Standard Forms Co. v. Nave

Decision Date24 May 1976
Docket NumberNo. CIV-2-76-30.,CIV-2-76-30.
Citation422 F. Supp. 619
PartiesSTANDARD FORMS COMPANY, Plaintiff, v. Joe R. NAVE, Defendant.
CourtU.S. District Court — Eastern District of Tennessee

COPYRIGHT MATERIAL OMITTED

Bernard H. Cantor, Cantor, Kiener & Bowman, Johnson City, Tenn., for plaintiff.

Ferdinand Powell, Jr., Johnson City, Tenn., for defendant.

MEMORANDUM OPINION AND ORDER

NEESE, District Judge.

This is a removed, 28 U.S.C. § 1441(a), diversity action, 28 U.S.C. §§ 1332(a)(1), (c), for injunctive relief and the enforcement of a covenant-not-to-compete provision of a contract of the parties. Prior to such removal, the state court of origin herein granted the plaintiff an order restraining the defendant* from violating further such covenant. Rule 65.03(1), (2), (3), Rules of Civil Procedure for the state of Tennessee. The plaintiff moved this Court after removal for a temporary restraining order, Rule 65(b), Federal Rules of Civil Procedure, to restrain the defendant in like manner pending a hearing in this Court on the plaintiff's application for a preliminary injunction.

It is provided, inter alia, by 28 U.S.C. § 1450: "* * * All injunctions, orders, and other proceedings had in such action removed from a state court to a district court of the United States shall remain in full force and effect until dissolved or modified by the district court." A restraining order, granted by a Tennessee judge at the commencement of an action without notice, "* * * unless it provides an earlier termination date, * * * shall remain in force until otherwise ordered by the court." Rule 65.03(5), Rules of Civil Procedure of the state of Tennessee. "* * * Pleadings filed in state court * * * need not be duplicated in federal court. * * * The statute i. e., 28 U.S.C. § 1450 ensures that interlocutory orders entered by the state court to protect various rights of the parties will not lapse upon removal. Thus, * * * injunctions * * * and other orders obtained in a state court all remain effective after the case is removed to federal court. Footnote reference omitted. * * *" Granny Goose Foods v. Teamsters (1974), 415 U.S. 423, 435-436, 94 S.Ct. 1113, 1122, 39 L.Ed.2d 435, 4486.

It is patent that the ex parte restraining order issued by the judge of the Chancery Court at Johnson City, Tennessee herein was not a "temporary" restraining order, issued by a state court prior to removal, so as to come within the rule fashioned by Mr. Justice Marshall in the cited decision. Ibid., 415 U.S. at 439, 94 S.Ct. at 1124, 39 L.Ed.2d at 45112. Although, "* * * once a case has been removed to federal court, it is settled that federal rather than state law governs the future course of proceedings, notwithstanding state court orders issued prior to removal * * *", ibid., 415 U.S. at 437, 94 S.Ct. at 1123, 39 L.Ed.2d at 4499, the evident remedy of the defendant, if he is dissatisfied with the continuation in its present form of the state restraining order granted by the state court before removal, is to apply to this Court under 28 U.S.C. § 1450 for its dissolution or modification. In its present posture, the restraining order, granted to protect the rights of the plaintiff, is restricted to its "* * * underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing on any such application by the defendant for a dissolution or modification thereof, and no longer. Footnote reference omitted. * * *" Ibid., 415 U.S. at 439, 94 S.Ct. at 1124, 39 L.Ed.2d at 45011.

This Court, being of the opinion that the restraining order of February 19, 1976 has not lapsed but remains effective after removal, the application of the plaintiff for a temporary restraining order hereby is

DENIED as moot. However, as an ex parte restraint of the defendant has been ordered and is in effect without his having been accorded a hearing thereon, he shall answer or present other defenses in the manner prescribed by Rule 81(c), Federal Rules of Civil Procedure, after which the clerk will advance this action in the assignment of a pretrial conference, and trial of this action shall be expedited. Rule 65(a)(2), Federal Rules of Civil Procedure.

MEMORANDUM OPINION AND ORDER

This is a removed diversity action brought by the plaintiff corporation for injunctive relief and the enforcement of a covenant-not-to-compete provision of a contract between it and the defendant, its former sales representative. 28 U.S.C. §§ 1332(a)(1), (c); 1441(a). Prior to removal to this Court, the state chancellor issued a restraining order prohibiting the defendant from violating such covenant. Such restraining order remained effective after such removal. See memorandum opinion and order herein of April 1, 1976. The defendant moved the Court thereafter for the dissolution of such injunction.

The defendant contends principally that the aforementioned contractual provision, upon which the restraining order is based, is void and unenforceable for unreasonableness. Such covenant provides:

* * * * * *
The Representative defendant agrees that he will not, without written consent for a period of one year after date of termination of employment (for whatever reason) engage, assist or have any active interest in any business (directly or indirectly, individually or in combination with another or others, or as principal partner, agent, contractor, employee or officer of a Corporation or otherwise) which is engaged in manufacturing, producing and/or selling any product or products that compete with corporation the plaintiff in Representative's former territory. * * *
* * * * * *

It is the general rule in Tennessee that a covenant restraining future competition is valid if it is reasonable as to time and space. Telecommunications, E. S. & S. Co., Inc. v. Southern Tel. S. Co., D.C.Tenn. (1974), 380 F.Supp. 997, 10035. "* * * There is no inflexible formula for deciding the ubiquitous question of reasonableness, insofar as noncompetitive covenants are concerned * * * rather, * * * each case must stand or fall on its own facts. * * *" Allright Auto Parks, Inc. v. Berry (1966), 219 Tenn. 280, 409 S.W.2d 361, 3632. "* * * It is generally agreed that, before a noncompetitive covenant will be upheld as reasonable and therefore enforceable, the time and territorial limits involved must be no greater than is necessary to protect the business interests of the employer. * * *" Ibid., 409 S.W.2d at 3633. In making such determination the Court may consider such factors as the consideration supporting it, the threatened danger to the employer in the absence of such an agreement, the economic hardship imposed on the employee, and the public interest. Ibid., 409 S.W.2d at 3632.

The defendant does not contend that the covenant involved herein is unreasonable as to time: it obviously is not. Cf. Delta Corporation of Amer. v. Sebrite Corporation, D.C.Tenn. (1974), 391 F.Supp. 638, 6401. This covenant limits Mr. Nave from engaging in, or being associated with, any business which competes with the plaintiff in Mr. Nave's former territory. Such limited area was defined as follows by Mr. Nave in his affidavit filed herein:

* * * When I ceased to work for the plaintiff on January 6, 1976 I had covered a maximum extent of territory bounded by Elizabethton, Bristol Abingdon, Marion, Wytheville, Tazewell, Virginia, Bluefield, West Virginia, Pikeville, Kentucky, Pound, Norton, Big Stone Gap, Virginia, Gate City, Virginia, Rogersville, Morristown, Dandridge and Newport, Tennessee, Asheville, and Weaverville, North Carolina, and back to Elizabethton, Tennessee. None of my solicitations or sales were outside of that area except one sale in Montgomery, Alabama on a reference from Norton Community Hospital. * * *

This description is not disputed by the plaintiff.

It is evident that the foregoing geographical area, in which the covenant prohibits Mr. Nave from competing with the plaintiff, is not greater than is reasonably necessary to protect Standard Forms' business interests. In a covenant of very similar import1 a former sales representative agreed not to compete with his former employer within his (the employee's) previous geographical sales and service territory, which consisted of the entire states of North Carolina, Georgia, and Virginia. In considering such employee's attack upon the validity of such restraint, it was held that the provision was not unreasonable under Tennessee law either as to its duration or territory. Telecommunications, E. S. & S. Co., Inc. v. Southern Tel. S. Co., supra, 380 F.Supp. at 10038.

Mr. Nave's argument, that this covenant is unreasonable and void because it prohibits him from accepting any type of employment anywhere in the world by any company which competes with the plaintiff in Mr. Nave's former territory, is untenable.2 The only area in which Mr. Nave may not presently compete with Standard Forms is within his defined former territory. He is not precluded from engaging in such competition for one year, so long as it does not occur within this reasonably limited geographical area. Under the plain terms of this covenant the defendant is merely forbidden from competing with Standard Forms in this one specific region. Whether such competition arises from within or without such territory is irrelevant: the scope of the restricted territory is reasonably narrow.

It thus appearing that the covenant-not-to-compete involved herein, considering the threatened danger to the plaintiff in the absence of...

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6 cases
  • DiMauro v. Pavia
    • United States
    • U.S. District Court — District of Connecticut
    • April 17, 1979
    ...called upon to find anything more than that the executor filed an accurate statement of what he found. 12 But cf. Standard Forms Co. v. Nave, 422 F.Supp. 619 (E.D.Tenn.1976). In Standard Forms the state court, before the case was removed, had granted the plaintiff an order restraining the d......
  • Dwyer v. Conflict of Interest Com'n
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    • U.S. District Court — District of Rhode Island
    • August 29, 1986
    ...has discretionary power to dissolve or modify preliminary injunctions issued by state courts prior to removal, Standard Forms Co. v. Nave, 422 F.Supp. 619 (D.C.Tenn.1976), and federal law rather than state law governs once the case is removed. Granny Goose Foods, Inc. v. Brotherhood of Team......
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    • United States
    • U.S. District Court — District of Puerto Rico
    • September 18, 1980
    ...court before removal was to request relief from this Court under 28 U.S.C. § 1450 to dissolve or modify the same. Standard Forms Co. v. Nave, 422 F.Supp. 619 (E.D.Tenn., 1976). 28 U.S.C. § 1450 provides: "All injunctions, orders and other proceedings had in such action prior to its removal ......
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    ...condition of granting injunctive relief, See Urbain v. Knapp Brothers Mfg. Co., 217 F.2d 810 (6th Cir. 1954) and Standard Forms Co. v. Nave, 422 F. Supp. 619 (E.D. Tenn. 1976), and are not applicable here. Defendant relies upon State Wide Enters. v. U.S. Gypsum Co., 238 F. Supp. 604, 606 (E......
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2 books & journal articles
  • Litigation Issues
    • United States
    • ABA Antitrust Library Franchise and Dealership Termination Handbook
    • January 1, 2012
    ...560-61 (1968) (federal court may modify or set aside state court orders relating to temporary injunctions); Standard Forms Co. v. Nave, 422 F. Supp. 619, 621 (E.D. Tenn. 1976) (defendant dissatisfied with restraining order granted by state court before removal may apply to federal court und......
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    • United States
    • ABA Antitrust Library Franchise and Dealership Termination Handbook
    • January 1, 2012
    ...546 F. Supp. 1245 (W.D. Wis. 1982), 10 St. Martin v. KFC Corp., 935 F. Supp. 898 (W.D. Ky. 1996), 163 Standard Forms Co. v. Nave, 422 F. Supp. 619 (E.D. Tenn. 1976), 88 State Distribs. v. Glenmore Distilleries Co., 738 F.2d 405 (10th Cir. 1984), 55, 56 State Farm Mut. Auto. Ins. Co. v. Camb......

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