LCP Holding Co. v. Taylor

• Decision Date: 30 September 2004
• Docket Number: No. 2003-P-0067.,2003-P-0067.
• Parties: LCP HOLDING COMPANY, Appellant, v. TAYLOR, Appellee.
• Court: Ohio Court of Appeals

158 Ohio App.3d 546

2004-Ohio-5324

817 NE 2d 439

2004-Ohio-5324

LCP HOLDING COMPANY, Appellant, v. TAYLOR, Appellee.

No. 2003-P-0067.

Court of Appeals of Ohio, Eleventh District, Portage County.

Decided September 30, 2004.

COPYRIGHT MATERIAL OMITTED

Todd F. Palmer and Daniel P. Petrov, for appellant.

Christopher J. Carney, for appellee.

JUDITH A. CHRISTLEY, Judge.

{¶ 1} Appellant, LCP Holding Company, appeals from a judgment of the Portage County Court of Common Pleas that denied its request for a preliminary injunction against appellee, David M. Taylor. For the reasons that follow, we affirm.

{¶ 2} Appellant is a corporation that engages in the manufacture and sale of commercial truck equipment. Appellee was formerly employed by appellant and worked in various managerial sales positions.

{¶ 3} Appellee began his employment with Great Lakes Truck Equipment in 1977. At that time, he was employed as a driver of commercial trucks. Soon thereafter, Great Lakes Truck Equipment became America's Body Company ("ABC"), and appellee transitioned into a sales position.¹

{¶ 4} Subsequently, appellee's responsibilities began to increase and expand to areas outside of Northeast Ohio. From 1991 until 1998, appellee acted as Vice President of Sales and Vice President and General Manager of ABC. In 1998, appellee was promoted to Vice President of National Dealer Sales. In this position, appellee's sales territory included the entire United States, excluding those areas where an ABC division was located.

{¶ 5} In 1998, ABC's former owner sold the company to appellant. As part of the sale, certain employees, including appellee, were given the opportunity to purchase shares of appellant's stock. Appellee purchased appellant's stock and, in doing so, executed a standard Security Holders' Agreement. The agreement contained a noncompetition provision, which stated:

{¶ 6} "Each Employed Security Holder acknowledges and agrees that * * * during the period Employed Security Holder is employed by the Company and for a period of two (2) years thereafter, he will not, except in furtherance of his employment with the Company, either directly or indirectly (a) solicit business from, or compete with the Company for the business of any customer of the Company or (b) operate, control, advise, be engaged by, perform any consulting services for, invest in (other than less than one percent of the outstanding stock in a publicly held corporation which is traded over-the-counter or on a recognized securities exchange) or otherwise become associated in any capacity with, any business, company, partnership, organization, proprietorship, or other entity who or which manufactures, sells or distributes products in competition with the business of the Company in those geographical areas in which the Company conducts or has conducted such business during the Employment Period."

{¶ 7} The agreement also included a nondisclosure provision, to wit:

{¶ 8} "Each Employed Security Holder agrees at all times to hold as secret and confidential * * * any and all knowledge, information, developments, manufacturing and trade secrets, know-how and confidences of the Company or its business of which he has knowledge as of the date hereof, or of which he may acquire knowledge during the Employment Period, to the extent such matters have not previously been made public (`Confidential Information'). The phrase `made public' as used in this Agreement shall apply to matters within the domain of (a) the general public or (b) the Company's industry. Each Employed Security Holder agrees not to use such knowledge for his own benefit or for the benefit of others or, except as provided above, disclose any of such Confidential Information without the prior written consent of the Company, which consent shall make express reference to this Agreement."

{¶ 9} Moreover, the agreement contained a noninterference provision that stated, "Each Employed Security Holder agrees that during * * * employment * * * and for a period of three (3) years thereafter, he will not * * * directly or indirectly solicit, induce or attempt to solicit or induce any employee, agent or other representative or associate of the Company to terminate its relationship with the Company or in any way interfere with such a relationship or a relationship between the Company and any of its suppliers or distributors."

{¶ 10} In November 2002, appellee, as part of a divorce settlement, transferred his shares of appellant's stock to his minor children. The stock was simultaneously placed in a trust for the benefit of his children. Subsequently, on or about November 15, 2002, appellee resigned from his employment with appellant. Shortly thereafter, appellee was employed by Supreme Corporation ("Supreme"). Supreme is engaged in essentially the same business as appellant and is a direct competitor.

{¶ 11} On March 7, 2003, appellant filed a verified complaint for injunctive relief and money damages. The complaint alleged that appellee had breached the agreement and, therefore, that appellant was entitled to a preliminary injunction.² Specifically, appellant alleged that based upon appellee's employment with Supreme and his "calling on, selling to, or providing services to current, former or potential customers of appellant subsequent to his leaving employment with appellant within that same geographic area, appellee had breached the terms of the Agreement, including the noncompetition, nondisclosure, and noninterference provisions thereof."

{¶ 12} A hearing on the complaint's request for injunctive relief commenced on March 27, 2003. Following the hearing, the trial court issued a judgment entry denying appellant's request for a preliminary injunction. The court made the following determinations: (1) appellant and Supreme are competitors and do business throughout the United States; (2) appellant's and Supreme's pricing of products varies between buyer dealerships, but such pricing is "widely known throughout the industry as the dealerships will play off against each company to get the best deal possible for themselves"; (3) "the existence of accounts are basically that each company can go to the phone book and look up auto dealers and call on them to see if they can sell their product"; and (4) appellee, through a divorce decree, has placed his shares of appellant's stock in trust for his children; thus, he is no longer a shareholder.

{¶ 13} Based upon these determinations, the court concluded that the noncompetition provision was overly broad because it had no geographical limits and it prohibited appellee from working for two years in the only field he knows. The court further determined that because appellee was no longer a shareholder, appellant had no legitimate business interest to protect. Accordingly, the trial court denied appellant a preliminary injunction that would forbid appellee's employment with Supreme. Furthermore, the court noted that because its "judgment will affect a substantial right of Plaintiff, * * * this is a final appealable order, and there is no just reason for delay of appeal of this entry of judgment."

{¶ 14} From this judgment, appellant filed a timely notice of appeal and now sets forth the following assignment of error for our consideration:

{¶ 15} "The trial court erred to the prejudice of Plaintiff-Appellant in denying its Motion for Preliminary Injunction."

{¶ 16} Under its sole assignment of error, appellant presents the following three separate issues for our review: (1) whether the trial court erred in deciding that the noncompetition provision was overly broad, (2) whether the trial court erred by refusing to exercise its power to modify the agreement's noncompetition, nonsolicitation, and nondisclosure provisions, and (3) whether the trial court erred in determining that appellee's transfer of his shares relieved him of his obligations under the agreement.

{¶ 17} We must first determine whether the court's denial of injunctive relief was a final appealable order. It is well established that the determination as to whether an appeal is immediately appealable is a threshold issue that must be resolved, conceptually at least, before the determination of the appeal on its merits. Premier Health Care Services, Inc. v. Schneiderman (Aug. 21, 2001), 2nd Dist. No. 18795, 2001 WL 1479241, at * 2.

{¶ 18} Ordinarily, an order issuing or denying a preliminary injunction is not a final appealable order. Hemberger v. LaBrae Bd. of Edn. (Dec. 5, 1997), 11th Dist. No. 96-T-5567, 1997 WL 772939. However, an order denying a request for a preliminary injunction will be considered a final order if it meets the requirements of the two-prong test established by R.C. 2505.02.

{¶ 19} R.C. 2505.02 provides:

{¶ 20} "(B) An order is a final order that may be reviewed, affirmed, modified, or reversed, with or without retrial, when it is one of the following:

{¶ 21} "* * *

{¶ 22} "(4) An order that grants or denies a provisional remedy and to which both of the following apply:

{¶ 23} "(a) The order in effect determines the action with respect to the provisional remedy and prevents a judgment in the action in favor of the appealing party with respect to the provisional remedy;

{¶ 24} "(b) The appealing party would not be afforded a meaningful or effective remedy by an appeal following final judgment as to all proceedings, issues, claims, and parties in the action."

{¶ 25} A "provisional remedy" is defined as "a proceeding ancillary to an action" and expressly includes an order for a preliminary injunction. R.C. 2505.02(A)(3).

{¶ 26} The first prong of the test has been satisfied, as the court has issued an order determining the action with respect to the provisional remedy of a preliminary injunction, and this order prevents a judgment in favor of appellant with regard to the preliminary injunction. Accordingly, we will now examine the second prong.

{¶ 27} The second prong...