Moore v. Preferred Research, Inc., 77867

• Decision Date: 08 March 1989
• Docket Number: No. 77867,77867
• Citation: 191 Ga.App. 26,381 S.E.2d 72
• Parties: , 1989-2 Trade Cases P 68,687 MOORE v. PREFERRED RESEARCH, INC.
• Court: Georgia Court of Appeals

Page 72

381 S.E.2d 72

191 Ga.App. 26, 1989-2 Trade Cases P 68,687

MOORE v. PREFERRED RESEARCH, INC.

No. 77867.

Court of Appeals of Georgia.

March 8, 1989.

Rehearing Denied March 23, 1989.

Certiorari Denied May 4, 1989.

Alston & Bird, Peter M. Degnan, John E. Stephenson, Jr., Atlanta, for appellant.

James M. Crawford, Christopher J. McFadden, Atlanta, for appellee.

POPE, Judge.

In 1979, plaintiffs Earnest N. Moore and Preferred Research of Atlanta, Inc., entered into a written licensing agreement with defendant Preferred Research, Inc. (PRI) for exclusive rights in a specified territory to certain "techniques and procedures" developed by PRI "in the fields of courthouse records research and verification, credit investigations, examination of records effecting title to real estate and personal property and related services...." The agreement contained a covenant not to compete whereby the plaintiffs agreed not to engage "in a similar business to that licensed and established hereunder within an airline radius of twenty-five (25) miles of any of [plaintiffs'] places of business" for a period of twelve months after terminating the agreement. In 1986, plaintiffs brought suit against defendant alleging breach of contract and, by amended complaint, plaintiffs sought a declaratory judgment determining the enforceability of the restrictive covenant contained within the licensing agreement. The trial court granted defendant's motion for partial summary judgment and held the restrictive covenant to be enforceable. Plaintiffs appeal.

1. The first issue on appeal is whether the restricted activities are reasonable or overly broad. The restrictive covenant in this case prohibits plaintiffs from engaging in a "similar business to that licensed and established hereunder" within a certain geographical area. To determine what activities are thus restricted, one must look to other provisions of the agreement which define the business activities licensed under the agreement. One of the preamble paragraphs of the agreement states that the licensed techniques and procedures relate to "the fields of courthouse records research and verification, credit investigations, examination of records effecting title to real estate and personal property and related services...." (Emphasis supplied.) Plaintiffs argue that the phrase "and related services" is vague and indefinite and thus renders the restrictive covenant unenforcable.

The licensing agreement at issue in this case "is analogous to an employment contract for purposes of analyzing the covenant not to compete." Watson v. Waffle House, 253 Ga. 671, 672, 324 S.E.2d 175 (1985). "The rule of reason is the overarching standard to be applied in all cases involving covenants not to compete.... The scope of activities restricted will be found reasonable when there is a rational relationship between those activities and the activities the employee conducted for his former employer. The relationship between activities during employment and activities prohibited is interpreted with reference to the individual situation." Wesley-Jessen, Inc. v. Armento, 519 F.Supp. 1352, 1356-1357 (N.D.Ga.1981). So long as the restricted activities are reasonably related to the business interests which the employer seeks to protect, the restricted covenant is enforceable. See Edwards v. Howe Richardson Scale Co., 237 Ga. 818, 229 S.E.2d 651 (1976).

Here, the restricted activities are limited to those specified procedures "and related services" licensed by the defendant. By definition, only those activities licensed by the agreement are restricted. See Pierce v. Industrial Boiler Co., 252 Ga. 558, 559, 315 S.E.2d 423 (1984) (where a restrictive covenant was limited to a specific business "in any capacity held by the employee," because the employee was employed only as a salesman in said business, then by definition "this activity alone [was] prohibited by the covenant" and it was found not to be overly broad). The covenant not to compete at issue in this appeal is similar to the one at issue in Wesley-Jessen v. Armento, supra. In Wesley-Jessen, as in the case now before us, the covenant not to compete incorporated language set forth earlier in the contract describing the scope of employment. The covenant prohibited the employee from selling contact lenses "and related products and services." Applying Georgia law, the federal trial court found the covenant was enforceable because it did not restrict the employee from working for a competitor in any capacity or in an area unrelated to the field of expertise gained at the employer's expense. See also Edwards v. Howe Richardson Scale Co., supra (where a covenant not to engage in certain specified activities " 'or in any similar business which is competitive with the business of the [employer] ... at the date [the employee's] employment is terminated' " was held enforceable because it was reasonably related to the business interest which the employer sought to protect).

Contrary to plaintiffs' assertions, the language now before us is not analogous to that in Wilson v. Center Bros., 250 Ga. 156, 296 S.E.2d 589 (1982), wherein a covenant which prohibited the employee from engaging in a specified business "and related trades" was found to be unenforceable. In Wilson, the covenant attempted to restrict the employee in activities other than those he performed for the employer. However, the phrase "and related services" in the agreement now before us defines the activities which the plaintiff was licensed to perform under the agreement. Therefore, when read in conjunction with the covenant not to compete, the restricted activities are synonymous with, not broader than, the licensed activities.

In Lokey v. Preferred Research, 332 S.E.2d 659, 334 S.E.2d 696 (1985), the Georgia Supreme Court affirmed, without written opinion, a lower court ruling enforcing the restrictive covenants of an almost identical licensing agreement between Preferred Research,...