Wesley-Jessen, Inc. v. Armento

• Decision Date: 14 August 1981
• Docket Number: Civ. A. No. C81-1158A.
• Citation: 519 F. Supp. 1352
• Parties: WESLEY-JESSEN, INC., a Delaware Corporation, Plaintiff, v. Charles R. ARMENTO, Defendant.
• Court: U.S. District Court — Northern District of Georgia

519 F. Supp. 1352

WESLEY-JESSEN, INC., a Delaware Corporation, Plaintiff, v. Charles R. ARMENTO, Defendant.

Civ. A. No. C81-1158A.

United States District Court, N. D. Georgia, Atlanta Division.

August 14, 1981.

COPYRIGHT MATERIAL OMITTED

William A. Clineburg, Jr., L. Joseph Loveland and Dan L. Heller, King & Spalding, Atlanta, Ga., for plaintiff.

Eugene Zimmer, Jones, Thomas & Askew, Atlanta, Ga., for defendant.

ORDER

ROBERT H. HALL, District Judge.

Plaintiff seeks injunctive relief and damages against defendant, a former employee, for violation of various clauses of the defendant's employment contract with the plaintiff. The complaint sets forth three claims: that the defendant breached a covenant of non-competition; that after his termination the defendant retained confidential business records that were the plaintiff's property; and that the defendant breached, or would breach an agreement not to disclose confidential business information of the plaintiff. The defendant counterclaimed for monies he claimed the plaintiff owed him at the time of the termination of his employment relationship with the plaintiff.

Jurisdiction is predicated on diversity of citizenship, 28 U.S.C. § 1332 (1970).

On June 16, 1981, the court granted the plaintiff's request for a temporary restraining order. A hearing on plaintiff's motion for a preliminary injunction was held on June 26, at which time the court allowed the temporary restraining order to expire. For the reasons set forth below, preliminary injunctive relief is DENIED on all claims.

The standards for granting a preliminary injunction are well settled: The granting or denying of a preliminary injunction rests within the sound discretion of the district court. Clements Wire & Mfg. Co. v. N.L. R.B., 589 F.2d 894 (5th Cir. 1979); Johnson v. Radford, 449 F.2d 115 (5th Cir. 1971).

However, this discretion must be exercised in light of the four well established prerequisites for issuance of a preliminary injunction: (1) a substantial likelihood the plaintiff will prevail on the merits; (2) a substantial threat that the plaintiff will suffer irreparable injury if the injunction is not granted; (3) the threatened injury to the plaintiff must outweigh the threatened harm an injunction may cause the defendant and; (4) granting the injunction will not disserve the public interest. Clements Wire & Mfg. Co. v. N.L.R.B., 589 F.2d 894 (5th Cir. 1979); Barrett v. Roberts, 551 F.2d 662 (5th Cir. 1977).

The burden of proof on each element rests with the movant, although the quantum of evidence necessary to carry that burden can fluctuate from element to element. On each of the prerequisite elements the sufficiency of the evidence presented is balanced by the court on a sliding scale: a much stronger showing on one or more of the necessary elements lessens the amount of proof required for the remaining elements. Texas v. Seatrain International, S.A., 518 F.2d 175 (5th Cir. 1975); Siff v. State Democratic Executive Committee, 500 F.2d 1307 (5th Cir. 1974). See, Canal Authority of the State of Florida v. Callaway, 489 F.2d 567 (5th Cir. 1974).

The following constitutes the court's findings of fact and conclusions of law on plaintiff's motions for preliminary injunctive relief. Rule 52, Fed.R.Civ.P.

FACTS

The plaintiff, a manufacturer of daily wear contact lenses, hired the defendant as a salesman in April, 1979. The defendant had prior experience as an eyeglasses salesman. However, when the defendant was hired, the plaintiff provided about a month of training and instruction on contact lens mechanics and the plaintiff's own business methods.

The defendant resigned his position on April 13, 1981, effective April 20, 1981. By April 20th, the defendant was already at work as a salesman for Cooper Vision, Inc., a maker of extended wear contact lenses. Daily wear and extended wear contact lenses are competing products in the eyecare industry. All the defendant's sales territory for Cooper Vision is territory he had formerly covered for the plaintiff, including the City of Atlanta and environs. The defendant has been actively and successfully covering this territory for his new employer.

At the time he tendered his resignation the defendant had possession of a car, a sales manual, a movie projector and promotional movies, promotional brochures, and at least four different types of computer generated customer lists and sales reports covering various months. All these items were property of the plaintiff. The car, the movie projector, and some of the other items were returned in April shortly after defendant's resignation. Other items were returned only after the present litigation began. Some items, including customer lists and credit information on each customer were never returned. The defendant testified that the unreturned material was destroyed or thrown out.

Each of the plaintiff's three claims for injunctive relief is separately discussed. Although all four prerequisites for a preliminary injunction were considered, in this discussion the court focuses primarily on the plaintiff's likelihood of prevailing on the merits.

COVENANT NOT TO COMPETE

The central issue for both parties in this case is whether the defendant will be found in violation of his agreement not to compete. In essence, the non-competition covenant calls for a 300 day period during which the defendant will not compete with the plaintiff in selling or training others to sell contact lenses within twenty-five miles of Atlanta. In pertinent part the agreement states:

5. The Employee agrees that for a period of 300 calendar days from date of such termination, within the geographic area hereinafter defined:

(a) Employee will not directly or indirectly engage in any of the activities described in 1(a) and 1(b) above,

and/or

(b) Employee will not directly or indirectly recruit, train, supervise or assist others to engage in any of the activities described in 1(a) and 1(b) above....

7. The Employee agrees that in the event Employer is required to resort to court action to enforce its rights hereunder, the foregoing restrictive time period shall be extended for a period of 300 calendar days from the date of any final order of the court enforcing this Agreement.

The activities described in paragraph one are:

(a) To contact opticians, optometrists and ophthalmologists, hereinafter called "practitioners," for the purpose of selling to them contact lenses and related products and services, and

(b) To provide and offer to provide to Practitioners assistance, advice and consultation with respect to contact lenses and related products and services, and

Georgia law provides that contracts in restraint of trade or tending to lessen competition are against public policy and are therefore void. Ga.Const. (1945) Art. IV, Section IV, Par. 1; Ga.Code Ann. § 20-504 (1968). Covenants against competition in employment contracts are considered in partial restraint of trade. They are to be tolerated only if "strictly limited in time and territorial effect and are otherwise reasonable considering the business interest of the employer sought to be protected and the effect on the employee." McNease v. National Motor Club, 238 Ga. 53, 55, 231 S.E.2d 58, 60, (1976); Accord, Kroger Properties, Inc. v. Adams-Cates Co., 247 Ga. 68, 274 S.E.2d 329 (1981); Orkin Exterminating Co. v. Pelfrey, 237 Ga. 284, 285, 227 S.E.2d 251, 252 (1976). The reasonableness of the restraints is a question of law for determination by the court. UniWorth Enterprises, Inc. v. Wilson, 244 Ga. 636, 261 S.E.2d 572 (1979); McNease v. National Motor Club, 238 Ga. 53, 231 S.E.2d 58 (1976); Taylor Freezer Sales Co. v. Sweden Freezer Eastern Corp., 224 Ga. 160, 160 S.E.2d 356 (1968).

The requirement of "otherwise reasonable" is frequently interpreted as an inquiry into the scope of activities prohibited. E.g., Puritan/Churchill Chemical Co. v. Eubank, 245 Ga. 334, 265 S.E.2d 16 (1980); Southeastern Beveridge & Ice Equipment Co. v. Dillard, 233 Ga. 346, 211 S.E.2d 299 (1974). While that inquiry is a relevant one, the requirement of "otherwise reasonable" includes more. The rule of reason is the overarching standard to be applied in all cases involving covenants not to compete. See Durham v. Stand-By Labor of Georgia, Inc., 230 Ga. 558, 561, 198 S.E.2d 145, 148 (1973). The meaning of reasonableness in this context was set forth in the seminal case of Rakestraw v. Lanier, 104 Ga. 188, 195, 30 S.E. 735 (1898):

If considered with reference to the situation, business and objects of the parties, and in light of all the surrounding circumstances ... the restraint contracted for appears to have been for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them, and not specially injurious to the public, the restraint will be held valid.

The Territorial Limitation: By its very terms — the city of Atlanta and the area within 25 miles from its limits — the territorial limitation of the non-competition covenant is precise and strictly limited. Both parties acknowledged that Atlanta is the "heart" of the plaintiff's territory. The defendant's sales territory was considerably larger than the small zone restricted in the contract. The plaintiff limited the restriction as much as it could while still protecting its own legitimate business interests. Thus, the restriction is reasonable. Landmark Financial Services, Inc. v. Tarpley, 236 Ga. 568, 224 S.E.2d 736 (1976).

The Scope of Activities Restricted: The scope of activities restricted is also precise and strictly limited. The scope of activities restricted will be found reasonable when there is a rational relationship between those activities and the activities the employee conducted for his former employer. The relationship between activities during employment and activities prohibited is interpreted with reference to the individual...