Electrical South, Inc. v. Lewis

• Decision Date: 07 November 1989
• Docket Number: No. 8918SC19,8918SC19
• Citation: 96 N.C.App. 160,385 S.E.2d 352
• Court: North Carolina Court of Appeals
• Parties: ELECTRICAL SOUTH, INC. v. J. Gregory LEWIS.

Page 352

385 S.E.2d 352

96 N.C.App. 160

ELECTRICAL SOUTH, INC. v. J. Gregory LEWIS.

No. 8918SC19.

Court of Appeals of North Carolina.

Nov. 7, 1989.

Adams Kleemeier Hagan Hannah & Fouts by Joseph W. Moss, Greensboro, for plaintiff-appellant.

Turner, Rollins, Rollins & Clark by Clyde T. Rollins, Greensboro, for defendant-appellee.

GREENE, Judge.

Plaintiff (hereafter "Company" or "plaintiff") and defendant J. Gregory Lewis (hereafter "Employee") were parties to a noncompetition agreement. Plaintiff requested and was granted a preliminary injunction by the trial court, restraining defendant from disclosing trade secrets and confidential information. The trial court denied the Company's request for a preliminary injunction restraining defendant from competing with the Company. Plaintiff Company appeals.

The evidence presented to the trial court at the preliminary injunction hearing tended to show that the Company and Employee executed an "Employment Contract" (Contract) on or about 24 July 1984. The Contract provided in pertinent part:

9. Non-disclosure of Trade Secrets and Confidential Information. The employee agrees that during the term of his employment hereunder and thereafter, he will not disclose, other than to an employee of the company, any confidential information or trade secrets of the company that were made known to him by the company, its officers or employees, or learned by him while in the company's employ, without the prior written consent of the company, and that upon termination of his employment for any reason, he will promptly return to the company any and all properties, records, figures, calculations, letters, papers, drawings, blue prints or copies thereof or other confidential information of any type or description. It is understood that the term "Trade Secrets" as used in this agreement is deemed to include lists of the companies [sic] customers, information relating to the industrial practices, know how [sic], processes, inventions, decisions and formulas [sic] of the company and any other information of whatever nature which gives to the company an opportunity to obtain an advantage over its competitors who do not have access to such information, but it is understood that said term does not include knowledge, skills or information which is common to the trade or profession of the employee.

....

11. Covenant Not to Compete. The employee covenants and agrees that for a period of twenty-four (24) months after the termination of his employment with the company, regardless of whether such termination is voluntary or involuntary, and whether with or without cause, the employee will not directly or indirectly own, manage, operate, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any concern which manufactures or designs industrial solid state electronic equipment or which repairs or services industrial solid state electronic equipment, or which competes directly or indirectly, with the company in such endeavors, within a radius or two hundred (200) miles of the company's branch office to which the employee is assigned at the time of such termination .... (Emphasis added.)

Pursuant to the Contract, Employee worked with the Greensboro office of Company in its business of repairing industrial electronic equipment. Employee resigned his employment with the Company in late February, 1988, and on or about 1 March 1988, Employee began working for an electronics company in Pickens, South Carolina.

The Company's complaint alleges that Employee is now directly competing with the Company's business in performing repairs on industrial electronic equipment. The Company also alleges that Employee's new employer is located within a two-hundred-mile radius of Greensboro, North Carolina, and that Employee has solicited the Company's customers within a two-hundred-mile radius of Greensboro.

The trial court preliminarily enjoined Employee from disclosing the Company's trade secrets and confidential information. The trial court denied the Company's request for a preliminary injunction for the Covenant Not To Compete, entering in its order the following pertinent findings of fact and conclusions of law:

Findings of Fact

6. The covenant not to compete contained in the employment contract between plaintiff and defendant prohibits the defendant from working for any employer, wherever located, if that employer competes, directly or indirectly, with the plaintiff within a 200-mile radius of the plaintiff's office in the City of Greensboro, North Carolina. [Emphasis added.]

[Conclusions of Law ]

2. The covenant not to compete provision contained in Paragraph 11 of the employment contract is overly broad with relation to territory or area encompassed in the prohibition in that it prohibits defendant from working for any employer wherever located which competes, directly or indirectly, with the plaintiff within a 200-mile radius of plaintiff's office in the City of Greensboro, North Carolina.

NOW, THEREFORE, IT IS ORDERED:

1. Plaintiff's motion pursuant to Rule 65 of the North Carolina Rules of Civil Procedure for an order preliminarily enjoining defendant from competing with plaintiff within a 200-mile radius of plaintiff's office in the City of Greensboro, North Carolina, is denied.

2. Plaintiff's motion for an order preliminarily enjoining defendant from divulging trade secrets or other confidential business information under Paragraph 9 of the employment contract is hereby granted; and defendant is hereby preliminarily enjoined from disclosing any confidential information or trade secrets of the plaintiff that were made known to him by Electrical South, Inc., its officers or employees, while in the company's employ, including lists of the Company's customers, processes, inventions, and formulas [sic] which are unique in nature and which give plaintiff an opportunity to obtain an advantage over its competitors who do not have access to such information; provided, that such trade secrets and confidential information do not include knowledge, skills, or information which is common to the trade or profession of the defendant.

3. Defendant shall immediately return to the company any and all property, records, figures, calculations, letters, papers, drawings, blue prints or copies thereof of any confidential information of any type or description of the plaintiff Electrical South, Inc. [,] which the defendant presently has in his possession.

_____

The issue presented in this case is whether the Company's restrictive covenant can bar Employee from employment with a competitor located anywhere in the world who does business within 200 miles of the Company's branch office in Greensboro, North Carolina. The answer to this question resolves the ultimate issue of whether the trial judge properly denied the Company's request for a preliminary injunction.

No appeal lies from a trial court's denial of an interlocutory preliminary injunction unless the appellant would be deprived of a substantial right which he would lose absent a review prior to final determination. A.E.P. Industries, Inc. v. McClure, 308 N.C. 393, 400, 302 S.E.2d 754, 759 (1983). This court must consider whether plaintiff has a right of appeal "even though the question of appealability has not been raised by the parties themselves." Waters v. Qualified Personnel, Inc., 294 N.C. 200, 201, 240 S.E.2d 338, 340 (1978) (emphasis added). Plaintiff has offered no argument, contention or evidence that it would be deprived of a substantial right if we do not hear this case. However, we determine that plaintiff would lose a substantial right prior to final determination of the covenant on its merits in that plaintiff has "essentially lost its case because the [two-year] time limitation" under the covenant expires in March, 1990. A.E.P., 308 N.C. at 401, 302 S.E.2d at 759. Although "the appellate process is not the procedural mechanism best suited for resolving the dispute ... [n]evertheless, because this case presents an important question affecting the respective rights of employers and employees who choose to execute agreements involving covenants not to compete, we have determined to address the issues." A.E.P., 308 N.C. at 401, 302 S.E.2d at 759.

A preliminary injunction is an equitable remedy, and will issue only if the movant is able to show at the hearing the " 'likelihood of success on the merits of his case.' " A.E.P., 308 N.C. at 401, 302 S.E.2d at 759 (emphasis omitted) (citations omitted). This 'likelihood of success' results from the movant's prima facie showing of prerequisites to the enforceability of a covenant: its reasonableness as to time and territory. A.E.P., 308 N.C. at 402-03, 302 S.E.2d at 761. "Since the determinative question is one of public policy, the reasonableness and validity of the contract is a question for the court and not for the jury, to be determined from the contract itself and admitted or proven facts...." Kadis v. Britt, 224 N.C. 154, 158, 29 S.E.2d 543, 545 (1944).

Because grant of an injunction is an equitable matter, the trial court in its sound discretion considers the "question of undue hardship imposed on the defendant." Kadis, 224 N.C. at 164, 29 S.E.2d at 549. The public's interest in preserving an...