this state, namely the flow of information needed for competition among businesses, and hence their validity is determined by the public policy of this state. [Cits.]

Nasco, supra at 676(2), 238 S.E.2d 368.

The rationale for this decision was shown to be former Georgia Code § 102-110 (now OCGA § 1-3-9) ("courts shall enforce [the comity of states], unless restrained by the General Assembly, so long as its enforcement is not contrary to the policy or prejudicial to the interests of this state"), and this Court's holding in Ulman &c. Woolen Co. v. Magill, 155 Ga. 555, 117 S.E. 657 (1923). The Ulman decision simply applied the foregoing Code section in reaching the conclusion that Georgia would not enforce a Missouri contract that violated public policy in this state. On this principle, the cases are legion. E.g., Hulcher Svcs. v. J. Corman R. Co., 247 Ga. App. 486(2), 543 S.E.2d 461 (2000) (selection of choice of Texas law will not be followed where it flagrantly contravenes the public policy of Georgia); Federal Ins. Co. v. Nat. Distributing Co., 203 Ga.App. 763(1), 417 S.E.2d 671 (1992) (Restatement approach has been rejected in Georgia and the traditional method retained); Enron Capital &c. v. Pokalsky, 227 Ga.App. 727(3), 490 S.E.2d 136 (1997) (although the parties may have chosen the law of a foreign jurisdiction to govern, a Georgia court will not enforce the contract if it is "particularly distasteful"); Merrill Lynch, Pierce, Fenner & Smith v. Stidham, 658 F.2d 1098, 1100 fn. 5 (5th Cir.1981); Barnes Group v. Harper, 653 F.2d 175, 178, fn. 4 (5th Cir. Unit B 1981); Marketing and Research Counselors v. Booth, 601 F.Supp. 615 (N.D. Ga. 1985).

We reaffirmed our commitment to the traditional choice of law rules in General Tel. Co. &c. v. Trimm, 252 Ga. 95, 311 S.E.2d 460 (1984). Again by way of certified question from the Eleventh Circuit, this Court was faced with the question of whether Georgia adhered to the traditional rule of lex loci contractus¹ in cases involving conflicts of law, or if Georgia had adopted the Restatement (Second) of Conflict of Laws § 188 (1971) "center of gravity test"² to determine which state law governs contractual disputes. We expressly rejected the Restatement center of gravity test noting that it "is neither less confusing nor more certain than our traditional approach." Trimm, supra at 96, 311 S.E.2d 460.

However, in Nordson Corp. v. Plasschaert, 674 F.2d 1371 (11th Cir.1982), the Eleventh Circuit reached a contrary conclusion in reviewing a case involving Georgia choice of law rules. The Nordson court determined that Georgia would honor a choice of law provision in a covenant not to compete which provided that the agreement would be governed by Ohio law, even though the terms of the covenant would not be enforceable under Georgia law. Recognizing that "[e]ven when the contract provides for a choice of law under which the covenant would be enforceable, Georgia may elect not to enforce it," id. at 1374, the Nordson court nonetheless looked to the "materially greater interest" test embodied in the Restatement (Second) of Conflict of Laws § 187(2) (1971),³ and then conducted its analysis based on the Restatement factors. In so doing, the Eleventh Circuit claimed to be guided by this Court's decision in Nasco. However, this Court did not adopt § 187(2) of the Restatement in Nasco; the single reference to that provision was prefaced with the introductory signal "see,"⁴ and followed in a separate sentence the citation of authority which directly supported the proposition that Georgia courts will not apply chosen law which would contravene the policy of, or would be prejudicial to the interests of, this state, namely, OCGA § 1-3-9 and Ulman &c. Woolen Co. v. Magill, supra. Nasco, supra at 676, 238 S.E.2d 368. Thus, Nordson erroneously interpreted Nasco and is in direct conflict with that case.⁵ The Eleventh Circuit perpetuated the error in Bryan v. Hall Chemical Co., 993 F.2d 831 (11th Cir.1993), by relying on its erroneous holding in Nordson.

In Trimm, supra at 96...