Sysco Food Services of Atlanta, Inc. v. Chupp

• Decision Date: 18 March 1997
• Docket Number: No. A96A2306,A96A2306
• Citation: Sysco Food Services of Atlanta, Inc. v. Chupp, 484 S.E.2d 323, 225 Ga.App. 584 (Ga. App. 1997)
• Parties: , 97 FCDR 1543 SYSCO FOOD SERVICES OF ATLANTA, INC. v. CHUPP et al.
• Court: Georgia Court of Appeals

Page 323

484 S.E.2d 323

225 Ga.App. 584, 97 FCDR 1543

SYSCO FOOD SERVICES OF ATLANTA, INC. v.CHUPP et al.

No. A96A2306.

Court of Appeals of Georgia.

March 18, 1997.

Jones, Byington, Durham & Payne, Frank H. Jones, Rome, Arnall, Golden & Gregory, Debra M. Buster, Atlanta, for appellant.

Brinson, Askew, Berry, Seigler, Richardson & Davis, C. King Askew, Mark M. J. Webb, Rome, for appellees.

SMITH, Judge.

This appeal involves the construction of customer non-solicitation covenants executed by two former sales representatives for appellant Sysco Food Services and a non-competition and non-solicitation covenant executed by a former sales manager for Sysco.The trial court struck down all three agreements as overbroad and denied injunctive relief.Because the trial court's construction of the agreements was incorrect, we reverse.¹

The facts relevant to our analysis are straightforward.AppelleeCharles Don Chupp, a district sales manager and 13-year employee of Sysco, executed an employment contract with Sysco containing two agreements relevant here.The contract contains an "Agreement Not to Compete": "Employee covenants and agrees that during employment by the company and for a period of one year after termination of such employment for any reason, employee will not, without prior written consent of the company, directly or indirectly within the territory, (a) for himself, (b) as a consultant, manager, supervisor, employee or owner of a competing business, or (c) as an independent contractor for a competing business, engage in any business in which employee provides services which are the same or substantially similar to employee's duties for Sysco as described in this agreement and its incorporated exhibits."

Chupp's contract also contains an "Agreement Not To Solicit Customers": "Employee covenants and agrees that during his employment by the company and for a period of one (1) year following the termination of such employment for any reason, within the territory he will not, without the prior written consent of the company, either directly or indirectly, on his own behalf or in the service or on behalf of others, solicit or attempt to divert or appropriate to a competing business, any customer of the company having an office or place of business within the territory and to whom the company sold or provided any products [or] services and with whom the employee dealt on behalf of the company at any time during the 12 months immediately preceding termination of his employment hereunder.In no way does this paragraph purport to restrict the post-employment activities of employee outside the territory.""Competing business" and "territory" are separately defined.An attached page on Sysco's letterhead listed 11 north Georgia counties comprising "District 'L', Donny Chupp, District Manager."

In January 1996, Chupp resigned his position at Sysco and took a similar management position, covering much of the same region of north Georgia, with Sysco's competitor Alliant Food Services, Inc.It appears undisputed that he immediately began soliciting Sysco customers.

Appellees Yearous and Phillips also executed employment agreements containing a non-solicitation covenant, but without a non-competition covenant.Phillips's contract contained the same non-solicitation covenant executed by Chupp.Yearous's contract contained language essentially the same as the non-solicitation covenant executed by Chupp and Phillips, but omitting any reference to "the territory."²

Shortly after Chupp's resignation, Yearous and Phillips simultaneously resigned their positions and immediately joined Chupp at Alliant.³Both immediately began soliciting many of their former Sysco customers.After Sysco complained in a letter to Alliant, Yearous and Phillips exchanged their accounts, so that Yearous called on Phillips's former Sysco customers while Phillips called on Yearous's former accounts.After Sysco lost a number of accounts to Chupp, Phillips, and Yearous, it filed this action seeking injunctive relief.

1.Unlike a contract in general restraint of trade, a restrictive covenant in an employment contract is considered only a partial restraint of trade and will be upheld if the restraint imposed is reasonable, founded upon valuable consideration, and reasonably necessary to protect the interest of the employer, so long as it does not unduly prejudice the public interest.The reasonability of a restrictive covenant is a question of law for the court, considering the nature and extent of the trade or business, the situation of the parties, and all other relevant circumstances.W. R. Grace & Co. v. Mouyal, 262 Ga. 464, 465(1), 422 S.E.2d 529(1992)."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.]"Id.

Applying these guidelines, we first address the scope of Chupp's non-competition covenant.The trial court found that this covenant was properly limited in the scope of activities prohibited.We agree.See generallyMouyal, supra.It is also clear that a one-year time limitation after termination of employment is well within the duration permissible under Georgia law.See, e.g., Smith v. HBT, Inc., 213 Ga.App. 560, 563(4), 445 S.E.2d 315(1994)(five years);U3S Corp. v. Parker, 202 Ga.App. 374, 378(2)(b), 414 S.E.2d 513(1991)(two years).

The trial court further concluded, however, that the territorial coverage of the agreement was overbroad due to changes in Chupp's management district between the time of execution of the non-competition covenant and his departure from Sysco.The original description of Chupp's territory inadvertently omitted one Alabama county that should have been included.By the time Chupp left Sysco in January 1996, his territory had also changed to the extent that after July 1994he was no longer working in two of the eleven listed Georgia counties and was sharing another Georgia county with a second manager.It is undisputed, however, that Chupp in fact worked in all 11 counties listed during his tenure with Sysco.

The trial court incorrectly concluded that Chupp's non-competition covenant is overbroad.The goal of a non-competition covenant is to balance two competing rights: first, the employee's right to earn a living and his ability to determine with certainty the prohibited territory; second, the employer's interest in customer relationships created or furthered by its former employee on its behalf and its right to protect itself from the former employee's possible unfair appropriation of contacts developed while working for the employer.Mouyal, supra, 262 Ga. at 466, 422 S.E.2d 529.Under this analysis, an employer is permitted to include in such a covenant the territory in which the employee has in fact performed work, thus protecting itself from the unfair appropriation of good will and information acquired in the course of that work.Id.;Howard Schultz & Assoc. v. Broniec, 239 Ga. 181, 183(1), 236 S.E.2d 265(1977).The fact that Chupp's territory had not included two of the counties listed for approximately 18 months does not, of itself, render the agreement void for overbreadth.

As the covenant stands, its description of Chupp's territory is more narrow than the territory in which Chupp actually worked for Sysco.The law does not...