Ormco Corp. v. Johns

• Decision Date: 02 May 2003
• Citation: 869 So.2d 1109
• Parties: ORMCO CORPORATION v. Timothy M. JOHNS.
• Court: Alabama Supreme Court

869 So.2d 1109

ORMCO CORPORATION v. Timothy M. JOHNS.

1020162.

Supreme Court of Alabama.

May 2, 2003.

Rehearing Denied June 27, 2003.

Joseph B. Mays, Jr., John E. Goodman, T. Matthew Miller, and John C. Neiman, Jr., of Bradley Arant Rose & White, LLP, Birmingham, for appellant.

Michael D. Freeman and Ed R. Haden of Balch & Bingham, LLP, Birmingham, for appellee.

HOUSTON, Justice.

Ormco Corporation appeals the Jefferson Circuit Court's denial of its request for a preliminary injunction stemming from Ormco's action against its former salesperson, Timothy M. Johns, for his alleged breach of a noncompetition agreement. We remand.

I. Facts

Ormco manufactures and sells orthodontic supplies. From 1999 to August 2002, Johns was employed with Ormco as a regional manager with the exclusive rights to sell Ormco products to orthodontists in a region covering parts of three states: the Florida panhandle, the northern part of Mississippi, and all of Alabama. The names and addresses of the approximately 125 orthodontists in this region were readily available to the general public. Johns would make sales visits to those orthodontists, and between 80 to 90 of them purchased some of their orthodontic supplies from Ormco. Ormco provided Johns with an expense account by which he could build business relationships with the orthodontists through taking them out for meals and purchasing gifts.

Before his employment with Ormco, Johns had had no experience with orthodontics or with the sales of orthodontic supplies. Accordingly, when he first became an Ormco employee, Ormco trained Johns in the orthodontic-supplies industry through seminars as well as through audiotaped and written materials.

In August 2002, Johns accepted a job as a salesperson with GAC International ("GAC"), one of Ormco's primary competitors. GAC solicited business from the orthodontists in the same region in which Johns had worked as a salesperson with Ormco. In his new position with GAC, Johns sells orthodontic supplies to orthodontists in virtually the same region he covered as a salesperson with Ormco. After accepting the position with GAC, Johns began contacting orthodontists in his former Ormco region, informing them that he is now with GAC.

Upon learning that Johns had taken a position with GAC, Ormco sued Johns, alleging various claims relating to an employment agreement Johns had signed with Ormco.¹ The employment agreement contains the following noncompetition agreement, which Ormco alleges Johns is breaching by his activities as a GAC salesperson:

"I ... agree that for a period of one (1) year following the termination of my employment, for whatever reason, with SDS [Sybron Dental Specialties, Inc.] (or if my employment with SDS is for a period of less than one (1) year, for a period equal to the term of my employment) I shall not, directly or indirectly, alone, or as a member of a partnership or as an officer, director, stockholder, employee or representative of any company, engage in any business activity which is the same or similar to work engaged in by me as an employee of SDS within the territory, wherein I represented SDS and which is directly competitive with the business conducted, or to my knowledge contemplated, by SDS at the time of my termination, unless I have the written consent of SDS. I acknowledge that SDS has the right, from time to time, to change the territory wherein I shall represent SDS."

Along with its complaint, Ormco filed a motion for a temporary restraining order ("TRO") and a motion for a preliminary injunction, seeking to prevent Johns from violating his covenant not to compete during the course of the litigation. The TRO was granted, but was later dissolved and was supplanted by an order from the trial judge prohibiting Johns from "contacting or soliciting business from Ormco customers that he solicited, contacted, or did business with while employed at Ormco."

Following expedited discovery, both sides submitted briefs on Ormco's motion for a preliminary injunction. After an evidentiary hearing, the trial court requested additional briefing on whether Ormco had an adequate remedy at law and whether Ormco could demonstrate immediate and irreparable injury. Following the submission of briefs on those issues, the trial court denied the motion for a preliminary injunction, finding that Ormco had failed to present sufficient evidence to demonstrate irreparable injury. Ormco appeals. See Ala. R.App. P. 4(a)(1)(A) (providing for appellate review as of right from "any interlocutory order granting, continuing, modifying, refusing, or dissolving an injunction").

II. Analysis

A plaintiff seeking a preliminary injunction has the burden of demonstrating

"(1) that without the injunction the plaintiff would suffer immediate and irreparable injury; (2) that the plaintiff has no adequate remedy at law; (3) that the plaintiff has at least a reasonable chance of success on the ultimate merits of his case; and (4) that the hardship imposed on the defendant by the injunction would not unreasonably outweigh the benefit accruing to the plaintiff."

Perley v. Tapscan, Inc., 646 So.2d 585, 587 (Ala.1994). Here, the trial court stated as its reason for refusing to grant the preliminary injunction that Ormco failed to produce sufficient evidence that without the injunction it would suffer irreparable injury stemming from Johns's activities during the litigation of Ormco's action against Johns.² Id.

"`Irreparable injury' is an injury that is not redressable in a court of law through an award of money damages." 646 So.2d at 587 (citing Triple J Cattle, Inc. v. Chambers, 551 So.2d 280 (Ala. 1989)). However, "courts will not use the extraordinary power of injunctive relief merely to allay an apprehension of a possible injury; the injury must be imminent and irreparable in a court at law." Martin v. City of Linden, 667 So.2d 732, 736 (Ala. 1995); see also Borey v. National Union Fire Ins. Co. of Pittsburgh, 934 F.2d 30, 34 (2d Cir.1991) (stating that "a mere possibility of irreparable harm is insufficient to justify the drastic remedy of a preliminary injunction"). The primary focus of the parties' briefs to this Court is their disagreement over the nature of the evidence required to demonstrate "irreparable injury."

A. Ormco's Argument

Ormco contends that irreparable injury should be inferred when a violation of a noncompetition agreement is alleged and when there has been an initial showing that the agreement is enforceable and that the employer has a protectible interest. Accordingly, Ormco argues that if such a showing is made, irreparable injury is established and it need present no further evidence as to that element of injunctive relief. Ormco acknowledges that this Court has not explicitly adopted this inference of irreparable injury in a case involving the alleged violation of a noncompetition agreement; however, Ormco cites several decisions of other jurisdictions that appear to indicate that the courts in those jurisdictions either explicitly use that inference or at least appear to be willing to find irreparable injury easily established in a case involving the alleged violation of a noncompetition agreement: Ticor Title Ins. Co. v. Cohen, 173 F.3d 63, 69 (2d Cir.1999) ("New York cases in the covenant-not-to-compete context apparently assume an irreparable injury to plaintiff"); JAK Prods., Inc. v. Wiza, 986 F.2d 1080, 1084 (7th Cir.1993) (under Indiana law, "[w]henever an employee uses his experience gained from an employer in violation of a reasonable covenant not to compete, irreparable injury occurs and injunctive relief is appropriate"); Highdata Software Corp. v. Kothandan, 160 F.Supp.2d 167, 168 (D.N.H.2001) (stating that "[a]ny significant violation of an enforceable noncompetition and nondisclosure agreement causes irreparable harm to the party seeking to promptly enforce the agreement"); American Express Fin. Advisors, Inc. v. Scott, 955 F.Supp. 688, 693 (N.D.Tex.1996) ("[i]n Texas, injury resulting from the breach of non-compete covenants is the epitome of irreparable injury," because "[i]n a situation where trade secrets and goodwill are involved, the threat is significant that the harm experienced by the misappropriation or misuse of trade secrets will be irreparable" and "damages [will be] impossible to calculate"); Harrison v. Albright, 40 Colo.App. 227, 231-32, 577 P.2d 302, 305 (1977) ("irreparable injury is presumed from the breach of [a noncompetition] clause, and ... the remedy at law is presumed inadequate"); McRand, Inc. v. Van Beelen, 138 Ill.App.3d 1045, 1054, 486 N.E.2d 1306, 1313, 93 Ill.Dec. 471, 478 (1985) ("Once a protectable interest is established, irreparable injury is presumed to follow if the interest is not protected."); Osage Glass, Inc. v. Donovan, 693 S.W.2d 71, 75 (Mo.1985) ("If the [noncompetition] covenant is lawful and opportunity for influencing customers exists, enforcement is appropriate.").

Ormco points out that this Court has never held a trial court in error for finding that an employer demonstrated irreparable harm stemming from an employee's breach of a noncompetition agreement, so as to justify a preliminary injunction. See, e.g., Seymour v. Buckley, 628 So.2d 554 (Ala.1993); Gross v. QMS, Inc., 613 So.2d 331 (Ala.1993); and Harkness v. Scottsboro Newspapers, Inc., 529 So.2d 1000, 1003 (Ala.1988). However, this fact is of little persuasive effect, given that this Court reviews a trial court's ruling on a request for a preliminary injunction with great deference to the decision of the trial court. See Seymour, 628 So.2d at 557 ("The issue before us is whether the trial court's finding that irreparable harm would result if the preliminary injunction was not issued was plainly and palpably erroneous. It is settled law that wide discretion is accorded the trial judge hearing a motion for a preliminary injunction and that his action will not be disturbed on appeal...