Early v. MiMedx Grp., Inc., A14A2141.

Decision Date10 February 2015
Docket NumberNo. A14A2141.,A14A2141.
Citation330 Ga.App. 652,768 S.E.2d 823
PartiesEARLY et al. v. MIMEDX GROUP, INC.
CourtGeorgia Court of Appeals

Erika Clarke Birg, Atlanta, for Appellants.

Collin Lambert Freer, Neal Fredric Weinrich, Benjamin I. Fink, Berman Fink Van Horn, Atlanta, for Appellee.

Opinion

McMILLIAN, Judge.

We granted this interlocutory appeal to determine whether a provision in a Consulting Agreement that requires a designated employee of the Consultant to “devote her full working time” to the performance of the Consultant's duties under the Agreement constitutes an illegal and unenforceable restraint of trade, and if not, whether the provision is enforceable against the employee named in the agreement, even though she did not expressly agree to be bound by the provision at issue. We answer the first question in the affirmative and thus need not reach the second question.

Pertinent to these issues, the record shows1 that appellee MiMedx Group, Inc. (“MiMedx”) develops, manufactures, and markets patent protected biomaterial-based products, including bioimplants made from human amniotic membrane. Appellant Ryanne Early2 was experienced in this field, and had worked for a “now defunct emerging competitor of MiMedx.” Sometime around January 2011, MiMedx and Early entered into negotiations about a possible “business relationship,” and later that month MiMedx and Early, as founder and president of ISE Professional Testing & Consulting Services, Inc. (“ISE”), entered into a “Mutual Confidentiality and Nondisclosure Agreement” (“Nondisclosure Agreement”) prohibiting Early from disclosing trade secrets and confidential information, which might be revealed to her during negotiations with MiMedx.

A short time later,3 MiMedx and ISE entered into a Consulting Agreement whereby ISE, as the named “Consultant,” would provide product, research and development consulting services to MiMedx related to its amnion products. Paragraph 2 of the Consulting Agreement named Early as the ISE employee who would provide consulting services to MiMedx, and further specified that Early would “devote her full working time (not less than forty (40) hours per week) to [the] performance of Consultant's duties hereunder” (“full-working-time provision”).

MiMedx terminated the Consulting Agreement in December 2011, and subsequently filed a verified complaint against, inter alia, Early and ISE (collectively referred to as appellants) seeking damages, specific performance and injunctive relief under the Consulting Agreement and the separate Nondisclosure Agreement.4 Although the complaint set out numerous causes of action against both ISE and Early and specifically alleged that Early had failed to devote her full working time to the performance of the consulting duties under the Consulting Agreement, it did not set out a separate cause of action for breach of that Agreement.

Appellants answered and filed a counterclaim seeking payment for the consulting services which were rendered in December 2011. A short time later, MiMedx filed an amended complaint asserting a cause of action against ISE and Early for breach of the Consulting Agreement. Although MiMedx did not specifically allege which provisions of the Consulting Agreement had been breached, the amended complaint again alleged that Early had failed to devote her full working time to the performance of the consulting duties under the Consulting Agreement and had instead misappropriated MiMedx's trade secret and confidential information to start a rival company.

Appellants subsequently filed a motion for judgment on the pleadings,5 contending, among other things, that the full-working-time provision6 of the Consulting Agreement was void and unenforceable as either a general or partial restraint of trade.7 Following a hearing, the trial court denied appellants' motion for judgment on the pleadings without explanation, and appellants filed an application seeking interlocutory review of that order in this Court. We granted appellants' application, and this appeal followed. As more fully set forth below, we now reverse.

It is well settled that,

[o]n a motion for judgment on the pleadings, we treat all well-pled material allegations by the nonmovant as true and all denials by the movant as false. Although such motion is, by definition, limited to the pleadings, a trial court may also consider exhibits that have been incorporated into the pleadings. If, in reviewing these documents, there is a complete failure by the plaintiff to state a cause of action, then the defendant is entitled to judgment as a matter of law.

(Footnotes omitted.) Printis v. Bankers Life Ins. Co., 256 Ga.App. 266, 266, 568 S.E.2d 85 (2002). However, we are mindful that [a] motion for judgment on the pleadings should be granted only if the moving party is clearly entitled to judgment.” (Citation and punctuation omitted.) Sherman v. Fulton County Board of Assessors, 288 Ga. 88, 90, 701 S.E.2d 472 (2010).

1. Before turning to the merits of this appeal, we must first address MiMedx's contention that appellants are barred from challenging the enforceability of the Consulting Agreement because they failed to raise this issue by way of a responsive pleading below, and because appellants admitted that the Consulting Agreement was valid and enforceable in their counterclaim seeking payment for the consulting services that were rendered in December 2011.

(a) MiMedx first asserted its claim for breach of the Consulting Agreement in its amended complaint, but did not specify which provision of the Agreement was allegedly breached. Appellants did not file an answer to the amended complaint, but raised the issue of the enforceability of Paragraph 2 of the Consulting Agreement by way of a motion for judgment on the pleadings. This was sufficient. As we have held on numerous occasions, a defendant “is not required to file an answer to an amended complaint unless the trial court itself has affirmatively ordered such answer.” (Citation and punctuation omitted.) Hiner Transport, Inc. v. Jeter, 293 Ga.App. 704, 705, 667 S.E.2d 919 (2008). See also OCGA § 9–11–12(a). “This is consistent with the statement in OCGA § 9–11–8(d) that averments in a pleading to which no responsive pleading is required or permitted shall be taken as denied or avoided.” (Citations and punctuation omitted.) Nat. City Mtg. v. Point Ctr. Fin., Inc., 306 Ga.App. 655, 656, 703 S.E.2d 113 (2010). Moreover, although MiMedx cites OCGA § 9–11–8(c) for the proposition that affirmative defenses such as illegality must always be raised by way of a responsive pleading, our precedent clearly establishes that this rule is not as inflexible as MiMedx contends.

The purpose of the requirement that affirmative defenses be pleaded is to prevent surprise and to give the opposing party fair notice of what he must meet as a defense. If it is not pleaded[,] it is generally held that the defense is waived, but if it is raised by motion, or by special plea in connection with the answer or by motion for summary judgment there is no waiver.

Hardy v. Ga. Baptist Health Care Systems, Inc., 239 Ga.App. 596, 596–597(1), 521 S.E.2d 632 (1999), and cites. Cf. First Bank of Clayton County v. Dollar, 159 Ga.App. 815, 816 –817(3), 285 S.E.2d 203 (1981) (affirmative defense of illegality waived when it was neither included in a defensive pleading nor raised by written motion).

Moreover, by failing to raise this issue in the trial court, MiMedx itself has waived this issue on appeal. See Phillips v. State Farm Mut. Auto. Ins. Co., 121 Ga.App. 342, 347(2)(b), 173 S.E.2d 723 (1970) (“The lack of pleading, if such there was, was not raised in the trial court and that issue is not properly before us. The question was not submitted to the trial court, was not passed upon by that court, and thus under the law of this State cannot be considered by this court.”) (citations and punctuation omitted). Roberts v. Farmer, 127 Ga.App. 237, 240 –241(5), 193 S.E.2d 216 (1972) (contention not made in the trial court cannot be considered on appeal).

(b) MiMedx also contends that appellants are barred from asserting this defense because they themselves sought to enforce the Consulting Agreement in their counterclaim and specifically pled that the Agreement was valid and enforceable. Again, however, MiMedx has waived the right to raise this contention by failing to raise it below. E.g., Crippen v. Outback Steakhouse Intl., 321 Ga.App. 167, 170(1), 741 S.E.2d 280 (2013).

Moreover, this contention fails on the merits. First, MiMedx had not asserted its claim for breach of the Consulting Agreement at the time the appellants made this allegation in their counterclaim, and thus it would be incongruous to say that they had admitted to a claim that had not yet been pled.8

Additionally, the Consulting Agreement contains the following severability clause:

[i]f any provision of this Agreement shall be declared invalid or illegal for any reason whatsoever, then notwithstanding such invalidity or illegality, the remaining terms and provisions of this Agreement shall remain in full force and effect in the same manner as if the invalid or illegal provision had not been contained therein.

It is well settled that the intent of the parties determines whether a contract is severable such that the remaining contract provisions will survive even if one or more provisions of the contract are void. Capricorn Systems, Inc. v. Pednekar, 248 Ga.App. 424, 428(2)(d), 546 S.E.2d 554 (2001). And [a] severability clause indicates the intent of the parties where the remainder of the contract can exist without the void portion.” Id. Accordingly, [v]oid restrictive covenants, which cannot be blue-penciled out of the contract, do not void the entire contract when the contract contains a severability clause ... [Cits.] [T]he other contract terms survive the void terms, provided that the contract is severable.”9 Id. Applying these principles here, we find...

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    ...have regularly struck down restrictive covenants for years. The Georgia Court of Appeals did so again in Early v. MiMedx Grp., Inc., 330 Ga. App. 652 (2015). That in itself is not remarkable. The Early case, however, serves as a reminder of the importance of considering whether to have key ......
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