Robins & Weill, Inc. v. Mason, 8318SC1201

• Decision Date: 02 October 1984
• Docket Number: No. 8318SC1201,8318SC1201
• Citation: 70 N.C.App. 537,320 S.E.2d 693
• Court: North Carolina Court of Appeals
• Parties: ROBINS & WEILL, INC. v. Homer L. MASON and Roger M. Hill, individually and trading as Business Insurers.

Page 693

320 S.E.2d 693

70 N.C.App. 537

ROBINS & WEILL, INC. v. Homer L. MASON and Roger M. Hill, individually and trading as Business Insurers.

No. 8318SC1201.

Court of Appeals of North Carolina.

Oct. 2, 1984.

Stern, Rendleman & Klepfer by Robert O. Klepfer, Jr., Greensboro, for plaintiff-appellee.

Helms, Mulliss & Johnston by E. Osborne Ayscue, Jr., Charlotte, for defendants-appellants.

BRASWELL, Judge.

Robins and Weill, Inc., the plaintiff-insurance agency, brought this action to enjoin two of its former employees from breaching covenants not to compete contained in their employment contracts. After a hearing the trial court entered a preliminary injunction against the defendants. The defendants appealed and also filed in the Court of Appeals petitions to stay the preliminary injunction and a writ of supersedeas. In an ex parte order, this Court stayed the preliminary injunction as far as it prevented the defendants from competing in all lines of general insurance, but kept intact that portion of the injunction which forbade the defendants from selling commercial line property and casualty insurance, until a final decision on the merits had been reached in the trial division. From this ruling, both parties appealed to the Supreme Court which denied their motions.

The pertinent facts of this case follow: The defendant Mason was employed by the plaintiff on 14 August 1972. The defendant Hill was first employed on 12 August 1974. Both men were hired to secure and service commercial insurance accounts. The defendants contend that several weeks after they had each started to work they were handed employment contracts to sign which contained the following covenant not to compete:

4. Mason [Hill], as consideration for his employment by the Company and in consideration of the covenants and agreements herein provided to be performed by the Company, agrees that at no time during the term of his employment, or for a period of three (3) years beginning at the termination of his employment, will he for himself or on behalf of any other person, persons, partnership or corporation, engage directly or indirectly in the general insurance business in competition with the Company within Guilford County, [as to Hill, also Randolph County] North Carolina; nor will he in any way directly or indirectly for himself or on behalf of or in conjunction with any other person, persons, partnership or corporation, solicit, divert, or take away any of the customers or business of the Company during the aforesaid period in Guilford County, N.C. [as to Hill, also Randolph County].

On 30 June 1983, Mason was fired by the plaintiff because he had approached insurance companies for which the plaintiff was an agent with the proposition that they appoint him as their agent when he left the employment of Robins and Weill. On 1 July 1983, Hill resigned from the employment of Robins and Weill. Mason and Hill on or about 1 July 1983 then opened their own general insurance business in Greensboro under the name of "Business Insurers." According to the defendant's brief, "[t]here is no dispute that the defendants were competing with the plaintiff in Guilford County at the time the suit was brought and defendants did not challenge the reasonableness of the purported covenants as they relate to time or territory."

The defendants assert that the covenant not to compete contained in the documents had never been mentioned before or bargained for as a part of their original employment agreement. Because their written employment contracts were executed after they had started to work for the plaintiff pursuant to their oral employment agreements, the defendants contend that the covenant found within the written documents was not supported by valuable consideration.

The plaintiff, however, argues that it is its established practice to obtain covenants not to compete with its employees prior to and as a condition of employment. John P. Young, III, senior vice president and agency manager for Robins and Weill, testified by affidavit that he discussed with Mason and Hill in several pre-employment conversations that they would have to sign a covenant not to compete with the agency. In addition to their discussions, Young furnished Mason with a copy of the written covenant used by Robins and Weill. Young also testified that he told Mason and Hill that the terms of their employment which had previously been discussed would later be reduced to a written agreement. Thereafter, Mason signed a written employment contract, dated 14 August 1972 with the plaintiff, agreeing not to compete or to attempt to lure away any of the plaintiff's clients. Hill also signed an employment contract, dated 12 August 1974, agreeing not to compete with the plaintiff or to solicit its customers.

The ultimate issue for our determination is whether the trial court properly granted the preliminary injunction against the defendants. "The term, 'preliminary injunction' refers to an interlocutory injunction issued after notice and hearing which restrains a party pending trial on the merits. G.S. 1A-1, Rule 65." Pruitt v. Williams, 288 N.C. 368, 371, 218 S.E.2d 348, 350 (1975). Of course, no appeal lies to an appellate court from an interlocutory order unless the order deprives the appellant of a substantial right which he would lose absent a review prior to final determination. G.S. 1-277; G.S. 7A-27(d)(1). "Thus, the threshold question presented by a purported appeal from an order granting a preliminary injunction is whether the appellant has been deprived of any substantial right which might be lost should the order escape appellate review before final judgment." State v. School, 299 N.C. 351, 358, 261 S.E.2d 908, 913, rehearing on other grounds, 299 N.C. 731, 265 S.E.2d 387, appeal dismissed, 449 U.S. 807, 101 S.Ct. 55, 66 L.Ed.2d 11 (1980). In the present case, we hold that the granting of the plaintiff's motion for a preliminary injunction deprived the defendants of a substantial right. By the terms of the covenants not to compete, the defendants are forbidden from engaging "in the general insurance business" in competition with the plaintiff. The trial court's enforcement of the covenant has effectively closed the defendants out of the insurance business in the territory where they have recently begun an insurance agency of their own. See Industries, Inc. v. Blair, 10 N.C.App. 323, 331, 178 S.E.2d 781, 786 (1971). With the covenant lasting for three years, we recognize, as the Supreme Court did in A.E.P. Industries v. McClure, 308 N.C. 393, 401, 302 S.E.2d 754, 759 (1983), that "where time is of the essence, the appellate process is not the procedural mechanism best suited for resolving the dispute.... Nevertheless, because this case presents an important question affecting the respective rights of...