Lanmark Technology Inc. v. Canales

• Decision Date: 29 September 2006
• Docket Number: No. 1:06CV327.,1:06CV327.
• Citation: Lanmark Technology Inc. v. Canales, 454 F.Supp.2d 524 (E.D. Va. 2006)
• Parties: LANMARK TECHNOLOGY, INC., Plaintiff, v. Arturo CANALES, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

Page 524

454 F.Supp.2d 524

LANMARK TECHNOLOGY, INC., Plaintiff, v.Arturo CANALES, Defendant.

No. 1:06CV327.

United States District Court, E.D. Virginia, Alexandria Division.

September 29, 2006.

Jeffrey Paul Hildebrant, Hildebrant & Associates, McLean, VA, for Plaintiff.

John Joseph Rigby, Mclnroy & Rigby, LLP, Arlington, VA, for Defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

In this diversity action for breach of contract and fraudulent misrepresentation, plaintiff, Lanmark Technology, Inc.("Lanmark"), alleges that its former employee, defendantArturo Canales, (i) breached a non-compete clause in his employment agreement and (ii) fraudulently induced Lanmark to hire him based on misrepresentations of his educational experience.Chiefly at issue on summary judgment is (a) whether Lanmark's non-compete clause is fatally overbroad, and hence unenforceable under Virginia law and, if not (b) whether Canales violated the clause when he accepted an employment offer that required him to work under a contract with Lanmark's former client, the Defense Logistics Agency("DLA").

I.¹

Lanmark, a Virginia corporation headquartered in Fairfax, Virginia, provides information technology services, program management oversight, and administrative support to clients in the federal government and commercial sectors.According to Lanmark's website,² included within these broadly-framed categories of services are the following specific services:

• Information Technology Services: software development, software testing, software quality assurance, software configuration management, web design and development, audio/visual technical support, system design and data integration, data interoperability, network engineering and maintenance, information technology operations and helpdesk support, net-centric enterprise services, knowledge management systems, and database and application development;

• Program Management Services: program/project analysis and support, conference management support, training development and support, logistical planning and support, and resource planning;

• Administrative Support Services: program and personal support, finance, budgeting and accounting services, library science and information management, contract support, inventory management, warehousing services, file/records digitization, and management and maintenance.

By any measure, this is an exceptionally broad range of diverse services that Lanmark purports to offer government and commercial customers.

Canales, a Tennessee citizen and resident, claims to have twenty years of experience in military contracts, technology services, and project management.Additionally, he claims to have earned both a bachelor's and master's degree in engineering from Columbia State University.

Lanmark hired Canales, in June 2004, as a project manager at an annual salary of $92,000.Lanmark claims it hired Canales based, at least in part, on Canales's representation that he had received two engineering degrees from Columbia State University.There is, as it turns out, an issue as to whether Columbia State University is a "diploma mill" that provides "bogus degrees" or a genuine educational institution.³Lanmark asserts that Columbia State University is a diploma mill, that Canales knew this when he applied for a position at Lanmark, and that Canales intentionally misrepresented his education at Columbia State University to induce Lanmark to hire him.Canales vigorously disputes this claim, contending that he believed then, as he does now, that his degrees are genuine.In any event, this dispute is immaterial to the dispositive issue of the enforceability of the non-compete clause.

From June 2004 until November 2004, Canales worked on projects related to the contract between Lanmark and DLA (the "Lanmark-DLA contract"), in which Lanmark performed an inventory audit of DLA's assets.Two DLA representatives in charge of the Lanmark-DLA contract, John Frankenberger and Danny Lester, testified that Canales was knowledgeable and performed his duties in a satisfactory and professional manner.Despite DLA's satisfaction with Canales's work, Lanmark now contends that Canales did not meet either DLA's or Lanmark's expectations.Certain undisputed facts reflect otherwise.To begin with, DLA representatives, as noted, praised Canales's work and gave no indication they were dissatisfied with his performance.⁴The evidence also suggests that Lanmark was satisfied with Canales's performance.In mid-July 2004, Lanmark gave Canales a 4% raise (amounting to $4,000), increasing his annual salary to $96,000, and increasing his vacation time from 80 hours (two weeks) per year to 120 hours (three weeks) per year.Finally, when the Lanmark-DLA contract was completed, DLA, as a satisfied customer, paid Lanmark the full amount due under the contract.

In October 2004, only a month before he was terminated, Canales signed a Nondisclosure/Noncompete Agreement that included the following clause at issue here:

Employee shall not, for a period of two years following termination of employment with the Company, assist, as an employee or otherwise, any competitor to [Lanmark] to obtain business opportunities to perform services similar to those provided by [Lanmark] that relates to (1) a contract or project being performed by [Lanmark], (2) a business opportunity that [Lanmark] is pursuing Or (3) a person or organization for whom [Lanmark] has provided or is providing services.

The agreement further provided that Virginia law would govern all disputes arising under its terms.

In November 2004, after only five months of employment, Lanmark terminated Canales's' employment for reasons not stated in the record.Following his termination, Canales returned to work for his pre-Lanmark employer, PC Mall, in Memphis, Tennessee.While working at PC Mall, Canales accepted employment with CrystalView Technology Corp.("CrystalView"), which has a contract with DLA's Cooperative Administrative Support Unit⁵(the "CrystalView-CASU contract") that requires it to perform management and oversight services for DLA.Significantly, Canales's work on the CrystalView-CASU contract differs from the work he performed under the Lanmark-DLA contract.Specifically, the Lanmark-DLA contract required Canales "to do an inventory and to apply barcodes to assets and to review documentation and to create replacement documentation when it [did not] exist."By contrast, the Crystal-View-CASU contract requires that Canales "support the [Immediate Response Team], attend meetings, maintain a [Plan of Action and Milestones] for both DLA and [the Department of Defense] in a support role and help review scheduling of ongoing efforts."Thus, as Frankenberger testified, the two contracts do not involve "the same sort of functions at all." importantly, it is undisputed that Canales did not "assist" CrystalView with any contract proposals or otherwise help CrystalView to solicit, negotiate, or obtain the Crystal-View-CASU contract.The parties dispute, however, whether, at the time of CrystalView's employment offer, Canales was aware that CrystalView had a contract with the CASU that would require him to perform services for DLA.

On February 21, 2006, Lanmark filed suit in the Circuit Court for Fairfax County, Virginia, alleging that Canales (i) breached his employment agreement (a) by failing to return Lanmark property upon his termination and (b) by competing with Lanmark in violation of the non-compete clause; and (ii) misappropriated trade secrets.On March 28, 2306, Canales, pursuant to 28 U.S.C. § 1446, filed a notice of removal to the Eastern District of Virginia based on diversity jurisdiction.In June 2006, Lanmark amended its complaint omitting the claim of misappropriation of trade secrets, and asserting instead a claim for fraudulent misrepresentation.Thereafter, on August 16, 2006, Canales filed a motion for summary judgment contending (i) that the non-complete clause is unenforceable because it is functionally and geographically overbroad and (ii) that even if enforceable, Canales did not violate the clause because he did not assist CrystalView in obtaining the CrystalView-CASU contract.

II.

The summary judgment standard is too well-settled to require elaboration here.In essence, summary judgment is appropriate only where, on the basis of undisputed material facts, the moving party is entitled to judgment as a matter of law.Celotex Corp. v. Catrett,477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265(1986).And, importantly, to defeat summary judgment the non-moving party may not rest upon a "mere scintilla" of evidence, but must set forth specific facts showing a genuine issue for trial.Id. at 324, 106 S.Ct. 2548;Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986).

III.

The central, dispositive issue on summary judgment is whether Lanmark's non-compete clause is unenforceable under Virginia law.⁶In Virginia, as elsewhere, non-compete clauses are disfavored restraints on trade.⁷Virginia courts take this view because covenants not to compete, by their nature, restrain competition, and accordingly curb the "fundamental right of individuals to seeks success in our free-enterprise society."⁸Given that such non-compete covenants are disfavored in Virginia, they"have been upheld only when employees are prohibited from competing directly with the former employer or through employment with a direct competitor."Omniplex World Servs. Corp. v. U.S. Investigations Servs. Inc.,270 Va. 246, 618 S.E.2d 340, 342(Va.2005).With respect to employment with a direct competitor, non-compete clauses that "restrict the former employee's performance of functions for his new employer [are upheld] only to the extent that the proscribed functions are the same functions as were performed for the former employer."Cantol, Inc. v. McDaniel,No. 2:06cv86, 2006 WL 1213992 at *4, ...