PEMCO Corp. v. Rose

• Citation: 163 W.Va. 420,257 S.E.2d 885
• Decision Date: 16 July 1979
• Docket Number: No. 14358,14358
• Parties: PEMCO CORP., etc. v. Willie ROSE.
• Court: Supreme Court of West Virginia

Page 885

257 S.E.2d 885

163 W.Va. 420

PEMCO CORP., etc. v. Willie ROSE.

No. 14358.

Supreme Court of Appeals of West Virginia.

July 16, 1979.

Dissenting Opinion Sept. 13, 1979.

Syllabus by the Court

A contract for employment entered into in Virginia, to be performed in Virginia, is governed by Virginia law.

Richardson, Kemper, Hancock & Davis, Robert M. Richardson, Bluefield, for appellant.

David Burton, Princeton, for appellee.

McGRAW, Justice:

Appellee, PEMCO Corporation, (plaintiff) commenced this action seeking an injunction to specifically enforce a restrictive covenant in a written employment contract between itself and its former employee, appellant Willie Rose (defendant). On July 17, 1978, the Circuit Court of Mercer County entered a final order enjoining the defendant for a period of two (2) years beginning on May 31, 1978, from engaging either directly or indirectly in employment with the American Mine Research or any other business or enterprise the nature of which is competitive to the plaintiff's business, within the radius of one hundred fifty (150) miles of the City of Bluefield, West Virginia. On August 4, 1978, the trial court overruled the defendant's Rule 59(e) motion to dissolve the injunction and this appeal followed.

Defendant seeks to reverse the rulings of the trial court on several grounds. The two principal contentions are that the non-competition covenant is not supported by consideration and that it creates an unreasonable A careful review of the record reveals the following material facts: The plaintiff is a West Virginia corporation engaged primarily in the design and development of electrical devices used in underground coal mining, with its principle place of business located in Bluefield, Virginia.

restraint of the trade unenforceable by equitable relief. Based upon what we believe the present State of Virginia law to be, we agree with both these contentions, reverse the trial court and dissolve the injunction. Accordingly, we do not address defendant's other contentions. ¹

Willie Rose, the defendant is an electrical engineer with a specialty in electronics engineering. Prior to his employment by the plaintiff he had been employed as an engineer for the previous eight years, working in Pennsylvania, Florida, and most recently in the Washington, D. C. metropolitan area.

On August 30, 1976, he visited the plaintiff's offices in Bluefield, Virginia, and had personal employment interviews with approximately five corporate representatives. On that day he was offered and and accepted employment with the corporation, and a salary was agreed upon by the parties. Thereafter, he cancelled his housing lease in the Washington, D. C. area and signed a contract to purchase a home in Bluefield, West Virginia. During this time period he contacted one of plaintiff's representatives concerning his relocation expenses and in early September, was advised in writing that his relocation expenses would be borne by plaintiff.

On September 20, 1976, when defendant arrived at the plaintiff's offices in Bluefield, Virginia, for his first day at work, he was asked by an employee of the corporation to sign an "agreement" containing the restrictive covenant which is the subject of the present litigation. The defendant signed the purported agreement which reads in material parts:

EMPLOYMENT AGREEMENT

WHEREAS, the Employee desires to be employed by the Company in its plant and laboratories at Bluefield, Virginia, upon the terms and conditions hereinafter stated; and

3. The Employee agrees that for a period of two years and after the time of termination of his employment he shall not engage directly or indirectly, in any business or enterprise, the nature of which competitive to the Company's business, within a radius of one hundred & fifty miles of the City of Bluefield, West Virginia.

When asked about the circumstance surrounding this event, defendant testified, "I read it carefully. I had already entered into an agreement to buy the house. We'd already terminated our lease. We were renting a house in Washington. I wanted to move into the area. I signed the contract." The employment contract was also signed by the plaintiff's company president, but he signed the standard form agreement at some earlier point in time. The general practice was for plaintiff's president to sign a number of standard agreements in advance for the employee to execute on the first day of work.

During defendant's employment for plaintiff, he performed services on three distinct developmental projects, the most important of which in the context of this case was the development of an underground tone wire or cable monitor. The purpose of a tone wire monitor is to prevent mining accidents by guaranteeing the integrity of electrical cables used in the operation of various types of machinery in the underground coal mining industry.

On May 15, 1978, the defendant resigned his position effective May 31, 1978, and on June 1st of the same year commenced employment with American Mine Research, a company engaged principally in the manufacture and development of a small electronic communication device for coal mines which had as its principal product a type of tone ground wire monitor.

On June 2, 1978, the next day, plaintiff filed suit in the Circuit Court of Mercer County seeking to enforce by injunction the restrictive covenant. Plaintiff alleged that during the course of defendant's employment, he worked on projects involving trade secrets which could be used by competitors in the geographic area to the detriment of plaintiff.

Based on the post-employment restraint, plaintiff requested and obtained a temporary injunction against the defendant enjoining him from accepting employment or working for American Mine Research or any other competitive business within the geographical limitations referred to in the contract for a period of two years from May 15, 1978.

The trial court found plaintiff requires all engineers to execute an employment agreement prior to actually going to work as a condition precedent to employment. It also found that the purported agreement was a valid agreement and that the restrictive covenant contained therein was reasonable and necessary for the protection of the plaintiff and that enforcement of such provision would not unduly restrict the defendant from earning a livelihood.

We begin by noting that the "Agreement" in question was formed in Virginia to be performed in Virginia, where plaintiff's business was located. Both parties apparently agree that under West Virginia's traditional conflicts of law principles, Virginia law controls the validity of an enforceability of the restrictive covenant. ² See, e. g., Michigan National Bank v. Mattingly, W.Va., 212 S.E.2d 754 (1975).

Both parties to this proceeding are in agreement that a restrictive covenant not to compete must be supported by valuable consideration before it is enforceable by a party to the agreement. See, Merriman v. Cover, Drayton, & Leonard, 104 Va. 428, 51 S.E. 817, 819 (1905). The parties, however, disagree as to whether there was a valid oral contract formed at the time the defendant employee interviewed for a position with the plaintiff company on August 30, 1976.

Plaintiff argues that the real beginning of defendant's employment was September 20, 1976, and the Court should address itself only to the written agreement signed that day. Similarly, it is argued that the "oral agreement" between plaintiff and defendant should be considered as merely an offer of employment which was not accepted by the defendant until he executed the employment agreement of September 20, 1976, and commenced performing services as a full-time employee. Finally, plaintiff argues that even if the Court should find a valid oral employment agreement was formed by the parties on August 30, 1976, the written agreement is supported by valid consideration because it was executed near in time to the initial employment contract and is, therefore, ancillary to that employment contract.

The defendant employee argues the evidence demonstrates an employer-employee relationship was established by oral contract on August 30, 1976. He then urges upon us the rule that once the relationship of employer and employee is established without a restrictive covenant, any agreement thereafter made by the employee not to compete with the employer must be in the nature of a new contract based upon a new consideration.

Preliminarily, we find the evidence clearly supports the conclusion that a valid oral employment contract was entered into by the parties on August 20, 1976, before the defendant employee actually commenced performing services for the plaintiff employer on September 20, 1976. The trial court made no express finding on this point but the evidence clearly establishes the employment relationship began on August 30, 1976. ³

Having concluded the evidence requires a finding that an oral contract of employment was effected by the parties prior to defendant's execution of the "Employment Agreement," we must decide if the non-competition covenant is supported by valuable and adequate consideration under Virginia law. We frankly admit the question is of substantial difficulty, and would be no less difficult under West Virginia law. In deciding the question, as we must, we are admonished by Justice Holmes in Southern Pacific Co. v. Jensen, 244 U.S. 205, 222, 37 S.Ct. 524, 531, 61 L.Ed.2d 1086 (1917) that "(t)he common law is not a brooding omnipresence in the sky, but the articulate voice of some sovereign . . ." The sovereign here is the people of Virginia and the voice of immutable expression on this point must come from its court.

The question presented is whether continued employment is adequate consideration to support the imposition of a restrictive covenant not to compete contained in a written contract for an indefinite term of employment when...