Fuller v. Kolb

• Decision Date: 06 April 1977
• Docket Number: No. 32079,32079
• Citation: Fuller v. Kolb, 238 Ga. 602, 234 S.E.2d 517 (Ga. 1977)
• Court: Georgia Supreme Court
• Parties: , 1977-1 Trade Cases P 61,371 Drew R. FULLER et al. v. J. Randolph KOLB.

Page 517

234 S.E.2d 517

238 Ga. 602, 1977-1 Trade Cases P 61,371

Drew R. FULLER et al. v.J. Randolph KOLB.

No. 32079.

Supreme Court of Georgia.

April 6, 1977.

Harland, Cashin, Chambers, Davis & Doster, Thomas J. Venker, Joe G. Davis, Jr., Atlanta, for appellants.

Heyman & Sizemore, Gerald M. Edenfield, George H. Myshrall, Jr., Atlanta, for appellee.

INGRAM, Justice.

In this appeal we consider the dismissal of appellant's suit to enforce a restrictive covenant in an employment contract.The trial court granted a motion to dismiss the suit upon the ground that it failed to state a claim upon which relief could be granted.We affirm.

Appellant is a certified public accounting firm doing business as Fuller and DeLoach.The appellee Kolb is an accountant and former employee of Fuller.The parties entered into an employment contract which contained a restrictive covenant.The relevant portion of the covenant provides:

"The employee agrees that for a period of two years subsequent to the termination of this agreement, he will not render public accounting services, either as a practitioner, or as an employee of another practitioner, for any organization or individual which was a client of Fuller and DeLoach or of a predecessor firm at the time of termination or which had been a client within a year thereto . . . " The covenant also provided for injunctive relief and liquidated damages upon breach.

Kolb quit his job with appellant and went into business for himself before the contract terminated.Subsequently, he performed accounting services for several of appellant's former clients.Appellant brought suit to enforce the covenant.Kolb answered, alleging that the covenant was void and unenforceable and counterclaimed for damages.He then moved for dismissal of the complaint for failure to state a claim and the trial court granted this motion.

At the oral argument of the case before this court, counsel for both parties agreed that the decisive issue in this appeal is whether the covenant is limited as to territory.We do not think that it is and so affirm the judgment of the trial court.

In Georgia, contracts which tend to lessen competition or which are in restraint of trade are against public policy and are void.Georgia Constitution, Art. IV, Sec. IV, Par. I (Code Ann. § 2-2701(Rev.1973) );Code Ann. § 20-504(Cum.Supp.1976).Restrictive covenants in employment contracts are in partial restraint of trade and are enforceable "only if strictly limited in time and territorial effect and (are) otherwise reasonable considering the business interest of the employer sought to be protected and the effect on the employee."Orkin Exterminating Co. v. Pelfrey, 237 Ga. 284, 285, 227 S.E.2d 251, 252(1976).See alsoMcNease v. National Motor Club of America, Inc., 238 Ga. 53, 231 S.E.2d 58(1976).

The covenant which we are asked to consider in this case, as it is written, has no territorial limitation.The absence of such a limitation renders it void.SeeColonial Life & Accident Ins. Co. v. Byrd, 227 Ga. 198, 179 S.E.2d 746(1971);Edwin K. Williams & Co. East v. Padgett, 226 Ga. 613, 176 S.E.2d 800(1970).The problem inherent in restrictive covenants which do not have territorial limitations is one of notice to the former employee.See, e. g., Ellison v. Labor Pool of America, Inc., 228 Ga. 147, 184 S.E.2d 572(1971);andWAKE Broadcasters, Inc. v. Crawford, 215 Ga. 862, 114 S.E.2d 26(1960).This is particularly true in this case where appellant has offices in four different cities and the covenant prohibits dealings with any organization or individual which had been a client of appellant for a year preceding the termination of employment.The burden imposed on Kolb to determine whether he is in violation of the covenant in accepting a particular client is unreasonable as written.

Appellant argues that this case should be controlled by Kirshbaum v. Jones, 206 Ga. 192, 56 S.E.2d 484(1949).In Kirshbaum, the court upheld a restriction which was written without a territorial limitation.There the court found "(w)ith respect to the territorial limitation, the employee was prohibited from soliciting the employer's customers whom he had served, and the territory would necessarily be limited to that specific area."(Emphasis supplied).The opinion in Kirshbaum does not point out either the type of business or the locality involved in that case.Appellant...