Holland Ins. Grp., LLC v. Senior Life Ins. Co.

• Decision Date: 20 November 2014
• Docket Number: No. A14A1235.,A14A1235.
• Court: Georgia Court of Appeals
• Parties: HOLLAND INSURANCE GROUP, LLC et al. v. SENIOR LIFE INSURANCE COMPANY.

329 Ga.App. 834

766 S.E.2d 187

HOLLAND INSURANCE GROUP, LLC et al.

v.SENIOR LIFE INSURANCE COMPANY.

No. A14A1235.

Court of Appeals of Georgia.

Nov. 20, 2014.

Drew Eckl & Farnham, Joseph C. Chancey, Meredith Riggs Guerrero, Atlanta, for Appellants.

William Edward Holland, Edward Fowler Preston, Coleman Talley, Gregory Tyson Talley, Valdosta, for Appellee.

Opinion

RAY, Judge.

William Holland and Senior Life Insurance Company (“Senior Life”) entered into an agreement (“Agreement”) authorizing Holland to sell Senior Life's insurance products as an independent agent. Senior Life subsequently terminated the Agreement and notified Holland that it “suspended” payment of commissions to Holland pending an investigation of whether Holland had violated restrictive covenants contained in the Agreement. Holland then filed a complaint against Senior Life seeking injunctive relief and a declaratory judgment that the Agreement's restrictive covenants are overbroad and thus, unenforceable.¹ Holland filed a motion for judgment on the pleadings, which the trial court denied. Senior Life then filed an amended counterclaim seeking enforcement of the forfeiture provisions of the agreement based on Holland's alleged violation of restrictive covenants. Senior Life then sought a preliminary injunction for the return of all confidential documents, including completed insurance applications and “Leads” (information regarding prospective clients). Senior Life also sought to enjoin Holland and his sub-agents from using and distributing such information after the termination of the Agreement. The trial court granted that motion. Holland appeals from both of the trial court's rulings.² For the reasons below, we affirm in part and reverse in part.

1. Holland's motion for judgment on the pleadings sought a declaratory judgment that: “(1) the non-solicitation and confidentiality provisions of the [Agreement] are unenforceable as a matter of law; and (2) the liquidated damages of the [Agreement] are void[.]” The motion also sought “a permanent injunction preventing Senior Life from attempting to enforce such provisions” and asked the trial court to order Senior Life to pay Holland all commissions that he is owed under the Agreement. After a hearing, the trial court denied the motion in a single sentence.

On appeal, Holland argues that the trial court erred in denying the motion for judgment on the pleadings because the Agreement contains several restrictive covenants that are overbroad and, thus, unenforceable and invalid under A.L. Williams & Assocs. v. Faircloth, 259 Ga. 767, 386 S.E.2d 151 (1989).³ In A.L. Williams, our Supreme Court held that “ [i]t would be paradoxical to strike down a covenant as invalid, and at the same time uphold a forfeiture that is conditioned upon a violation of that very covenant. Hence, a forfeiture provision that is conditioned expressly upon an invalid covenant must be invalid in se. ” Id. at 768(1)(b), 386 S.E.2d 151.

A motion for judgment on the pleadings is proper where the undisputed facts that appear from the pleadings establish that the movant is entitled to judgment as a matter of law. All well-pleaded facts are to be accepted as true. However, the trial court is not required to adopt a party's legal conclusions based on those facts. In other words, the granting of a motion for judgment on the pleadings under OCGA § 9–11–12(c) is proper only where there is a complete failure to state a cause of action or defense. In considering a motion for judgment on the pleadings, a trial court may consider exhibits attached to and incorporated into the pleadings, including exhibits attached to the complaint or the answer.

(Citations and punctuation omitted.) Lapolla Industries, Inc. v. Hess, 325 Ga.App. 256, 258(2), 750 S.E.2d 467 (2013). See also Cardin v. Outdoor East, 220 Ga.App. 664, 665, 468 S.E.2d 31 (1996) (The grant of a motion for judgment on the pleadings is proper only where the allegations disclose with certainty that the opposing party would not be entitled to judgment under any state of provable facts).

Accordingly, in deciding whether Holland is entitled to judgment on the pleadings, the trial court must accept Senior Life's well-pleaded allegations. See Kwickie/Flash Foods, Inc. v. Lakeside Petroleum, Inc., 246 Ga.App. 729, 729, 541 S.E.2d 699 (2000). The pleadings allege that Senior Life and Holland entered into the Agreement by which Senior Life appointed Holland as an independent agent and representative of Senior Life for the purposes of soliciting and selling life insurance policies. Under the Agreement, Senior Life agreed to pay Holland “commissions and fees based on premiums received by [Senior Life] with respect to [Senior Life] insurance policies issued and placed into force from applications solicited by or through [Holland] or [Holland's] [s]ub-agent[s].” The Agreement was in effect from July 29, 2002, until June 15, 2011, when Senior Life terminated the contract. Senior Life's answer also contends that Holland “has violated one or more of the terms of the [Agreement]; consequently, he has forfeited all rights to renewal commissions pursuant to Section 5.7” and “Holland has induced or assisted in inducing a Senior Life policyholder to surrender, lapse, relinquish ... or otherwise reduce a policy in value by use of non-forfeiture benefits; [and] consequently, he has forfeited his right to renewal commissions pursuant to Section 7.10” of the Agreement.

Holland contends that the trial court erred in denying his motion for judgment on the pleadings on the grounds that restrictive covenants, nondisclosure provisions, and forfeiture provisions of the Agreement are unreasonable, invalid and unenforceable. The reasonableness of a restrictive covenant is a question of law, which we review de novo. Murphree v. Yancey Bros. Co., 311 Ga.App. 744, 747, 716 S.E.2d 824 (2011).

[R]estrictive covenants that are ancillary to employment contracts receive strict scrutiny, and are not blue-penciled. This is because it is generally true in an employer/employee relationship that the employee goes into a transaction such as this at a great bargaining disadvantage and does so in exchange for the opportunity to [be employed].⁴

(Punctuation and footnotes omitted.) Id. However, the Agreement contains a severability clause.⁵ “Void restrictive covenants, which cannot be blue-penciled out of the contract, do not void the entire contract when the contract contains a severability clause[.]” (Citations omitted.) Capricorn Systems, Inc. v. Pednekar, 248 Ga.App. 424, 428(2)(d), 546 S.E.2d 554 (2001). Accord Johnstone v. Tom's Amusement Co., Inc., 228 Ga.App. 296, 297 –298(1), 491 S.E.2d 394 (1997).

(a) Holland first contends that Section 5.5 of the Agreement, titled “Confidentiality,” is overly broad. That provision provides, in relevant part, that “[u]ntil this Agreement terminates and at all times thereafter, you will hold in the strictest confidence and not use in any manner detrimental to us, or disclose, publish, or divulge, directly or indirectly, to any individual or entity any Confidential and Proprietary Information [.]” Section 5.5 defines “Confidential and Proprietary Information” as

certain confidential and proprietary information relating to our business, including, but not limited to, certain lists of or data relating to our Customers and Prospective Customers ... and certain other information relating to our services, marketing techniques, business methods or finances, which information is generally not known to the public.... [Senior Life] take[s] all reasonable steps necessary to ensure that each and every component of the Confidential and Proprietary Information constitutes a “Trade Secret.”

Holland contends that the “Confidential and Proprietary Information” defined in Section 5.5 does not constitute a trade secret and, thus, that the confidentiality covenant is void because it does not contain a time limit.

The validity of a non-disclosure provision depends upon its reasonableness, which, in turn, hinges on two factors: (1) whether the employer is attempting to protect confidential information relating to the business, such as trade secrets, methods of operation, names of customers, personnel data, and so on; and (2) whether the restraint is reasonably related to the protection of the information.

(Punctuation and footnote omitted.) Physician Specialists in Anesthesia, P.C. v. MacNeill, 246 Ga.App. 398, 407 –408(7), 539 S.E.2d 216 (2000). “A nondisclosure clause with no time limit is unenforceable as to information that is not a trade secret.” (Citation omitted.) Allen v. Hub Cap Heaven, Inc., 225 Ga.App. 533, 539(6), 484 S.E.2d 259 (1997). Accord Carson v. Obor Holding Co., LLC, 318 Ga.App. 645, 649 –650(1)(a), 734 S.E.2d 477 (2012). It is undisputed that Section 5.5 of the Agreement contains no time limitation; thus, whether or not Section 5.5 is overly broad and unenforceable hinges upon whether the “Confidential and Proprietary Information” it prohibits disclosing constitutes a trade secret.

OCGA § 10–1–761(4) defines a “Trade Secret” as “information, without regard to form, including, but not limited to, technical or non-technical data, ... a method, a technique, ... financial data, financial plans, product plans, or a list of ... potential customers or suppliers which is not commonly known by or available to the public ...”

(Emphasis supplied.) Although “a client list may be subject to confidential treatment under the Georgia Trade Secrets Act, the information itself is not inherently confidential.” (Citations and punctuation omitted.) Crews v. Roger Wahl CPA, P.C., 238 Ga.App. 892, 898, n. 4, 520 S.E.2d 727 (1999). This is because “[c]ustomers are not trade secrets. Confidentiality is afforded only where the customer list is not generally known or ascertainable from other sources and was the subject of reasonable efforts to maintain its secrecy.” (Citations omitted.) Id.

In Physician Specialists in Anesthesia, P.C....