Smith v. HBT, Inc.

• Decision Date: 03 June 1994
• Docket Number: No. A94A1294,A94A1294
• Citation: Smith v. HBT, Inc., 445 S.E.2d 315, 213 Ga.App. 560 (Ga. App. 1994)
• Parties: , 1994-2 Trade Cases P 70,674 SMITH v. HBT, INC.
• Court: Georgia Court of Appeals

Page 315

445 S.E.2d 315

213 Ga.App. 560, 1994-2 Trade Cases P 70,674

SMITH v. HBT, INC.

No. A94A1294.

Court of Appeals of Georgia.

June 3, 1994.

Reconsideration Denied June 16, 1994.

Certiorari Denied Sept. 22, 1994.

Herbert W. Benson, Jason K. Koffman, for appellant.

Mills & Chasteen, Robert W. Chasteen, Jr., for appellee.

BLACKBURN, Judge.

The appellee, HBT, Inc., a Georgia corporation, brought the instant action seeking damages and injunctive relief against the appellant, Jeff Smith d/b/a South Georgia Agri Supply, based upon Smith's alleged breach of a written covenant not to compete executed by the parties. Smith responded, asserting several defenses and counterclaims, alleging that the covenant was an unreasonable restraint on trade.

Following an evidentiary hearing on November 3, 1993, the trial court found that the covenant was reasonable in terms of duration, territorial coverage and scope of prohibited activity, and that Smith violated the covenant by calling upon HBT's customers from a list formerly used by Smith while Smith was employed by HBT as a salesman. The trial court temporarily enjoined Smith from contacting customers shown on HBT's customer list. Smith directly appealed the trial court's order to the Supreme Court, and on February 25, 1994, the Supreme Court transferred the appeal to this court for appellate review. We affirm.

HBT is a supplier of nuts, bolts, tools, and farm and industrial supplies throughout south Georgia. The company's primary method of operation involves direct sales to customers by salesmen from trucks stocked with supplies. The company's salesmen are provided with a list of customers and the list was developed over a 15-year period. HBT also furnishes its salesmen with a marketing program developed by the company which includes information on the individual supply needs of each customer and the prices of various products.

Smith began working with HBT on March 27, 1989, in the company's inventory warehouse and was subsequently promoted to the position of a route salesman on May 7, 1990. As a route salesman, Smith was responsible for contacting farmers for sales of agricultural supplies in a 42-county area. Prior to and as a condition of his employment as a salesman, Smith executed the contract not to compete, acknowledging that HBT's marketing program and customer and client lists were trade secrets that should remain concealed. Smith agreed to use his best efforts to refrain from using or disclosing the confidential information, and, based upon the terms of the contract, Smith was enjoined from disseminating the confidential information. All salesmen were required to execute such a covenant because of the marketing information provided to them by HBT.

Under paragraph nine of the contract, Smith specifically agreed not to "compete in any way against HBT either by himself as an individual, or in association with others, incorporated or otherwise, for five (5) years from the date his employment is terminated with HBT by using any facet or part of the heretobefore marketing program or calling on or conversing with or selling any of the clients or customers in the list of customers furnished by HBT in the following described geographical area, to wit: All Georgia counties south of Macon, I-16 and U.S. Highway 80, a radius of 50 miles around Dothan, Alabama, a radius of 75 miles around Tallahassee, Florida, a radius of 75 miles around Hastings, Florida, all counties in which HBT has previously served and in which HBT has a customer or client."

Approximately one month after his termination from employment with HBT in July 1993, Smith started his own business, South Georgia Agri Supply, selling agricultural hardware and supplies out of his truck in the south Georgia area using HBT's marketing program and contacting customers to whom he had sold supplies while employed with HBT. On October 7, 1993, HBT filed the instant action to enforce the terms of the contract and enjoin Smith from violating its terms.

1. Smith initially asserts that the trial court erred in failing to use the proper standard in determining whether the prohibitions contained in the covenant not to compete were enforceable. ¹ We disagree.

"While a contract in general restraint of trade or which tends to lessen competition is against public policy and is void (1983 Ga. Const., Art. III, Sec. VI, Par. V(c); OCGA § 13-8-2), a restrictive covenant contained in an employment contract is considered to be in partial restraint of trade and will be upheld 'if the restraint imposed is not unreasonable, is founded on a valuable consideration, and is reasonably necessary to protect the interest of the party in whose favor it is imposed, and does not unduly prejudice the interests of the public.' [Cit.] Whether the restraint imposed by the employment contract is reasonable is a question of law for determination by the court [cit.], which considers ' "the nature and extent of the trade or business, the situation of the parties, and all the other circumstances." (Cits.)' [Cit.] A three-element test of duration, territorial coverage, and scope of activity has evolved as a 'helpful tool' in examining the reasonableness of the particular factual setting to which it is applied. [Cits.]" W.R. Grace & Co., Dearborn Div. v. Mouyal, 262 Ga. 464, 465(1), 422 S.E.2d 529 (1992).

In the case sub judice, in determining the reasonableness of the covenant at issue, the trial court used the three-element test, and found that the covenant was reasonable. Since the trial court properly considered the appropriate elements in reviewing the reasonableness of the covenant at issue, this enumeration is without merit.

2. Next, Smith maintains that the trial erred in failing to declare the covenant null and void because the covenant prohibits him from competing "in any way" with HBT, and hence,...