Lapolla Indus., Inc. v. Hess

• Decision Date: 15 November 2013
• Docket Number: No. A13A1097.,A13A1097.
• Citation: 325 Ga.App. 256,750 S.E.2d 467
• Parties: LAPOLLA INDUSTRIES, INC. et al. v. HESS et al.
• Court: Georgia Court of Appeals

325 Ga.App. 256

750 S.E.2d 467

LAPOLLA INDUSTRIES, INC. et al.

v.HESS et al.

No. A13A1097.

Court of Appeals of Georgia.

Nov. 15, 2013.

Reconsideration Denied Dec. 5, 2013.

Certiorari Denied March 10, 2014.

Robbins, Ross, Alloy, Belinfante & Littlefield, Heather Huggins Sharp, Atlanta, for Appellants.

Berman, Fink & Van Horn, Benjamin I. Fink, Neal Fredric Weinrich, Collin Lambert Freer, Atlanta, Kristin Noelle Zielmanski, for Appellees.

ANDREWS, Presiding Judge.

This appeal arises from a claim made by Lapolla Industries, Inc. that a competing business, Premium Spray Products, Inc., and Maclean Hess (on behalf of Premium) hired, or were attempting to hire, five former employees of Lapolla in violation of non-compete covenants in employment agreements between Lapolla and the former employees. In response to Lapolla's demand letter that Premium and Hess cease this activity with respect to the former employees, or face legal action for alleged tortious interference with the employment agreements, Premium and Hess filed a declaratory judgment action against Lapolla seeking a declaration that they were not tortiously interfering with Lapolla's contractual relations with the former employees because the non-compete covenants in the agreements were void and unenforceable.

The trial court entered an order granting a motion by Premium and Hess for a partial final judgment on the pleadings as to Count 2 of the complaint (which sought a declaratory judgment as to the non-compete covenants), and pursuant to OCGA § 9–11–54(b) the court entered a partial final judgment on Count 2.¹ The court found that, because the pleadings showed that the non-compete covenants in Lapolla's employment agreements with the former Lapolla employees were void and unenforceable as a matter of law, Premium and Hess were entitled to a declaration that any activities in violation of the non-compete covenants "are not tortiously interfering with and cannot tortiously interfere with Lapolla's contractual relations with the former Lapolla employees." The trial court denied a motion by Lapolla and Kramer to dismiss or stay the suit. Lapolla and Kramer appeal from these rulings, and for the following reasons, we affirm in part and reverse in part.

1. Lapolla and Kramer contend that, because Premium and Hess were not parties to the employment agreements between Lapolla and the former Lapolla employees, they had no standing to seek a declaratory judgment with respect to the non-compete covenants in the agreements.

A superior court is authorized under OCGA § 9–4–2(a) and (b) to enter a declaratory judgment "to declare rights and other legal relations of any interested party" petitioning for a declaration "in cases of actual controversy" under subsection (a), and in "any civil case in which ... the ends of justice require that the declaration should be made" under subsection (b). The declaratory judgment statute is liberally construed; applies where a legal judgment is sought that would control or direct future action; and requires under subsection (a) or (b) the presence in the declaratory action of a party with an interest in the controversy adverse to that of the petitioner. Famble v. State Farm Ins. Co., 204 Ga.App. 332, 333–334, 419 S.E.2d 143 (1992) ; Atlanta Cas. Co. v. Fountain, 262 Ga. 16, 17, 413 S.E.2d 450 (1992).

We find under the circumstances of this case that the requirements for application of the declaratory judgment statute have been met. Similar circumstances were present in Enron Capital & Trade Resources Corp. v. Pokalsky, 227 Ga.App. 727, 490 S.E.2d 136 (1997), where an individual and his current employer were uncertain as to the legal right to continue their employment relationship in the future in light of restrictive covenants contained in an employment agreement between the individual and a former employer. Id. at 728–730, 490 S.E.2d 136. We found under those circumstances that the current employer and the individual were entitled to bring a declaratory judgment action under OCGA § 9–4–2 against the former employer seeking a declaration as to the legal effect of the covenants on the current employment relationship. Id. Similarly, in light of the non-compete covenants between Lapolla and the former Lapolla employees in the present case, Premium and Hess were uncertain as to their legal right to continue attempts to hire (or continue to employ) the former Lapolla employees. Under these circumstances, Premium and Hess had standing to bring a declaratory judgment action under OCGA § 9–4–2 against Lapolla to seek a declaration as to the legal effect of the non-compete covenants in the employment agreements. Enron, supra.

2. Lapolla contends that the trial court erred in granting a declaratory judgment on the pleadings as to Count 2 declaring as a matter of law that the non-compete covenants contained in the employment agreements between Lapolla and its former employees were void and unenforceable.

[A] motion for judgment on the pleadings is authorized 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.

Novare Group, Inc. v. Sarif, 290 Ga. 186, 191, 718 S.E.2d 304 (2011) (citations omitted); OCGA § 9–11–12(c). In others words, "[t]he 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." Pressley v. Maxwell, 242 Ga. 360, 249 S.E.2d 49 (1978). 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. Raysoni v. Payless Auto Deals, LLC, ––– Ga.App. ––––, 746 S.E.2d 250, 253 n. 5 (2013); Shreve v. World Championship Wrestling, Inc., 216 Ga.App. 387, 388, 454 S.E.2d 555 (1995) ; OCGA § 9–11–10(c).

In the present case, the complaint for declaratory judgment alleged that all five of the Lapolla former employees at issue had non-compete covenants in their employment agreements with Lapolla that were void and unenforceable under Georgia law. The complaint attached and incorporated a letter from Lapolla's attorneys to Premium and Hess regarding the "Employment Agreements and Restrictive Covenants Contained Therein between Lapolla Industries, Inc. and Ted Medford, Troy Herring, Carl McKettrick, Vincent Majewski, and Moody Ozier." The letter stated that attempts by Premium and Hess to hire any of the former employees (or actual employment of the former employees) violated non-compete covenants in their employment agreements with Lapolla; demanded that Premium and Hess cease any such activity; and stated:

The Non–Compete language for each employee is set forth as follows:

During the Employment Period and for a period of two (2) years after the termination of Employee's employment with [Lapolla] for any reason (collectively the "Restriction Period"), the Employee shall not, either directly or indirectly, for himself or any third party, anywhere within North America: (a) engage in or have any interest in any activity that directly or indirectly competes with the business of [Lapolla] or any of its affiliates as conducted at any time during the Employment Period, including without limitation, accepting employment from or providing consulting services to any such competitor, owning any interest in or being a partner, shareholder or owner of any such competitor, (b) solicit, induce, recruit, or cause another person in the employ of [Lapolla] or its affiliates or who is a consultant or independent contractor for [Lapolla] or its affiliates to terminate his employment, engagement or other relationship with [Lapolla] or its affiliates, or (c) solicit or accept business from any individual or entity which shall have obtained the goods or services of, or purchased goods or services from, [Lapolla] or its affiliates during the two year period immediately prior to the end of the Employment Period or which otherwise competes with or engages in a business which is competitive with or similar to the business of [Lapolla] or any of its affiliates, (d) call on, solicit or accept any business from any of the actual or targeted prospective customers of [Lapolla] or its affiliates (the identity of and information concerning which constitute trade secrets and Confidential Information of [Lapolla] ) on behalf of any person or entity in connection with any business competitive with the business of [Lapolla], nor shall the Employee make known the names and addresses of such customers or any information relating in any manner to [Lapolla's] trade or business relationships with such customers, other than in connection with the performance of Employee's duties under this Agreement.²

In response to the complaint, Lapolla and Kramer filed an answer which admitted that the letter attached to the complaint was a true and correct copy of the letter sent by Lapolla. The answer also attached as an exhibit a copy of one of the five employment agreements at issue (Ozier's agreement) which contained the exact "non-compete" covenants referred to in Lapolla's letter as "the Non–Compete language for each employee."

Lapolla and Kramer argue for the first time on appeal that the trial court erred by ruling on the motion for judgment on the pleadings because the court should have allowed discovery with respect to the employment agreements with the former employees. Lapolla contends for the first time on appeal that it "does not have a copy of the complete agreements and never had an opportunity to seek them in discovery." According to Lapolla, it attached a copy of Ozier's employment agreement to its answer merely as an example of an agreement containing the "non-compete" language contained in its letter to Premium and...