Reynolds and Reynolds Co. v. Tart

• Decision Date: 12 February 1997
• Docket Number: Civil No. 5:96CV77-T.
• Court: U.S. District Court — Western District of North Carolina
• Parties: The REYNOLDS AND REYNOLDS COMPANY, Plaintiff, v. Harry T. TART, and Robert F. Wheeler, Defendants.

955 F.Supp. 547

The REYNOLDS AND REYNOLDS COMPANY, Plaintiff, v. Harry T. TART, and Robert F. Wheeler, Defendants.

Civil No. 5:96CV77-T.

United States District Court, W.D. North Carolina, Statesville Division.

February 12, 1997.

COPYRIGHT MATERIAL OMITTED

John C. Nicholls, P. Marshall Yoder, Poyner & Spruill, Charlotte, NC, for plaintiff.

W. Joseph Dozier, Jr., Dozier, Miller, Pollard & Murphy, Charlotte, NC, for defendants.

MEMORANDUM AND ORDER

THORNBURG, District Judge.

THIS MATTER is before the Court on the Defendants' timely filed objections to a November 27, 1996, Memorandum and Recommendation of United States Magistrate Judge Max O. Cogburn, Jr., denying the Defendants' Motion for Summary Judgment.¹ Having reviewed the Memorandum and Recommendation, as well as the motions and pleadings of the parties, this Court will adopt the recommendations made by the Magistrate Judge in full.

I. STANDARD OF REVIEW

The Court reviews de novo those portions of the Memorandum and Recommendation to which objections have been filed, 28 U.S.C. § 636(b)(1)(C); United States v. Raddatz, 447 U.S. 667, 100 S.Ct. 2406, 65 L.Ed.2d 424, reh'g denied, 448 U.S. 916, 101 S.Ct. 36, 65 L.Ed.2d 1179 (1980), and gives careful review to un-objected portions for clear error. 28 U.S.C. § 636(b)(1)(A); see Peck v. Tegtmeyer, 834 F.Supp. 903 (W.D.Va.1992), aff'd, 4 F.3d 985 (4th Cir.1983), cert. denied, 510 U.S. 1074, 114 S.Ct. 884, 127 L.Ed.2d 79 (1994). The Defendants filed objections to the Memorandum and Recommendation on December 6, 1996, and proposed amended objections December 10.² The Plaintiff filed a motion in response to Defendants' amended objections on December 23, 1996.

The Defendants have specifically objected to the Memorandum and Recommendation's central tenants: (1) that summary judgment should be denied on the issue of whether the non-competition covenants here at issue were supported by adequate consideration; and (2) that summary judgment should not be entered on the covenant's non-assignability.³ For the reasons set forth in the Memorandum and Recommendation and discussed herein, the Defendants' objections are hereby overruled and the Memorandum and Recommendation adopted as consistent with the law.

Summary judgment is appropriate if there is no genuine issue of material fact and judgment for the moving party is warranted as a matter of law. Fed.R.Civ.P. 56(c). A genuine issue exists if a reasonable jury considering the evidence could return a verdict in favor of the non-moving party, here the Plaintiff. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)).

Defendants, as the moving party, have the initial burden to show a lack of evidence to support Plaintiff's case. Shaw, supra, (citing Celotex Corp., v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986)). This showing does not require the Defendants to prove the absence of a genuine issue of material fact but only note its absence. Holland v. High-Tech Collieries, Inc., 911 F.Supp. 1021, 1025 (N.D.W.Va.1996) (citing Celotex, supra). If this showing is made, the burden then shifts to the Plaintiff, who must convince the Court that a triable issue does exist. Shaw, supra. Such an issue will be shown "if the evidence is such that a reasonable jury could return a verdict for the [plaintiff]." Id. A "mere scintilla" of evidence will not suffice to defeat summary judgment. Id.

In considering the facts of the case for the purposes of a summary judgment motion, the Court views the pleadings and materials presented in a light most favorable to the Plaintiff as the non-moving party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), on remand, In re Japanese Electronic Products Antitrust Litigation, 807 F.2d 44 (3d Cir.1986), cert. denied, Zenith Radio Corp., v. Matsushita Electric Industrial Co., 481 U.S. 1029, 107 S.Ct. 1955, 95 L.Ed.2d 527 (1987).

II. INTRODUCTION AND BACKGROUND

In this action, Plaintiff Reynolds and Reynolds Company ("Reynolds") seeks an injunction ordering the Defendants Robert F. Wheeler and Harry T. Tart to abide by the terms of certain non-compete covenants as well as damages arising from the Defendants' failure to so abide thus far. Defendants contend that the restrictive covenants are unenforceable because (1) they were not initially supported by adequate consideration; and (2) the Plaintiff, as an assignee of the covenants, lacks standing to enforce them.

Reynolds manufactures, buys, sells, trades and deals in business forms such as stationery, account registers, records, printed materials and other similar products. Exhibit E, Affidavit of Johnny Buff, attached to Plaintiff's Response to Defendants' Motion for Leave to Amend and Defendants' Objections to Memorandum and Recommendation ("Plaintiff's Response"), filed December 23, 1996 ("Buff Affidavit"). On January 23, 1996, Reynolds purchased a substantial portion of the assets and good will of Jordan Graphics, Inc. ("Jordan"). Exhibit A, Affidavit of Adam M. Lutynski, attached to Plaintiff's Response ("Lutynski Affidavit"). In connection with the acquisition, Reynolds was assigned a number of contracts and agreements Jordan had with third parties, including its employment agreements with Defendants Wheeler and Tart. Buff Affidavit.

Tart began his employment with Jordan in April of 1978. Wheeler began his employment in September 1985. The actual date on which each employment began is in dispute; however, at least one fact surrounding each employment is not: prior to the day that each man signed his covenant, he interviewed with Richard Deese. Richard Deese was Jordan's Vice-President of Sales from 1967 until January 31, 1990; his job included hiring sales people and he was authorized to offer positions of employment to potential sales people. Affidavit of Richard Deese attached to Defendants' Motion to Dismiss or for Summary Judgment ("Defendants' Motion to Dismiss"), filed July 31, 1996, at 1 ("Deese Affidavit") Tart met with Deese on April 21, 1978. Affidavit of Harry T. Tart attached to Defendants' Motion to Dismiss at 2 ("Tart Affidavit"). Deese told Tart that Jordan had a sales position open in Hickory, North Carolina, and familiarized him with the terms of the employment, including a base salary, travel expenses and a future commission arrangement. Deese Affidavit; Tart Affidavit. Deese and Tart swear that Deese offered Tart the sales position at that meeting and Tart accepted. Id. Mr. Johnny Buff, currently Regional Sales Manager for Reynolds in the area worked by Tart, states that Tart "applied for a sales representative's position with Jordan on April 24, 1978 and was hired on that date." Buff Affidavit at 2.

Deese met with Wheeler in August of 1985. Bob Murr, Jordan's regional sales manager for the Greensboro region was also present. Deese Affidavit at 2. Deese told Tart that Jordan had a sales position open in Hickory, North Carolina, and familiarized him with the terms of the employment, including a base salary, travel expenses and a future commission arrangement. Deese Affidavit at 2-3. Deese and Wheeler swear that Deese offered Wheeler the sales position at that meeting and Wheeler accepted. Id., at 3; Wheeler Affidavit at 2. Johnny Buff, currently Regional Sales Manager for Reynolds in the area worked by Wheeler, states that Wheeler "applied for a sales representative's position with Jordan on September 16, 1985 and was hired on that date." Buff Affidavit at 3.

Wheeler and Tart state that at no time prior to the day each signed his covenant not to compete were such covenants mentioned or discussed. Wheeler Affidavit at 2-3; Tart Affidavit at 2-3. Deese, for his part, states that he does not "believe" he mentioned or discussed the Jordan non-competition agreement to or with Tart. Deese Affidavit at 2. Deese flatly states that he did not mention the non-competition agreement to Wheeler. Id., at 3. According to his affidavit, Deese states that he told very few potential sales people that their employment with Jordan was conditioned upon signing an employment and non-competition agreement, and that Jordan simply included such an agreement in the administrative paperwork to be signed by the new employee on his or her first day of work. Id.

On April 24, 1978, three days after Tart interviewed with Deese, Tart met with Deese in Jordan's Charlotte office and was given a stack of paperwork to complete. Tart Affidavit at 2. Wheeler's route to the paperwork was slightly more circuitous. After his late August interview, Wheeler drove back to Texas, resigned from his position at K-Mart and sometime thereafter packed his belongings and moved to Kernersville, North Carolina, arriving on September 10. Wheeler Affidavit at 2. On September 10 or 11, Wheeler reported to the Jordan office in Hickory, North Carolina, and, with the salesman who had recently resigned from Wheeler's new territory, traveled to Morganton to meet several of Jordan's customers. Id. It was not until September 16, 1985, when Wheeler arrived at Jordan's Charlotte office, that Cynthia Ross, a Jordan personnel officer, presented him with papers to sign. Id., at 3.

Each man signed essentially identical covenants not to compete, Wheeler on September 16, 1985, and Tart on April 24, 1978. The terms of the agreement as relevant to this action are set out below:

WHEREAS, Salesman is desirous of working for the Company as a Salesman in [territory, including radius], and the Company is willing to employ [name] as a Salesman in the territory. [sic]

NOW, THEREFORE, in consideration of the premises and the sum of one ($1.00) Dollar to each of the parties hereto paid to the other, the receipt of which is hereby acknowledged, and in further consideration of the provisions and agreements hereafter set forth, it is agreed by and between the...