Harwell Enterprises, Inc. v. Heim

• Citation: 276 N.C. 475,173 S.E.2d 316
• Decision Date: 15 April 1970
• Docket Number: No. 11,11
• Court: North Carolina Supreme Court
• Parties: HARWELL ENTERPRISES, INC. v. Gary L. HEIM, Individually, and Gary L. Heim, and Dwight Ballard, Trading asMetro Screen Engraving Company.

Page 316

173 S.E.2d 316

276 N.C. 475

HARWELL ENTERPRISES, INC. v. Gary L. HEIM, Individually, and Gary L. Heim, and Dwight

Ballard, Trading asMetro Screen Engraving Company.

No. 11.

Supreme Court of North Carolina.

April 15, 1970.

Whitener & Mitchem by Basil L. Whitener and Anne M. Lamm, Gastonia, for plaintiff appellant.

Horace M. DuBose, III, Gastonia, for defendant appellee Heim.

Hollowell, Stott & Hollowell by Grady B. Scott, Gastonia, for defendant appellee Ballard.

MOORE, Justice.

In passing upon the demurrer this Court must accept as true the facts alleged. Hence, for the present hearing these facts are deemed established: (1) Plaintiff is engaged in various business endeavors including all phases of silk screen processing, plastics, importing and various other ventures throughout the United States; (2) the parties entered into a written contract which provided, Inter alia, that Heim would not engage in any business competitive with the plaintiff in the United States for a period of two years after termination of his employment with the plaintiff; (3) Heim voluntarily left the employment of plaintiff on 11 February 1968; (4) in violation of the terms of the agreement Heim entered into the silk screen processing business with Ballard, also a former employee of the plaintiff; (5) Heim acquired valuable trade and technical processes, customer lists, price information, and research and development data while employed by plaintiff; (6) Ballard knew of the contract between Heim and the plaintiff and conspired with Heim to violate it; and (7) defendants are presently engaged in the silk screen processing business, are actually soliciting business from plaintiff's customers, and are now supplying named concerns in North and South Carolina which were customers of plaintiff during Heim's employment.

Under the facts as alleged, Heim's conduct violated the terms of the restrictive covenant. The question for decision is whether the restrictive covenant is valid and enforceable. The defendants say its territorial scope (United States) is too large, and the business sought to be protected (any competitive business) is too broad; hence, it is void and unenforceable. We hold otherwise. The general rule for the interpretation of such covenant is well stated by Stacy, C.J., in Beam v. Rutledge, 217 N.C. 670, 9 S.E.2d 476:

'The test to be applied in determining the reasonableness of a restrictive covenant is to consider whether the restraint affords only a fair protection to the interest of the party in whose favor it is given, and is not so broad as to interfere with the rights of the public. (Citing authority.) The question is one of reasonableness--reasonableness in reference to the interests of the parties concerned and reasonableness in reference to the interests of the public. (Citing authority.) Such a covenant is not unlawful if the restriction is no more than necessary to afford fair protection to the covenantee and is not injurious to the interests of the public.'

Such covenants will be enforced if they are no broader than reasonably necessary for the protection of the employer's business and do not impose undue hardship on the employee, due regard being given the interests of the public. Asheville Associates v. Miller and Asheville Associates v. Berman, 255 N.C. 400, 121 S.E.2d 593. If the covenant in this case is enforceable as to Heim, and Ballard knowingly entered into a conspiracy with Heim to violate it, he would be jointly liable with Heim for the breach. Sineath v. Katzis, 218 N.C. 740, 12 S.E.2d 671.

Defendants rely upon Comfort Spring Corp. v. Burroughs, 217 N.C. 658, 9 S.E.2d 473, to support their contention that the covenant in the present contract including 'all the United States' is void in North Carolina because the territory covered is unreasonable. In that case the restrictive clause which was held void referred to a particular company, the Spring Products Corporation of New York City, or its successor, and provided:

'* * * (I)t is understood and agreed that for the period of five years immediately following the termination of this contract by either party for or without cause, the party of the second part shall not, directly or indirectly, enter into the employ of such corporation, or its successor, or represent same within the entire United States; and the said party of the second part agrees that for said period of five years and in the United States he will not represent or enter the employ of the said Spring Products Corporation in any manner whatsoever.'

In passing upon the validity of this covenant, this Court said:

'It should first be observed that the only breach of the restrictive covenant alleged is that the defendant has accepted employment from the Spring Products Corporation and is calling upon the customers of the plaintiff. There is no allegation nor evidence as to the territory in which the defendant is calling upon the plaintiff's customers * * *. In truth, there is no allegation nor evidence as to over what territory the plaintiff's business extends. Therefore we...