22, 2001...

TABLE OF CONTENTS

Bill of Complaint for Declaratory and Injunctive Relief, with Exhibits,

Appendix Page

filed February 22, 2001 ••.••••.•.••••.••.•••••••••.•••••••• 1

Exhibits:

A. Letter to Chasen's from Cecelia Ann W eschler, with Attachment,

dated February 12, 2001 •.••.••••••••••••••••••••• 5

Attachment:

Employment Agreement dated April 12, 2000 • • • • • . . . • • • • • • • • • • • • • • • . 7

B. Letter to Johnetta R. Stinnett from Cecelia Ann Weschler

dated February 12, 2001 •••.•••.•••••.••••••••••• 17

C. Letter to Johnetta R. Stinnett from Cecelia Ann Weschler

dated February 21, 2001 •••.••••••••••••••••••••• 18

Johnetta R. Stinnett's Notice and Motion filed February 22, 2001 ••.•••••••.••••••.••••••••••••••••• 19

Modern Environments, Inc.'s Notice of Application for Injunction filed March 8, 2001 ...........•.••...•................•.• 20

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Modern Environments, Inc.'s Demurrer and Cross-Bill for Injunctive Relief, with Exhibit A,

filed March 8, 2001 . . . . • • • • . . • • • • • • . . • • • • • • • • • • • • • • • • • . •• 22

Exhibit A:

Employment Agreement dated April 12, 2000 • • • • • . • • • • • • . • • • • • • • . . • . • • • • • • • • • 31

Affidavit of Lewis Harrison filed March 8, 2001 • . • . • • • . • . • . • . • . . . . . . • . • • ·. • • . • • • • • • • • • 41

Johnetta R. Stinnett's Answer to Cross-Bill filed March 13, 2001 ••..•••••..•..............•....•••••• 44

Johnetta R. Stinnett's Demurrer to Cross-Bill filed March 13, 2001 ••••••...•.•.•••••••••••••••••••••••• 47

Johnetta R. Stinnett's Motion to Strike filed March 13, 2001 •...••••....•••.•••.•••••..•.••.••••• 49

Johnetta R. Stinnett's Brief in Support of Her Request for Relief and in Opposition to the Cross Bill, with Attachments,

filed March 13,2001 ••••.•••••••.•.•..••••......••••.•••• 51

Attachments:

Richardson v. Paxton Company decided August 31, 1962 ...•.••.••••.•••.••.•••••••.• 58

Roto-Die Company, Inc. v. Lesser decided April 17, 1995 .•....•.••.••.•••••..•.••••••.. 61

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Attachments, continued:

Selbe v. United States decided June 9, 1995 .••••••.••••....••.••.•••.••.••• 70

Pais v. Automation Products, Inc. decided April 17, 1995 ..••••••.••.••••••••••••••••••• 71

Grant v. Carotek decided June 18, 1984 ••..•.••••.••••••••••••••••••••• 78

Opinion and Order Re: Cliff Simmons Roofing, Inc. v. Cash

entered June 4, 1999 • . . . . . • • • . . • . • • • • • . • • . • • • • • • • • • • 81

Letter Opinion Re: Alexander v. Kandarp Shah, M.D., P.C.

dated July 21, 1995 ••••••.••.•..•.••••••••.•••.•••••• 85

Motion for Declaratory Judgment Re: Alexander v. Kandarp Shah, M.D., P.C.

dated December 1, 1994 .•.••.•.•••••.••.••..•••••••.• 87

Brief in Support of Plaintiff's Motion for Summary Judgment Re: Alexander v. Kandarp Shah, M.D., P.C.

dated May 22, 1995 •••••••••.••..••.•••••••••••••••• 91

Modem Environments, Inc.'s Brief in Support of Motion for Temporary Injunction

·filed March 28, 2001 ....•.••...•...•.....•.....•.••••.•• 100

Decree entered April 17, 2001 .....••.........•..•.•••.•••••••••• 108

... 111

Modern Environments, Inc.'s Notice of Appeal filed April 26, 2001 ..................•................... 110

Assignments of Error . . . . . . . . . . . . . . . . . . • . . . . . . . . . . . ._ . . . • . . . . . 111

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PREMRIED BY

STALLINGS AND

RICHARDSON 'IIRGINIA BEACH.

VIRGINIA

VIRGINIA: IN THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH

JOHNJ;TTA R. STINNETT,

Complainant,

v. IN CHANCERY NO.: CH01- Ia 6 7 rR

MODERN ENVfUONMENTS, INC., Serve: Lewis Harrison, President, Registered Agent

370 Cleveland Place Virginia Beach, VA 23462

Respondent.

BILL OF COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

NOW COMES your Complainant, Johnetta R. Stinnett, .by counsel, and in

support of her Bill of Complaint for Declaratory and Injunctive Relief, states as

follows:

1. Complainant Johnetta R. Stinnett (hereinafter "Stinnett") is a resident

of the City of Chesapeake, and until October 2000, was an employee

of Respondent, Modem Environments, Inc. (hereinafter "Modern

Environments"), which, upon information and belief, is a Virginia

corporation headquartered in the City of Virginia Beach.

2. Stinnett was employed by Modem Environments for several years

before entering into a restrictive employment agreement with Modern

Environments.

3. In 2000, Modem Environments demanded that Stinnett sign a

restrictive employment agreement, a copy of which is attached hereto_

as the last 1 o pages of Exhibit A (the first two pages ofExhi~i~ A. are 'I A. SE.:.~H Ct5\:~:·: .:. - ... · ~

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-1-J "' ':~ ~~;· ~-. ~T LERK· . • 1..-._.1,11•.• • • • I

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PftJEMRIED BY STALLINGS

AND ~ICHARDSON

1RGINIA BltACH, VIRGINIA

a letter from counsel for Modem Environments).

4. When Stinnett was required to sign the restrictive employment

agreement attached as a part of Exhibit A, she received no additional

consideration. Further, her employer threatened that if she did not

sign the restrictive employment agreement, certain commissions she

had earned would be withheld. Accordingly, the "agreemenf' was

signed without consideration, and is the product of fraud, duress, and

coercion, thus making it unenforceable.

5. Since the time that Stinnett ceased employment with Modern

Environments, her new employer received a letter dated February 12,

2001 authored by Cecelia Ann Weschler, counsel for Modern

Environments, which included a copy of the· supposedly valid

restrictive employment agreement. The two page letter and ten page

"employment agreemenf' are attached collectively as Exhibit A.

6. Further, counsel for Modern Environments wrote to Stinnett directly by

letter dated February 12, 2001, and threatened legal action against

her. A copy of said correspondence is attached hereto as Exhibit B.

7. = By facsimile dated February 21, 2001, counsel for Modem

Environments wrote again to Stinnett, and threatened immediate legal

action against Stinnett. A copy of said correspondence is attached •

hereto as Exhibit C.

8. The communications which Stinnett and her new employer have

received from counsel for Modem Environments make it clear that

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PRIEMRIEDB'f

STAWNGS AND

ICHARDSON ~GINIA BEACH,

VIRGINIA

Modem Environments intends to interfere with Stinnett's current

employment and her ability to earn a livelihood.

9. The restrictive provisions of the "employ agreemenr attached as a

part of Exhibit A are overbroad, unenforceable, unduly vague, contrary

to Virginia public policy and unconscionable.

10. Modern Environments' threats to interfere with Stinnett' employment

and ability to earn a livelihood are causing her substantial harm.

11. Due to Modem Environments' material breaches of express and

implied agreements Modem Environments made with Stinnett, due to

Modern Environments' breach of its common law duty of loyalty to

Stinnett, and due to Modem Environments' "unclean handsn, Modem

Environments is barred, as a matter of law and equity, from enforcing

any type of restrictive covenants or contracts against Stinnett.

12. Without injunctive relief from the court, Stinnett will suffer ongoing and

irreparable harm in her ability to earn a livelihood.·

WHEREFORE, for the foregoing reasons. your Complainant, Johnetta R.

Stinnett, respectfully requests that this Honorable Court grant the following relief:

a) = Entry of an order declaring that the purportedly valid restrictive

covenants contained in the "employment agreemenr attachment as

a part of Exhibit A be declared void and unenforceable.

b) Entry of an order enjoining Modem Environments, temporarily and

permanently, from claiming to any persons or entities whatsoever

(including, but not limited to, current and prospective employers,

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PR&MRIEO BY

STAWNGS AND

RICHARDSON VIRGINIA BEACH.

VIRGINIA

customers, and any other individuals) that John etta R. Stinnett is or

ever was subject to a valid covenant not to compete and/or restrictive

covenant with Modern Environments.

c) Such other and further relief as deemed appropriate and equitable

under the circumstances of this litigation, to ·include an award of

reasonable attorney's fees and all costs of litigation.

Kevin E. Martingayle, Esquire STALLINGS & RICHARDSON, P.C. 2101 Parks Avenue, Suite 801 Post Office Box 1687 Virginia Beach, VA 23451 (757) 422-4700

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WEINBERG & STEIN A PRO,-CSSIONAL. CORPORATION

ATTORNEYS ANC COUNSE:l-L.ORS AT t.AW

DOMINION TOWER

.JE:RROLO G. WE:INSE:RG

E:OWARO S. STE:IN

CE:CE:L.IA ANN WE:SCHL.E:R

BARRY W. SPE:AR

899 WATI:RSIOC QRIV&:, SUIT&: ICI2!S

NORFOLK. VIRGINIA 23!510.:3340

MAIUNG AOQRE.SS

TE:LE:PHONE: ('7!5'7) 627•10ee

TE:I.E:COPIE:R: ('7!5'7) 622-G870

E·MaD: [email protected]:

estefn@J:'!nn.net bsJ:'ear@epH:rustee.c:cm

l

NORFOL.K, VIRGINIA 2351-4-3789

CERTIFIED i\ILJ\IL-RETURN RECEIPT REQUESTED Chasen's 5365 Robin Hood Road, #B Norfolk, VA 23513

February 12, 2001

Re: Modem Environments/Johnetta R. Stinnett

Gentlemen:

00Jc

We represent Modem Environmc!nts, Inc. Please be advised that your employee. Johnetta R. Stinnett, is a party to an employment agreement \Vith ~lodem Environments made on April 12, 2000. A copy of the agreement is attached for your infonnation. The agreement contains the following provisions among others: ·

ARTICLE Ill NON -CO i':fPETIIION

3.1 Employee agrees that for as long as Employee remains employed by the company, and for a period of one (1) years after Employee's employment

. · ··.-=··-W:.ith th~ Company c.eases, Employee \Vill not (i) directly or indirectly, own, manage~ operate, control, be employed by, panicipate, in, or be associated in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the Company or any of its affiliates (a "competing business")~ \Vhich competing business is within a fifty (50) mile radius of the home office or any business location or locations of the Company or any of its affiliates at which Employee worked; (ii) solicit, aid, induce or encourage any officer, agent, or employee to leave their employment with the company fo.r the purpose of perfonning services or becoming employed with any business competitive with the business conducted by the Company or any of its affiliates; (iii) induce any customers of the Company or any of its affiliates ~C? . patronize any business which conducts a business in competition with the Company or any of its affiiia~a~d .. Qv) directly or indirectly request or advise

v A • s ~ :, c H c m ~ t •• : '·: · ~: ·

0 I FEB 22 PH 3: 36

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WEINBERG & STEIN

Chasen's In re: flllodern Environments /J ohnetta R. Stinnett February 12, 2001 Page 2

any customer of the company or any of its affiliates to withdraw, curtail or cancel such cu5tomer's business with the Company or any of its affiliates.

ARTICLE II INFORMA TTON

2.1 Nondisclosure of Infonnation.

(a) Employee shall be barred forever from disclosing any infonnation which the Company has customarily considered privileged, confidential or proprietary, including, but not limited to, business procedures, operations manuals, employee compensation, commission and benefits schedules, marketing plans. strJtegic plans, customer lists, promotional campaigns, and any other busin~ss contracts, supplier relationships, and/or resources developed by the Con1pany and used in its business, including any such resources and relationships dev~loped by Employee during the tenn of this Agreement. Employee shall not use, disclose, disseminate or in any way communicate any such confidential, privileged or proprietary information, \vhether during the tenn or after the tenn of this Agreement.

Please also be advised that Modem Environments intends to enforce all its rights under this contract. Thank you for your attention to this matter.

Sincer~ly yours, .

WEINBERG & STEIN

~~uD-1-luW..nc.~ Cecelia Ann Weschler

CAW/bb cc: tvlr. Lewis Harrison

iVls. Johneua R. Stinnett

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MOUEI<N ENVlRONrvlENTS

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Ei\fiJLOThfENT ACRE~\.fENT

TinS EMPLOTh!ENT ~OREEMI!NT, ma.<k thU 12t& daly of ApriL lROO ~~n

MODERN £NVIRONMJ!N1S, a. corporation of th~ Commonwe3ltb. o£Virgi:lin:. h:lving itS

yduclpal offi~c: at 370 Clc:vclnnd Plc.ce. Suite 101, Virginia B~ Vugini~ (rha "'t~mpan}1 .

"--ld Johnn~tta R. Stinaett (the "'Employee"').

\VHE~EAS, the F.mploycc aad the Company arr: cu:rc:ndy upcr:.ting tw!er ar.

employrn~nr acreement.

W HF.RF .AS. the Employee and the CultliJ&lY \1rl5h tO enlarge the aecoun~ on which ~ie

Employ~ may work.

N0\1l, r~R.EFORE~ f'or me! in ~:on::idc:tation ofth~ pre::lisc:s. whieh. M•~ r.nn:r#\Ct~l

c.:9t1S!dC!·ati.otu ac.d not mere pr~entorJ rcciutions, and i: co:siderntion nt the murual convcnan~

and ~CI'l\:'.:mCJnts hereinafter c:ontainc:d. and other goetl and ~luable consideration deemed

~eq\Ulta ~d ;;diident in l~w, ~ipc whr.rcnf, at and betbr~ lhe Signin~ ancl scaliu14 ~fdlcsc:

pr~ent.-:, is he:~by ar.know1Prt£ed by the parti:s. Ute parties c1o hc:r:by ~v~uaut and ag~ C1S

foUowi:

ARTICLE 1 El\tPLOY?viENT

1.1 = Emoluvwent Term. The C.ompcny agr~s to .:rnploy t.l,.~ Employe-e and w Erupluy::: ~81~ \u ~r;cpt such employment, in ~cordance with. the terms ~11.rl ~..nnnitinns of ~iis

Agrecm.~nt: from t&c da.te of" this Agre:m-ent until such tmploym~.nr i~ terminated as provided

herein.

1.2 Dnrir.~. The F.mplo)·cc is engaged as a sal~:spcr.suu. TI1e place o{ employment

and s~rvices tn h~ rendered shall be as the Company ~1-'C:.:it'l~) aud direct.' from tin1c tn tim~. The

Fmploy~ agrees: (a) ro devote his endre tim~ ~kill:;. labor and a\.tention to said employment

during the: term ofhis emplo)mcut; aud {b) ta follow cuefull~· the in~.:cticns with NSpCCt to his

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MOUEHN ENV1RONrvlEN15 ~mp~oymenr which he tnay le\Zi,;c fiaut the Company. I!mplcycc a.grcc3 and ackncwlcdgea thn:

he uwc:s._ and will comply with. a fiduciary duty of loydty, fidelity and allegi:mce to 2c:t at all

time:~ in the hat intorc3t3 of the Company :u:d to ta.ko r\O action or fail to t:lke a.c:tion if such

action oc failure to 3.Ct would injutf: tb~ Compan.y's business, its intttests O\" it~ r~pu~ttnn

1.3 E:rtrnt nr s~m~.-. Emf1lnyee shall not durinLt the period of this Agreem~nt.

~ioo dir~c-.rly nr mdirectly. render sc:rviees or otha ~islano=. or provid= r~uuG:c=- ur ah~ lJud.

.. whether as an owner. ~a.rmer. officer. director. employe:. cun~ult.an~.: 01 iu auy othct· .;ap&.:ity,

whether or not for consideratio~ co any pc:rson, cufilura!i.:.n ''' any entity whic:h a,vns, cp:rat~:

or conducts a business which. ~c::ll~ au~ ptvdtJ.c::tS or scrviecs whic:h ar~ simila: or c:ompt:titive to

those suld bJ Em(Jluyct.

I .~ ( :nmnensarion.

(a) s~IAty. '["ne Co.--npMy shall pay r;,e Emi'Iny~ 5Uc:, tompensation as che

p:uties agree upon ciuring th." p~rlorl of cnt!'loyment as sel forth~ :;chedule :\. attached.

(b) E;rnen3es. The: Company shall rcimbur:sc: Ernplvyee fot c:xpcns;3

Employee incurs In bis sales efforu as scl rurt.lt iu Sdu:t.luJ~ B atta~hCd.

(c) \\'itbhuldiug. The Company shall ''id-.hold froni Employee's

~VWJJc:u~ation such sunu ~ ~required by l&w a.'"\d t'orv.-ud them tta appropriate to \he s:rop~r

govcmmcntal agencies.

{d) T errltorv ar Lining of A££211ntS- Tha ( :nmpany ,..Jill iive the Em~Ioye~

1 ~tory, or a listing nr;u~r.nunt'\, or a combination o!borh. as set forth in Scb.:dule C attncb.;d.

(e) Otht:r Ma.llt:P-:. The El11ployc: $hall not rc:cc:ivc :ny ~umpcnsntion other

than that set fL"M hcndn. Empl~1e.c :shall not receive my pwd ve.~on or holid11~. i:C~?loyee

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MODERN ENVIRONMINTS

may schedule: vacation periods as Empluy= dcsi .. es. Durira.g such v:ation, the Comp~y ~h:lll

continue to pay to Ernpluy= auy ecnnmissioa$ =ned in Employee•:; territory ..

• !" (f) Compa..a.y•s Ric:ht: to giodltv SC'b41.thtle.-q. The <:ompany rna.y mOd!:Y the

terms ~et forth in Schedule A. B md C attac:hcc1 a1 any time during the term. ofEmplo;-e~·s

employment.

l.S Iermina.tion.

(a) E~ther partY [IU,.y u:cruiuatc: Empl\lycc:'s employment. ""ith •>r withoul

causa. immediat~ly by ~iviug the other party wriacn cotio: of an inter.t to t~:t:r.ta. T::is

Agr=mc::ll ~llc:U uutom-nically tcr:nina.tc if Employee di6 ch:ring it5 tenn or be~ca:es to tall}'·

incap~itatcd and is unable to parfonn his duties. Tbi~ A~t:::t.mt shall tenninMca upnn rht!

Company's c~ing to =:ry on business.

(b) • If the Employee i~ terminated fnr any rea.,on. the CQmpany shall be

obligated to the Employee oal~ tbt C".t\mmts.~\ans arising on sales for which signed purchcuc:

arders ho\•e b.-.t~ rt.r .. P.1Vt.d by the c.ompany at ltS offices on or before the c!a.Lc: the c:mpl~yulcnt is

t~rnated. pn all such sales as to which slJilccl purcha.s~ urdc:rs Lave bc:tl c;~ch-cd on cr bcfo:~

the date o! termination or ~mpluyrncnt, the Cwupany sbaU pay c:ommis.iion., to the Erni'lny~~

only wllen '--~h or il:f cqu.ivalCllt is received by the Company on such purchaJ:e urd~:::. Pur=~tt

uulca~ lbat d,, not ~uirc my more 3ignifiwtt time ta c:omple1e \\ill be paid in fUll; others witl

be paid S~'f. of normal commis:;ion p=e:itage.

( c:) In the e~~ot of n:ceiving.or 3iving nni1C".C: of tennination of employment.

the Employ~e shall immediately retum all· record.~. notes, books. ciocuments. cachin~::. sales

lclts, sample!- ancl nrh~ items belonging to the Company or relatea to the cump-~tL!'~ lJ~il!ess. lf

tht~ eve-.nt the l'!mployce docs not retun:i any otthese items a,.,d the cumpi:luy in~tit~Lc:~ lcg:a.l

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MOUEI{N EN\llRONrvlENlS

. proceedings to oblain the, lhc EJuvloJCC shall be liable for the rca3oaablc e.~pe~~ including

at.tomt:y':s fc~ uf1Jtiugillg suc:h prc.:c:ediqs and obtaining possessi<ln.c or~ch items.

ARTICLEll INFQRMAIION

2.1 !1ondJstlnsure urlnfurwatiou.

(:.) t-:mpioyec shall be ba."T:d forever from disclu:sin~ all)' iutb~atation which

The Cnmpany has cUStomarily considered privilc:}(c:U. c.:unliuc:!&thrl 01 propri~f:', including. ~ut

not limited to. business prcc:edures. Ol'~rtdiiJED ma11ual~, emplay:e compc:untion, com..'ni~::ic:2.

and ~~fits s.cheduld.1Uar~c:tin& plans, Strategic: plans, cu3to~c: li~, p(omotioMl C3.mpai~4S.

and :my ulhc:r ln1::»ineu tontracts, supplier rclationlhip:s. c.nd/oc re=;ources developed by tM

Cumpa.uy aud used in its businc3,, induclli:g 0!1Y GUch. r~ourc.:s and ~lationships developed by

Employ~c durin~ dlc t~&"ln of thi!i Agrc:r:ment. Employee shall not use, ciselose. diF-.~tnate OC'

iJl any way COmmunicate nny SUCb (Onfidential. priviJ~g~d nr proprietaiy infotma~fOO.. Whet.let'

during the ~m\ or iftcr the term of' rht$ Afre~enl

ARl.lCLEin NON-COM?ETITION

j.l Empluyc:e agrees that for as long as Employ~ rcmnins cnployed by the eompan~·, .

and for a p~riud ur \)UC (1) r=~ idler Employec'3. ~mployment "r'\ith the Company ceues, Elnpluy= will uot (i) dir~tly .,t indi."'Cetly. own, manage, oper3te, cont:al, be employed by,

pll~~ipa~ .. in. or be associated il1 any mCUUlet ""ith the own~bip, management:_ up:tation .. nr

\':Catrol uf uny bu:tin~ ~i:ni13J' tO the type ofb\&Sin~ (Qnd.w:ted by w Compttny nr any cf its

:1fiiliat" (a "competing bU$ine$s"'}: ""hi~n r.nmp.-J;ne ht~~tne.'~ is within a fifty (SO) mile radius ot'

the hooe office or t"tny hn~ines.~ location or locations of the Company or :my uf ils affi!bs.tc::t 4:ot

wllich Employee worlced; (ii) solicit. aid. induee ur cncuura&e any officcr.11gent. or cmployc:c: to

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MODI:RN. ENVI~ leave their employment tJ,ith The company for.~e purpose of perfonninll services ur bc:umi.u~

emrfnyed with any business competitive wilb lho b~in=:s c:uuuu.c~ by the Comp~y or :my of

itS affiliates: (Iii) tnctw:e in)· cusLumets of the Compan)· or any of its affiliat=J to pa.tronize any

business which c:uuuU\."tS a bu3in-= in Gem~tition ,.,;th th11 Company or ~y of i~ ~lintes; md. . (i '-") dL. c:c.tly ar indirc~y rc:c:ucst ot ::.chi:te my customer of the Company or any of its afrilinrc-.'\

to v.irhdnwt c:uruUl or .:=eel suc!t~omer's ~iduhe Comp.!!!l' nr 3l1YJ2.iits.aftj.li?J~.: .......... ~.~ ...... , ----------:.-----~.,' I •. t.~ • ~ \. "•

3.2 If :uw court should cktermizae thar ""v 1\~lriction herein is unentorceabl~ the: . . p:arti~S agree that the obligation.-; tmder this paragraph Shalt be enforceabl~ (or lnc Rl~imwu. tCCU\

~d. maximum Gt!ngr.t[Jh1cal3tea allowable by law. .------------·--· ARTlCL£1V

1\flSCELJ ... ANRI ll :S

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1.1 Notices. All notic.c:s and oth~ ~ommunieatioas undt:r this .A..gr~~ment shall ~in

w·cith•g a.\d ~ha.ll be C:c:c:mcd ca hnvc been delivered 0:1 the da.te personally de:::liv~~ci l'\r M the

date mAfic:~ poltttgc prc~d .. by certifted mail, return rec~pr n-'ln~i'.d .. enunled, or cc:tegrapncd. . . .

Ir 1u the EwJJloy=: Johnncrta R. Stimzett~ ll7 Cr~i:ads Dr. ilOS, CbQapcakc, VA lJJlO OR (Employee's last known address thi1t m~pln:tee has notified pe~onnel depanment at ~lodtm1 .. :n"1ranments)

lf1o the com[W\y: • 'Aodem Environmellts 370 Qeveland Place. Suite 10 1 Vugjnia Beach. VA 23462

·1.2 Eadre Agnement. Tni~ Agrt~m~t constitutes the entire understanding uflh;

4graement between the Company ~nc1 rhe F.mployee with re~ard to all maucrs helc:w. Thee= a::

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MODERN ENVlRONMINIS

..

no other agreements. eondilions or representations, be: lhc:y oral or written.. c.'tpr~ed ct impli~~

With fei;ard herer.o.

4.3 Equitable Relic(. The: Employ<:O acknowlcd~es that a cemudy at fa,v fa,r nny

~~ of Artie!~ [ or nt of this Agreement will be inadeC1Uatey asr~~~ th:tt rhe t:nmp3lly :;hall bt:

entided to specific performance and injunctive or otb.er eqnirahle relie!in case of an}' such brtach

or "n~mpted hres.ch and further AS~ tn waive any requirement that the Companv Sc:CUTC \J1' J"U:iL

any hand in r.OM~.r.non Wlth obtalnfn: of any such Injunctive or cc.(uitalJlc: 1clicl'.

4.4 S14rtlV!tl or Certillq Obliglltious. Notwith,tanding IUlything tu the c."'ntr:t.ry

herein. Emplo·;cc:':i obli~4tic.~r~ und~r Articl~ U anc IU lhall 3urvh·c: any tifrmin~tion cf

Em.pluycc':) c:mplc..-,uaeut hcceundcr.

4.5 ,\J~igum~at. This rlgtccr.tent r.t:lY not 0¢ assigned by th~ Empl·:SJt:~. Thi~

Agrcem~nt may be as3igned by th~ Comp:my to :my cc.tpor2tion which if ;'lthhated.with the

C'.omp:my or to UtY suc:cesso:.

4.6 · Bjnciino- lt:ft'ed, Subject to the ptaviSion$ of 4.S·.ofthis.AJU'=tocnt. this

A.ereement sball be binding on and Inure to the bencfil ur die 1'41 ti~ hereto. the Employcc:1l hci::s

a.;d· w 5ucce.ssors and asslgns or lhc Cuntpauy.

4. 7 Guvwninc L!lT. This Agreement sh.all ~ can=ucd :and en£orc~d in 2s:c:or:d:1.1.~~

wiW. aud govt.--ned by, the la.ws of the oo~onwealth ofVirgini~

4.8 Countorp:u-ts. This .~ment may be exee1tt,.rl m multiple original

eounterparts. t:".dl ofwhic:h shall bt! de~ca.d ~n nngtnal. but all of which log~thcr shall constitute

the saal.C insuu.'11ent.

-12-

...

i I·

I •

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I

MODERN F.NV1RONMENIS

. ..

4.9 Waiver. tht waiver of either palV orcmy right h&:l\.."'Undcr cr My brc~h ofuu~

Ai!=ment shall noL upc::t"~lc as or be conswcd to be an amendment of tl\i:l Agr~~ent or a

wa.i vc:t of any rlght or breach.

4.10 Oc=nd<!r. All ref~r.:at'.es tn rh~ i'na.(cuhne pronoun aie u..~ for conveni~ce ar..tt

ease of rwin~ only :md. apply tc thR teminine gender as well.

IN \VITNI-..'\S WHF.REOF. the Employee bas Sii£Iled his nam~ hc:rc:tu .. aud.tb~ C-\int~any

ha~ cau.~ed it.~ duly authorized officers. anci has =~-.:d iL:S ~.d to lie heL-cun:o affi.-.:ed thi~ 12th

day of All1:lL 1000. Sclaedute A tu lie: rcuqotlatc:d r=rly.

MODERN ENVIROm-r£?-w'jS

-13-

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•. • r •• •

MODl:RN SCmtDULE A .. EWLOXEE COMPENSATION

ENV1RONMENT.S TI~ Schedule u subject to change .&om time to time thzaughout tho Employee's

cn1pl~yn1cnt.

Puymen~ ,,;n be paid to Employee bued on.the time which rhe Comp,.ny reeei·.,-~s

payment for orders processed. P:~ymentS will be mad~: nn rhe I Sth or each month and 'J.ill be

b~ed on a c:oa-..mission rate C"t gn.~~ rmfit on an order. Inv~tory items are as set foc-Jlln the

invenrory pr<'1cram for quantities and commisslon rate. Furniture iu:ms Jrct!' a 22'o cc.muniS)iuu

- nfthe total protit. There will be a draw of S 2,090.00 per mu11(h, a car allowanec ofS190 pc:r

month.

The Comp411~ will p4y all c.~pcn3~ rol4t~d to ttuvel. suy and school ~'--ns.:s, if my.

Th.: c~mpany will p~y rot the employ~'s tuitinn, rebted tra~el and lodging expenses for

letn.irur.a:- the :llLt!nd~ce :1t ·which \'-ill enhar.c:e the Employc:'s sales. "l'b: C..".omp<1ny :.nd rhc

Cmplayee mu.~t aarcc on the sc:minar in advance of the l:!rnpl,yee·~ attendance.

Hmrlnyer ~.Jlll mnintnin for Employee's partieipa.tian a Profit Sharln.\1 Pl3n as acpru~c:d by

che IRS and as administered by the fidodary nfthe Plan. . .

The Compmy ~ tu provide health iruuraa~ tor the Employee; with co:Jt:S :shared

90%·1 00/o by Lla~ COU1pany and &aplcyc~ rcsp:ctivc:ly. Thi:l pc:rcentnp rno.y be changed from

Liruc: to time. ll1c Compan:r rnak= spo~c and family coverage Q'Y4i.l:J.b1e, but th.e employe~ must

pay the entire =tount or Lhi~ covcrugc.

• ·.:. I J ,I • .• I •: •

-14-

MODERN ENVlRONNIENl5

$(JDIDULEB·l!XfENSES

This Schedule is St.lbject to change tinct ilir~ to rime rhrnugnnut the Emplcyee·s

employ~t.

. ':', • I .J • t ~ •

The Cnmpany lifee5 to provide:~~ nu C.:U:IC to ELUploycc COVQ'CgC or cxpc~c3 f'or th~ .

Employee in his sales c!Cort~. Thc:ie. iu gctlC(al, inelud~ t.:Jc:phonc calls related to S3l~s efforts

... and appropriate office: :suU'ft.l provide support: propQSw md qu.otatio~ that are deemed

necessary by the C.uu&VclUY· The company will provid~ 11 computer and pager :~t n~ c:ost to me Smpluy=.

Equipment proviclcd b:' the Comp:..ny ror the Empl•'l'~t .r~main~ the propeny of the:

company. J"he Employee ~my use it to e~nr.e ht~ sales effortS. The Employee is responsibl~

for ke~ing the ~qttipmt:nt an goad condition. The 1:.-nployec will replace wbh cq~l value if it i~

lo.c;t nr damaged due to improptr ~.

·.:- z. I ,, • t r. ••

-15-

MODERN . 1 ENVIRONMENlS c· . . l :. SCHEDULE C l "I}~RRJTORY OR LISTING OE ACCOUNTS

. . : .. .

This Schedule is subject ro chang!! fr9m time to hmr. thrnughnut the Employie's

eJnploymt:nt and at Modem EnvironmentS di:lCJ'Ctton as neeaee.

NORFOLK VIROINil\ BFACH

- PORTSMOUTii CI-IESAPE;\Jc:~

SUFFOLK NEWPr.urr NH\SJ~ H.~'tP· ro" Wlf.f.rAMSBtiR.G

•t:. , : •' - 1 t: ..

-16-

WEINBERG & STEIN A PROI"CSSIONA&.. CORPORATION

ATTORNEYS AND COUNSELLORS AT L.AW

..J&:RROL.D G. WltiNB&:RG

EDWARDS. ST&:IN

CE:CE:LIA ANN W&:SCHLE:R BARRY W. SP&:AR

CERTIFIED MAIL-

DOMINION TOWER

899 WATER510E DRIVE • .SUITE 1825

NORFOL.K. VIRGINIA 23510-3340

MAIUNO AOORESS

.. OST OI"I"IC!: BOX 3708

NORFOU<. VIRCIINIA 23814-37118

Februarv 12, 2001 ~

RETURN RECEIPT REQUESTED Ms. Johnetta Stinnett c/o Chasen's 5365 Robin Hood Road, #B Norfolk, VA 23513

Re: Modem Environments/Johnetta R. Stinnett

Dear Ms. Stinnett:

TELEPHONE:: (757) 827•1088

TS:L£COPIER: C7!S7) eaz .. e87.0 E-MaD: [email protected]:

-=rt:[email protected]:

bspear@•pttruste..com

We represent .Modern Environments (the "Company''). It has come to the Company's attention that you are presently employed by Chasen's in Norfolk, Virginia. Your employment violates the employment agreement you entered into with the Company. A copy is\.0 enclosed for your reference. You have breached your covenant-not-to-compete (Article III). by M

working for a business which competes directly with the Company. Your violation of your.: M contract entitles the Company to an injunction enforcing the contract and restraining your .. :.:;~ E:

·"'-

continued violation of its terms. ~~ ~ :::.!'-=' C'J •- N

. Modem Environments demands that you honor your contractual obligation~!.~ ffi including immediately terminating your employment with Chasen's. You should also abide~ LL

your other covenants, including those made in Article II, which bar you forever from using < o confidential, privileged or proprietary infonnation of the Company. >

If you fail to abide by your agreement, Modem Environments will be forced to take legal action against you, including the immediate seeking of injunctive relief. ·

I look forward to receiving your immediate response.

Sincerely your$,

WEINBERG & STEIN

&.~0- Q ~)-VJ{., Cecelia Ann Weschler

/CAW!bb -17-

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02/21/01 17:08 ft757 857 1357 CHASEN'S !g) 002

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WEINBERG t STEIN ~ax:757-62l-69?0 Feb 21 •c 15:00 P.01101 .. . .. . . . . • ····:tr .. · .• •4•·1 1':1.••.

..ICPIROLD G .. VleJNSII:Ra CDWA" Q J:., S,.EJN

CC:C&:t.IA AlliN WCSC:HU:N CU.Dt:IY w. Sa:tt;:AD

BY FAX: 857-7199 Ms. Johnetta SLinnett c/o Cha.Cien '~

WEINBERG & STEIN

oo .. ,.,.,ot1 ,-oweq

•au ~-teRStCC DI'\VL GUITC ta::l NOftP'OLI'(, VIRGINIA c:JCIC>Oe40

"'AII.IIIIICI .e.Q!;JII'aJ8

~~ ~C:!W*a?OD

NOCIJPO\,M. \IIRSINIA 22SI.a.:a7B9

~ebruary 21, 2U01

TeLePHCNIC. ""d.,., 1'!1::7-1000 T£t..ECCPIERr C'S7) Gaa.oGa70

s: M::allz.~

~~ ...... ......._.,.,.,.,.

5365 R.obln Hoed Road, #B . · . 'Ncsrfalk; VA 23513 ',, ,., ...... ~·· ·-=· •

Re: Modem J:nvtrOnmenfs/Johnerta R.-~rinnen ·

Dear Ms. Stinnett:

Y nu should have had sufficient time ro revieVJ your EmploymenL Agre~eut w illi Modem 'Environments and to conclude that your employment wich Chasen's 'liulaLc~ ilic ~areement. Please confirm thai you will honor your A~emenl.

Ul do not hear from you by 11:00 a.m. on Fcbruory 22,2001, Modem EnvironmentS will &$Sume that you m still iD violation, and will saek to enforce the Agreement.

Sincerely yours,

WiiNBER.G & STI:ilN

r..ccelia Ann Weschler

.. "tAW/bb a:: Mr. Lewis Hamson

·.-18- .. · ... . . ·. ·.= . . ·· ....

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PRawtiEDBY STALUNGS

AND RICHARDSON

VIRGINIA BEACH, VIRGINIA


JOHNETTA R. STINNETT,

Complainant,

v. IN CHANCERY NO.: CH01 .. __ _

MODERN ENVIRONMENTS, INC., Serve: Lewis Harrison, President, Registered Agent

370 Cleveland Place · Virginia Beach, VA 23462

Respondent.

NOTICE AND MOTION

TAKE NOTICE that on Friday, .March 2, 2001 at 9:30 a.m .• or as soon

thereafter as counsel may be heard, the undersigned will move this Honorable Court

for temporary injunctive relief in accordance with the Bill of Complaint filed herein.

Govern yourselves accordingly.


-19-

JOHNETTA R. STINNETT

By l~sel

0 \ FEB 22 PH \2: 56 ·

J. cuE ns FRU\ r. CLERK c.JOr-- .

i

VIRGINIA: IN THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEAGH -

JOHNETIA R. STINNETT,

Plaintiff,

v. IN CHANCERY NO. CHOl-607

MODERN ENVIRONMENTS, INC.,

Defendant.

NOTICE OF APPLICATION FOR INJUNCTION

TO: JOHNETIA R. STINNETT

You are notified that Defendant, Modem Environments, Inc., has filed a Cross-

Bill, a copy of which is attached hereto~ against you in the Office of the Clerk of the Circuit

Court of the City of Virginia Beach, Virginia and that the undersigned will on the 15rh· day of

March, 2001, at 2:30p.m., or as so~n thereafter as counsel ~ay be heard, before a Judge of the

Circuit Court of the City of Virginia Beach, move for a temporary injunction against you.

GOVERN YOURSELF ACCORDINGLY.

Cecelia Ann Weschler WEINBERG & STEIN Dominion Tower 999 Waterside Drive, Suite 1825 Post Office Box 3789 Norfolk, Virginia 23514-3789 (757) 627-1066 (757) 622-6870 (facsimile)

MODERN ENVIRONMENTS, INC.

By: @J.e&L.Ov a~ W.tnc_~ Of Counsel

-2o-

l

CERTIFICATE

· On March 7, 2001, I mailed a copy of this document to Kevin E. Martingayle, Esquire, Stallings and Richardson, 2101 Parks Avenue, Pavilion Center, Suite 801, Post Office Box 1687, Yirginia Beach, Virginia f3451-4134.

-21-

VIRGINIA: IN "I:HE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH


Plaintiff,

v. Chancery No. CHOl-607


Defendant.

DEMURRER AND CROSS-BILL FOR INJUNCTIVE RELIEF

· Modem Environments, Inc. ("Modem"), by counsel, for its Demurrer and Cross-

Bill for Injunctive Relief alleges as follows:

INTRODUCTION

In her Bill of Complaint for Declaratory and Injunctive Relief, Plaintiff~ Johnetta

R. Stinnett ("Stinnett''), alleges that the restrictive covenants, including the non-competition

covenant in the employment agreement with her former employer, Modem, is void for lack of

consideration, duress, fraud, and coercion, ~dis overbroad, unduly vague, contrary to Virginia

public policy and unconscionable. She seeks injunctive relief decreeing that the covenants are

void and unenforceable. Stinnett, however, states ~o facts w~i~h·would support any legal ground

to void the non-competition covenant or any other covenant with Modem. Her case should be

dismissed.

0 [ ,',.·,: .. ··.· - ~' • • • 0, A - :. : , . ~.~: L· J

-22-

Demurrer

For its Demurrer to the Bill of Complaint and Injunctive Relief, Modem states:

1. The Bill of Complaint for Declaratory and Injunctive Relief does not state

any cause of action and fails to state facts (as distinguished from mere conclusory allegations)

upon which the relief demanded can be granted.

2. The general grounds on which Modem concludes that the Bill of

Complaint is insufficient at law are:

Alleged Lack of Consideration

Stinnett alleges that she was employed by Modem for sevet:al years before

entering into ~·a restrictive employment agreement" with Modem. Bill of Complaint 1r2. She

alleges that "when [she] was required to sign the restrictive employment agreement ... she

received no additional consideration." Bill of Complaint ~4. The de~ense of lack of

consideration is not available to Stinnett under Virginia law. See Paramount Termite Control v.

Rector, 238 Va.171 (1989) (continued at-will employment and access to valuable infonnation

supplied consideration for written non-compete executed by employees as condition of continued

at-will employment. Trial court refused to enforce~ Supre~e Court reversed).

Alleged Duress

Stinnett alleges that Modem "threatened that if she did not sign the restrictive

employment agreement, certain commissions she had earned would be withheld" and that the

agreement is the product of "duress and coercion." Bill of Complaint 1r4. Her claim premised on

duress and coercion is insufficient at law for these reasons:

-23-

1. Stinnett does not plead duress with the necessary specificity or state _the

essential circun1stances which warrant such a charge.

2. Stinnett does not plead the essential elements required to state a cause of

action for duress, including: an allegation of a wrongful act or threat and facts showing that she

manifested apparent assent to a transaction without volition or that Modem caused such fears to

preclude her from exercising free will and judgment in executing ~he employment agreement.

A}leged Fraud

Stinnett alleges that the employment agreement was entered into as a product of

fraud. Bill of Complaint 1f4. Her claim premised on fraud is insufficient at law for these reasons:

1. Stinnett does not plead fraud with the necessary specificity or state the

essential circumstances which would warrant such a charge.

"') Stinnett does not allege any facts which would support a finding that

Modem made false representation of a material fact or even allege that it made such a false

representation.

3. Stinnett does not allege any facts which would support a fmding that

Modem acted intentionally and knowingly with intent to mislead, or even allege that it acted

intentionally and. knowingly with intention to mislead.

4. Stinnett does not allege any facts which would support a fmding of

detrimental reliance by her or even allege detrimental reliance.

5. Stinnett does not allege any facts which would support a finding that she

was damaged by any fraudulent conduct.

-24-

Remaining Cballenges

Stinnett also charges that the non-competition and other covenants are

"overbroad, unenforceable, unduly vague, contrary to Virginia public policy and

unconscionable." Bill of Complaint 1l9. She also alleges that the non-competition and other

covenants are unenforceable because Modern breached a common law duty of loyalty and has

"unclean hands." ld. at 1lll. Stinnett's claim-- premised on the above grounds .... is insufficient

at law, for these reasons: Stinnett does not plead any facts which would support a finding that

the non-competition covenant or other covenants are void on any of the alleged grounds. The

non-competition covenant on its face reasonably protects the employer's business and is incident

and ancillary to the contract of employment and is limited as to area (one year) and duration (50

miles) and is enforceable in equity. The non-disclosure covenant is valid under Virginia law.

Further, Stinnett states no facts to support any cause of action based on Modem's

breach of a common law duty of loyalty to her or unclean hands.

Cross-Bill

1. Plaintiff, Modem Environments, is a corporation organized under the laws

of the Common~ealth of Virginia with its principal place of busjness in Virginia Beach,

Virginia. Modern Environments is engaged primarily in the business of designing, selling and

installing office furniture .

.., Defendant, Johnetta R. Stinnett ("Stinnett"), is a resident of the

Commonwealth of Virginia.

3. Stinnett is working in Norfolk, Virginia in violation of the non-

competition covenant contained in her employment agreement with Modern. It seeks injunctive

-25-

relief forbidding Stinnett from further violating the non-competition covenant in her employment

agreement.

4. Stinnett is a fanner employee of Modem Environments. She was

employed as a salesperson.

5. Stinnett's employment ended on or about August 25,2000 when she

resigned.

6. Stinnett is now employed by Chasen's, a Virginia corporation, which is

engaged primarily in the business of designing, selling and installing office furniture. Chasen's

competes directly with Modem Environments within a fifty (50) mile radi~s of Modem

Environment's home office in Virginia Beach, Virginia.

7. On or about April 12, 2000, Stinnett and Modem Environments entered

into an employment agreement ("Agreement''). A copy of the Agreement is attached hereto as

Exhibit A and is incorporated herein.

8. The Agreement is a valid and binding contract for employment supported

by adequate mutual consideration.

9.: In Article III, Stinnett agreed:

ARTICLE III NON--COMPETITION

Employee agrees that for as long as Employee remains employed by the company, and for a period of one (1) years after Employee's employment with the Company ceases, Employee will not (i) directly or indirectly, own, manage, operate, control, be employed by, participate, in, or be associated in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the Company or any of its affiliates (a "competing business''), which competing business is within a fifty (50) mile radius of the home office or

-26-

Chasen's.

any business location or locations of the Company or any of its affiliates at which Employee worked; (ii) solicit, aid, induce or encourage any officer, agent, or employee to leave their employment with the company for the purpose of perfonning services or becoming employed with any business competitive with the business conducted by the Company or any of its affiliates; (iii) induce any customers of the Company or any of its affiliates to patronize any business which conducts a business in competition with the Company or any of its affiliates; and (iv) directly or indirectly request or advise any customer of the Company or any of its affiliates to withdraw, curtail or cancel such customer's business with the Company or any of its affiliates.

10. Stinnett has violated Article III of the Agreement by being employed by

11. Paragraph 4.4 of the Agreement provides that Stinnett's obligations under

Article III (Non-Competition) shall survive any termination of Stinnett's employment.

12. In paragraph 4.3 of the Agreement, Stinnett acknowledges that Modem

would have no remedy at law for breach of the non-competition agreement. She agrees that

Modem shaH be entitled to specific performance and injunctive or other equitable relief in case

of any such breach or attempted breach.

13. As a consequence of Stinnett's breaches of the Agreement, Modem

E~vironment's lias suffered and Will continue: to ·suffer irrep~uable. hann, resulting in money

damages which are difficult to calculate. Modem Environments will continue to suffer

irreparable hann if Stinnett is allowed to continue to violate the Agreement. Modem

Environments needs preliminary relief to preserve the status quo so that Modem Environments is ...

not further damaged by Stinnett's wrongful conduct while the trial is pending.

WHEREFORE, Defendant, Modem Environments, prays for relief against

Johnetta R. Stinnett as follows:

-27-

(a) for a Decree temporarily and pennanently enjoining Stinnett from

violating the non-competition covenant in her Employment

Agreement by forbidding her, for a period of one year, from,

directly or indirectly, owning, managing, operating, controlling,

being employed by, participating in, or being connected in any

manner with the ownership, management, operation, or control of

any business similar to the type of business conducted by Modem

Environments or any of its affiliates, which competing business is

within a ftfty (50) mile radius of the home office or any business

location or locations of the Company or any of its affiliates at

which Stinnett worked; and othei"Nise violating the tenns of the

Agreement;

(b) for all consequential and compensatory damages caused by

Johnetta R. Stinnett's breach of the Agreement;

(c) for a Decree sustaining its Demurrer ~d dismissing Plaintiff's

Bill of Complaint for Declaratory and Injunctive Relief; and

(d) for such other and further relief as the Court may deem just and proper.

WHEREFORE, Modern Environments, Inc. prays that Plaintiff's Bill of

Complaint be dismissed.


By: J2~~9· u_)h~

-28-

Cecelia Ann Weschler WEINBERG & STEIN Dominion Tower 999 Waterside Drive, Suite 1825 Post Office Box 3789 Norfolk, VA 23514-3789 (757) 627-1066 (757) 622-6870 (facsimile)

CERTIFICATE

On March 7, 2001, I mailed a copy of this document to Kevin .E. Martingayle, Esquire, Stallings & Richardson, P .C., 2101 Parks Avenue, Suite 801, Post Office Box 1687, Virginia Beach, Virginia 23451.

Cecelia Ann Weschler

-29-

VERIFICATION

I, Lewis Harrison, President of Modem Environments, Inc., swear and affirm that the

facts contained in the foregoing A" " :' :ad Cross-Bill are true and accurate to the best of my

knowledge and belief.

~~ Lewis Harrison

COMMONWEALTH OF VIRGINIA CITY OF NORFOLK, to-wit:

Sworn to and subscribed before me, a Notary Public for the above jurisdiction, by Lewis Harrison, President of Modem.Environments, Inc. this 2,1rt:/ day of March, 2001.

f1 .... ~ a. r:k~ otary Public

My Commission expires: 6/30/2002

-3Q-

MODERN ENVlRONMENlS

. .

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, made this 12th day of April, 2000 between

MODERN ENVIRONME\rrs, a corporation of the Commonwealth ofVirginia, having its

principal office at 370 Cleveland Place. Suite 101, Virginia Beacht Virginia (the "'Company") .

3nd Johnnetta R Stinnett (the "Employee").

\VHF.REAS, the Employee and the Company are currently operating under an .. . .. .

· . e!Dpl9yment ;1greert!~nt, · · . · · · · . . ·. · . ·. ·

-~ ·~·:·.;: :: ~ ;~~; ~·.. ~·~~~~~:~~:,~.,~~~Fi:~s<~.~~:srii~I~y~~~~~:ihe CDiriPait~:w.rs.~.~~ ~nJhe. ili6-accotuis·.o .. r ~hicii· ilie = • · ·• ... : • .-::. ;. : ·• . .. ~ .. . . . • ~ . .. • . . •·• ' ..... ·• ·:. . . . .• •.. . ·: •. • . . . .. ::·.: . :: ~ : .. : .. . :J: . • ·::·: • . ;. .• :. ' : ':~ :.~.~.:: •• :·: ... • ·~~.-:. · .. :. ~~ ...... . -.:: ... ~ ·:' .

Ewploy~~c m~y ·work.

l

NQ\l.,'. THEREFO~ for and in consid~rc:stion ofth~ premi~. which are contractual ·

cpnsidcrations and not mere precatory recitations, and in consideration of the mutual convenants.

~d agre~ments hereinafter contained, and other good and valuable consideration deemed

edequate ~d sufficient in law, receipt whereof, at and before the signing and sealing of th~se

pre.~ent'i. is hereby ~cknowledged by the parties, the parties ~o hereby cov~nant and agree as

follows:

ARTICLE 1 EMPLOYMENT

1. J ~m=plo'' ment Term. The Company agrees to employ the Employee and the

Employee agrc..~s to accept such employment. in accordance with the tem1s and conditions o(this

Agreemen~ from the date of this Agreem~nt until such employment is tenninated as pro,rided

herein.

1.2 Duties. The Employee is engaged as a salesperson. TI1e place of employment

and serlices to be renderc:d shall be as the Company specifies and direct.<\ from time to time. The

E1nployee agrees: ta) to devote his entire time. skills. labor and attention co said employntent

during the ccnn of his employment; and (h.~.t~,: lo.~low carefully the instructions with respect to his ·

PLAINTIFF'S EXHIBIT

A

,_ ____ r/1.37

. .

MODERN ENVJRONMEN15

.·•

employment which he may reCeive from the Company. Employee agrees and acknowledges that

he owes. and will comply with, a fiduciazy duty of loyalty, fidelity and allegiance to act at all

times in the best interests of the Company and to take no action or fail to take action if such

action or failure to act would injure the Company's business, its interestS or its reputation.

1.3 Extent of Service. Employee shall not. during the period of this Agreement.

_ . -· eith~r directly o~ indire~tly, render services or oth<:r assistance, or pravide r~ouc~es of any kind:-

: ·=·:·i~~ ~~-:.. .:= =~;~·~:~ ;~~e~~-~~··tfi~~t;~ .... ~r~:~fti~(~:Aif.~iQ~{ ~~plo}~~,-~ti~~~¥!:PJ.~.i~.~;. ~~er ~~9~iy·: .. :.,-:. ~= :~. : ..... ·~-.:;. ·.~:··~ .:· ::_: ... .•. · .... · .. · • .. · ... · .... ·•.··• ~· : .·.·.r·· •.. .:·.·· ·:.~ , __ .: . .. ·· ".:.··.::· ... · •. ·· ·· ...•.. · ••

\vh~tht:r or not for consideration~· ~p ·~y petson~. ccirporati~n or ahf ertthy ·,:..•hich 0\\~s. o.perar<:s . .

ur conducts a business which sells any producL~ or services which ar~ similar or C(nnpc:titjv: to

those sold by Employer.

1.4 Compensation.

(a·J Salarv. The Company shall pay the Employee ~uc;h compensation as the ...

partieS agree upon during the penod of employm~nt as set fon:h hi Schedule A _attached.

(b) Expenses. The Company shall reimburse Employee for expenses

Employee incurs in his sales effons as set forth in Schedule B attached.

{c) Withholding. The Company shall withhold from Employee's

compensation such sums as 3J'e required by law and forward them as appropriate to the proper

goverrunenta1 agencies.

{d) Territorv or Listing of Accounts. The Company will give the E1nployee

a territory. or a li~1ing of accounts~ or a combination of both! as set forth in Schedule C anachcd.

(e) Other !\-tatters. The Employe~ shall not receive any compensatiun '-'ther

than that set t~1rth herein. Employee shall nol r~~cive ~ny p~1d vacaiiqn or holidays. Eniployec

-32-

...

MODERN ENVlRONMENlS

may schedule vacation periods as Employee desires. During such vacatio~ the Company shall

continue to pay to Employee any commissions earned in Employee's tenitory.

(f) Company's Right to Modlfv Schedules. The Company may modify the

tenns set forth in Schedule A. Band C attached at any time during the tenn of Entployee·s

. e~pl~yment.

(a) Either pwi.y may tcm1inatc: Empluy(!c:·s c:mployn1cnt. v.=ith or \vhhc•ut

cause., immediately by giving the other party written notice of an intent to terminate. This

Agre~rnent sha!l automatically terminate if Employee dies during its term or becomes totally

incapacitated and is unable to perfonn his duties. Thi~ A.grcemc:nt shall tenninate upon the

~~n~p3;11y'_s c~asing. to carry. on bu~.i~<;S$.. . ... . : . . ..

(b) - If the Employee is tenninated for any reason, the Company shall be

. obligated to the Employee only for commissions arising on sales ior ,.._.hich signed purchase

orders have been received by the company at its offices on or before the date the employment is

tc:rminated. On aU such sales as to which signed pw-chase orders have been received on or before . ~ie date of tennination of employ men~ the Company shall pay commis.~ions to the Employ~e

only when cash or its equivalent is received by the Company on such purchase orders. Purchase

orders that do not require any more significant time to complete \\ill be paid in full; others will

be paid 50~~ of nonnal commission percentage.

(cj In the event of receiving or giving notice of termination of employmcn~

the Employt!e shall imntediately return all records .. notes~ books, documentS. machinery~ sales

kits, samples and other items belonging to the Company or related to the company's business. [f

t:,~ cvcm th~ Employee do~s m.!l r~t.ID1 any of these iten1s and the company institutes legal

-33-

I

I i I

MODERN ENVIRONMEN15

....

proceedings to obtain the, the Employee shall be liable for the reasonable e.xpenses~ including

anomey's fees, of bringing such ·procc::edings and obtaining possessions of such items.

ARTICLE II INFORMATION

2.1 Nondi~closure of Information .

. ~ ... ~ .. : .. ·. ·.: . .- ....... ·=-.; .. ··: • {a}·,!: . Empl~~~c sha.U 9c b~ (orever .fro~t4~~los~ng any· .inforniati~n ~hi~h :: ~ ·, · . · . ~~-: ~··:·.··. :·: • .... :·~ ·.: ·;-= .. . ·.:·~:. ·-r:··,.··4', .,.,: ::-:\ -=·· .. ·.:.~:·~.::: ,·~:1 :.: :.·· •• :· .. • .. ~ ···~·- ·: • ;i ··:·· ··:·> ~;. ... · .: '··.·~ ... ; .::·.; :,.:: ::: .. ·· :·:· .. ,;.-:: .... :'.:.. :·. "t•.:.

· · ·· ·.- .. the·tomp~n~' has c:tciiomaiily co~sidc:red priviie:g.ed;'eciiin~eniial br .. proprfet"ary·: •nthiding;.'litii' ·. :· ·. ·.:'··::-::. ·: ... :1: .~:.<:

not lunited to. business procedures~ operations manuals~ empioy~c! coo1pensc:nion.' con1mission

and benc:fils schedul(!S. ntarketing plans, strategic plans, custon1er lists, pron1otional campaigns.

:md :my other business contracts, supplier relationships. andior resources developed by the

Company and used in its business, including any such resources and relationships developed by

Employee during lhe tenn of this Agreement. Employee shall not usc, disclose, disseminate or

in &Ul)' way corrunu:ticate any such confidential. privileged or proprietary inforinati•>o .. v.·hether

during the term or after the tenn of this Agree.ment.

. ARTICLE III

NON-COMPETITION

j .I Employee agrees that for as long as Employ~ rc:mains c:mployed by the company,

and tor a period of one (I) years after Employee's employment with the Company ceases.

Employee will not (i) dir~tly or indirectly, 0\\.11, n1anage, operat~ control~ be employed by,

participate. in. or be associated in any maMer with the ownership: managemenl·: opcrdtion. or

~ontrol of at~y business similar to the type of business conducted by the Company or any cfics

affiliates (a ··competing business''), which compc:ting business is within a fifty (50) mile radius (')f

the home ot~1c~ or any business location or locations of the Comp3.!..,Y or any of its aftilic:ues at

which Employ~e worked; (ii) solicit. aid, induce or encourage any officer. agent .. or employee to

-34-

..

MODERN ENVlRONNlENIS

•· ..

leave their employment with the company for the purpose of perfonniag services or becoming

employed with any business competitive with the business conducted by the Comp~y or any of

ics affiliates; (iii) induce any customers of the Company or any of its affiliates to patronize any

busiucss which conducts a business in competition \'vith the Company or any af its affiliates; and

(iv) directly or indirectly request or ad\'ise any customer of the Company or any of its affiliates

to wirhdraw. curtail or cancel such customer•s business wi(h th~ Company or any n.f its affiliates .

. . · 3.2 lf anv coun should determine that anv restriction hc:rein is unenforceable .. the . . . ../ . . . .

· ~··~ ·:··~··: = -; ·~· -~~p~rir~~· ~gf~· ih~i::ilit~obtjgiiil9its-~~e~ .. tfu~.~W.11 ·~haJf""~e~-~arQ"~bl~·r~~~·m#i~~--~~ ~ .. ~~;.: ·=. = .:.:.:. ·:.~!. :y:-. .. • • • • • • • • .. . • .. • • • • • • • • • • • • • .' • ..·.:· • ~ ·- • .:-·. *!. • •••• ·: • .......

and maximum gc:ograp~ical area allowable by {~'\.V.

ARTICLE IV l\1ISCELLANEO CS

4.1 Notices. All notices and other comnlWlications urtder this Agreement shall be in

writing and ~hall be deemed to have b~en delivered on the d3t~ personally delivered or on the - .

date mailed. postage prepaid. by certified mail., return receipt requc!~t~ .. emailed, nr telegraph~d - .

and confim1ed if addressed to the parties as tollo,vs:

If to the Employee: Johnnetta R. Stinnett, 217 Ct"osswinds Dr .. #105,

·· • · .. Cbesa.peake, VA 23320 OR (Employee's last kno"'n address that employee has notified personnel department at ~{odem Environments)

[f to the company: Modern Environments 370 Cleveland Place, Suite 1 0 I V~rginia Beach .. VA 23462

4.2 Eo tire Agreentent. This Agreement constitute~ the entire understanding of the

a~!'~~mcnt between the Company and the Employee with r~ga:d to all matters herein. Th~r~ ar~

-35-

MODERN ENVlRONlvlENlS

··-.

no other agreements, conditions or representations, be they oral or written.. e.'tpressed or implied,

with regard hereto.

4.3 Equitable Relief. The Employc::e acknowledges that a remedy at law for any

breach of . .1\rticles l or Ill of this Agreement will be inadequat~ agrees that the company shall be::

entitled to $peciJic perfonnance and injWlctive or other equitable relief in case of any such breach

. or attempted .breach and further agrees to waive any·requirem~t that $e Company sc:cilrc or post . -... :.-:·.:.·-::·~-: ·,·.:·.,.~·,.:.:.:··,. ·· .. ~:-·=.·· ... ···:-_. .. :.-~·.· .. : ... ~···· ,· ··~ :,_.:.: .. ··. :; .:-·.::· ... · ; .... . · .. -,: ._.: .. . · ... ·.::· .... ::·.:·.-· .~· ...

· .. · · · . · · ... any15Qnd ·tn c<n~n~cti~n·With :of:>~·~.~·~~~~'?~ .ihJ~~~~·.o~ ~qut~l~~~~ef .. -·~ .. : · ·: • . ~··: ~·\;.~ ... ·:··· .~;:.~·~ . .: .. :.·,·::.:.~-~-~-:~::!

4.4 Sun·h'!ll of Certain Obligation~. Noh\ithstanding anyt~1ing to Lhe \.:•.'nlre!.::

herein. Employee's obligations under Articles II and lll shall SUl"\ive any termination of

Employee's empl~ym~nt hereunder.

4.5 Assit!nmcat. This agreement may not be assigned by the 'Gn1ployee. Thi~

Agreement may be ~signed by the Company to any corporation which is affiliated with the

Company or to an}=- succe..<isor.

4.6 Binding Effect. Subject to the provisions of 4.5 of this Agreement .. this

· Agreement shall be binding on and inure to the benefit of the parties hereto. the Employee·s heirs

and the successors ind zssigns of the Company.

4. 7 Governing Law. This Agreement shall be construed and enforc~ in accordance:

with .. and governed by. the Laws of the commonwealth of Virginia. . .

4.8 Couotcrpar1s. This agreement may be executed in multiple original

counterparts. ~ach of which shall be deemed an original, but all of which together shall constitute

the same insuu:r.ent.

-36-

MODERN ENVIRO~

4.9 Waiver. The wai:verofeither party of any right hereunder or any breach of this

Agreement shall not operate as or be construed to be an amendment of this Agreement or a

\1-'aiver of any right or breach.

4.10 Gc:ndc:r. All refC:rc:nces to the masculine pronoun are u.~d for convenience and

case of reading only and. apply to the feminine gender as well .

. : •. · :: =· , •. :~: ·.-:. ~· ':,: ·:/IN. ~'ii~s:· ~~F-".~~~loye~,h3s~rfp:;~·hii:~~n~r.etci".~.:~ ~ntPUv: ;~:.,: ··; -:;· ~· ·~· . : !· . ; ~; ' • • 0 0 .. 0 ot •. ·:·. ~· .0 0 - 0~·. ·· .. :·~ ·· ... 0 .· ·.:--..... ~ ·~ .. ·:0 0. . .. ::·--: .. ·. -0:· :: :~0· 0 . . ·:0~· .•• 0 .. o.·~ •• · .•.

h~1s ca1i!'eci ir~ duly a~tht):-izcd ot1icers, and has caused its se31 to be hereur'lto .. ,affix~dothis 12th.

d!iy of April. 2000. Schedule A to be renegotiated yearly.

~lkv~ J\10DERN El\"VIRONl\fENTS

(\Vitncss)

~~ l!tvYJ4?iP V (Witness)

..

-37-

'.

·.

MODERN SCHEDULE A - El\{PLOYEE COMPENSATION

ENV1RONMEN15 This Schedule is subject to change from time to time throughout the Employee's

employment.

Payments will be paid to Employee based on. the: time which the Co1npany receives

payment for orders processed. Payments will be made on the 15th of each monch and v..ill be

based on a conwission rate of gross pro tit on an order. Inventory items are as set forth in the

inventory progr8J!l (o_i quantities and coounission n1te. Furniture items pay a 22~~ commission

': ·:; .• : · '.:. ;r;:t·~f ~ .io~'~;!ifi~;:;;w.~~ .!'fa~~· Sl(:.~~.·~~-¥.9f.~~:~o~.~ ... ~ :~~?:~~ .. ~~~ ~~9-.~r ,.~ ; :, :. ·:;i ·~'~-:. , ., : ~. . . .. . .. . . :.: . . . . . . . . . . ... , . . . .. ~ . . . . . . . . . .. . ... . . . : :. . . . . . . . ... . . ':.• . · ..

nl~'nth. · · ·.

The Company will pay all expenses related to travel. stay and school ~xpenses, if any.

Th~ company will pay for the employee's tuition, related travel and lodging expenses for

seminars .. the attendance at \\:hich '""ill enhance the Employee's sales. The Con1pany and the: . .

·. ·: .,. ... ~mp~~Y.<:~.n1~t ~g~~c ~s.l t~c.sc~n~ J~.-~d~~~e of_(h~ ~mJ?_l~t~~·s.~~ren~-~~c~. . .......

Employer \"'viii maintain for Employee's p311icipation a Profit Sharing Plan as approved by

the IRS and as administered by the fiduciary of the Plan .

. T}lt: Company agrees to provide health insw-ance tor the Employee with costs shared

90%- J 0~1o by the:company and Employee, respectively. This percentage may be changed front

time to time. ·Ibe Company makes spouse and family coverage available .. but the employee must

pay the entire amount oi this coverage.

-38-

. . ··,··

MODERN ENVlRONMENIS

· ..

SCHEDULE B-EXPENSES

This Schedule is subject to change from time to time throughout the Employee's

emplo~ent.

The Company agrees to provide at no cost to Employee coverage of ex.penses for thl!

Employee in his sales efforts. Th~. in general.. include telephone calls related to saJes eftons

..... : · .. ·~. and ~pprQprj~te.offic~staffto prQ\'id~ supp~!{, proposals.a:nd quotations that are ~e~tned . .......... , , -: :.·:·~. ·····-: :: • .t ·.·•. ... • .. ~-~~- • • ·".: :·' :.· .. ••••• ·~.: ·i,: ~ . .!' .... :.·,· •• : .. ••• •. ~ • • • ••• • ·: • ... ·.·' • '• ••• : •• • •• • ••• • .. • ... ;.; ·~.· .... ·... ~ • • •

· .. · ..... · ""netess~ b): tile'c.(;ti~·pariy ... ·The.~inpaA)'.,viri r1r~\:icie a.cdin{;ut~r ~nd~pag~r ~fno. cost to 'tf~e··. Employee.

Equipntent provided by the Company for the Employee renuins the property of the

company. The Employee may usc it to e~Tlce his sales effortS. The Employee is responsibh:

1br keeping the equipment in good condilion. The Employee will replace with equal value if it is

lost ot "damaged dUe ·.to impropc:r ·<:w-t: •. . "'-'. ~· -··.: . . .. .. • ...... . · ... i'···. : ·· .. . ...

•

' .

-39-

•' • :I • ,•. ; .. :· .:· . . : .

... ., .

..

MODERN ENVlRONrvlENIS

··-

SCHEDULEC TERRITORY OR LISTING OF ACCOUNTS

This Schedule is ~"Ubjc:ct to change fn?m tilne to time r~..roughout the Employ~e's

employment and al Modem EnvironmentS discretion as needed.

NORFOLK VIRGINIA BF.ACH

-: POR:fSMOUTH _· _.. . - ... CHESAPE!\K~- .· ..

. Sl:FFOLK NE\VPORT !\E\l..:S HA~iPTO~

\\'lLLIAl\·1S BURG

-4Q-


JOHNEITA R. STINNETT,

Plaintiff,

v.

MODERN ENVIRONMENTS, INC.,.

Defendant.

COMMONWEALTH OF VIRGINIA CITY OF NORFOLK, to-wit:

IN CHANCERY NO. CHOl-607

AFFIDAVIT

TinS DAY personally appeared before me, a Notary Public in the aforesaid

jurisdiction, Lewis Harrison, who, after being first duly sw~m, stated and deposed as follows:

1. My name is Lewis Harrison. I am a resident of Virginia Beach, Yirginia.

2. I am President of Modem Environments, Inc. ("Modem''). The home

office for Modem is in Virginia Beach, Virginia at 370 Cleveland Place, Suite 101, Virginia

Beach, Virginia 23462.

3. As President of Modem, I am familiar with Modem's employment of

Johnetta R. Stinnett ("Stinnett") and the employment agreement which Modem entered with

Stinnett on or about Aprill2, 2000. Stinnett's employment with Modem ended August 25,2000.

4. . Stinnett served as a salesperson for Modem. During her employment with

Modem, Stinnett solicited and served clients in Norfolk, Virginia Beach and the surrounding areas

throughout Hampton Roads.

. . '" I • -

fh

-41-

5. The document attached as Exhibit A to the Answer and Cross-Bill in this

case is a true and correct copy of the employment agreement which Stinnett entered with Modem.

Stinnett's signature appears on page 7 of the employment agreement.

6. Paragraph 3.1 of Article III contains a non-competition covenant which

precludes Stinnett from competing against Modem for one year following the end of her

employment within a 50 mile radius of the home office or any business location or locations of

Modern or any of its affiliates. As the employment agreement provides, this covenant. survives the

tennination of Stinnett's employment.

7. Contrary to her employment agreement, Stinnett has become employed by

Chasen's, a business which competes with Modern. Chasen's principal place of business is 5365

Robin Hood Road, Suite B, in Norfolk, Virginia.

8. The location of Chasen's in Norfolk is within a 50 mile radius of the location

where Stinnett formerly worked for Modem.

9. · Stinnett's competing business activities will cause irreparable harm to

Modem's business interests. In addition, if Stinnett discloses certain proprietary information to

Chasen's, Modem will suffer substantially along _with the injury. to its business and.proprietary

interests that cannot be restored by payment of money damages.

10. It is extremely important for Modem's continuing business operations that

Stinnett be prohibited from violating the non-competition covenant contained in her employment

agreement.

-42-

WITNESS the following si~ ~

LE S HARRISON

Subscribed and sworn to before me this .2ncl day of March, 2001.

il~-·!fo Q Y3J .. ec • · otary Public

My Commission expires: 6/30/2002

-43-

PltiiMRRD BY STALUNGS

AND RICHARDSON




Plaintiff/Cross-Bill Defendant,

v. IN CHANCERY NO.: CH01-607


Defendant/Cross-Bill Plaintiff, .

ANSWER TO CROSS-BILL

NOW COMES your Plaintiff/Cross-Bill Defendant, Johnetta R. Stinnett

(hereinafter "Stinnete), by counsel, and answers the Cross-Bill loc;tged against her

as follows:

1. Paragraph 1 of the Cross-Bill is admitted with the exception· of the

allegation that Modem Environments is in the business of"designing" office furniture

which Stinnett can neither admit nor deny, and therefore denies.

2. Paragraph 2 of the Cross-Bill is admitted.

3. Paragraph 3 of the Cross-Bill is denied . .

4. Paragraph 4 of the Cross-Bill is admitted.

5. Paragraph 5 of the Cross-Bill is denied. ·

6. Stinnett admits that she is employed by "Chasen's", and admits that

there is some overlap regarding the type of business conducted by Chasen's and

Modern Environments. Stinnett further admits that the companies are located within

50 miles of each other. S~innett is unable to admit nor deny the rest of this

paragraph.

-44-

Fn ~n ....... '-"

.... "'C''- ~"''r"'T VA BE ...... ,•r···• .... " ... . · ""'~n -...1r. v ., • <~..,_ ..

0 J MAR 13 Pii 4: 0 I ''r.1'"' -~·.r !l r rt c·;l,( J. Cu1{ ~~ n· . ..,, • , v · ;..hn

Pl'llli'IU'm BY STAWNGS

AND RICHARDSON

VIRGINIA BEACH. VIRGINIA

7. Stinnett admits to signing the document labeled Exhibit A ref~renced .

in Paragraph 7 of the Cross-Bill. Stinnett denies that the document is valid,

enforceable, and/or binding in any respect.

8. Paragraph 8 of the Cross-Bill is denied.

9. The identified document speaks for itself. Stinnett denies that the

document is valid, enforceable, or binding in any respect whatsoever.

1 0. ~tin nett denies that she has violated any valid contract or agreement

with Modern Environments.

11. The identified document speaks for itself. Stinnett- denies that the


12. The identified document speaks for itself. Stinnett denies that the


13. Paragraph 13 of the Cross-Bill is denied.

14. Anything not admitted herein is denied.

15. As a part of her answer and grounds of defense to the Cross-Bill,

Stinnett affirmatively re-alleges all of the allegations set forth in her Bill of Complaint.

16. Stinnett deoies that Modern Environments is entitled to any type of

relief, whether legal or equitable.

WHEREFORE, for the foregoing reasons, your Plaintiff/Cross-Bill Defendant,

Johnetta R. Stinnett, respectfully requests that this Honorable Court dismiss the ..

Cross-Bill exhibited against her, that she be awarded all costs and attorney's fees

incurred herein, and such other and further relief as deemed appropriate under the

circumstances of this litigation.

2

-45-

PRIIEMit&o BY

STALUNGS AND

RICHARDSON VIRGINIA BEACH.

VIRGINIA


CERTIFICATE

I hereby certify that a true copy of the fore oing was faxed and mailed this 13th day of March, 2001, to Cecelia Ann Wesch r, ~ttorney at Law.

3

-46-

PRaMREDBY

STAWNGS AND

RICHARDSON VIRGINIA BEACH,

VIRGINIA







DEMURRER


(hereinafter "Stinnett"), by eounsel, and demurs to the Cross-Bill exhibited against

her on the following grounds:

1. The contract pled by the Cross-Bill Plaintiff is over-broad,

unenforceable, and void on its face without the necessity of taking evidence. Some

of the defects in the contract are indistinguishable from those discussed in Rota-Die

v. Lesser, 399 F.Supp. 1515 (W.O. Va. 1995).

2. Because the Cross-Bill Plaintiff relies upon a void and unenforceable

contract to enforce its right to injunctive relief, there is simply nothing to litigate.

· 3._. . . -. · Beca~se 1he contract. which is the foundation of the Cross-.Bill is

defective and void, no amendment to the Cross-Bill can save the former employer's

claims.

WHEREFORE, for the foregoing reasons, your Plaintiff/Cross-Bill Defendant, ...

Johnetta R. Stinnett~ respectfully requests that this Honorable Court sustain her

Demurrer and dismiss with prejudice the Cross-Bill exhibited against her and award

-47-

FILED MAR 13 2001

J. <.,,;RnS ~UIT, Clark va. fleac\' J"~~'Cflit Cowt __

PRKMRCDB't STAWNGS

AND RICHARDSON


attorney's fees,· costs, and such other and further relief as deemed appropriate

under the circumstances of this litigation.

Kevin E. Martingayle, Esquire STALLINGS & RICHARDSON, P.C. ·21 01 Parks Avenue, Suite 801 Post Office Box 1687 Virginia Beach, VA 23451 (757) 422-4 700

CERTIFICATE

I hereby certify that a true copy of the foregoing was faxed and mailed this 13th day of March, 2001, to Cecelia Ann Weschler ttomey at Law.

2

-48-

PRIII"RIID BY

STALUNGS AND


VIRGINIA


JO.HNETTA R. STINNETT,



MODERN ENVIRONMENTS_, INC.,


MOTION TO STRIKE


(hereinafter "Stinnett"), by counsel, and moves to strike the Affidavit attached to the

Cross-Bill exhibited against her as follows:

1. Modem Environments has filed a Cross-Bill of Complaint against

Stinnett. Attached to the Cross-Bill was an "Affidavit" signed by "Lewis Harrison",

who is identified a "President of Modem Environments, Inc."

2. To the extent that this Affidavit is simply a part of the pleading, it is

permissible, but to the extent that this Affidavit is intended to be taken as "evidence"

or is intended to be considered by the Court absent sworn testimony, is it not

admissible.

3. While affidavits are used with great regularity in the federal court

system, they are generally inadmissible in the state court system, and Stinnett

objects to any testimony or evidence presented by Modem Environments through ...

the use of swam affidavits. The material assertions contained in Mr. Harrison's

affidavit are in dispute, and therefore Stinnett must be afforded the opportunity to

cross-examine. flf c:-;; v ;\ r= .- t -. • J ~,~-. ....... :-.:. f- .._

' '-'- ;. v {I "'1 • ._.'.I· • f'P I""-•· • • • · ... v~;~ 1

0 I I--'.~~ l3' ,..,. f . :n:. r ;; 4: 0 I

-49-

PIIKMRCBV

STALUNGS AND


VIRGINIA

WHEREFORE, for the foregoing reasons, your Plaintiff/Cross-Bill Defendant,

Johnetta R. Stinnett, respectfully requests that this Honorable Court strike the

Affidavit from consideration to the extent that it is offered as independent testimony

or evidence.

Kevin E. Martingayle, Esquire STALLINGS & RICHARDSON, P.C. 2101 Parks Avenue, Suite 801 Post Office Box 1687 Virginia Beach, VA 23451 (757} 422-4 700

CERTIFICATE

2

-so-

PltiiMftSD B'f STALLINGS

AND RICHARDSON

VIRGINIA BEACH, VIRGaNIA


JOHNETT A R. STINNETT,


v. IN CHANCERY NO.: CH01-607 .


Defendant/Cross-Bill Plaintiff,

. PLAINTIFF'S BRIEF IN SUPPORT OF HER REQUEST FOR RELIEF. AND IN OPPOSITION TO THE CROSS-BILL


{hereinafter "Stinnett"), by counsel, and files this brief for consideration by the

Honorable Court in anticipation of the initial hearing on this matter scheduled for

March 15, 2001.

I. LAW AND ARGUMENT

A. THE LAW OF COVENANTS NOT TO COMPETE

The standard for judging covenants not to compete contained in employment

contracts is the following:

1. ·Is the re~traint, .from the standpoint ofthe employer, reasonable in the sense that it is no greater than is necessary to protect the en;1ployer in some legitimate business interest?

2. From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to eam a livelihood?

3. Is the restraint reasonable from the standpoint of a sound public policy?

Richardson v. Paxton Company, 203 Va. 790, 127 S.E.2d 113 (1962)(emphasis added); Rota-Die Co .. Inc. v. Lesser. 899 ... ft~~P· 1515 0ft/.D. Va. 1995); Pais v. Automation Products.~~~·! ~t~~-::Xir:· !:::;~~.7 230 (Newport News 1995)(all three cases attachec'1 nereto}.r~ ·

0 l ll. :~ C'l ! 3 ~;: ~ 4: 0 \ r·1tj.r. \ ' '•

-51-

•• _ •• r-•·-1 n- ;.., ~~:'/

J r-• !!• ; - •· :. i. . ;· :.... ... o\1\ • ·\..rvt· ... t- ' ·~·' ··•.'

\I

P~qMIIIICDBY

STAWNGS AND


VIRGtNIA

"As a general rule, Virginia law does not look favorably upon restraints of

trade. The employer bears the burden of showing that the restraint is

reasonable." Grant v. Carotek. Inc., 737 F.2d 410, 411 (4th Cir. 1984)(emphasis

added}( attached), citing Alston Studios. Inc. v. Gress & Associates, 492 F.2d 279

(4th Cir. 1974); Richardson v. Paxton. Co., 203 Va. 790, 127 S.E.2d 113 {1962).

"More importantly, Virginia law requires that non-competition clauses be

strictly construed against the employer." Grant v. Carotek. Inc., 737 F.2d 410,

411 (4th Cir. 1984)(emphasis added), citing Alston Studios. Inc. v. Gress &

Associates, 492 F.2d 279 (4th Cir. 1974); Richardson v. Paxton. Co., 203 Va. 790,

127 S.E.2d 113 (1962)(other citations omitted).

When covenants not to compete are defective, they are not re-written or

"blue-pencilled". Rather, defective anti-competition covenants are void and ·

unenforceable. Rota-Die v. Lesser, supra; Pais v. Automation, supra.

B. THE FUNCTIONAL LIMITATIONS CONTAINED IN THE EMPLOYMENT CONTRACT ARE OVER-BROAD. AMBIGUOUS. AND UNENFORCEABLE AS A MATTER OF LAW.

The contract at issue s_tates that · during th~~ perio~ · of non-·campetition,

Stinnett may not:

... (i) directly or indirectly, own, manage, operate, control, be employed by, participate in, or be associated in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the Company or any of its affiliates (a "competing business"), which competing business is within a fifty (50) mile radius of the home office or any business location or locations of the Company or any of its affiliates at which Employee worked; (ii) solicit, aid, induce or encourage any officer, agent, or employee to leave their employment with the company for the purpose of performing services or becoming employed with any business

2

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PR ..... IKDBY STALLINGS

AND RICHARDSON VIRGINIA BEACH,

VIRGINIA

competitive with the business conducted by the Company or any of its affiliates; (iii) induce any customers of the Company or any of its affiliates to patronize any business which conducts a business in competition with the Company or any of its affiliates; and {iv) directly or indirectly request or advise any customer of the Company or any of its affiliates to withdraw, curtail or cancel such customer's business with the Company or any of its affiliates.

First, this language fails to define exactly what business it is that Stinnett is

prohibited from doing. It simply fails to name any activity. Consequently, it is too

vague to be enforced.

Second, this language prohibits Stinnett from engaging in any activity which

is "similar to the type of business conducted by the Company", without defining

what is "similar". There is no way for Stinnett to determine exactly what activities

and enterprises are "off limits" from this type of vague language. The burden is on

the employer - - not the employee - - to put together a very well-defined, carefully

tailored agreement.

Third, as the subject employment agreement indicates, Stinnett was

employed as a "salesperson,.. There is no other description of her activities set out

in the agreement, yet, presumably, her job was to sell something for the benefit of

Modem Environments. However, instead of simply restiicting Stinnett and her ability

to sell products for future companies, people, and entities, instead, Modem

Environments relies upon a contract which says that she may not "own, manage,

operate, control, be employed by, participate in, or be associated in any manner with ...

the ownership, management, operation, or control of any business similar to the

type .... ". Further, not only is she restricted from doing these things directly, but also

3

-53-

PRIEMAm BY STALLINGS

AND RICHARDSON


indirectly. This sort of over-broad language can lead to absurd results, and has

been rejected by tribunals in this Commonwealth repeatedly.

In Rota-Die Co .. Inc. v. Lesser, 899 F.Supp. 1515 0fV.D. Va. 1995), the

functional limitation language contained in that employment contract stated that the

employee could not:

(d) Engage in or be associated with any trade or business involved in the manufacture or sale of EDM'd or mechanically engraved or milled rotary tooling (hereinafter referred to as "Competitive Business"). EXECUTIVE shall be deemed as being directly or indirectly engaged in or associated with a Competitive Business if EXECUTIVE becomes· a principal, director, officer, employee, agent, consultant, partner or individual proprietor of or becomes financially interested in any such business ....

Rota-Die, 899 F. Supp at 1517, 1518.

In analyzing the above language, Judge Kiser wrote:

Turning first to the issue of overly broad scope of activities, I believe that Lesser's argument is well-taken. Lesser focuses upon the language in paragraph 7(d} that prohibits him from being an "employee" of any "Competitive Business." Strictly construed against the employer, which means in this context ·to give the broadest possible meaning to the language, this provision would prevent Lesser from working In any capacity, including that of a janitor, for a "Competitive Business."· Lesser· relies principally upon Richardson, Grant, and Power Distribution. Inc. v. Emergency Power Engineering. Inc., 569 F. Supp. 54 (E.D. Va. 1983)(Merhige, J.).

I agree with Lesser that the covenant not to compete is void on its face. The provision contains no functional limitation as to Lesser's work with another employer. Thus, construed strictly against the employer, it could be read to prohibit any type of employment, even employment outside the scope of the work Lesser did for Micrometries.

Rota-Die, 899 F. Supp. at 1520 (emphasis added).

4

-54-

PftU~Utm BY STAWNGS

AND RICHARDSON


The exact problem identified by Judge Kiser in Rota-Die, supra, is present

here. Stinnett's contract prohibits her doing anything as an employee of any

competing company, including functions she never performed. To use Judge Kiser's

example, Stinnett may not work as a janitor for a Newport News furniture company.

Likewise, Stinnett may not own stock in a publicly traded company which competes

in any manner. Clearly, this goes beyond what is necessary to protect Modem

Environment's legitimate business interests.

In striking down an overly restrictive covenant in Pais, supra, Judge Robert

P. Frank wrote:

In addition, the covenants totally prohibit Mr. Pais from dealing with any business regardless of whether the business concerned office furniture [the relevant business]. Thus, Mr. Pais is prohibited not only from buying cleaning supplies from the same business as API, but· also from catering· an office party for API's customers.

Pais, 36 Va. Cir. at 238. See, also, Cliff Simmons Roofing. Inc. v. Richard W. Cash, VLW 099-8-216 (Rockingham Co., June, 1999) (attached), citing Grant, supra, and Pais, supra, as favorable authority.

In Alexander v. Kandaro Shah, CH94-401 0 (Virginia Beach, July, 1995)

· · ·· {pl-~adings and decision attached), the Ho~orable A .. ·e.onwiil Shockley addressed a

case in which a doctor employed by a medical pr~ctice as a gastroenterologist

sought relief from a written employment contract containing non-competition

provisions. The functional limitation part of the contract provided that upon

termination of the contract, the doctor agreed not to "engage in the practice of

medicine~ within a 25-mile radius of any of the employer's offices and at any of the

hospitals at which the employer practiced for a period of 2% years. In granting

5

-55-

PMMRI!D BY STALUNGS

AND RICHARDSON


summary judgment for the employee, by letter opinion dated July 21, 1995, Judge

Shockley wrote:

The Court now finds that the contract's prohibition against practicing medicine of any kind is broader than necessary to protect the employer's legitimate business interest, since the employer is not-·engaged in the practice of all fields o{ medicine. Therefo~e, the contract's anti-competition provisions fails the first prong of the three-prong test followed in Virginia. {Internal citations omitted). ·

Of course, at least the contract in Alexander. supra, made some attempt to

define a functional limitation, i.e., the "practice of medicine", but even that defined

activity was found to be too broad. Here, Stinnett's contract is completely open

ended and therefore is even more defective than what Judge Shockley invalidated

in Alexander.

wrote:

In Rota-Die, supra, Chief Judge Kiser of the Western District of Vir~inia

As Judge Merhige astutely observed in Power Distribution, "the court need not determine the exact reach of the covenant in order to conclude it is over-broad. The fact that its reach is so difficult to determine and may so easily exceed in effect the permissible reach renders the covenant over-broad." 569 F. Supp. at 58. The mere act of subj~cting the employee to the uncertainty of an ambiguous provision offends public policy. I d.

Roto-Die v. Lesser. 899 F. Supp. 1515, 1521 (W.O. Va. 1995) {emphasis added).

Finally, there is no evidence which Modem Environments can learn through

discovery and/or present in any future trial to justify allowing this litigation to linger

any longer. The restrictive covenants relied upon by Modem Environments are

facially ambiguous and over-broad, and evidence cannot fix that problem. See, !L.Q.:.,

6

-56-

PRWEMRIED BY

STAWNGS AND


VIRGINIA

Cliff Simmons Roofing. Inc. v. Cash, VLW No. 099-8-216, Rockingham Co. (June,

1999) (defendant employee's demurrer sustained based upon facial invalidity of

employment restrictions); Grant v. Carotek, 737 F.2d 410,412 (4th Cir. 1984) (" ... on

its face the non-competition clause fails to pass muster~").

WHEREFORE, for the foregoing reasons,· your Plaintiff/Cross-Bill Defendant,

Johnetta R. Stinnett, respectfully requests that this Honorable Court sustain her

Demurrer to the Cross-Bill of Complaint, declare that the subject employment

agreement is over-broad and unenforceable as a matt~r of law, award attorney's

fees and court costs, and grant such other and relief as deemed appropriate under

the circumstances of this litigation.


CERTIFICATE

I hereby certify that a true copy of the foregoing was faxed (w/out cases) and mailed (w/ cases) this 13th day of March, 2001, t Cecelia Ann Weschler, Attorney

·at Law.

7

-57-

I en CQ

I

'

790 RICJJARDSON \'. Pll"TON CoMPANY, 203 VA. 790. Syllabus.

§taunton

RAY 0. RacuAnosoN v. PAXTON CoMl,ANY.

August ll, 1962.

Record No. 5414.

Prcsem, Et:glcsron, C. )., :uul Spr:atle)•, Uuchan:m, Snentl, I'Anson :and C:arrico, JJ.

(I) llcsan•int of Trade-Covenant by Employee Not to Compcac-llules as an Villidity Stn&ed. .

(2) Restraint of Trade-Covenant by Employee ;Not to Compete-Held Ian·alid Because Unrcasoambly Restrictive.

I. Covcn:ams in :m employment contract resrricring rhc employee's acrivilies :afrer employment terminates will be enforced unless unnecessary for the emJlloyer's protection or unnecessarily restrictive of the rights of &he employee or contrary to public a•ulicy. Each c:asc turns on ics (:acts, but the emph>)'er h:as the burden of proving that the restraint is reasonable. Ucing in restraint of tr::adc, the covenant is carefully examined, and is more limired in scope between employer :uul employee rhan a similar co,•enam between seller and buyer.

2. Richanlson was employed by Paxton Company as :a salcsm:m of a specialized Jine of marine &lroducts. 1-lis contract prohibired his engaging in "any br:anch" of activities reJ:uing to any kind of marine or industrial supplies, equipment or sen•ice in :m area covering Virginia and se,·cral other states lor three )'Cars after termination of lhe employmem. \·Vhen Paxton Company's franchise ro sell this line was cancelled, Richardson :acccprcd n selling position with the manufaclurer nf it and Paxton Comp:my filed a bill to enforce the

. covenant. But because the rcsrraint was unreasonably broad in that it encompassed acdvities in which Paxton Comtl:any was not engaged, decree granting an injuncdon was reversed.

Appeal from a decree of the Circuit Court of the city of Norfollc. I-Ion. Clyde I-1. Jacob, judge presiding.

Reversed mia din11issed.

The opinion states the case.

He·llry E. Howell, ]r. (Howell, A1111hzos & Dmegberty, on brief), for the appcllaot.

Ltttber J·V. T-V bite, Ill (l·Vortbingto1l, J,Vbite & Harper, on brief), for the appellee.

RtcUAIUlSON v: PAXT~N CoMPANY, 203 VA. 790. 79 Opinion.

SNEAD, J ., delivered the opinion of the court.

Paxton C01npany, i\ \lirginia corporation, filed a bill of complair in which it sought to have Ray 0. Richardson enjoined and resrrainc· fro1n .. entering or engaging in any branch of n1arine or industri~ supplies, equipn1enr, services business .. in the states of Virginia, Non. Carolina, South Carolina and lvlaryland for a period of three yem

·from J\1arch 3 I, 1961, the date he tenninatcd his employment \Vit

Paxton Company, hereinafter called P•txton. In the altermttive, th bill as Iced th~t Richardson be restrained from engaging in sue businesses for a period of time nnd in an area the court found to b reasonable· for the protection of Paxton's lcgitianntc interests. Th relief prayed for \Vas premised upon the restrictive provisions of :u employn1ent contract Richardson had entered into with Paxton. Aftc hearing the evidence ore te11ur, the chancellor awnrdcd the injunctio: for three years but lllitde it applic;lble only in the Commonwealth o Virginia. ·

Paxton Con1pany is engaged in the business of selling mnrine an• industrial supplies, paints, chemicals and services, ha\•ing its principn office in Norfolk. It has customers in \Tirginin, Nonh Carolin:1 l'vlaryland· and also a "fe\vu in Delaware and South Carolina. Th company's operations consist of several departments, one of which i the chemical and cleaning department. ·

On April 18, 1957, Ray 0. Richardson, who \Vas age 23 and with out experience in this particular business, \Vas en1ployed by Paxton a an assistant in the paint section on a "flat salary .. basis. By contrnc dated Decen1ber 30, 1958, Paxton was appointed distributor for prod ucts manufactured by Gamlcn Chemical Company "for the territor! 1cnown as Norfolk, Ponsmouth and Newport News ... It had former ly been a distributor for Gamlen, but the contract \Vas rescinded h! Gan1len several years prior to the new contract. The agrecn1ent pro vided, amc;mg other things, that all sales be invoiced by Gan1len. Th Gamlen products include solvents, chcanical cleaning anaterials, pre servatives, acids etc., \vhich are used to remove scale f roan bmler and evaporators and. as a preservative. !cchnical sldll .and .. specia lcnowlcdge" nrc reqmred of the salesman an order to ad vase customer of the proper materials to use for a particular job. A \vrong applica· tion of the products \Votlld cause damage to the equipment aa1<l the misuse thereof \vould cause iniury to persons \Vorlcing \vith it as th< chemicals arc roxie and harmful to the slcin.

Paxton placed upon Richardson the "primary responsibility" fo1

I U\ cc I

792 RICHARDSON v. PAXTON COMPANY, 203 VA. 790. Opinion.

the sale of Gamlen's products. l-Ie \Vas sent to a training school held .by Gam!cn in New J~r~ey to learn the derails of rhe usc of the produ~ts. 1-IJs tr:lVcl ~nd hv1ng expcns~s the~·e were paid l>y Gaanlen anti Ius. salarY. was pa1d by Paxton. I-lls ~ut~cs with Paxron not only requued hun to sell, but also to a{>J>ralse JObs, select the chen1ical and oversee the application of it. - c sold products other than those m:mufactured by Gamlen and assisted ·in the training of salesmen. Rtchardson became proficient in his \Vorlc, intimately acquainted \Vith some of Paxton's customers and their needs for its products, and WitS a villuablc man to Paxton.

In Apri! 1960, !?axton decided it should change the method of coa~1pcnsanon for us lcey en1ployees from a salary to a commission basts and set the terms out in a written contract. vVillinan P:lxton president of the company, testified that the decision \Vas made becaus~ u would be a ufurther incentive for them to do a little more than a man docs normally on a fiat salary.'' Guy R. Beale, Jr., vice-president and secretary, stated that an additional reason for the contract was because in the past the company had developed certain unlcnown lines :md later had then1 withdrawn, and that as a "safeguard", the management thought it advisable "to secure these salesmen on a contract'' and in return give then1 adequate compensation. I-Ie further stated that Gam len had previously withdrawn its line from Paxton and had mlcen one of irs lcey salesmen at that time. A contract of employment W&lS prepared by Beale f rmil some legal fonns he had in his oflice and wirhout rhe advice and assistance of counsel. Willian1 Paxton testified chat it was intended .to obligarc the company to employ Richardson for five years and to obligate Richardson to \vorlc for It

for the same period of time. The contract which Richardson executed \vas dated April 1 S, 1960,

and the pertinent portions thereof follow: "I. 1 .. he Salesman ( Richards~n] agrees to continue in the service

of the Company as a salesman of anarine and industrial equipment, supplies, services and goods distributed by the Company and of such articles as the Company deems necessary to assist it in the distribution of irs products in the States of Virginia, North Carolina, South Carolina and Maryland for a period of five years from l\4ay 1, 1960. Both parries reserve the right to cancel this agreement with thirty ( 30) days written notice in the event of either party•s failure to live up to the provisions stated herein.

• • • • • .. ..

. ! ' l

t ! .•'

}tJCIIAlmsoN v.· .PAXTON CoMJ•ANY, 203 VA. 790. 793 Opinion.

.. 8. The Salesman agrees that he wHI not, directly or indirectly, either as principal, agent, or servant, for the tcrnl of three (3) years after any tcrmmation of said cnlploy•nealt, enter or engage in any branch of marine or industrial supplies, equipment, services business in die territory, without the \Vriucn consent and approval of said Comp~ny ...

Paragraph S provided a formula for computing compensation on a commission basis, the details of which arc not imporcant for a determination of the issues here involved. Suffice it co say that by this method of payment Richardson•s coanpensation increased substantially over the fixed salary he \vas receiving.

Later George E. Lawson, cast coast supervisor for Gan1len, told William Paxton thar he thought the company .should get more volun1c of sales in the territory and sugR'csted that Richardson unot be dcd up too much" in supervising b01lcr cleaning so that he could spend more time selling. According to Lawson, Gamlen decided in December, 1960, to wid1dra\V Paxton's franchise, and on lvlarch 1, 1961, gave notice in writing, in accordance with the terms of the contmct, thar it would terminate the contract on Mny 31. La\vson stated that he made such recommendarion to Gamlen, because he did nor rhinlc the area was being "covered .. properly. .

In the latter part of February 1961, Richardson n1et \Vith representatives of Gan1lcn in New Yorlc. There he \vas told that Paxton's distributorshil> \\'ould l>e terminated. Later he was ofT ered a position with Gam en ns sales representative for Virginia and North Carolina, which he agreed to accept. Richardson (PVC notice to Paxton of his intention to resign from his employment effective March 31, by letter dated March I, \vhich was the same day Gamlen advised Pnxton thnr the distributorship \vould be \Vithdrawn. I-Ie had prior theretg consulted an attorney as to \vhether his contract \Vlth Paxton \vould prohibit him from accepting the position \Vith Gamlen and he was advised that he was not bound by the contract. Richardson testified that at the time the employment contract was n1adc he thought both parties \vere bound under it. Upon receipt of Richardson •s letter of resignation, Paxton \vrotc him that it considered paragraph 8 of their contract, supra, binding, and that if he violated irs provisions. appropriate action \\'Ould be talccn to enforce them.

Richardson assumed his duties with Gamlen on April J, pursuant to a written contract, and an office and a \Varehouse \Vere obtainea in Norfollc. I-Jc testified that neither he nor Gamlen intended to enter the acid cleaning busin~ss as c~nductcd. by Paxton. Paxton secured

- I en Q

I

794 RICHARDSON v. PAXTON CoMl'ANY, 203 VA. 790. Opinion.

rhc diS[ributorship of T ricon products, which nrc comparable ro the ~inc sold by Gmnlen, and employed a new man to head the deparunent formerly headed by Richardson. On April 6, Paxton filed irs bill against Richardson to enforce the restrictive covenants contained in paragmph 8 of their contract, rupra. By decree of A•lay 12, 1961, the chancellor enjoined and restrained Richardson "front eauering or engaging, either directly or indirectly, either as principal, agent, or servant, in any branch of marine or industrial supplies, equirntenr, services business, within the State of Virginia" for •• period o three years after A4arch 31, 1961. l~he entry of this decree gilvc rise to this appeal. ·

In his assignments of c1-ror, Richardson alleges that d1e ch:mcellor erred in decreeing that the negative covenants and restrictions conrained in the contract were reasonable and enforcenble, and in decreeing injunctive relief.

Richardson argues that the restrictions placed on hiin \Verc greater than necessary to prorect Paxton with respect to the purpose of rhe employment contract; that they were unnecessarily restrictive of his rights; lh:n Pilxton did not prove il case for injuncdvc relief; that the contract was unenforceable for laclc of mutuality, and that the chancellor having concluded that rhc restrictive covenant as to area was run broad, he should have voided the entire agrecn1ent.

[ 1 ) \Vhcther restrictive covenants in ;ul employment contract \viii be enforced in equity depends upon the fncrs 111 each particular case. ,Hcisscl ''· Fiulcy, 198 \Ia. 577, 579, 95 S. E. 2d 186; 36 An1. Jur., Restraint of Employee after Termination of Service, § 79, p. 555. In the ,1-/cisse/ case \VC quoted with approval as a guide to decision from l¥ elco111t! 1Vagon "· ,\-Jorrir, 4 Cir., 224 F. 2d 693, 698, \vhercin rhc court stated: ·

u~ • • i\4odcrn courts have usually, in passing on these contracts, employed rhrcc .criteria: ( 1) Is the restraint, front rhe standpoint of the employer, reasonable in the sense rhat it is no greater than 1s necessary to protect the employer in some legitimate business interest? (2) From the smndpoint of the employee, is the restraint reasonable in the sense rhat it is not unduly h;ush and oppressive in curtailing his legitimate elf arts to earn a livelihood? ( 3) Is the restraint reasonable from the standpoint of a sound public· policy?,.

In J·Von·ie v. Roze, 191 Va. 916, 926, 62 S. E. 2d 876, 881, \Ve said:

"That restrictive covenants of this character which reasonably protect the cmploycr•s business and arc incident and anciiiary to the con-

t~ •. .. ''ll ;~ :

I

RICHARDSON v: ·PAXTON CoMPANY, 203 VA. 790. 795 Opinion.

tract of employment and limited as to area anc.l duration arc enforceable in equity is not open to question." • • • Such covenants \viii be enforced " 'unless found to be contrary to public policy, unnecessary for the employer's protection, or unnecessarily restrictive of the rights of the employees, due regard being had to the .suhjcct-ntattcr of the contract and the circumstances and conditions under which it is to be performed! .. See Jl'Jeissel v. Fi11/ey, supra, 198 Va. at page 580.

I' or a further discussion of restrictive provisions in an entploymcnt contract, sec ~rtbur 1Hur-ray Da11ce Studior v. H~'ittcr, 62 Ohio La\v Abst. 17, Ohio Com. Pl., 1 OS N. E. 2d 685, and cases there cited. · In· cases ~f this t)'pe the employer has the burden of proving that the restraint is reasonable and the contract is valid. Smce the restraint sought to be imposed restricts the employee in the exercise of a gainful occupation, it is a resrrnint in rr;tdc, and it is carefully examined .and strictly construed before the covenant will be enforced. Moreover, the scope of Jlermissible restraint is "more limited between employer and employee than between seller and buyer, and the covenant· is construed favorably ro the employee. A,-tbur A~lrnTay Dm1cc Studior v. l·Vittcr, supra.

(2] I-Ierc. the restrictive coven:tnt provided that Richardson 'vould. not "directly or. indirectly, either as principal, agent, nr scrvnnr, for the term of three ( 3) years after any tcnnination of s:1id entployntcnt, enter or engage in any brn11cb of marine or industrial supphes, equipment, services business in the territory • • ... • (Emphasis added.) 1-he territory had reference to the stares of Vi1·ginia, North Carolina, South Carolina and l\'laryland. !"he covenant not only restricts Richardson from selling, but prohibits him front entering or engaging in ":1ny branch'• of acriviues relating to any lcind or type of ntarinc or industrial supplies, any ldnd of ntarine or industrial equipment, and any Jcind of marine or industrial $ervice in the restricted area. The restraint imposed is too broad and it cncontpascs activities in which Paxton is not engaged. Such rcstrnint is unreasonable in that it "is ~renter than is necessary to protect Paxton in his legitimate business mterest, and it is unreasonable from the standpoint of Richardson because it is unduly harsh on. him in curtailing his lcgirintate elforrs to earn a livelihood. Thus it cannot be enforced .

!-laving reached this conclusion, \ve do not consider it necessary to discuss other questions raised. -

For the reasons indicated, the decree appealed from is reversed. the iniuncrion dissolved and the bill dismissed.

I

Rcvcrrcd a11d dinuisscd.

I B

ROTO-DIE CO.., 1~·c . ...-. LESSER C!tt&aai' F.Sui'='· ljl.S CW.D.\"£. lfl3J

Tr.;~ ca:a is yet a:.o:.~er e:1t:a."lt L"l a t!resome pa:ade tJf i:t::icless d!sc.ti.T.ir.at!on cas~s. Ag-c1i ~"td ag~:n. t.ite Co!!rt's resources ~: sapped by such cattc:-s, i.".stiptcd by L-::placabie parJes · a£zd prosecuted ~it.i questionable judgment by their counseL It is high time Cor t.;.us to stop. The Court entreats the legal couu-nurJty to pause ~"ld reflect, during their prefili.'lg i."tquiry and continually as they nu.-se ~i.e case: to rt'.atu..'ity, whether they can identitt any tenable basis !tlr a claim o{

discr~.i'lation other tha.'l their clie::1t's s~., color,~~: religion, 9r gender. Without su...7iclent e•,idence of disc:rirr.in.ation, that is, an adverse employment decision made becc:use oj a protected chuacte..~tic (and not simply one that conce."US a pe.'"Son e.·thibiti.'lg a protected characta.~tic), a case under Title V!I must faiL

·. ROTC-DIE COu1P .. ~'IT. INC.., Plaintift~

. '\".

David LESSER, Defendant.

Civ. A. No. 93-0049-D.

United States Dis~t Cou.r~ w .D. Vi.'"ginia.

Personality conflicts are a fac:t of life, ac· curring i.'t the work-place v.ith the frequency o( O\"erly-de.'lla.'lding super.isors an~ crushed employee e.~ctations. And yes, d!saimina· tion is also alive a.'ld v.·eU in America today. But one will not unearJt invidious distinctions lur!dng beneath every act of disclpU.rte or e\·ery deni3! of adva.'lcement. .4..ny atta.'Dpt to argue otherwise tri\ialli:es the law'S enacted to eradicate the bigotry that still bloc:Y.s the path to indi\idual achievement and inhibits our collective advancement.

It also fosters a culture of victims. This Court daas not ha\·e the po~-er to prevent the rai.rt from falling into anyone's life, a.'ld is not about to inte..-cede in e-.,·ery v.-ork·place squabble. \Vnere, as here, the law offers no ' remedy, the responsibility for recovering from the occasional affronts oi office life falls a.t the feet of the complainant. Thus, a per· son who clings steadfastly to. the beliei that she has ~n Unjustly v.TOnged, when all the e\idence suggests otherwise, risks more than a judicial defeat. She also imperils her own ability to rise above the nonnal setba.c:.lcs of life and renders he..'"Sell ill-prepared to face the ne.'rt ine,.it.able pitfall. And this self· iml!cted wound is Car mare damaging.

To those souls who still labor under the hea\1' hand of illegal work"Place disc:rimina· tion, the doors of this Court \\ill remain ever· open. The pretenders, though, must learn to

, V.Test control of their own lives from deleteri·

-61-

Dan,ille. Dhision.

April 17, 1995.

Fonner employer brought action agai1St fanner employee/e:cecutive alleging breach or covenant not to compete. Cross-motions were tiled for summary judgment. The District Cour'-9 Kiser, Chief Judge, held t.iat: (l)

former e.'llployee was estopped from denyi:1g validity of coveni.'lt not to competa; (2) restrict.n.·e covenant prohioiting employee from being a."l employee ot any competiti•:e business was overly broad in scope under Vu-ginia b.~-; (3) restricti,.·e covenant not to cornnate v;hich did not limit geo~pit.lc scope had to be consaued as world wide in scope a..rtd was unenforceable under Vu-t~"'li3. law absent evidence that employer needed wodd· 'ftide nrotection; and ( 4) mere fact that portions ~( noncompete covenant were void un· der Vttgi.'lia law did not render rema!nder oi·· employment contract void.

Defendant's motion granted.

1. Federal Civil Procedure e::-2~;0

\Vhere record ta.tcen as a whole could not lead a rational trier or fact to fi.rtd ior non· moving party, there is no genui.?te issue Cor trial and summary judgment is appropriate. Fed.Rules Civ.Proc.Rule 56(c), 2S· U.S.C-~

1516

2. Fed-era! Ch;l Pl"ocedw-e ¢=12~

In c~r.sfdet:.;.-:g a r:tot!on for Stlr:'.-~a:j· jt:dgment, C!strict court is reaui:ed to •,-leo;.· fa::~ and d.""A·;; reasonable irJa;en~s i..'l light most favorable to nor.:no.,ing party, ~.,d

p!ai"ttiff is antitled to ha'-·e credibility of all of rls e"-idence presu..'lled. F ed.Rules Civ .Pr~ Rule 5o(c), 2S U.S.C_-\.

3. Federal Civil Procedure ¢=124i0

'l"nere is a genuine issu,.e of fact preclud· ir.g Stlrnmarj" judgment ii e'tidence is such that a reasonable jU....-y _ c:ould retu.rn a verdict for ncMlovi::g pa.~. Fed.Rules Civ.Prcc. Rule 56(c), 2S u.s.c_~

4. Contracts ¢=116(1, 2) In deta.."illi.nL'"lg validity of restricti..,·e

CO\"e.'lants Wlder Virginia law, court inquires as to wnether restraint, from sta.!'ldpoint or employer, is reasonable in the sense that it is no greater tha.?t is nece.Ssar;; to protact employer in some legitimate business i.?tt.erest; v.·bether restrai.'lt, from standpoint of employee, is reasonable in the sen5e that it is not W!duly ha."Sh a..?td oppressr.·e in c:u:tilli.ng his legitimate effor..s to earn a livelihood; and whether restraint is reasonable from standpoint of some public policy.

5. Contracts e= 141(1)

Under V~rginia law, employer bears burden of proving restraint i.'l restrictive covena..'lt is reasonable.

' 6. Contracts ¢:::a116(1)

· ·. Enforceability of noncompetition ag!'eement in employment contract is detennined i.'\ light of facts of each case under Vtrginia law.

7. Contracts e:-202(2)

VIrginia law requires that noncompetition clauses in emplo)~e.'lt contracts be stricdy construed against employers; however, VIrginia Jaw recognizes that the law applicable·v.·hen the sale of business is involved is somewhat difi'erent.

S. Estoppel e=7S(2)

Fonner employee was not estopped from denying validity of a covenant not to compete, despite clause in employment con· tract stating that employee purportedly

-;.·ai·:=d c...~d ';04S !S::."j~c-=d f:o::l as.se:-J.-:5 t..~t :-es~cti·:e co·•anl..-:~ v-4.3 ille~ or U:~en.fo~=ao!e; to adopt for::e!" erno[o·:~:'s a.r~-n=n~ v.·ocld penr.lt employers cd i.~u!ata ::oncomp-etition ~eements £:-om re.,ie-:.·, si-nply by i..'lc!udi'lg a s~-: phr-c:.Se or clause that says either e.-nploye-e ca..'l.'lot c:ha!!enge it or that employee recognizes irnpor1.1nce of employer's inta-est, and th!s ~.-ou!d cont:ravene Vsr· gt"lia law v.·hich looks v.ith d!sfa..,·or upon rest:r.Unts of trade.

9. Contracts ¢:::» 11 i(i)

A world-v.ide co·.·eiUnt not to ·compete is unreasort2ble U.'lder v-u-ginia law.

10. Contracts ¢=1117(3)

If covena.."lt not to compete is overly broad in scope or geography, then it is unreasonable from employee's st..a..'ldpoint as well as employer's sta.'ldpoint.

11. Contracts ¢=117(.5)

Restricti,_-e covenant in employme.'lt contract proiu"biting employee irom being an employee of any competitive business W2S

overbroad in scope Wlder ·Vu-ginia law; s~ctly construed, pro,i.sion would have prevented employee from v.·orld.ng in any capacity, including that of a janitor, Cor a competi-tive business. ·

12. Contracts ¢=117(3)

_4.lthough it was possible to read restric· tive co,·en.a.nt not to compete. prohibiting employ~..s fror.t sollcici.'lg any cusU~mers with intent to sell same product as employer made, as narrov.· enough as to· one employee as it ~"2.5 lliaited to prOhibiting solicitation of present customers, it was too broad a.s to another employee as it covered geographic: areas where employer v.-as not doing busi-. ness, and the clause -;,-as thus Wlenforceable under Vll"ginia. law.

13. Contracts ¢=1li(7)

Restrictive covenants not to compete which did not limit geographic scope ha~ to be construed as world-'9ride in scope and were thus unenCorce.able under Vtrginia law absent ev;dence that employer needed world· \Vide protection.

-62-

ROTO-DIE CO., INC. ';'. LESSER 1517 14. Contracts <::=llo(l)

Chc&a 5n F..Su;p. l.HJ (W.C.\·a. 1'!93)

FACTS: '~ . . . . :•J.c!"e:y suojcC:t!..'!g' an employee to an In 1982, ~!eht. Sta."l!ev a.1.d Da·.id r .:lee"' ..

i::c:or:-Arat.ed ~!icrometrlcs Systerr-:S~·-i~;. cu~fic:rot::atric:s") as a v-q.r.ia c:orporatioC'_ Its prr .. .rtdpal buSi.'less v;a.s in rotary toolL'li. On October 14, 1983, in cort..nection ~c.; th~ sale o{ part of the c:ompa.'ly to Rotc-Die Compa.'ly, Inc. ("Rotc-Die"), Lesser, Sta.~e·t and Lesser's v.iie entered emolo~""rnent agreements -;.ith Micromet."cs. • Tnese agreements contii.'led co,·enants not to com-· pete. At the time Lesser signed his agreer:tent, he v.-as the secret.arJ and haad of marketi.'lg and sales. There is some dispute as to v.·hether he l'l"a.S directly involyed in a.'\y o( the t.echnic:a.l aspects or Micrometries.

~ubiguous rest.'icti"·e c:o\·enant v;olatcs Vi:gi."!ia public p'llic~.

15. Contracts ¢='116(1), llS

Clause in rest:ricti,·e co\·er.a..'\t not to c:ocpeta protecting from disclosure confidential L"!iormation and prohibiting solicitation of employer's employees v.-a.s "-a!id U..'lde!" virpnia law. Ya.Code 1950, §§ 59.1-336 to 59.1-343.

--16. Contracts <t=t137(4)

Mere fact that portions of noncomcete co,·e..7~ant were void under Vu-ginia law· did not render re.znalnder of employment con. tra.c:t void.

17. Contracts <t=t137(l)

. "Blue pencil" polll·er does not e.-'Cist i.7~ v"L-ginia with respect to contracts.

-"-"lthony Paul ~iorno, U.S. Attorney's Of. fie~ Roanoke, VA. Jane Siobhan Glenn. Fishlllick, Jones &: Glenn. Roanoke, VA. for plaintiff.

Robert Fran..lc Rider, Rider, Thomas, Cleaveland, Ferris &: Eakia, P .C., Roanoke, VA. ~!ichael J. Quinan, '\V oods, Rogers &:

. Haz!egrove, P .L.C., Roanoke, VA. Anthony H. ~!onioudis, Woods, Rogers. & Ha:degro,·e. Da..~,iJle, V.4., Joseph Vlalton Milam, Jr., Woods, Rogers & Ha:degro,·e, P.L.C., Dan\ille, V.~ for de!enc!ant.

ME~.~OP-4NDU:'d OPINIO~.V

KISER, Chie! Judge.

In February 1987, a notice for a soedal shareholders' meeting was sent out. • T'ne Cleeti.rtg's pu.~ose 1,\"2$ to remove Lesser a.s a member. of the board of directors. Th! cause of the strained relationship is open· to some • dispute, but the fact that a cloud aooeared over Lesser's head in early Februa..ry. i987 is U."lci!sputedly established by the shuehold· ers' meeting notice. On April28, 1987, Lesser entered into a Termination }..greem!nt. Lesser sold his minority stock interest to Stanley.1 .4-t this time, Micrometries and . Roto-Die m~ed other parts of their operation. They were doing business under the trade name "Roto-~!et:rics Group" and had shared customer lists and sales info.rnuticln. The combination of these two firms captured nearly 4090 or the U.S. market during Lesser's tenll!'e.

The Termi.'lation Agreeme."lt supe."Seded the Employment Agre-o_ment. but incorporat-ed the restrictive covenant from the Emplo)·· ment Agreement in paragraph seven. Tne covenant contains four subparagraphs, all of which are relevant to the discussion belov.·. ... Paragraph seven forbids the defendant. for a period o! five years, from doing the follo-wing

This case is before II,le on the parties' cross-motions for summary judgment. The case L'lvolves the enforceability of a covenant not to c:ompeta that the defendant entered into v.ith the plaintiff's predecessor. 'The part:ies have fully briefed the issues involved and the Court has heud oral argument. The case is, therefore, ripe for decision. For the reasons belo\\·, I wW grant the defendant's motion in part and de~y the plaintiff's motior_

. acts:

l. L..-sscr held no more man a onc•third inccrr:st

-63-

(a) Disclose or di\-ulge to my person. e."lti· ty, firm or company 9.-hatsoever, or use fot:" EXECUTIVE'S 0\\11 benefit or for the benefit of any other person, entity, fi.Pin or company, which is directiy or·indirec:tly in the trade or business of the manuf3Cture

in Micromcuics.

....... ., .... :-15is.: SS9 FEDER..l.L Sti'PPLE;,t:E~'T

cr sa!~ or ED~!"d or :n:d·.a.~ca!I:· :n· ~·::ci or wiH:d rot::ry c.oolL"lg, an:· ~o~·ieds:, t:ior:nation. busi.~:ss m:t.~ods, te:h· !'.iqu=s, c-..:stomer listS, price lists, proc:dures, L1"!iotn".ation re!ad.11g to the bus~'!ess of t.~e CORPORATiON o~'lY ot.~er in{orrnation regarciLttg any of the CO RPO R.4.· !ION'S cus:Omers or clients or a.'ly othe:~-.n. c:ompa.'ly, or entity -;with ~·nom the CORPOR.-\TION has h~!d fir.a..'lcial dea!b~. which information may ha·-·e ~n divulged to EXECUTIVE or to which EX· ECtiTTVE may hay e. -b*n e."Cposed dur.ng the term of employment by the CORPOR.~TION;

(o) Solicit, diver... ta.tce away or i.'lterfere v.it..~ a.11y of the officers, directors, employees, autho:-b:ed sales representati\·es, agents or wholesale.'"'S of the CORPOR.-\.TION'; (c:) Solicit, ca.'lV2SS, contact, divert, ta.tce a~-ay or do business with a.rr.y acc:ou.'lt, c:t!Stomer, c:!!ent or company with the in· ~nt to sell or cau.se to be· ma:n:u.jad:u.Ted. ~ther ED~!'d rotuy tooling or m-er:hatU· ca!ly milled or engraved rot:a..ry tooling; 01

(d) Engage· i.'l or ·be associated ~ith an} t::'ade or busL'less involved in the manufac:· ture or. sale of EDM'd or mecha.'lic:all}· engraved or milled rotary tooling (nerein· ar~r refen-ed to as "Competitive Busi· ness"). EXECtJTIVE shall be deemed 2S

~i.'lg directly or indirectly engaged in. or associated ~ith a . Competit:i\·e Busi.rr.ess if EXECUTtvt: bec:oces a principal, director, officer, rrnplcyee, agent,. consulta..~t. pa."'t.~er or i.~dividual proprietor of or be· comes financi2!1y intarestcd i."l any such b~iness ••••

(emohasis added). Lesser testified in depositio-n that he read b~th agr~..ments, under· stood them, and ~ an attorney revievt them before signing them.

The rotary tooling industr.f is a fairly small market with only about 3,000 custome."S and 10-30 ma.'lw"acturers of rotary dies. All of the manufactUrers are in Nor..h America or Eu.~pe. Gro~"th opportunities e."cist largely in export markets because the United States' market is reaching saturation. This ~-as par· tic:ularly true ior Roto-Met:rics. Lesser rec· ognized the in~rnational nature of the busi-

n:ss :,y r~:.:.id::i J ef La:t-! co s::-:: as Crl:f Ex:c-..:ti·;e Offc:er- of ?res\.0:-l E::p·: .. ets, Inc: •• a cornpa..1y Lesser- b:cs..T.e fn•:ot·:ed v.ith 2-l:...cr lea"ini ~!ic:rometric:s. La..'le is from the U nitad Kingdom. .-\.."lot.~er effort by Lesser v.·as the u."lion of C~rhardt Indust&-ies, a Europea..'l ma.'luiacturer, v.ith Preston in an a!!ia.11c:e to sell products L, the U rJted Statt!S.

The tecllnology a:td de,·clopment of products is closely guarded. Intor.:1ation such as. c:usto:ner lists, e.uc:t market share, market size, current technology, technological projects a.qd progress, a.'ld plans Cor market e."Cpa.l'lSioa, if disclosed to competitors, ~-ould destroy a compa..'ly's ability to compete. Lesser- admits on brier that he came into contact "1'tith L'llorrnation t.ltat ~!icromer:ics could consider ·sensitive and v,-orthy of protection.

Lesser's college degree is in chemistry a.rr.c. political science. He bas done graduate ~-ork in business. Prior to joining ~!ic:rocetrlcs, he llt-orked ~ith \Vebtech, a user of rota.'")' tooling equipment. 'While a.t ~!icrometric:s, he was a member of. the board, director of marketirtg a.P?.d sales, an officer, and a shareholder. His e.-cpertise "'·a.s in selling. St.a:ueys e.-cper-Jse was in manuiactu...;."'lg.

DISCUSSION:·

Summa:ry Judgment Sttrn.rl.a:rd.

(1-3] SurtU!la.ry judgrn~rr.t is appropriate where there is. no genui11e issue as to a."ly material fact a.'ld the mo,i.'lg pa..-rty is entitled to judgment as a. matter of law. Fed. R.Civ.P. 56(c:). Vihere the record ta..~en as a whole could not lead a rational trier of fact to :find !or the nor.mo,ing party, there is no genui.'le issue for trial and summary judgment is appropriate. Ma.ts-u.sh.ita. Euc. Ind.u.s. Co. v. Ze:n.itk Radio Co., 475 U.S. 574, 587, 106 S.Ct. 1348, 1350, 89 L.Ed.2d 53S (1986). In c:onside.,.;ng a motion for summa...7 judgment, "the court is required to ,iew the facts a.'ld ·draw reasonable inferences in a

·light most fa•rorable to the nonmoving party. The plaintiff is entitled to have the credibility oi a!1 his evidence preswned." Ska:w 'J. Stl'f1UI!.. 13 F .3d 791, 798 (4th Cir.) (citations omitted), cerl. denied. - U.S. -. 115

-64-

ROTC-DIE CO .• l?\C. 7. LESSER 1519 Ci~~lH F.Sa:;,. llll (W.D.t.·~ nilJ

r~ :~:: ~~-===~.,- -4~ ~ -~ -~ ,.---.... ~ ••• .... ;J· ---··~C.:.:·: ... o .... ~ · .... ! -=~·J ::.mot.::·:.

-~~~t.: !t--=~~~~· - .. a· .:. r-:~... .... . ... 1 •• -··· 4 ·! •• -·•·-•·'- c.. . -.~..a ... ~ ' 1 !:n-':.t.'la~:·J:& A~ee~a::t ·~·e:-: !.'<~.!ted i:1. co~.,.:u-o"'on ,...:.~

:;:[II ....... -. ... :..-....

1-,.-=,. ·--.. ·-:~c•'o""u' ;,. 1°;:3 t. E 1 &.;, .s -· ~..;; .:..;.::_. '- ..... •·• • ::· •• n~ rnp o:.·· oe~t Agreements ~·e::e uOtal.."tea as cart of a

S.C~ 67, 130 L.Ed..2d ~. c:'td c~ ~n.ied. - U.S. --, 115 S.Ct. &3, !3:J L.Ed.2d 2~ (1994). Tnere is a i!n!!.L-:: issue of fac: "'if th: e'.idence ts such ~:.:a~ a !:'!c.sanable ju..-y ·cou!d return a. "'"erdict for c::e nonmo•,1.;z oar;y.'' .47tdzn07t t:. Libmu Lob{J;rJ l ,~-_.;. u ~ , .. ? , .. 1!'\ s c .. . .. - -· . nc •• ,, ' .:,. --· -~. 105 • t. 2.;)0\l, 2~10,

sale of a. porJon of the compa.'ly to Rotc-Di~. In 1957, the pa..rtfes en~red ,!r.t:l t~e Ten:-Jnation •4..greement as part oc ti:e s.a!e o( Less-91 L.Ed.2d 20"2 (1986).

Caue:na.7'.t Mt to Com:pete Sltmdt:Ttf.

(4-SJ A th.re~·part test detarinL'les d1e v!-ti.ciit~; of rest:icti\·e co,·ena.'lt.s. Tr.e L'lqt.tirles a:e:

(1) Is the restraint,. from the sta.?tdpoi.nt o{

the employer, reasonable in the sense th~t it is no gTeater than is necessa."'Y to protect the employer i'l some legitimate business interest?

(2) From t.~e standpoint of the employee, is the rest:'aint reasonable in the sense that it is not unduly harsh and oppressive in C'.l.r"~g his legitimate eff'or..s to ea..-n a. u,·eli.~ood?

(3) Is the restraint reasonable from the standpoint or sound pub!ic policy?

BllU Ridge A'Tt.Utkesia. & Criticcl. Cen, Inc. 11. Gillick. ·239 Va.. 369, 389 S.E.2d 467, 469 (1990). The employer bears the burden of proving the restraint is reasonable. Gra:nt 11.

Ca.rouk. l1U!, 737 F .2d 410, 411 (4th Cir: 1984). Tne enforceability of a noncompetition agreement is detern"lned in light o( the

·facts of each C2.Se. N e:w Ri11er lvl edia Group, Inc. 11. Knighto14 245 Va.. 36i, 4.29 S.E.2d 25, 26 (1993).

(7] Vtrgi..ni~ law requires that "non-competition clauses be strictly co~trued against the employer." .Gra.nt, 737 F ..2d at 411. However, v1rgi..nia law recognizes that the law applicable when a sa!e .of a business is involved is somewhat diff'erenl .A..Lsttm Studios, Inc. 11. Lloyd V. Gres3 & Assocs., ·492 F .2d 279, 2S4 (4th Cir.l9'74). T"ne dmerence is that the sco~ of ~..rmissible restrictions increases. Ricka:rdsrm 11. Pa:r!..an. 203 V a. 790, 127 S.E.2d 113, 117 (1962).

l. 1l:c sand~d c!isc:us.scd in che prc:c::c!i:\g three pa.r::1gr:phs. however. docs not ncccs.:t.:uily apply co non-disclosure and non-solic:iudon agree• menu. as will be discussed later in the opinioll.

-65-

er's btterest in t.~e company to St.a.'l!e·.·. However, the 1987 tra;1.Saction, a..,d the r;_ suiting restrictive c:o .. ·ena.'lt d1~tly L'l issue here, L'lvolved the sa!e of Lesser's minoritu position in the compa..""ly l41.der questionabl~ circumstances: In sL'l'li!ar cas~. coun.s ha·:e held the minority shareholder to be in r.o better bargaining posicion than a mere e::tployee. See S. }/ rrmTTtOTU!. $tcry Agmcy. I~ v. Bazr, 202 Ga_l\pp. 2Sl, 414 S.E.2d 287, 2-,.qg (1991). Acc:ordL-sgly, I v.ill treat this case as equivalent ·to a case uwol•ing a..'\ employer and employee.: Estoppel

(S] Plaintiff argues that Lesser is estopped from denying t.ste va.!!diC'f of the .co..,·eca..'lt not to compete. It rests this argument upon. pa."'"agraph 6 of the Termination Agreement and paragraph 7(d) of the Employment .Agreement (subsequently L'lcorporat.ed into the Te."''Ilination Agreement). In paragraph 6, Lesser p~ortadly ~ves a..'ld is estopped from asserting that the ro..strictfve covena..'lt is illegal or unenforceable.: . Paragraph 7(d) statas that Lessefs employment ~-ou!d "constitute knowledge that the restrictions cont:2i.'led·. [in the restrictive co\·enant] .are reasonable and necessary • • • to protect the ... legitimate business L'lterest"· of the plaintiff.

Plaintifi' s argument is not v.·e!l-taken. .To adopt plaintifrs argument would allow employe...-s to i.'lSUlate their noncom~ta agr~ments from review, simnly by including a stock phrase or clause that says eith~· the employee cumot c:hallen~e it or that the employee rec:ogni%es the importance of the employer's interest. VIrginia law clearly looks with disfavor upon restraints of trade. Grrrn.t, 737 F .2d at 411.1 Employe..'"S may not. circumvent this public: policy merely by in·

3. Virgini.1. law is also ~n.sitivc co the: rcspc:ctivc baqaining positions o( chc: panics. s~~ Foti , •. cook. 220 va. sao. 263 s.Lld ~Jo • .:JJ c 19SOa.

• ..1520. S99 FEDEP..AL Sli7PL.E)1E~"T f.ftli~~~~.· •. ...

(9, 10] Lesser presents. ~·o maL, arr~rnents t.l:at the co\·ena.'lt b par.il"aph 7(d) is unreaso~-A!:I!e. First, he 2l6'.!es that its scop-e is O'-'erly broad i.'1 the types of actl'.it!es proi'tJbitcd. Second, he a..~es that the co..,·ena."lt, which does not contai..'l a specific gao· graphic !i-nita.tion. applies o;:.·orld-v.ide. A v.·orld-~ice covenant is W'-'"easonable. For bot.~ of these reasons, Lesser argues, t.~e fi..'"St oart of the t.~e;-oart test is W'_,atisiied. Less~ aLso argues t.Jta·t the co\·ena..'lt \iolat.t:s oublic: oo!ic:v as a. result o! its overly broad, in. ter~e~ effect. While no specific attack is made ~der the second pa.'i: of V1rgit'Ja's test, it is clear that iC the co,·enant is overly broad in scope or geography, the.'l it is unreasonable from the employee's standpoint as v.·ell as tl:e employer's.

·-··~ .. .:. . :.. • ..

t.~~ e.~~~a ~ "a:t:·· ::::.plo:---r:.s~t" -:.~t:t a ccm· - f • ;J • • p:t:COt". rOt" e.Y •• a:np.e, ~, •• OSe"'ttC~~.., ~!

co~ upheld tr.a foilo-:..:lo6,i la.'!~ga: "Emole,;:: ~ill not .•• ~eccl'r'' or i.'!direccly. oo;.-n, ~a.~ge. o::~:ata. cona-oi, be ern:p/qr;er!. by. ca.."t!cioate L"l, or be a.ssociatad in 2..'1\o' ~s..rmer . . . v.ith th~ o-.;,-nersrJp. rna.'lagernent, operation or control of any business sim!!ar to the type of busbess co!lducted by .(employer] .••. "

.. •.

J . ~·

• a~t t

·:.

P.o~enba.u111.. 290 S.E.2d aL 883 (emphasis •· added). LL'-:ewise, i.'"\ Bl"ZU Ridge the coo,·e- ":.· na.'lt oro·.ided that: "Emol~vee ••. v.-ill not J . . . OPen or be tmr:plcyec!. by .or act on beha!! -. of an.v como. etitor of Employer v.·hich renders ~

~ the sa.'Ue or si..-nilar sa.rvices as Employ- ~-~ er .... " BLue Rir14e, 389 S.E.2d at 46S (ern- \:. phasis added). T'ne co.,·enant allo~-ed the_ ~-. employee to v;ork b the medical industry in ~i a noncompetitive role. !d. 1 i ~

On the at. Iter ha.'ld, the lack oi a rest:iction · ! I to busi.'lesses that may compete v.ith the ~ i

(11] Tu.oruing first to the issue o( overly employer was the reason the Riciz.c:rri.san. :: .• broad scooe of activities, I believe that Less- c:owt struc:k do~~ t.~e c:ovenant i.'l question ~ er's ~ent is well-taken.. Lesser focuses there. s~e Rosmbc::::m, 290 S.E.2d at SS5 &: ~ uoon the language in paragraph 7(d) that n. 3. That is the iziling of t!'.is co.,·e.~~--~~ p~hibits him from being an "empl9yee" of AdrrJttadly, it cont.a.bs re!erenc:e to <'"Com~-... ---1 .. an.y "Competitive Business." Strictly con- p!titive Busi."lesses." But the term as used strued ag-c:inst the emoloyer, which mean: in in the c0,,.ena.71t is merely a descriptive term, thiS conte."d to give the broadest poSSlDle a. short-ha.'ld reference for tM more leng-..hy m-g tO ttie liiigu.age, thiS provision ••a.'lv trade or· business invol..,·ed in the ma.'lu-~ma prevent LeSser from worldnr in MY iacbu-e or sale of ED~!'d or mech31'Jcally c:a.pa.dty, L'lcluding that of a ia.nitDf. for. a engraved or milled rotary toolL"lg .••• " This "C,ompetitive Business." Lesser relies prm- nro,'ision does not bespea..'< actual competi-c:ipally upon P.:i.ciuJ.Tdsan, Gnmt, a.'ld Pawer tion be~·een ~ficromet:rics or Roto-Die a.'!d

. . :Di3trifruti~ !Til!. v. Emergmcy Pawr:r Ew.gi- an~ c:omoetitor. s~e Gra:n.t. 737 F .2d at 412 . me:n.?zg. I~ 569 F .Supp. 54 (E.D.Va.1983) (la~t.: of ;est.-ic:tion to actual competition ren-

(ZY!erhir-, J.). dered co\·enant unenforceable): Sun.sta.tes

xt· I agree with Lesser that the covenant not Refrig~c!. Se:rus. •. 1-ru:. 11. Griffi:n. 215 Ga. tJ) compete is void on its !ace. The provision -~on. 61, ~9 S.E..2d 858, 860 (1994) (descripcontains no ~ctio~-mon as to Less- tfo~~ te.l"'tl "comoeting busi.'less" ~.sufficiently ers work "iiT'&.h another employer. Thus, con- restric:ti..,·e of post~mployment activit:~. ~ strued strictly against the employer, it could sustai.'l cove~!..,~ot ... tqaSP.!!!P.et.e). . c:o • -be read to nrohibit any type of employment, fmgi'r,I-oelteve the co,·ena.'lt .contained L?t

e..,·en emploYment outside the scope of the J paragraph 7(d) is more lLlce those held U.'lenwork Lesser did for ltfir.:rometrlcs. It is true tiorceable i.'l Ricka:rd.srm. and ~~

-'· Plaintiffs re5cn to Lesser's ~r:swer is also U.'13· ""s~,u'ChltihM ;.;~itn:"rpi:-:y cite the case. Compr~· vailing. (:, parag~ph ll o£ lessc:r·s answer. J:e-..sivc Tlchr:ologiu lr::"l. Inc. "· So(nttt:.-:./'r:~

scrrs. (nc •• J F.Jd 730, 7lS (4th Cir.). vcccr~ en lc:sscr m::cly ac!mics ~t the Termination c~. dismi.ssd. Sept. 30. 1993 •• involved 3 very Agreement and/or Employmcnc Agr-c:cmcnt con• simil:sr siCU3don. However. g1vcn chc: subsc:· cained lango.:age rr:ga:·ding the nc:=d £or th-: rc· quenc hisc~ry a£ the c:a.se. it is not binding ~ut.'tol'· s::icdvc covcn:mt. icy within the: circuit.

-66-

ROTO-DIE CO., t's"C. -r. LESSER 1521 Cl~u.lii r.Su.,,. t.Sl.! (W.O.,/~ lii.S) (l '1 ':»--:--=:l; ~'c:) o: .:.. ,., . • • ... - • ~-~-- •• ''- • ~,.: CiJ'•:::a.& ... o,~~- A""'V O""A""bro .. d •• 5 .. 9 "' =o

.:sr-·· i - ... ; ... ;,A T· ·~-- i'l • : : ··- • ...... • c • ~ r -upp. ac ~- Tne .... ~ a c.o:::a. .:~--- .. :. s~--·~ ... ~oac~,. r:-. tts -Aro:a act of sub::l4"'.: __ •• •

... ,:-~;,=-;.,; .. ""or;c:"'!'ion -.-~··c,.~;:"t,.. .. ~ ... -·I .• '··-·.. . • :J--~·5 ~'le emptoy* to t.~: ~ ~--- t:.J - -- •• w• ... --·~5 ~.=- =-mo 0 ... U.'lc:c.-'-'U..'lt\" o· .. ., .. P!'tbt-·ous • • . ~~ .::.. "·. • ·,;,.. • , • • .. -..:-· ,. .. ... • • .. :- '".. " .::.; • .::.; •• ·6~ P:O\"!Ston of-.... h or.t aou.s oust.'!es~ ... L~'l a compa.~y ienas cub lie oolic:•.-. Iri.. v.ith the "bcent to sail or c:.ause to be manu- • • • fac:tured" ED~!"d rot.ar"J too!i.~g or mec:ha.'ti- . (13] This !:ads to the !ssue of g:~graohi-cally milled or engraved rota.-J toolL'lg. 1 cal scope. Tr.e defenda.'tt"s position i.s v.:e!!'I'his clause could be sa\·ed gi\·en the orooer ta.~en. Neither pa.-a.g-raph i(c:>' o: 7(d) c:on: readL~g. Unlike the c!escrlpt£\.·e tar.n ~·c~m- t.ai..'l any geographical li:nit. ocdy a tL-ne I!. ':lit petid,·e Busin!ss." that conta1"1ed no. fu."!.c· o{ fh·e yea.'"S. \vithou: an appa."'ent lL-:Ut L'l tiona! lintltation. paragraph 7(c:) applies to the la.~gu.age of the c:o .. ·ez:a.-:ts thcn-..sel·-tes, I "a.~y a~ount, customer, client or comoa.,v .. ca.'l orly conclude t.~at tr.a c:o...-ena..,ts are

j]r.is ¥tordL~g L,dicatas an i.'l~nt to lfr.tit ~e meant to be ttt,·orld-v.ide i.'l scope. Sl# ALs!on esi:riction. to p.res.ent busines.s r~latior~hip_ s. Studios. 492 F .2d at 2S3 (co\·ena.'lt did not

_ conta!..'l geographic limit a.'u!, thus, could oro-. I v.·oula be mc:hned to upnola pa.'4graph h.ibit employment a.'l)w·here in che wo;ld).

7(c) v;ere it not for the troublesome ohrase "or causa to· be ~anufact:t.ired." Th~ only logical w-ay I ca.n sae to addr~s this phrase is to say that it pertains to ~·o d.iff'erent e."<ec:uti·,,.es: Lesser. the salesman, a.~d Stanley, the eng!"eer. Under this interpretation, as to Lesser. the clause v;ould read: Exec:uth·~ will not solicit any customers v.ith intent to sell ED~rd rota.7 tooling, etc. As to Stanley, the clause would read: Executive ll.ill not cause to be manufactured a.'lv EDard rotary tooling, etc. T"nus, the claus~· v.·ould be narrow enough for Lesser because it is limited to present customers or pla..intiff, but it may be too broad as to Sta.'lley because it would cover geographical areas Vw·here . pl2i'ltiff is not doing business.

T"ne issue, the.'l, is whet.'ter the subpa.'"2.graph may r!!maL, effective as to defendan~ even if it w-as too broad as to Sta.'uey? I conClude that it may not and, thus. will hold pa.~ph 7(c) U.'leniorceable. W"nile the reading proposed above is possicle, the very fact that the mental gymnastics required to reach ~t .had to be ~Clte.s v.ity it must zail. As J~hige' 2Sf:utely observed in Pf1UWIT ~t:riinditm: -rhus, theCourt need not determine the e."'C2Ct reach of the covenant in order to conClude it is overbroad. The fact that its ruch is so difficult to determine and may so easily e.:cceed in meet the ~ible reach. renders the cnv-

6. Bc:ausc t.'tc ccr:n .. do business with •• could apply co working (or- anochc:r company. t apply cbe standards developed Cor covenants noc co compete co par2gr.aph 7(c:).

-67-

Plaintiff seems to concede this point, but argues that v.·orid-wide protection is required. viev.·ed i."l the ligh:. most ra,·orable to plaintiff, · the e\idenc:e establishes that there. are few suppliers of rob...-J tooling equipment in the v.·orld. T:~e e'tidence· also establishes that manui'ac:tu:e..'"S mu.st turn . to e.:cport markets i.'l order to iue! continued grov._..Jt. 1 Indeed, Lesser w-t:.S L,,.·ol·;ed in the push towards i.'lter:-.ational e..'Qar..sion. How .. ever, the unciisputad e\oider.;e re\·eazs that plaintiff's sales ove..'"Seas. while i.'lc:reasi.'lg, rem.ai.'l a small percentage o{ tot2l sales. Fu.~ermore. Stazd:y testffied that there have been sales only i.'l Ca."lada, the United Kingdom, ~...rmany, Aust:ria. and S~itzerland. T"nere is also e,idence of sales acti...,ity i."'l unspecified coWttrie.s in lati..'l America. ~.s ·to another group of coamt:ias. Chi."l.a, the former Soviet Union. a.'!d .Africa, Sta.'lley tastified he v.-as unsure of the e."C"W!nt of activity i.'l those areas. In some of d:e countries, there could be no acthity. Tr.:!!"e is no other evidence in the record rega..-d!ng a..'ly othe:countries.

I believe the plaintiff has failed L'l its cilrden to c:ome io~-ard with e\idence on which a reasonable finder oi fac:t could determine that it. is entitled to world-;;ide protec:tion. There are c:erbinly a lot more countries in the world tha.'l the Caw· that St:!cley · has named. LLlcev.ise. the O';en.!! ?..r;enbge or 7. Oc!enc!ant Jw ch3.1lc:ngec;l t.':e ac!.-:Ussibilicy o(

chc: Ron Spring affic!3vic bccusc Mr. Spring wa.s not idcndfic:cl on incer:-ag:acorics. ( nc:ed not decide chis issue ~ar:sc chc cvic!enc:= conuinc:c! in the affidavit docs not alccr t.L:e :-..st.:IL ( r=c:h.

1522 599 FEDEP ... .1J.. Sl7PL.E)lE~1

s~=r.T-~ of pr::snc:e i.-1 c~"!.aGa a.;d E U!'O~. r.:os~ or the ~"'i~rnadonal sa!:s c:e p:-obab[j· i."'l those c:cu..--:~-les. At h!O!t, p!2L'ltffi' rt".ight C.: able to dai."n protection· !or Et!!"o~a.'l c:ot:ntri:s ot.~er tha."'l those speciiica!ly mentioned. Bt:t that e."Ccludes a large nu:nber o(

marke~. i."lcluding much of tlw.-ee continent..~ . ..t~ia, .:1.frica and South • .i..merlc:a (to ~i.e C:.'C"'~nt not ir1duded in the term "Lat:L, Ar:1eric:a"'). A.'l employer's mere hope tbat it may potzntia.!.!y compete in a gi\·en market is L-tsu.ffic:ient. Powgr·· Distrlbutian. 569 F .Supp. at 5i. See ALston Studios_ 492 F .:Zd at 2S3 (i.rtva!idating c:oven.a.'lt not to compete! l.lihere it contained no lang-..1age li"niting the restriction to ueas· of oossible comoetition).s . . . PuiJl~ Policy

[14] As noted above, merely subjecting the employee to an a."'!biguous rest:ric:ti,·e c:o\·ena..'lt \iola~s public: policy. See PrJUJer Distribution. 569 F .Supp. at 58. T"nus. pa..1"2.graph.s 7(c:) a..-:d 7(d) fail foi' that reason as v.·ell.

Severa.hility

[15] The pl2i.ntifl" has argued L'l supplemental briefi..'lg that the Court should ana-1}-ze the !our subpar~ of the restrictive covenant i."ldepe.'ldently. Plaintiff reaso~ that the separate s-..tbpar-..s protaet different in~rest.S. Even if one may be in\·alid, the others should still be enforced. I agree and, therefore, hold tha~ paragraphs 7(a) a.'ld 7(b) are valid and enforceable.

Pa.~graphs :7(a) and 7("o) clearly add..~ss different conce.."llS than paragraphs 7(c:) a..'ld 7(d). Pa.ragraph 7(a) · protects from ~c:lo-

. sw-e of confidential informacion while paragraph 7(b) prohibits solicitation of plaintiff's employees.' Certainly, virginia. law recognizes the importance oC protecting c:oniiden-

8. C(. Con:prci:c,...siw Techr.ologiu. 3 F.Jd at 740 (upholding covenant nat co coc:1p.:tc with r.:ldonwidc gcagnphic scope because employer had a national ma.-k:t Cor its gooc!s). Judge Mum3• ghan dissented in Con:;trehll'"..siw T~t:l:r.ologics on the ground c.~at c."tc VirJin~ Suprcr:lc Cau:t h3d never uphelc! a covenant th:ac wu so gcogr:lphi· c:ally bnJad. /C. at 742 (citing c!lScs). He em· phasized the impartancc or rt:Si'CCUng the dcci• sions or the Virginia Supreme Court :LS to wh3c

tfa! L1!o:=.ati~:t. . T.1: !-et~flt~e ~=-==n.s l: L-::pot-..a::~ entJt:i=: c.' -::. .. ~~a t.~Ce set:e~ pro- . te~tion boo ~~e i;ll-~·:.b cc.C~. Va.Cc.:a . .\.::.:."l. § 59.!-3.'35 to ~3 (~!ic:-J: lS92). Co~;.S

hav~ a!so re-=or..ized th~ ~-npor~c:e of prct.ecti"lg cor'""idencia! i.~orn:adon, e\·en to th.e ex-~nt it may not quaiL~· cs a trade saaet u.11der t.:O:e stat!lt.e. Customer contacts a.-a a.."l e.u-nple of an L"'lterest L'l -;.·h!ch a busi.'tess has a legit1-natc ne~d to proc.ec:c.. Edzn Ha-n.· non & Co v. Su.mitmn.o Tr~l &: Ba:nkin~ Co .• 9_14 F .2d 506, 562 (4th Cir.1SSO), cttrt. denied. 499 U.S. 94i. 111 S.Ct. 1414, 113 L.Ed.2ci 467 (199lj.

(16] Cou.~ outside Vn-girt.ia decli.r!e to hold a.'l entire a;reement i;"'l\·alid whe.'l the agreement con~..s an invalid covena.'lt not to compete. 'Tne mere !act that a noncompete CO't"ena.'lt is \"oid does not render \"oid the remai..'lder of the employment c:ontnc:t." Zep l'rfjg. Co. v. HerJu:ock, 524 S.\V.2d 654. 662 (Te."C.CL~pp.l992); see ~o Hi-Lin.e Elec. Co. v. D~J.'CO Elec. Prorb., 765 F .2d 1359, 1363 n. 5 (5th Cir.1985). Instead. the invalid pro,ision may be se\-ered from the c:ont:rac:t and the valid pro.,ision ~..forced if the intent of the parties is not thereby fr\l!· t:rated. Zep, 824 S.W .2d at 662. Other courts adopt a si.-nilar view of the diff'erenc:e between a noncompete and a nondisclosure agreement Hm1:a:rd. Scitu!.t: & .Assocs. oj the Sf:IUtMa.3t. Inc. 11. BT'Ofr.itc.· 239 Ga.. 181. 236 S.E.:Zd 265. 269-70 (19'7i.); Du.Tiulm v. Sf.trnd.-By LciJor oj Ga., In&., 230 Ga. 55S,

:198 S.E.:Zd 145. 149 (1973) ("(A] c:bim for breach· of c:ovel"~t· not to comoeta ~d one fOr i-rongfw discl~sure and us~ oC confidential information it! violation of contract rn~y be maintained separately a.'ld independently undet t.~e same or distinct pro,isions oC the emplo)-ment agreement.•'); Cc.je Assocs., LlcL v. Gerngross, 305 S.C. 6, 406 S.E.:Zd 162, 165 (1991). The contract in th!s case contains provisions that are connected v.ith "or", indi-

V"~ law mca..'U. It!. at 74l. Sa S"J;trt: nocc 5 (discussing subsequent his:orJ a( Com?rr:i-.m· sive r t.t:l:nolagiu ).

'· While pang:-aph 7(c) appon on its race to prohibit soliciQtion of cu.s:omc:"$. :t.S nate~ above. corucrue:i saicdy ag:Unst the employer tt could als.l prohibit emplovmcnt and. d:u.s. · is anaJyzcd unc!cr the sand~ :ac!v:r.nced c:ltlier.

-68-

l f f f r

ROTO-D IE CO.. I:.'-' C. -.·. LESSER 1523 C!:c &a !" r.Su;tp. U U (W.D. \".a. l til)

c:a:i."!i inc~~-=nce..~: cbliga~ons. Mor~~-..·~:-. ?aJSas:s i.~ c:a.sas t.~a~ su&i:S~ t!:~ :.,-;.·::--;.·hfia t.~ere is no se·::rabi.!it.·.; .~ro•.is!on -~ ... :o~ • .:... ,.;~·c: • • • '·- • -: I r · · -· ~ . . . . - ""·-=- r.•l~o e=c.st t:z:ae:- -1 t.7..:.;za a-:.·. :-eli:·:: l e~&acon ~r-ent. t.."lat agre!r::er:t f.&.. the b!tter ... ;:~· is ci:ac the p-l-;.·er C:c-es not c:orporatas the folloo;."t&g sa;i.&gs c:lause: e.'dst. As the Fourth Ci."Cuit b Ai3tl:m Stu-

It is the CORPO? ... !.TION""S intention tu dios made clear: .. !Vie think c.~e rastric:t.i•te . rest."'ict E:\ECtiTrv'"E'S ac:d.,ities orJy to cot.·ena.'lt must be judgad as 2 whole and the e.~~nt nec:essa.-; for the orotaction or· d .. • must Sta.'l or !all when so judged.' " ~92 the legiti.-nate busi.'less biccrests of the F .2d at 2_~ (quoting lv'elcoms wagon v. £"! CT·

CORPOil:tTION. a::d bot.\ the CORPO- ...:. 9-'" F "d 503 ~ol ("·t.. c· tcr,'")) Vi · I ""~• _, - .. t I 'i'-'1 lr ••• l, • lrgt·

P ... a\.TION :u:d EXECUTIVE spec:i:.ic:a!!y ni.a's rule o! strict construction agair~t the agree that should 2.."1Y of' the pro•;isions sat employer, based upon the v;ords used itt the !or-Jt in this .'\.greament U.'lder any set of contract, is also indicative or 2. refusal to c:ircu%11stzn~es not now forese-en by either the CORPOR..~TION or EXECUTIVE adopt the .. blue penc:il" rult!. See Cli:ru:i& shall be deemed too broad ior that ptir· VellUy Piz.y~v. Ga:rr:ia, 243 Va. 286,414

'd . . ~" • el S.E.2d 599, 601 am). .Accordingly, I de-pose, sm proVlSlons ""w ne,·e~..n ess be cline the in'itation to create a new c:ontrac:t ,-a!iq and er.forc:eable to the e.-r~t neces-!or the parties.

sary f'or such protc!ction. !his clause indicates the parties intent to preserve portions of the c:ovenapt should other portions be voidecf.1°

Defendant's reliance on Edzn. Ha:n:nmr. is mispla.ced. T'ne Fourt .. ft Circuit in Ed.m. H a:n:ru:rn. did not apply the modified Blue Ridge facU,rs to the nondisclosure portion of the qreem!.'lt. The disaict court had already anal}-zed that portion of the agreement a.'ld found that there hut been no disclosure o( trade secrets and thus no violation or the nondisclosure pro,ision. Eden. Ha.nTU:I'It, 914 F .2d at 562. Instead, the court of appeals was concerned with the nonc:ircumvention agreement, ":hich i.'l that conte."tt -c:.·as tantamount to a covenant not to compete. /d. at 553. In..facl:, tl:te Fourth Circwt~s discussion in E dzn. H a:n:n,()1f. illustrates the diff'erenc:e be~·ee.'l a nondisclosure provision and a noncompete pro,ision. Simply put. the latter is just ~~ easier v,-ay to enforce t..ie former. See id. at 561-62. The dffi'erence i.'l pu.'"Pose is furJler indication of t..1e necessity for dif' .. ferent treatment. Blue Pencil Ptm.'er

[1 i] While I believe paragraphs 7(a) and 7(h) are severable from paragraphs 7(c:) and 7(d), I decline to adopt the so-al!ed "blue pencil" rule. There is no VIrginia c:3Se directly on point. Lesser points to various

10. This savings p"'vision should be concr.astcd with that held ineffective in th~ .. c:scopp:l.. db· cussion. suprc. The plainrins cscoppcl argumcnc

. act~mpc~d co pr:c:lud~ the dc!encbnc Cram actack·

-69-

The di.frerence betv.·een "blue penci!lin~ and seve..'ing is a matter of focus. The former emphasizes deleting, and in some juris- • dictions adding, words in a partic:t.!br c:lause. The bt"&ooer emphasizes const:rui.'li L~d:pen· dent clauses indepe..'ldently. ..CU the C-eoi-gi..a line of' cases Wust:rata, the two propositior.s are not inconsistent. See H au.oa:rd Scitultz, 236 S.E..2d at 269; Sumta.tes Ref:igerrzted Se:rus., !7lC. v. Grijfi71, 215 Ga_;!.pp. 61, 449 S.E.2d 858, 860 (1994) (Georgia•s reject!~n of the ""oiue pencil" .theory does not require in~dating pro.,isions in same qree.."nent conc:e."lli..'lg nondis!=losure, return of documents, and interference -;:,ith employe!'s contractual. relationships).

Based upon the forgoing, I gra.'lt L"l pa.'"t the de!e.r1dant's motion for summ~~ judgment a.~d deny the plaintifi's motion for summarj judgment. The covenant has at least two defective provisions, para.grapr.s 7(c) and ·· 7(d), which ran due to ambiguous construction a.'ld e."Ccessive geographic scope. However, pa..~phs 7(a) and 7(h) are seerringly

·valid. As the parties have not raised t.~e issue I do not decide whether, or under v.-hat

I • •

circumsta.'lces, paragraphs 7(a) a..,d iCo) could be deemed in"-alid. Se£ S11.713tc!es. ~9

ing the restrictive covenants ahogerhc::. 1':,: sav· ings claUSe: purports to have: no such ,.,-;c!c·r:a.~g· ing cffc:ct.

·'·

1524 sg.g FEDER.J...L SUPPLE~1E~-r

S.E.2d at SOO (~cupti."'tg t::o-p.:.:: s~ca:C: ,. :. . . . . . . -.!::-.:..~to ""or.s'~~'l""'l' .. ~ -:.·!'"a:- •j, t.-:s-· a·.;_ .. " ...... _._ .............. _... . -. .. ::

for a:lo!!-=·._;o-,, !"A ~o~ • ..::ccr ... ~:·,.o .a....-::::_:: ... .:o;:) . . ...... ......,. ... ~ _..., __ .. --· ·-···-·· ..... o( its decision. 25 u.s.c_-1_ § C...~!.

Frank G. SELBE, II!, Plaintiff,

v.

UNITED ST.4.'n:S' .. of America, Defendant.

Civ. A. No. 92-00JS-R.

United States District Cou.pt, W IJ. V1rgini3.

Roanoke Di"tision.

June 9, 1995.

Purchasers of ta."qlayer's home filed interpleader action and paid into court value of note upon llthic:h Internal Revenue Service (IRS) had le,ied. In a second action, t.a."qlayer's v.ife filed suit against government for v.Tongiullevy against note. ."-iter consolidating actions, the District Court, Kiser, Chief Judge, held that IRS was collate.'4lly estopped from· asserting that jeopardy assess-

. ment could 1M imposed on ta."qlayer, beC3use of his assignme."lt of note to his wife in alleged attampt to put property ·beyond reach or IRS, based on orior determii'.ation by distric:~ c~urt that p!'~"luptial agr~ment required ta..q,ayer to tra.'lSfer note to ~ife.

Ordered accordingly.

1. Internal Re~,.enue ¢='4635

In revie'Wing jeopardy assessment, district court must apply sb..'ldard somewhere between not arbitrary a:td opnaous and suppor...ed by substantial evidence. 26 u.s.c_~ § ~QSl.

2. Internal Re.,·enue ¢='463S

In revie\\ing jeopardy assessment. district court may consider what Internal Revenue Senice (IRS) knew or should have known and what is now kno,.,.-n; court is not

3. Judgment ~S

intertt.a! Re .. ·enue ~r-;ice (IRS) ~ coi· late:-ally estopp-!d from asse!'ti'"li t.~at jeop~dy assessment c:ou!d be f.tnposed on t.a.-cpay::-. beause of his assigi'-':tent of nota from sale · or home to his v.iie i."l alleged attampt to pu~ prop-erty beyond reach of IRS, based on crlor detarmi.nation b cri'ltinal case that ~:=· nuptial agreement required t.a."Cpayer • to

transfer note to ~iie. 26 u.s.c_-\.. § 6Sol.

4. Judgment ¢=713(1), i20, i24

Doctri.'le of collateral estoooel orecludes relitigation oi issue of law or ·f~ if oart:ies had full and f2l.r opportu:uty to 1itipt.e issues, issue was actually litigated, and it Vr"-d.S

necessary to prior judgment.

5. Judgment ¢='il3(1)

Mi."Ced issues of Ia-..· and fac:t and questions of Ia\\· applied to very same historic: facts are appropriate for issue preclusion.

Frank G. Selbe, m, Roanoke, V~ prose.

Richard .. 4.... Lloret, U.S. Attorney's Office, Ro&"loke, VA, l"Yilliam K. RoWISborg, -rr;.a~

Attorney, ~!argaret ~!. Earnest, U.S. De· partment of Justice, Ta."C Di,ision, Washing· ton, DC, for deienda."lt United 'Sbtes or America:

ME~.vtORA.lv DU1."'tf OPINION

KISER, Chief Judga.

On .4.-prU 2, 1992, the Internal Re\·enue Sen;ce ("IRS .. ) made a jeopardy assessment against the plai.'ltiff, Frm.lc G. Selbe III, !or Wlpaid federal income ta."C from the Ye3lS 1983 and 1984, under 26 U.S.C. § 6S61. Selbe sought administrative review and Vr"2.S denied relief. He then filed the instant act:fon see..ldng a judicial deta.1'1Ilinat:ion regarding the reasonableness or the jeopardy assessment and the amoWlt assessed, under 26 U.S.C. § 7429. Jurisdiction is preper under that section. T'ne parties are now before me on Selbe's motion for summary· judgment. filed pro se. The issues have been fully briefed and argued and are ripe for detenni-

-7o-

·I _, -. I

230 PAIS V. AtrrOMAnON PRODUCfS, INC. 36 vi.. cut. 230 (1995)

CIRCUIT COURT OF THE CI1'Y OF NEWPORT NEWS

Elwood A. Pais, Jr.

v.

Automation Products, Inc.

April 17, 1995

Case No. (Chancery) 25273-RF

IIEADNOTE: Parol evidence Is not admissible to show a mistake or law or what one of the parties to a contract believed.

In this case, the covenant not to compete was unenforceable because It was overbroad and unreasonable.

BY JUDGE ROBERT P. FRAN.K

In September of 1993, Elwood A. Pais filed a Motion for Declaratory Judgment against Automation Products, Inc., t/a API Business Furniture, ("API'') asserting that the restrictive covenants contained in the Employment Agreement were invalid and unenforceable because ( 1) API had generally released and cpvenanted not to sue upon them; (2) the covenants as a matter of law were overbroad and unreasonable;' and (3) the covenants could not properly be invoked by non-renewal of employment but instead required termination. Mr. Pais presently seeks summary judgment on these same issues.

In March of 1994, API filed a Bill of Complaint against Mr. Pais requesting injunctive reli~f for breach of the restrictive coven':lllts contained in the Employment Agreement. In addition, API seeks 'liquidated damages of $50,000.00 under Paragraph 5 of the Employment Agreement. Third, the Bill of Complaint alleges breaches of both common law and fiduciary duties by Mr. Pais. Lastly, API asserts a breach of the Trade Secrets Act by the willful and malicious misappropriation of trade secrets.

I. Parol Evide1ace

At the time of the hearing, this Court reserved ruling on the underlying issue of parol evidence as it pertained to the Separation Agreement. Counsel for API argued that such evidence was admissible under the partial inte~ration and mutual mistake exceptions to the parol evidence rule. Mr.

PAIS v. AurOMATION PRODUCfS, INC.

36 ~A. CIR. 230 (1995) 231 ::!

\ Pais, however, contends that the Separation Agreement is complete on its face, and thus, parol testimony is inadmissible.

The parol evidence rule states that "extrinsic evidence will be excluded when offered to· add to, subtract from, vary, or contradict the terms of a written contract ... High Knob, Inc. v. Allen, 205 Va. 503, 506 (1964). Phrased another way, .. evidence of prior or contemporaneous oral negotiations is generally inadmissible to alter, contradict, or explain the tenns o( a written instrument provided the document is complete, unambiguous, and unconditional." Renner Plumbing, Heating & Air Conditioning v. Renner, 225 Va. 508, 516 (1983). Therefore, "when the parties set out the tenns of their agreement in a clear and explicit writing, the document is the sole memorial· of the contract and the sole evidence of the agreemenL" I d.

There are, however, several well-recognized exceptions to the parol evidence rule. Jbe doctrine of partial integration, for example, provides that .. where the entire agreement has not been reduced to writing, parol evidence is admissible, not to contradict or vary its terms bu~ to show additional independent facts contemporaneously agreed upon, in order to establish the entire contract between the parties ... Renner Plumbing at S I S-16. Another exception, which arises on proof of the mutual mistake of the parties, states that "equity should give effect to the true intent of the parties, despite a contrary intent reftected by a writing the parties mistakenly believed to monument their bargain." Gibbs v. Price, 207 Va. 448, 449-50 ( 1966).

While API asserts that the parol evidence is admissible under the doctrines of partial integration and mutual mistake, it does not contend that the Separation Agreement is unambiguous or incomplete on its face. Rather, API relies on the testimony of Mr. Bany as well as the numerous drafts of the Separation Agreement to demonstrate that the agreement was neither reduced completely to writing nor reftective of the parties. true intentions. According to API's parol evidence, the parties agreed that the Separation Agreement neither conftnned nor refuted the existence of the non-compete clause in the Employment Agreement and that the parties would be left to litigate that issue another day.

In order for the partial integration doctrine to apply, however, the writ-· ing must be incomplete o.- unambiguous on its face, without assistance from the parol evidence. Tlie law is clear that a court may not, where the contract language is clear, invite or accept the submission of extrinsic evidence, find ambiguity in the contractual text based upon that evidence,

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232 PAIS V. AtrrOMATION PRODUCTS1 INC. 36 VA. CJR. 230 ( 1995)

nod then resolve the found ambiguity by resorting to that same extrinsic evidence. Amos v. Coffey, 228 Va. 88, 93, (1984). Therefore, when the writing "upon its face is without any uncertainty as to the object or· extent of the engagement, it is conclusively presumed that the whole engagement of the parties and the extent and manner of their unde~aking was reduced to writing." Adams v. Seymour, 191 Va. 372, 383 (1950).

Here, the Separation Agreement is plain, co~plete, and unambiguous on its face such that parol evidence is inadmissible under the partial integration doctrine. Paragrapll BB of the Separation Agreement clearly states that -\PI:

releases, covenants not to sue, and holds harmless Pais, his heirs and assigns, of and from all manner of action and actions, caused and causes of action, suits, debts, sums of money, accounts, covenants, contracts, agreements, promises, damages, claims, and demands of every kind or character whatsoever, whether presently known or unknown, suspected or unsuspected, under state or federal laws, which API now has against Pais, his heirs, and assigns.

This provision by Mr. Barry's own admission is a minor image of Paragraph SA which is intended as a general release of. ·liability for API as against its employees. The language is clear and certain, and therefore, the parol evidence is inad4Jtissible. ·

Furthermore, it shoUld be noted that API's parol evidence is not admissible under the partial integration doctrine for it attempts to alter the terms of the ·separation Agreement. The partial integration doctrine is available "not to contradict or vary [the] terms [of the agreement] but to show additional independent facts contemporaneously agreed upon." Renner at 5 16. Thus, API may not adniit evidence to show that the release was intended to exclude the noncompete covenants because such testimony directly conflicts with the language of the agreement.

API also asserts that parol evidence is admissible to show mistake, namely that the parties intended the release to be prospective only and not to a(ldress the Employment Agreement. The defense of mistake, however, only applies to enors of fact and not law. In addition, in order for parol evidence to be admissible to demonstrate mistake, the mistake must be common to both contracting partiesi "parol evidence is never competent to show merely what one of the parties thought." Fox-Sadler Co. v. Norris Roofing Co., 229 Va. 106, 110 ( 1985).

~

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PAIS V. AUTOMATION PRODUCTS, INC. 36 VA. CIR. 230 (1995)

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233\./

r In the present case, the only .error claimed by API is that the release was

intended to be prospective and not to address the Employment Agreement. Thus, the parties allegedly misunderstood the legal consequences and not some underlying factual presumption. As a result, relief will not be granted because the parties, operating with knowledge of all material facts, entered into the agreement only under a mutual mistake of law. Piedmont Tt11st Ba11k v. Aet11a Cas. & Sur. Co., 21 0 Va. 396, 401 ( 1969).

Second, the evidence only shows mistake on the part of API in its drafting. While Mr. Barry may have ened because "I was not thinking in tenns of the noncompete survivability" and "I did not focus on the specific individual terms," (Transcript pp. 5 1-2), the evidence is clear that Mr. Pais did not make th~ same mistake. In fact, Mr. Barry's testimony itself shows that Mr. Pais specifically and intentionally ·requested the addition of paragraph BB such that the release would be reciprocal. (Transcript p. 51.)

Further, it was Mr. Pais • understanding, from his conversations with Mr. Barry. that Mr. McDevitt did not intend to pursue the covenants. (Transcript p. 138.) While Mr. Pais admitted he ••would have felt better if it specifically said something" regarding the noncompete clauses, he nonetheless testified that he .. felt quite comfortable that paragraph eight covered everything." (Transcript p. 138.)

For· these reasons, API has failed to establish mutual mistake of law such that it would be entitled to the assistance of parol evidence to interpret the contract.

II. A11alysis of the Release

Having found the contractual terms to be clear and unambiguous, it is the duty of the court to enforce them. Winn v. Aleda Constr. Co., 227 Va. 304.(1984). Thus, this Court must now determine whether the tenns of the Separation Agreement serve ·as a general release and covenant not to sue such that the noncompete clauses of the Employment Agreement are dis-charged. ·

In interpreting the language of a contract, the general rules of construction require that the words be given their plain meaning; the court is not free to rewrite a contract to express .. an intention that is otherwise indi·scemible." Amos v. Coffey, 228 Va. 88, 93 (1984).

Paragraph BB of the Separation Agreement plainly states that API "releases, covenants not to sue, and holds harmless Pai.s ••• of and from 'an . . . covenants, contracts, agreements, promises . • • whether presently known or unknown .•• which API now has against Pais." The words of

234 PAIS V. AtrrOMATION PRODUCTS. INC.

36 VA. CIR. 230 ( 199S)

Paragraph 8B clearly grant a general release to Mr. Pais from al~ cov~nants then existing, including the covenant not to compete as contatned tn !he Employmen~ Agreement; no other rational interpretation or understandmg can be· derived from this language. And "even if this may not have been what [API] intended when it drafted this provision, we are limited to the language of the contract, strictly construed." Clinch Valley Physicians, Inc. v. Garcia, 243 Va. 286, 290 (1992). ..

For this reason, this Court finds that as a matter of law Paragraph 8B of the Separation Agreement releases Mr. Pais from all coven~ts an~ agree-ttents which existed prior to the Separation Agreement, tncludmg the Jvenants not to compete contained in the Employment Agreement. It

should be noted, however, that Paragraph 8B in no way releases Mr. Pais from any obligations or causes of actions which may have accrued subse-quent to the Separation Agreement. ·

_ 7 m. Analysis of the Covenants .

Even disregarding the paragraph 8B release, the covenants not to com-1 pete as contained in the Employment Agreement are invalid and unen~ forceable by reason of overbreadth and unreasonableness. The relevant I ' ' tat provastons s e:

S. During the term ~f his employment, Employee covenants that he will not engage in competition with the Company in the business of Company or a similar or related type of business, nor will he in any manner become interested in, directly or in- . directly, as an owner, partner (dormant or otherwise), agent, stockholder, director, or officer of a corporation ·or otherwise, any business in competition with Company or. any similar or related type business within the economic marketing area of Company defined 'n ~e following paragraph number 6 [emphasis added). Employee further covenants that for the period pf two (2) years after the date of the termination of his employment with Automation for any reason, he will in no event in competition with Automation solicit (directly or indirectly) accept, handle in anyway, do business with, or cause a change in the relationship between the Company and any person, firm, association, or corporation, including but not specifically limited to the customers, suppliers, and manufacturers who had any business relationship with Company, within tw~ years of the date of tennipation of the

PAIS V. AtrrOMATION PRODUcrS.INC. 36 VA. CJR. 230 (1995) ...

235

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Employee's employment. It is specifically understood that Em- ... rployee is prohibited for the said two-year period from soliciting, accepting, handling, or in any way doing business with anyone or a1ay. entity that has been a customer or identified as a prospective customer of Company during the two years preceding termination [emphasis added]. Employee further covenants that for the aforementioned period of two (2) years from the date of the termination of his employment and within the aforesaid economic marketing areas of Automation, he will not engage in competition with Automation in business as an employee, employer, owner, partner (dormant or otherwise), agent, stockholder, director, or officer of a corporation or otherwise, with any of th~ present or future, full or part time employees of the business furniture and office supplies business or a similar or related business, nor will Employee in any way, directly or indirectly, cause any of the aforementioned present or future, full or part-time employees of Automation to terminate his or her employment with Automation during ·the said two (2) year period [emphasis added] •••• 6. For the purposes of this Employment Agreement, the economic marketing area of the Company shall be defined as that area within a one hundred twenty-five mile radius of each and every Company office or employee location, wherever situated in which Company, Company's subsidiary, or Company's franchisee, whether in its principle name and capacity or under the Jerms of a Company subsidiary, Company franchise, or similar arrang~ment.

In Richardson v. Paxton Company, 203 Va. 790, 127 S.B.2d 113 (1962). the Supreme Court of Virginia applied the following criteria when analyzing restrictive covenants:

(1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer. in some legitimate business interest?

(2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legiti· mate efforts to earn a livelihood?

{3) Is the restraint reasonable from the standpoint of a sound public policy?

·236 PAIS V. AUTOMATION PRODUCTS, INC. 36 VA. CJR. 230 ( 1995)

In detennining the reasonableness of a resbictive covenant, the Supreme Cowt of Vuginia has consistently focused on lhe duration (not

-presently djsputed), territory, and activities restricted. Specifically, the Court bas given particular attenti.on to lhe relationship of lhe parties. Meis-sel v. Finley, 198 Va. 577 (1956). _. . .

In construing a covenant not to compete, the burden of proof ltes wtth the employer. Linville v. Servisoft ofVa., Inc., 2~ 1 Va. 53 (1970). Similarly, where a covenant not to compete contains vague tenns or ambiguities, the courts will construe the language strictly against the employer. Richards'!n ''·Paxton Co., 203 Va. 790, 127 S.E.2d 113 (1962); Linville v .. servisoft of Ia., Inc., 211 Va. 53, 174 S.B.2d 785 (1970); Alston Studios, Inc. v. Lloyd V. Gress &: Assocs., 492 F.2d 279 (4th Cir. 1974).

The testimony establishes that API is a dealer in office furniture for government offices; the company essentially serves as a broker which assists in purchasing and provides installation services for government offices. 10e vast majority of API's business, upwards of ninety percent according to Mr. Pais, involves the sale of a product with a price fixed on

1 the GSA award schedules. (Transcript pp. 8-12.) These prices are pub~ lished nationally, and under a GSA contract, the price may not vary. (Tran-I .

scnpt p. 7 .) . . The only variable in pricing_ a GSA contract involves the tnstallataon

and design charges. According to Mr. Pais, over 50% of API's business involves some fonn of installation which is basically lhe only negotiable element in the contract. (Transcript p. 12.) This fee for installation, or, in other words, the profit margin, is almost always a "percentage of the net" and is continually adjusted by API on a monthly basis. (Transcript pp. 12, 22.)

Mr. Pais served as API's executive vice-president-for approximately five years. As such, be knew the margin goal and established the ~aramet~rs for the salesmen; and if a salesman wanted to go below a certaan margm, Mr. Pais would make the final determination. (Transcript pp. 16-18.) In addition, Mr. Pais was responsible for the eveeyday management and growth of API such that he was fully infonned of all API's pricing fees and (lata. (Transcript pp. 78-80.)

Nonetheless, Mr. Pais insisted that this infonnation is by no means confidential or unique to API as it is available. from the public record. Once an award· has been made, the bids become public infonnation and any~ne making a request can receive a copy; from there, "it is then a very simple mathematical equation to get the installation." (Transcript pp. 22-

PAIS V. AUTOMATION PRODUCTS, INC. 36 VA. CIR. 230 (1995) . ...

237

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24.) In fact, Mr. Pais testified that his cempany would make such requests in order to double-check their bids and to calculate the profit. margin of their competitors. (Trapscript pp. 22-24.) Mr. Pais testified that he knew for a fact, based on this research, that the profit margin of API's largest competitor is 14-169&. (Transcript p. 23.)

As an officer of API, Mr. Pais was also very familiar with API's customer base. The majority of the business was located on the Southside, or here on the Peninsula. (Transcript p. 117 .) Beyond that there were no direct sales by the sales force north of the line running from Newport News to Richmond, southwest to Fort Pickett near Blackstone, Vi~ginia. (Transcript p. 118.) Any sales beyond that boundary were to prospective custom.ers throl}gh API's catalogue. (Transcript p. 1 18.)

Mr. Pais testified that this customer infonnation is not unique to API. however, because anyone can identify the purchasing agent at the military installations. (Transcript p. 19.) He testified that "it's easy to know the purchasing agent who buys furniture ••• because all you have to do is go to a military base and ask who is the purchasing agent that buys furniture. It's the same at· every base." (Transcript p. 19.)

Mr. Pais did admit that, as a result of this constancy, he could move away from the area without giving up much of an edge. (Transcript p. 20.) Yet due to Mr. Pais' personal and family circumstances, he is unable to make such a move presently. In addition, he is unable to make a career change given the fact that he is in his late forties, has been in the business over twenty years, and knows no other activity. (Transcript pp. 123-24.)

Mr. McDevitt, API's President, also testified regarding the customer and pricing infonnation which his company maintains is highly confidential and privileged. (Transcript pp. 80-85.) However, this testimony did not truly conflict with Mr. Pais, for on cross-examination, Mr. McDevitt admitted that the price of the bid, including the negotiable factor of installation, was available upon a proper request to the government. (Transcript pp. 93-95.) In addition, Mr. McDevitt acknowledged that there are national publications which list the various military associations throughout the country and which could be used to identify prospective customers.

In addition, Mr. McDevitt testified as to how he selected the 125 mile geographical limit. It was his opinion that it reflected "a fair limit on the service area that we can handle ... (Transcript p. 86.) However, he admitted that the company has clients far beyond that boundary, including one in Adzona. (Transcript p. 95.) API reaches these governmental installations

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238 PAIS V. AtrrOMATJON PRODUCfS,INC. 36 VA. CIR. 230 (1995)

through mass mailings of over 18,000 catalogues to "prospective customers" throughout the country. (Transcript pp. 95-97.)

Clearly .. API has a legitimate interest in preventing Mr. Pais from soliciting its customers or directly competing against it. Yet the restriction must be no greater than is necessary for its protection.

Geograpliically, the non-compete restriction would prohibit Mr. Pais from, at a minimum, competing within 125 miles of an API office or the work place of an API employee so that Mr. Pais is prohibited from sales as far north as Maryland. At a maximum, the restrictive covenants under subparagraphs 2 and 4 of Paragraph 5 could conceivably extend throughout the world.

The evidence is, however, that API bad minimal sales outside of the low~r half of the 125 mile radius. (Transcript p. 133.) In addition, sales outside Virginia made up less than 5% of API's sales. (Transcript p. 133.)

While the Supreme OGurt, in Blue Ridge Anesthesia v. Gidick, 239 Va. 369 ( 1990), has upheld a broad-ranging restriction that included four states and the District of Columbia, the restriction at issue only applied to territories serviced by the former employee, not Blue Ridge's entire market area. In Paramount Tennite Control v. Rector, 238 Va. 171 (1989), the Supreme Court similarly upheld a geographic restriction which was limited to counties in the state in which the employee· was assigned. Again, the restriction did not apply to areas in which the employee did not work.

The geographic restriction in this instant case is broader than necessary to protect API's legitimate business interests. The. 125 mile restriction is not related to Mr. Pais' former activities, but it covers API's entire market area of "potential customers" which conceivably ranges nationwide.

In addition, the covenants are unreasonable as to the relationships and activities which Mr. rais may establish. As highlighted above, subparagraph 2 of Paragraph 5 prohibits Mr. Pais from dealing with anyone with whom API has had any dealings, regardless of whether the business involved office furnishings or supplies. In addition, the covenants totally prohibit Mr. Pais fro~ dealing with any business regardless of whether the bll$iness concerned office furititure. Thus, Mr. P~is is prohibited not only from buying his cleaning supplies from the same business as API, but also from catering an office party for API's customers. .

Clearly, under these restrictions, Mr. Pais could not pursue a livelihood selling business furnishings while simultaneously remaining in the Peninsulaflidewater Virginia area. The· enforcement of this covenant would force the defendant to choose between a new career or a substantial

PAIS V. AUTOMATION PRODUCTS, INC. 36 VA. CIR. 230 (1995)

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239 \)<:::

t' relocation. Either option would severely curtail the defendant's legitimate efforts to earn a living. ~ In summary, the restrictive covenants are overly broad and unreasonable

both as to the geography and activities encompassed. Public policy would not encourage covenants that would effectively prevent a person from pursuing his livelihood or from requiring the person to move great distances to relocate. Thus, this Court holds, apart from its other findings, that the noncompete covenants are u~enforceable as drafted. As generally this Court has not been granted the authority to "blue-pencil" or otherwise rewrite the conb'act, the covenants therefore fail.

IV. Trade Secrets arad Confidential Information

In its Bill of Complaint, API claims that Mr. Pais has disclosed trade secrets and confidential information in violation of his contractual, common law, and statutory duties. In addition, API seeks ~n injunction based on any and all of the foregoing grounds.

In support of its breach of contract claim, API relies on subparagraph 4 of Paragraph 5 of the Employment Agreement which reads as follows:

Employee further covenants that he will. not divulge for a period of two (2) years to any person, corporation, or other entity any of the accounts, transactions, expansion or contraction plans, or any other secrets or privileged information of Automation. For any violation of this provision, Employee would agree to pay the sum of Fifty Thousand Dollars ($50,000.00) to be deemed liquidated damages, in addition to any other actual damages which Company sustains as a result of the breach hereof.

API asserts that Mr. Pais bas violated this provision by disclosing to Tiu Work Place, Inc., Mr. Pais' company, secrets and privileged information o: API, including cost and price data, as well as key employees and contact: of API's customers. ·

Each of these claims, for violation of conb'actual, common law, am statutory duties, however, is also governed by the Release in Paragrapl BB. As discussed above, API agreed to release, covenant not to sue, anc hold hannless Pais from all covenants, conb'acts, agreements, and prom ises then existing. ·

Clearly, API's contractual claim for $50,000.00 in liquidated dam"iige: necessarily fails under the terms of this general release. This liquidatec damages provision concerns a covenant by Mr. Pais which was in exist

240 PAIS V. AUTOMATION PRODUCfS, INC. 36 VA. CIR. 230 ( 1995)

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ence prior to the execution of the Separation Agreement. Therefore, it is encompassed within the tenns of the release and is not binding upon Mr. Pais.

With· regard to the claim for misappropriation under the Trade Secrets Act, the, release carries the same implications. In analyzing a cause of action under the Trade Secrets Act, the plaintiff must prove that the information was (1) a trade secret and (2) nlisapprop_riated. Without even addressing the agreements as to whether the infonnation was a trade secret for purposes of the statute, it is clear that there could be no misappropria-.:.,n.

Under the Trade Secrets Act, Virginia Code§ 59.1-336, "Misappropriation" is defined as:

1. Acquisition of a trade secret by another by a person who knows or. has reason to know that the trade secret was acquired by improper means; or 2. Disclosure or use of a trade secret of another -without express or implied consent. [Emphasis added.] I .......

0') I In the testimony, there was no suggestion that Pais acquired his knowl-edge or information by improper means; in fact, be was given the information as a result of his Vice-Presidential sales status. Thus, part one of the test for misappropriation cannot be satisfied. The only issue then is whether Pais' disclosure or use of any info_rmation was "without express or implied consent." -

When API and Pais first entered into their relationship, it was clear that - API was concerned with what it considered to be confidential information

and trade secrets. The prefaces to the Employment Agreement state:

Whereas, Automation has engaged in the sales of business furniture and office supplies and has developed a very valuable business and good will and, in addition, has developed and is developing as majof ~ssets of the business ( 1) lists of present and prospective cusfomers; (2) certain work methods and techniques; and (3) certain new products and new product ideas; and

Whereas, Employee is being hired for the position of Vice President-Sales with responsibility for all of Automation's sales accounts and, as such~ will devote his efforts to the sales of Company products and services to customers, to the developm~nt of existing and new sales accounts, to the training and

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PAIS V. AllfOMATION PRODUCTS, INC. 36 VA. CIR. 230 ( 1995)

241

development of sales personnei. and to such other services as are C3r delegated to him by Automation; and • . • .

Whereas. in the course of such employment, Employee will have access to such confidential information concerning custom· ers, prospects, sources of supplies, work methods and techniques, new product and product ideas, and other important confidential knowledge relating to the business and the background of the business of Automation as would result in irrepa-

. rable injury to Company not adequately compensable in money damages if Employee should enter into the employment of or become interested in a competitive concern or otherwise compete with Automation in its business.

The Employment Agreement then continues, after establishing the basic tenns of employment, by outlining in great detail the covenants not to compete and other prohibitions on competition which have been previ-ously discussed. . -

When the Separation Agreement, including the general release, was s!gned however, API entirely abandoned those covenants, agreements, and nghts, thus leading not only Pais but anyone else to believe that API had no intention of attempting to enforce its prior contractual agteements regarding competition. In other words, API not only· expressly_ but also impliedly waived its previous contractual rights and consented to business competition from Pais.

Therefore. API cannot now be heard to claim that Pais misappropriated any business infonnation or knowledge gained during his employment with API. If API had intended to enforce the covenants not to compete or any other prohibition on competition, it never should have granted Pais a gen~ral release in the Separation Agreement.

_Lastly, _with.regard to API's claims of breach of fiduciary duty, API bas faded to tdentafy any specific duty owed by Pais. In fact, as API's brief points out, the Supreme Court of Virginia, in Peace v. Conway, 246 Va. 27~, 281 (199~). has adopted part of the Restatement (Second) of Agency whtch states that "unless otherwise agreed, after termination of the agency, the Agent: (a) bas no duty not to compete with .the principle." While the agent may be limited from using confidential infonnation or trade secrets as similarly codified in § 59.1-336, he is nonetheless "entitled to use general information concerning the methods of business of the principle and th~ names of the customers retained in his memory."

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242 PAIS V. AUTOMATION PRODUCTS. INC. . 36 VA. CIR. 230 ( 1995)

Accordingly, there is no fiduciary duty distinct from those of the Trade Secrets Act, and thus, API bas no cause of action on this ground. Assuming, howe~er, that such a duty could be identified, the same analysis applied ·with regard to the Trade Secrets Act claim would be applicable. Where API bas clearly released Pais from all "covenants, contracts, agreements [and] promises" not to compete or use infonnation and knowledge acquired during his employment with API, it cannot now claim damages and seek an injunction against the same behavior.

In summary. the Court finds that the various covenants and agreements made by Pais in the Employment Agreement were released by the tenns of the Separation Agreement. Further, even had they not been released, the covenants not to compete are invalid as they are both unreasonable and overbroad. Finally, for the reasons discussed above, API's motion for a preliminary injunction is denied.

HARRIS V. MARSHALL 36 VA. CIR. 243 ( 1995)

CIRCUIT COURT OF THE CITY OF RICHMOND

Garland Lee Harris and Louise Williams Harris

v.

Watson M. Marshall, Exec~tor of the Estate of John T. Harris, Sr., deceased, John Thomas Harris, Jr., and Anita Dale Harris

April 17, 1995

Case No. HD-1288-1

243

HEADNOTE: Courts act by written orders and decrees,· and there Is no tennination of litigation untn the Court enters an appropriate order. The date of a nonsuit Is the date that lhe Court signs the written order of dismissal •

BY JUDGE MeLVIN R. HUGHES, JR.

The question for the Court in this case is whether a no·nsuit order should be entered for the day the motion was made or entered for the day the order is tendered for entry. The resolution of this issue may determine whether a second filing of the same case is timely.

The issue is framed by Defendants • Motion for Entry of Nonsuit Order. The following is a summary of the events taken from the motion and state~e~ts made at a hearing on the motion on April 6, 1995. On the day set for trial, July 7, 1994, plaintiffs advised through their attorney that they would take a nonsuiL The next day counsel for plaintiffs sent a transmittal letter and a sketch order for nonsuit to the defendants • attorney requesting that defense counsel send the order back to him after endorsing it. Defense counsel endorsed the order and returned it to the plaintiffs • counsel requesting that he send the order on to the Court for entry. According 'to a copy of a letter dated July 11, 1994, in plaintiffs' counsel's file counsel for plaintiffs sent the order to the clerk for entry. Neither the o~der nor the · transmittal letter of July 11, 1994, ever reached the clerk. Thereaftet thinking the order of nonspit for the first case was entered on or after Jut; 11, 1994, pl~intiffs filed a second identical lawsuit on January 11, 1995. (It

410 137 FEDERAL REPORTER, 2d SERIES

John L. G~vr. Appellee.

v. CAROTEK, INC., Appellant.

No. 83-2062.

United States Court of Appeals, Fourth Circuit.

Argued May 9, 1984.

Decided June 18, 1984.

Former employee. med suit to obtain declaratory judgment stating noncompetition clause in employment contract was void and could not be enforced against his new business. The former employer responded by filing suit against former em· ployee alleging that former employee had violated covenant not to compete. The ac· tions were consolidated and the United States District Court for the Eastem Dis· trict of Virginia, Robert R. Merhige, Jr., J., ruled for former employee on the ground that noncompetition clause was overly broad, and former employer appealed. The Court of Appeals, · Ervin, Circuit iudge, held that noncompetition clause was an un· reasonable restraint of trade under Virginia law.

Affi~ed.

1. Contracts c=» 116Cl) ·. As a general rule, Virginia law does

not too~ favorably upon restraints of trade by employer.

2. Contracts 4=141(1) Under Virginia law, employer bears

burden of showing that restraint of trade imposed on employee is reasonable. ·

3. Contracts $::1202(2) Virginia law requires that noncompeti-·

tion clauses be strictly construed against employer.

4. Contracts e::ansn. 2> To detennine if employer's restraint on

employee's trade is reasonable, Virginia court considers whether the restraint, from

-78-

standpoint of employer, is reasonable in the sense that it is no greater than is necessary to protect employer in some legitimate business interest, whether, from standpoint of employee, restraint is reasonable in the sense that it is not unduly harsh and oppressive in curta11ing his legitimate efforts to earn a livehnood, and whether restraint is reasonable from standpoint of some pubHe: policy.

5. Contracts ~116(1) Noncompetition clause in employment

contract precluding employee from making any contact with employer's contacts after termination of employment was an. unreasonable restraint of trade under Virginia law.

Andrew J. Ellis, Jr., Richmond, Va. (David G. Shuford, Mays, Valentine, Dav· enport & Moore, Richmond, Va., on brief}, for appellant.

Francis T. Eclc, Richmond, V a. (Hooker & Eck, Richmond, Va., on brief), for appellee.

Before RUSSELL and ERVIN, Circuit Judges, and BUTZNER, Senior Circuit Judge.

ERVIN, 9ircuit Judge:

John L. Grant is a former employee of a North Carolina chemical processing equipment distn"butor linown as "CUotek, Inc." In November of 1982 Carotek discharged Grant. With the help of another former Carotek employee, Grant proceeded to form his own diStnbution company. Grant's contract with Carotek, however, included a .. Non-Competition Clause" that purported to cover Grant's activities for five years after the termination o£ his employment with Car.otek. In March of 1983 Grant fded a suit in diversity in federal district court to obtain. a declaratory judg· ment stating that the non-competition clause was void and could not be enforced against his new business. Carotek responded by filing suit against Grant, alleg· ing that Grant had violated the covenant not to compete. Carotek sought injunctive

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GRANT v. CAROTEK. INC ace u '737 F.ld 410 (19M)

relief and damages. The actions were con- The district court concluded that the nonsoUdated, and the district court ruled for· competition clause was in fact overly ~rant on the ground that the non-competi- broad. and that Carotek bad no legitimate tion clause was overly broad. We affirm. business interest in proluoiting sueh a wide

scope of ~tivities. The lower court was

Carotek sells and I. distributes chemi--1 particularly concerned with the part of the '""" clause that stated that "the EMPLOYEE

processing equipment in Virginia, North agrees not to contract with any of the ••. Carolina, and South Carolina. John Grant manufacturers with which the employer was fU"St hired by Carotek in August of bas contracts." In the coUrt's view this 1975. From 19'15 to 1982, Grant held posi-tions as salesman, vice-president, executive prohibition went beyond a reasonable re-vice-president, and manager of Carotek's straint designed to protect a company from Virginia operations. It is undisputed that unfair competition because on its face it while he served in these positions Grant barred Grant from entering into any con· was privy to confidential information about ~~n thos~ haviD~ no~g to _do Carotek's operations, finances, and custom· . wtth chem1~l eqwpment dlStribution--wtth ers. · Carotek's clients.

Three days after Grant was fll'ed he On appea~ Carotek argues that the started a new company entitled Engineered clause, when read in ita entirety, only reSystems & Products, Inc. (ESP). ESP was stricts Grant from entering into contracts formed as a chemical processing equipment with Carotek's clients "for the sale and distribution company. With the help of his distribution of ehemical processing equippartner, Christopher H. Isenberg, Grant ment." This, Carotek insists, is both a began contracting with manufacturers for· reasonable and a limited restraint. In addimerly represented by Carotek. ESP's option, Carotek contends that the district erations, therefore, competed directly with court failed to ascertain accurately the parCarotek's Virginia operations. ties' intent. In Carotek's view, the parties

At the time Grant left Carotek's employ never contemplated that the clause could or he was working under -a contract that con· would be used to bar all contracts with tained a non~inpetition clause. The Carotek's clients. clause stated that:

NON-coMPETITION CLAUSE. In consideration of the foregoing, the EM· PLOYEE agrees not to contract with any of the principles [sic] or manufacturers with which the EMPLOYER has contracts .for a period of five (5) years after tennination of his employmel\t. This cove~ant not to compete shall be limited to the states of the United States where the EMPLOYER is doing business at "the time of termination of the EMPLOYEE'S employment.

Concemed about the legal implications of this clause for his new business Grant filed this action for a declaratory judgment in March of 1983.

t. Jurisdiction in the cllstrid court was based on 28 U.S.C. § 1332. We are n:qufrc:d, thcrcf'ore. to apply lhe law of Virginia. Em /Wirotul Co. v.

II. . (1-3] AA a general rule, Virginia law

does not look favorably upon restraints of trade.• The employer b~ the burden of showing that the restraiit ··Is reasonable. Alston Studi01, Inc. 11. Gras cl: Associates.. . 492 F.2d 279 (4th Cir.197 4): Richcrclson 11. ·

Pa:zton Co., 203 V a. '790, 127 S.E.2d 113 (1962). More important, V"ll'ginia law requires that non-competition clauses be strictly construed against the employer. Alston Studios, 492 F.2d 279; Richardson. 203 Va. 79o, 127 S.E.2d 113; tu:cord Roanoke. Engineering Sales Co. v. Rosenbaum, 22s V a. 548, 290 S.E.2d 882 (1982)i

Tompkitu. 304 U.S. 64, SB S.Ct. 817, 82 LEd. 1188 (1938).

412 '13'7 FEDERAL REPORTER, 2d SERIES

Foti v. Cook, 220 V a. 800, 263 S.E.2d 430 (1980).

[ 4, 51 To determine if a restraint is reasonable, Virginia courts have applied a three-prong test:

(1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer in some legitimate business interests?; (2) From the stand· point of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtaJ1ing his legitimate efforts to earn a liveli· hood!; (3) Is the restraint reasonable from the standpoint of a sound public policy!

Alston Studios, 492 F .2d at 282-83. We agree with the lower court that on ita face the non-competition clause fat1S W pys muster. As the trial court correctly point. ed out: ..

[T]he clause would prohibit Grant from contracting with Carotek's manufactur· ers and principals on any matter, wheth· er or not he would actually be competing with Carotek for any ·such contract. He

· could not, for instance, contract to provide them office supplies without violating the clause. Perhaps more realistically, he would be prevented from contracting to represent them in product lines in which Carotek might have no involvement or interest • • • ConceivablY. the non-competition clause could be interpreted more narrowly, but Virginia law requires that it he strictly construed against the employer • • • • In this case the broad interpretation of tJ:te clause is certainly the understanding that would most probably occur to the empioyee trying to c:ircumscn"be his behavior to c:om· ply with it.. .

Carot.ek contends that the plain language of· the c:Jause should be interpreted in a

2. Even if we were to look beyond lhe four comers of the contract. the extrinsic evidence is not as clear as Carotek sugscsll. Carotck relics heavily upon an affidavit submilled by Carotek's president to argue that the covenant was intend· eel to be a limited restraint. Under the circum·

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more restricted manner. Specifically, ~ otek argues that the use of the phrases "non-competition clause" and .. covenant not to compete" ·effectively limits the restraint · only to those contracts invohing direct competition with Carotek in the area · of chemical processing equipment distnoution. We fmd this logic strained. The term .. competition" is sufficiently broad to include a wide sp~m of contracts. We are not convinced that the use of this term can be rea~ to alter the plain meaning of the first sentence of the clause. Furthermore, VIrginia law requires that the Jan. guage of the restraint be sqictly construed against th~ employer. Ses Worrie 11. Boze, 191 Va. 916, 62 S.E.2d 816 (1951). Under these circumstances, Carotek has not met its burden of showing that the restraint was reasonable.

Despite the plain language of the clause, Carotek further contends that we should give the clause a different meaning based on an independent assessment of the par· ties' intent. This we decline to do. "If a writing appears to be plain and unambiguous on its face its meaning must be determined from the four comers of the instru· ment without resort to extrinsic evidence of any nature." J. Calamari. & J. Perillo, Contra.cts 11'7 (2nd ed. 197'1). The wording of the clause at iSsue here is anything but ambiguous. In simple language, the clause prohibits Grant from making any contract with Carotek's clients. We see no reason.

. therefore, to look beyond the language of the contract to other evidence of the parties' general intent.1

III. For the foregoing reasons. the judgment

of the lower court is

AFFIRMED.

stances. the cn:dibiJity of such D document is questionable. Without mo~. we believe the district court would be hard prc:sscd to dctcnnine accurutely from this extrinsic evidence the: par· tics' true intent.

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VIRGINIA:. IN tHE CIRCUIT COURT OF ROCKINGHAM COUN~Y·

CLIFF SIMMONS ROOFING, INC.

v. IN CHANCERY NO. CH99-l7308

RICHARD -W. CASH

OPINION AND ORDER

!n this case Cliff Simmons Roofing, Inc., a Virginia

corporation, bringe a Bill of Compla1n~ and an Application

for a Temporary Injunction to enjoin ~he Defendan~ from

engaging in the ~oofing b~sioees. eli!! Slmmone Roofing,

Inc. alleges in its Bill of Complaint lhat it is a Viroinia

corporation which installs and repairs roofing and roofing

materials in the Harrisonburg area and tr. Roekinqham and

Augu~ta County, Virginia. The Defendant was a nine-year

employee of the Plaintiff, who termir.ated his employment in

October of 1998.

In Marc::h of 1998, the Defendant had signed an ~t.E)(PLOYEE

NON-COMPE'rE AGREEMENT .. which provided in pertinent part ~s

tollows:

"The unde.reigned employee hereby agrees not to directly ·or indirectly compece with ~he business of the company and i~s eucceccors and acsiqna during tnc period cf cmploymc~~ for a period cf

· one year following termination of employment and notwithgtanding the eaus~ or. reaaon f.or termination.

The te~ •not compete' as used herein s~all mean ~hat ~he employee shall no~ own, manage, opera~e, conoult o• to be employee in a busineso substantially eimila:r to or competitive with the present business of the company or such other business activity in which the company may substantially engage during the term of employment."

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~u·,- .a. .• , , '••• .-.. ... r••• ... ,., • a .. "'' • r- 1-t .. -..~. ,., I r r ... • '

The Defendant has ftlad a nemurror to the aetion

~lleging, inter alia. that Lh~ Non-Compe~e Agreement is

unreasonable and un~nforceable as a matter of public palicy.

The Defenc1a!rt·• s allegat.ion is that although the agreement is

restricted to a one year period of time, che subatance of

~he aqreement prevents the emp~oyee f~om beins employ•d by

any company throughout the United States which conducta c

business substantially similar to that cond~cted by the

Defendant. This prohibition, alleges ~he Defendant, runs

beyond the bounds of reason particularly in light of the

fa~t that the Plaintl!f itself allegea that it only competes

in the Harrisonburg/Rockingham County/AQgusta County marke~

arec!!.

The law on restrictive covena~ts has been repeatedly

stated by the Su~reme Co~rt and is well su~~arized in ~

~~~~~ia Croup, Inc. v. Knighton, 245 Va 367 (1993) in

which it was stated that:

''In determining whether a non-competition agreement is valid and enforceable., ·we apply t·l'te following criteria: (1) Is the restr4int from the standpoin~ of the employer reasonable ir.·the Gense that it is no gre•tar than is nece~sary to protect the employer in some legitimate business interest? (2) From ehe standpoint of the employee, is the restraint reasonable in the sense that it is not unduly hareh and oppressive in curtaillng his leg~timate e:forts to earn a livelihood? (l) Is the restraint reasonable from the standpoint of a sound public policy?''. l.d.a. at p. 369.,

Tbe Caur~ has heard testimony ore tenus as to the

position held by the Defendant when employed by the

Plaintiff corporation after examining the applicab:e case

law, the Court concludes that the Non-Competition Agreement

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signed in this case is clearly unenforceable. It has

absolutely no geographic boundaries, and it would grevent

the Defendant froc going to work for any roofing company in

the On~t.ad States. Moreover, i~ would even·prevent the

Defendant from going to work for a roofing company located

in the Harrisonburg/Rockingham County/Augusta Coun·~y arec

even if ·he were to be emp!oyed in a p~sition in which he

could not utili2e confidential information and in which he

did not play u role in competing with his former employer

(~ as a janitor for a local roofing company, as ~ stock

clerk for a local roofing company, etc.). See~, Pais~

Aytomation Products, Inc,, 36 Va. Cir~ 230 (City o: Newport

News 1995) •

Moreover, although Plaintiff argues that the real

intention of the parties was to preven~ the Defendant from

competing with the Plaintiff in the compeeitive market place

where the Plaintiff does business, and ~hat that ir, the only

injunction they are asking be entered~ Such a request for

limited relief cannot c.ure .wh·at .is otherwise. a. defc~etive

Non-Competition Ag~eement, Because Non-Compet.itlon

Agreements by definition restrict competition which is

conaidered to be the norm of a free marke~, any ractrietion

upon competition must be str.ictly construed a.gains1: the

employer. Sea, ~, Qraot v. Garstok, Inc.,. 737 P.2d 410

(4th Cir. 1 ~e.~) • As ~udge .Frank said in Pais v. au~omat;..t.o.n

Proclucts 4 Inc .. : .. [T)his court has not been granted the

authority to •blue pencil' or oeherwise rewrite tho

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15_ 99 es:~e AM VA LAWYERS ~EEKLV

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contract, the covenanes therefore fail." Similarly in this

case, the Court declines to edit by selective enforcemont

-w-h-at is otherwise an invalid restriction· en competition.

Therefore, Defendant's Demurrer is sus~ained •

. The Clerk is directed to send dt~ested copies of this

Opinion and Order to all counsel of recor~.

Dated; June 4, 1999.

EN'l'ER:

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COMMON\VEALTH OF VIRGINIA

~NETH N. WHtrEHUllST. Jll. EDWAllD W. HANSON. JR.

JOHN I.MOORE ALAN !.ROSENBLATT THOMAS S. SHADRICI

R.OBEllT B. CROMWELL, JR. JER.OM! B. fR.I!D.MAN FUDEIUCI B. LOWE

A. BONWlLL SHOCILEY

Laura G. Gross, Esq. Kaufinan &. Canales, P. C. One Commercial Place Post Office Box 3037 Norfolk, Varginia 23514

Bruce H. Kushner, Esq. 133 Mt.Pleasant Road Chesapeake, V1rginia 23320

SECOND JUDICIAL CIRCUIT

July 21, 1995

Re: Alexander v. Kandarp Shah, M.D., P.C. CH94-4010

Dear Counsel:

ClllCUIT COURT CITY Of VlROINIA BEACH

VIROINIA BEACH, VA 23456 (&04) 427-4501

The court has before it the plaintiffs motion for summary judgment. On May 25, 1995, the court heard argument on plaintiffs motion for summary judgment and defendant's motion for a temporary injunction. Defendant's motion was denied and plaintiff's motion was taken under advisment: The parties have filed briefs addressing the motion for summary judgment.

This is an action for declaratory judgment brought pursuant to CODE OF Vm.omA §8.0 1-184. The following facts are not in dispute: The plaintiff was employed by the defendant medical ... practice as a gatroenterologist, pursuant to a written employment contract. Paragraph 14 of the parties' contract provided that upon termination of the contract, the plaintiff agreed not to "engage in the practice of medicine" within a twenty-five mile radius of any of the employer's offices and any of the hospitals at which the employer practiced, for a period of2~ years. That· paragraph further provided that the plaintiff would be tree to practice within the prescn"bed area if he paid the defendant employer "liquidated damages" in the amount of$225,000. ·

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Laura G. Gross, Esq. . Bruce H. Kushner, Esq.

July 21, 1995

P~eTwo------------------------------------------~~-------

The plaintifF filed this action asking the court to declare the entire Paragraph 14 of the parties' contract to be unenforceable. At the May 2S, 1995 hearing, this court ruled that the anticompetition provision ofParagraph 14 is over broad and unenforceable as to the defendant's request for a temporary injunction against plaintiff. The court took under advisement the larger question of whether the second part ofParagraph 14, the liquidated damages provision, would, when taken in the context of the entire paragraph, alter the coun's ruling as to the over broad nature of the restriction.

The court now finds that the contract's prohibition against practicing medicine of any kind is broader than is necessary to protect the employer's legitimate business interest, since the employer is not engaged in the practice of all fields of medicine. Therefore, the contract's anticompetition provision fails the first prong of the three prong test followed in Vu-ginia. Roanoke Engineering Sales Co .. v. Rosenbaum. 223 Va. 548, 552 {1982). Blue Ridge Anesthesia v. Gidick, 239 Va. 369, 371-372 {1990). "Since the restraint sought to be imposed restricts the employee in the exercise of a gainful occupation, it is a restraint in trade, and it is carefully examined and strictly construed before the covenant will be enforced." Clinch Valley Physicians v. Garcia.. 243 V a. 286, 289 (1992).

The court now finds that the entire Paragraph 14 is void and unenforceable. The court will not engage in "blue penciling" and rewrite the contract in order to make it enforceable. See Pais v. Automation Prods. Inc. (VLW 95-8-180, Newport News Circuit Court, Frank, J.) Since the anti-competition provision is over broad and therefore void and unenforceable, it must necessarily follow that plaintiff should not be required to pay for the privilege of engaging in conduct, the practice of medicine, that is not contractually prohibited. It tbt:tfter must follow that obligating an employee to make such a payment cannot some)low transfonn a void provision into one that is enforceable.

The plaintiff's motion for summary judgment is granted. The plaintiff's request for attorney's fees and costs is denied. The defendant's cross-bill is dismissed. Ms. Gross is asked to submit a properly endorsed order reflecting the above ruling, which order may 'also encompass the court's ruling of May 25, 1995; or if counsel prefers, two separate orders may be submitted. It appearing that there are no additional matters to be heard, the order should direct that this case be removed from the docket. •

A. Bonwill Shockley ABS/VSB/ed

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VIRGL'\1A: IN THE CIRCUIT COURT OF THE CITY OF Ym.GlNIA BEACH

.~ J. ALEXANDER, M.D.,

Plaintiff,

v. CHANCERY NO.

KANDARP SHAH, M.D., P.C.

SERVE: Kandarp Shah, M.D. . 816 Independent Boulevard, Suite 2-b Virginia Beach, VA 23455

Defendants.

MOTION FOR DECLARATORY JUDGMENT

COMES NOW the plaintiff, A. J. Alexander, M.D. ("Alexander" or "plairitiff''),

by counsel, pursuant to Sectic;>n 8.01·184, ~seq. of the Code of Virginia, and moves the

Court for declaratory judgment on the following grounds:

1. The defendant, Kandatp Shah, M.D.,. P.C. ("defendant") is a Virginia

professional corporation which routinely requests its physicians to. sign agreements that

would restrict them from practicing medicine in Virginia Beach, Norfolk, and other cities

after the-termination of their employment with· Kandarp·Shah; M.D., ·P.C. ("Shah").

2.: Kandatp Shah ("Shah") is the President and sole shareholder of defendant.

3. Plaintiff is a physician residing in the City of Chesapeake, Virginia.

4. On or about February 1, 1994, plainnff entered into an Employment ~

Agreement with defendant wherein plaintiff was employed as a physician specializing in

the field of gastroenterology. A copy of plaintiffs Employment Agreement is attached

hereto as Exhibit A.

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S. Pursuant to the terms of the Exhibit A Employment Agreement, plaintiff .

agreed to devote his services as a physician to defendant for two years or until such time

as the employment relationship was tenninated in accordance with paragraph 7 of the

Agreement.

6. As an employee of defendant, plaintiff engaged in the practice of

gastroenterology primarily in the Cities of Virginia Beach, Chesapeake, Portsmouth and

. Suffolk, Virginia.

7. During his employment by defendant, certain events occmred that forced

plaintiff to seek employment elsewhere, even if it meant accepting employment for less

compensation.

8. On August 22, 1994, in accordance with paragraph 7 of the Exhibit A

Employment Agreement, plaintiff gave Shah and defendant 90 days written notice of his

intent to resign his employment with defendant

9. Plaintiff is cmrently employed by NavCare with offices in Norfolk,

Virginia.

10. Defendant, through its President, has communicated to plaintifF, directly

·. _and through counsel, th~t it intends; to . severely restrict plaintiff's ability to earn a

livelihood and provide patients with necessacy medical care by attempting to enforce the

tertns of the restrictive covenant contained in paragraph 14 of the Exhibit A Employment

Agreement, which restriction would prevent plaintiff from practicing medicine in Virginia ...

Beach, Norfolk, Ponsmouth, Chesapeake, Hampton, Newport News and other cities.

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11. The restrictive covenant contained in paragraph 14 of the Exhibit A

Employment Agreement is not enforceable because it is much broader than is nec~ssary

to protect any legitimate business interest of defendan~ unduly restricts the ability of

plaintiff to earn a livelih<?Od and is contrary to public policy.

12. The liquidated damage provision contained in paragraph 14 of the Exhibit

A Employment Agreement is void as a penalty.

13. The facts set forth above establish a case of actual justiciable controversy

between the parties and involves controversy over the interpretation of a written

instrument so as. to empower this Court to render a declaratory judgment pursuant to

Section 8.01-184 of the Code of Virginia.

14. Plaintiff has no adequate remedy at law.

WHEREFORE, plaintiff prays that this Court take jurisdiction of this ca~e and

render a declaratory judgment as follows:

1. That the restrictive covenant provision in paragraph 14 of the Exhibit A

Employment Agreement is not reasonable, is contrary to public policy and is

unenforceable.

2. That defendant is not otherwise in a position to legally restrict plaintiffs

practice ot gastroenterology and/or internal medicine.

3. That injunctive relief issue prohibiting defendant from interfering with

plaintiffs practice of gastroenterology and/or internal medicine.

4. That plaintiff recover his costs and attorneys fees expended in this matter.

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s.. That plaintiff be granted such other relief as equity may require and this

Coun may deem just and proper.

Burt H. Whitt, Esq. Laura Geringer Gross, Esq. KAUFMAN & CANOLES, A

Professional Corporation Post Office Box 3037 Norfolk, VA 23514 (804) 624-3000

0174736.01, 11130194, S:40pm 4

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VIRG[',1.4.: IN THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH

A. J. ALEXANDER, M.D.,

Plaintiff '

v. CHANCERY NO. 94-4010

KAND.-\RP SHAH, M.D., P.C.

Defendant.

BRIEF IN SUPPORT OF PLAlNTIFF'S

. MOTION FOR SlJl.\IIMARY JUDGMENT

The undisputed facts in the instant case are as follows: On February 1, 1994, the

plaintiff. AJ. Alexander, M.D., ("Dr. Alexander" or "plaintiff'') entered into an

employment agreement with the defendant, Kandarp Shah, M.D., P.C. ("the practice" or

"defendant"), a private corporation under the sole ownership and control of Drs. Kandarp

Shah ("Shah") and Kalyoni Shah. This agreement contains a covenant not to compete,

the enforceability of which forms the basis of the instant motion for SUillilla1'Y judgment.

The restrictive covenant in question was drafted'by defendant Defendant's answer

to plaintiffs Request f~r AQmissions {heretnafter ·referred!-<> as·Adm.), 7. Defendant is

. and alv,·ay$ has been engaged in a practice primarily limited to gastroenterology and

internal medicine. Dr. Shah holds himself out as a physician specializing in

gastroenterology. Adm., 3 and 4. In fact, defendant admits that there are many fields

of the practice of medicine in which he does not engage. Adm. 1 6.

~g . his employment by defendant several events ocCUlTed that forced

Dr. Alexander to seek employment elsewhere, even if it meant accepting employment for

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less compensation.1 On August 22, 1994, in accordance with paragraph 7 of the

Employment Agreement between Dr. Alexander and defendant, Dr. Alexander gave

Dr. Shah and defendant 90-days written notice of his intent to resign his employment with

defendant

Defendant, through Dr. Shah, has communicated to Dr. Alexander, directly and

through counsel, that it intended to enforce paragraph 14 of the Employment Agreement,

which reads in pertinent part, as follows:

During the tenn of this Agreement and for a period of two and a half (2.5). years from the date of termination of the employinent contemplated in this Agreement, employee will not, directly or indirectly, as a principal, agent, employer or employee, or in any other capacity engage in the practice of medicine within a radius of twenty-five (25) miles of any of the employer's offices and any of the hospitals Vlhere the employer was practicing medicine during the tenn of the contract (emphasis added).

In response, Dr. Alexander filed his Motion for Declaratory Judgment, seeking a

declaration that the restrictive covenant continued in paragraph 14 of his Employment

Agreement with defendant is overly broad and unenforceable as a matter of law.

ARGU1\1ENT

I. THE COVENANT NOT TO COMPETE CONTAINED IN PARAGRAPH 14 OF THE EMPLOYiviENT AGREEMENT IS UNENFORCEABLE BECAUSE IT IS BROADER THAN NECESSARY TO PROTECT DEFENDANT'S LEGITIMATE BUSINESS INTERESTS.

1Dr. Alexander is presently employed at NavCare, where he earns substantially less than he did through his employment by defendant

2

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To detennine the reasonableness and enforceability of any non-competition

agreement, the Virginia Supreme Court has adopted a three-part test Meissel v. Finley,

198 Va. 577, 195 S.E.2d 186 (1956). As stated in ~·feissel:

Modem courts have usually, in passing on these contracts, employed three criteria:

(1) Is the restraint, ftom the standpoint of the employer, rcasonab le ii_1 the sense that it is no greater than is necessaty to protect the employer in some legitimate business interest?

(2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood?

(3) Is the restraint reasonable from the standpoint of a sound public policy?

Meissel v. Finlev, 198 Va. at 580, citing Welcome Wagon, Inc. v. Morris. 224 F.2d 693,

698 (4th Cir. 1955). To be enforceable, a restrictive covenant must meet all three criteria.

Roanoke Engineering Sales Co. v. RosenbaYm, 223 Va. 540, 290 S.E.2d 882 (1982).

In eyaluating whether a specific covenant not to compete is enforceable according

to these criteria, the Courts have consistently strictly construed these claus~s against

employers and favorably to the employee. Richardson v. "Paxton Co., 203 Va. 790. 795,

127 S.E.2d 113, 117 (1962) (a limitation that restricts employee in the exercise of a

gainful occupation will be carefully examined and strictly construed); Clinch Valley

Physicians, Inc. v. Garcia. 243 Va. 286, 289, 414 S.E.2d 599, 601 (1992); citin~ LinVIlle ...

v. Servisoft of Virginia, Inc., 211 Va. 53, 55, 174 S.E.2d 785, 786 (1970) (non-

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competition provisio~ in physician employment agreement carefully examined and strictly

construed against employer).

Focusing on the first prong of this long-established analysis, courts in Virginia

have consistently refused to enforce any covenant not to compete that is broader than is

necessary to protect an employer's legitimate business interest For example, in the

Richardson case. the Virginia Supreme Court considered a covenant not to compete that

stated that, in the event of termination. the employee would not uenter or engage in any

branch of marine or industrial supplies. equipment. services business in the territory . • . "

Richardson v. Paxton Co., 203 Va. at 795, 127 S.E.2d. at 117. In the Richardson case.

the employ~r, Paxton Co., was engaged in the business of selling marine and industrial

supplies. However, the Court found that by including the words "any branch of marine

or industrial supplies .·· .. " in the non-competition clause in Mr. Richardson's

employment agreemen~ Mr. Richardson was precluded from engagilig in aspects of that

industry in which the Paxton Company was not engaged. Therefore, the Supreme

Court reversed the lower Court and found that such restraint was "unreasonable and that

'it is greater than is necessary to protect Paxton in his legitimate business interests . . . "

ld. at 795.i

2 Specifically, the Court stated

"The covenant not only restricts Richardson from selling, but prohibits him from entering or engaging in 'any branch' of activities relating to any kind· or type of marine or industrial supplies, any kind of marine or industrial equipment, and any kind of marine or industrial

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. . . Similarly, in Grant v. Carotek. Inc., 737 F.2d 410 (4th Cir. 19S4), the

Fourth Circuit declined to enforce a covenant not to compete that stated that, in the .even

of termination, "the employee agrees not to contract with any of the principals (sic) 01

manufacturers with which the e~ployer has contracts . . . " Although the emp~oyer arguee

that the restraint. only applied when a competitive contract was involveq, the Fourth

Circuit affirmed the District Court's decision to grant the employee's motion for summary

judgment. The Court recognized that the language in the covenant, on its face, prevented

·the employee from contracting with his fom1er employer's customers in ways that could

not affect any business interest of the fanner employer.3

The instant non-competition clause states that, in the. event of t~ation, ·

Dr. Alexander cannot practice medicine. This covenant not to compete clearly prohibits

activities that plaintiff has no legitimate business interest in prohibiting Dr. Alexander

service, in the restricted area. The restraint imposed is too broad and it encompasses activities in which Paxton is not engaged. Such restraint is unreasonable in that it is greater than is necessarY to protect Paxton in its !

legitimate business interests . . ."

Richardson v. Paxton Co., 203 Va. at 795.

lTila.t courts can down non-competition clauses on a summary judgment motion whenever there is chance at such clause protects more than the employers legitimate business interests is 1 1ghted in Power Distribution, Inc. v. Emergency Power ... Engineering. Inc., 569 F. Supp. 54 (B.D. Va. 1983). In Power Dlsttibution, the most logical reading of the non-competition clause in question limited the restriction to competitive activities. However, because the court recognized that the clause could be interpreted as prohibiting activities that would not be necessary to protect the legitimate business interests of the former employee, the court granted· a motion for summary

judgment Id. at 58. ·

5

-95-

from performing. ·The words "practice medicine" include a myriad of activities that :

defendant has no legitimate business interest in limiting in any way. When an orthopedist

sets a broken bone, he or she is "practicing medicine". \Vhen a surgeon operates on a

patient, he or she is "practicing medicine". Indeed, every time a physician sees a patient,

for whatever reason, he or she is "practicing medicine".

This is not the first case in which a Virginia Coun has been called upon to address

a covenant purporting to restrict a physicianrs right to "practice medicine.11 In Steinberg

v. Stemlicht, Chancery No. CH-4496, also in the Circuit Court for the City of Virginia

Beach, Judge Whitehurst granted summa.ry judgment against enforcement of a restrictive

covenant with the identical "practice medicine" restriction. That employment agreement

was between a physician specializing in hematology and medical oncology and ~ cancer

group that employed him. Judge Whitehurst granted summary judgment to Dr. Steinberg

because of the impermissible breadth of such restriction, which purported to restrict the

practice of medicine generally.' A copy of a certified copy of Judge Whitehurst's ·Decree

along with the Bill of. Complaint are attach~d hereto as Exhibit ·A. Similarly, in

Southeastern Neurology G~up. P.C. v. Anne Denise Redding. M.D., Chancery No. C-93-

882, in the Circuit Court f~r the City of Portsmouth, Judge Otitsky refused to grant the

plaintiffs request for a temporary injunction: to enforce a restrictive .covenant with the

identical"practice medicine" restriction. In the Reddine case, the employment agreement

was between a physician specializing ~ neurology and the neurology group that employed ...

~e employer in this case appealed the decision and was unsuccessful in obtaining a writ

6

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her. A copy of the Bill of Complaint for Breach of EmploYment Agreement filed in the

Circuit Coun of the City of Portsmouth is attached hereto as Exhibit B.

Defendant has always specialized in. the ·practice of gastroenterology and

admits that there are fields of practice of medicine in which it does not engage.

Adm. 1I 6. The practice· also holds itself out to the public as specializing in the area of

gastroenterology. Adm. , 1. In fact, Dr. Alexander has engaged in the practice of

medicine within the restricted area for over 5 months since his employment with

defendant ended without any impact or harm to defendant Thus, the restrictive covenant

contained in paragraph 14 of the Employment Agreement, on its face, includes medical

activities in which defendant has no legitimate interest

It matters not that defendant may have intended some interpretation other than the

-r--. 1---plain meaning of the language in the non-competition covenant; these covenants are.

I~ JU. dged on their face in y;mnia and are not rewritten or nanowed by the courts.5 The ,,/ j,• -o-· t /j

I// i 1 .J covenant not to compete must survive judicial scrutiny, if at all, as written. If a covenant

is overbroad or otherwise defective as written, it is void and unenforceable regardless of

whether an alternative construction could render it acceptable. See Northern Virginia

Psvchiatric Group, P.C. v. Healprin, 19 Va. Cir. 279, 280 (Fairfax County 1990)

("Vuginia follows an all or nothing rule .. with respect to restrictive covenants in

5Moreover, Virginia courts have refused to rely on the subjective intent of the parties ... when reviewing noncompetition clauses. See, e.g., Linvt11e v. Servisoft of Virginia, 211 Va. 53, 174 S.E. 2d. 785 (1970) (constmed clause prohibiting employee fiom accepting employment with a competitive business as imposing a limit only on working for a competitor and not as prohibiting employee from operating . a competitive business himself; the court stated "whatever Sei"visoft's subjective intent, we must give effect to the language of the agreement, strictly construed11

).

7

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\

employment contracts); Alston Studios. Inc. v. Gress and Assoc., 492 F.2d 279, 2S4 (4th

Cir. 1974) ("the restrictive covenant must be judged as a whole and must stand or fall

when so judged"); Richardson v. Paxton Co., 203 v'a. at 795 (restrictive covenants will

not be reformed in the event that they are too broad). See, also Clinch Valley Physicians,

Inc. v. Garcia, supra. 6

The sweeping scope of the activity restricted by the non-compete provision ·

in Dr. Alexander's Employment Agreement and the defendant's own admission that the

non-compete is greater than is· necessary to protect any legitimate business interest of

defendant di~tes a ruling that the covenant is fatally overbroad and unenforceable.

Based on the clear meaning of the words contained in the instant noncompetition clause, . .

complainant is entitled to a declaratoty judgment that the noncompetition clause in

paragraph 17 of this employment agreement is unenforceable.'

6 Other jurisdictions have been called upon to address covenants that restrict a · · physician's right to "practice medicine" or "practice as· a physician." In Geocaris v.

Surgical Consultants, Ltd., 302 N.W.2d 76 (Wis. App. 1981), a Wisconsin Court reversed a lower Court and refused to enforce a restrictive covenant in an employment agreement between a Sl.irgeon and a surgical group because the non-competition clause restricted the surgeon's right to "practice as a physician". The Comt found that the suriical group for whom the physician ·had previously worked had no interest in preventing him from practicing as a physician in areas other than surgery.. The Geocaris Court stated that it did not matter that the physician was not likely to practice any other type of medicine ... because the restriction on its face, not in application, must be reasonably necessary for the former ~player's protection. 302 N.W.2d at 78.

7 Although .Dr. Alexander believes that the non-compete. agreement is fuither flawed, . for inst3:iice,· e~compassing an overly broad geograp~c ·s~pe, .. the· cl~ar.overbreadth of activities ... prohibited 'dictates a. declaration' tliat 'the 'non-cOnipete is" 'unenforeea~ie ..

8

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.. . .

CONCLUSION

For the reasons stated, the complainant respectfully requests that his motion. for

Summary Judgment be granted.

Btirt a:·Whi~ · ~ura Geringer Gross Ka~ &.~an~les, P.C. One· Commercial Place Post Office Box 3037 Norfolk, VA 23514-3037 804/624-3000

A. J. ALEXANDER

~ ,~_.-AI\ By:/ r~·

Of Counsel

CERTIFICATE OF SERVICE

I hereby certify that a true copy of the foregoing pleading was hand-delivered this

22~ . . _day of May, 1995, to Bruce H. Kushner, Esq., 133 Mt. Pleasant Road, Chesapeake,

VA 23320.

019S480.01. ~. 1:10pm 9

-99-

VIRGINIA: IN THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH·


Plain~

v. · IN CHANCERY NO. CHOl-607


Defendant.

MODERN ENVIRONMENT'S BRIEF IN SUPPORT OF MOTION FOR TEMPORARY INJUNCTION

I. BACKGROUND

Modem Environments, Inc. ("Modem") is a Virginia company

which sells and installs office furniture. J ohnetta Stinnett was a former employee

of Modem. She worked as a sales person. Stinnett went to work for Modem in

1995; in April, 2000, she signed an employment agreement which contained a

one· year, SO mile covenant- not- to- compete. Stinnett resigned in August, 2000.

She is now wo~king for Modem's competitor, Chasen's in Norfolk, Virginia, in

violation of the covenant-not· to-compete.

Modem sued Stinnett in Norfolk on February 22,2001 to enforce

the covenant and sought temporary and perm~ent injimctive relief. Stinnett sued

Modem in Virginia Beach on February 23, 2001, seeking to void the employment

agreement. The parties set their hearings on their motions for temporary

injunctions on March 2, 2000 at the same time. To resolve the impasse, Modern

agreed to file a cross-bill in the Virginia Beach caSe, and did so. The hearing on

the parties' motions for temporary injunctions was set for March 15, 2001 and

was postponed until March 29, 2001 to give the Court ~ opportunity to review·

v &eil~k£:~¥~:l'Z1~I tpe question of validity of the covenant-not-to-compete

01 MAR 28 PH 2: 03 J. ClJRT IS FRI 11T r'r r~v

-1oo-

and the propriety of granting temporary injunctive relief.1 Stinnett filed a brief.·

Modem writes to reply. ll. ARGUMENT

I. Modern's covenant-not-to-compete is enforceable under Virginia Law.

Stinnett agreed not to compete with Modem for a period of one year after

her employment ended; she agreed not to work for a competing business within a fifty

mile radius of Modem's home office. The language, in Article m, provides:

Non-Competition

3.1 ·Employee agrees that for as long as Employee remains employed by the company, and for a period of one (1) year after Employee's employment with Company ceases, Employee will not (i) directly 9r indirectly, own, manage, operate, control, be employed by, participate~ in, or be associated in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the Company or any of its affiliates (a "competing business"), which competing business is within a fifty (SO) mile radius of the home office or any business location or locations of the Company or any of its affiliates at which Employee worked, (ii) solicit, aid, induce or encourage any officer, agent, or employee to leave their employment with the company for the purpose of performing services or becoming employed with any business competitive with the business conducted by the Company or any of its affiliates; (iii) induce any customers of the Company or any of its affiliates to patronize any business which conducts a business in competition with the Company or any of its affiliates; and (iv) directly or indirectly request or advise any customer of the Company or any of its affiliates to withdraw, curtail or cancel such customer's business wi~ the Company or any of its affiliates.

1 Stinnett also set down for hearing on March 29, 2001 her demmrer and motion to strike an affidavit

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The Virginia Supreme Court has upheld similar covenants-not-to-compete

in several cases. This Court should uphold Modem's covenant as well. Among

the controlling cases are Roanoke Engineering Sales Co. Inc. v. Rosenbaum, 223

Va. 548 (1982); Blue Ridge Anesthesia and Critical Care Inc. v. Gidick, 239 Va.

369 (1990); and New River Media Group, Inc. v. Knighton, 245 Va. 367 (1993).

In each case, the Virginia Supreme Court reversed the judgment of the trial court

which had refused to grant injunctive relief to the employer. In Roanoke, a

salesman signed the following non-compete with language strikingly similar to

Modem's language:

4. For a period of three years after the termination of this agreement, ... Employee will not, in the territory covered by Roanoke, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be associated in any manner with the ownership, management, operation or control, of any business similar to the type ofbusiness conducted by Roanoke at the time of the termination of this agreement.

Roanoke, 223 V a. At 550. The salesman resigned and went to work for a direct

competitor, selling building supplies similar to those sold ~y his prior employer. The

employer sued, seeking injunctive relief forbidding the employee from violating the .

covenant not to compete. The trial court refused the injunction, deeming the covenant

too broad to protect the employer and too harsh to the employee. On the facts and the

record, the Supreme Court disagreed with the trial court's interpretation of the contract,

and reversed. The employee's access to confidential financial records, customer lists,

lists of supplies, detailed !mow ledge of overhead, pricing and bidding qualified him to be

a formidable competitor in the territory served by all four branches of his former

employer: Richmond, Roanoke, McLean, and Charlotte, North Carolina. The Court held

-102-

that the covenant was limited in time (three years) and coterminous with the area of the

territory in which the employer did business. The Court remanded the case instructing

the trial court to enter the injunction prospectively.

· The Court approved the precise contractual language used by Modem.

Roanoke Engineering is controlling.

In Blue Ridge Anesthesia, the employee signed the following non-compete:

In consideration of the covenants made herein by Employer, Employee agrees that if his employment terminates for any cause after he has been employed for ninety days, he will not, for a period of three years thereafter, open or be employed by or act on behalf of any competitor of Employer which renders the same or similar services as Employer, within any of the territories serviced by agent of Employer, expressly provided however, that this covenant does not preclude employee from working in the medjcal industry in some role which would not compete with the business of Employer. Id at 370.

A salesman and several servicemen who sold anesthesia equipment

occasionally left their employment and began selling anesthesia equipment and other

critical care equipment of the type sold by their former em.Ployer in theii former sales

territory. The employer filed suit. The trial court concluded the non-competition .

agreements were invalid and entered judgment for the employees. The Supreme Court

reversed and remanded the case for entry of another prospective injunction. Again, the

covenant survived scrutiny under Virginia law.

The Blue Ridge Court rejected the employees' arguments that they had ....

insufficient customer contact and possessed no confidential information, ruling that their

contacts with their former employer's customers could· adversely affect its efforts to

continue business. The employees also argued that the restraint was unreasonably

-103-

. restrictive to them because it was geographically and functionally overbroad. They

maintained that they were forbidden from selling medical equipment or working in any

capacity for a company which sells any medical equipment. They contended that the

restriction applied not only in all geographic areas in which their former employer sold its

equipment during their employment, but also in areas in which their fonner empl~yer

might later expand. The Supreme Court rejected all these arguments. It held that the

restriction applied only to territories serviced by the former employees, not the entire

market at the time they left or later. The employees were not forbidden from working in

any capacity for a medical equipment company or from selling any type of medical

equipment. They were only prohibited from working in the medical indilstry in some

role which would compete with the business of their former employer.

Similarly, Ms. Stinnett is forbidden for one year only from working for a

competing business. She can sell any other kind of furniture or office equipment within

the fifty mile radius dm:ing the year and sell anything outside the fifty mile restriction

now. The Blue Ridge Court again approved language simj.lar to that approved in ·

Roanoke in which the employee was forbidden from engaging in activities "similar to the .

type ofbusiness conducted by the employer." !d. at 369. As·inRoanoke, the Supreme

Court authorized prospective enforcement of a covenant-not-to-compete. Accord New

River Media Group v. Knighton, 245 Va. 367 (1993) (twelve month restriction) (60

miles) (employee promised not to engage in business that competed with former

employer within 60 air miles of former employer's broadcast station) (trial court erred in

ruling that the agreement was void and refusing to grant injunction) (case remanded for

entry of prospective decree enforcing non-competition subject to credit for time due

-104-

because of preliminary injunction). These Supreme Court cases compel the conclusion

that Modem's covenant-not-to-compete is valid and enforceable.

n. The Court should mnt Modem's Motion for Temporary Injunctive Relief.

Under Section 8.01-628 of the Virginia Code, no temporary injunction shall

be awarded unless the court shall be satisfied of the plaintiff's equity. The Virginia

courts often used the federal standards for preliminary injunctions in applying Virginia

law. The test is well known. The trial court must examine four factors:

1. The likelihood of irreparable harm to the movant if a preliminary injunction is denied;

2. The likelihood of harm to the potentially enjoined party if the request of relief is granted;

3. The likelihood that the movant will succeed on the merits; and .

4. The public interest.

All four factors do not weight equally; the first two dominate. If the

balance of harm favors. the moving party, the injunction will issue when ~e movant has

raised questions going to the merits so serious, substantial, difficult and doubtful, as to

make them fair ground for litigation and, thus, for more deliberate investigation. Virginia

Carolina Tools v. International Tool, 984 F.2d 113, 120 (4th Cir. 1993), cert. denied, 508

u.s. 960 (1993).

The balance ofharm tips in favor ofModern. Every day that Ms. Stinnett

competes with Modem's customers interferes with Modem's ability to sell. Her

competition impinges upon Modem's new sales representatives opportunities to generate

and maintain business.· Ms. Stinnett was well aware ofher covenant-not-to-compete.

-105-

After resigning, Ms. Stinnett took a job in Richmond. She recently returned to Tidewat~

before her agreed upon year had passed. She may procure other employment.

Further, Modem has raised questions going to the merits so "serious,

substantial, difficult and doubtful" as to make them fair ground for litigation. Virginia

Supreme Court precedent mandates that Modem's. contract be enforced. Modem will

succeed on the merits. Ms. Stinnett's defenses lack merit. She argues that the agreement

is overbroad, vague, unreasonable and unenforceable. She has also raised the defenses of

lack of adequate consideration, fraud, duress and coercion. The enforceability of the

agreement on its face is an easy question. The Virginia Supreme Court deems it

enforceable. The circuit court cases and federal cases Ms. Stinnett cites are

distinguishable. Roto-Die Company v. Lesser, 899 F.Supp 1515 (W.D. Va. 1995), for

instance, involved a five-year, worldwide covenant. In Judge Shockley's Shah case, the

covenant forbade a doctor from "practicing medicine of any kind." Stinnett can sell

furniture of any kind anywhere and can sell office furniture fifty miles from Modem's

home base. Stinnett's duress claim is baseless. She has nc;>t alleged any of the requisite

elements of duress to even state a claim. Similarly, her fraud claim has no merit She has

not stated one element of fraud much less those required to state a claim under Virginia

Law. Her argument based on lack of consideration is meritless. In Paramount Termite

Control v. Rector, 238 Va. 171 (1989), the Virginia Supreme Court ruled that continued

employment of an employee-at-will supplies sufficient consideration for the signing of an

employment agreement with a covenant-not-to-compete. The case is exactly on point,

and ends Stinnett's lack of consideration defense.

-106-

Additionally, Ms. Stinnett agreed to the awarding of an injunction when

she signed the covenant not to compete. Article 4.3 of the agreement provides:

· 4.3 Equitable Relief. The Employee acknowledges that a remedy at law for any breach of Articles I or ill of this Agreement will be inadequate, agrees that the company shall be entitled to specific performance and injunctive or other equitable relief in cas~ of any such breach or attempted breach and further agrees to waive any requirement that the Company secure or post any bond in connection with obtaining of any such injunctive or equitable relief.

Such an agreement is enforceable under Virginia law and negates any argument that

Modern is not entitled to injunctive relief. See Worrie v. Boze, 191 Va. 916, 927 (1951).

CONCLUSION

Stinnett is not entitled· to a decree forbidding the enforcement of her

employment agreement Further, the court should enter a temporary injunction directing

Ms. Stinnett not to violate her employment .agreement and setting the case for trial.

Dated this 23rd day of March, 2001

@p,c P /&4, ~ LUJ?~ Cecelia Ann W escliler

Cecelia Ann Weschler Weinberg & Stein 999 WaterSide Dr. #1825 Post Office Box 3789 Norfolk, VA 23514-3789

CERTIFICATE OF SERVICE

On March 27 , 2001, I faxed and mailed a copy of this document to Kevin E. Martingayle, Esquire, Stallings & Richardson, P.C., 2101 Parks Avenue, Suite 801, Post Office Box 1687, Virginia Beach, Virginia 23451.

&u.b,_, a~ WnJ::-FILED . Cecelia Ann Weschler

VA. BElCH CIRClJIT COURT

0 l HAR 2 8 AM 9: 3 7

a.e~~ -107-

)


JOHNEITAR. STINNETT

~

v. IN CHANCERY NO. CH01-607

MODERN ENVIRONMENTS, IN'C.

~-

DECREE

THIS CAUSE came to be heard on the 29th day of March, 2001 upon Johnetta R

Stinnett's Bill of Complaint for Declaratory and Injunctive Relief: Modem Environments, Inc.'s ·

Cross-Bill for Injunctive Relief and Application for Injunction and Stinnett's Demurrer to the

Cross-Bill.

After Considering the subject employment agreement, the legal authority filed by the

parties, and the arguments of counsel,

and it appearing, for the reasons stated on the record, that the subject. employment

agreement is over-broad and unenforceable on its face as a matter of law;

It is ADJUDGED, ORDERED, and DECREED as follow~:

1. The Court fu;lds and declares, as a matter of law, that _certain restrictive covenants

contained in the employment agreement are over-broad and unenforceable as a matter of law.

Accordingly, Stinnett is granted the declaratory relief requested in her Bill of Complaint.

Stinnett's application for a temporary injunction is withdrawn.

2. Modem Environments' application for a temporary injunction is denied. The

Cross-Bill filed by Modem Environments is dismissed with prejudice.

3. Stinnett is awarded her taxable court costs.

-108-

4. This cause shall be removed from the docket and placed upon the ended causes.

I ASK FOR THIS:

SEEN AND OBJECTED TO AS SET FORTH ON THE RECORD, INCLUDING THE ARGUiviENTS IN ITS BR1EF IN SUPPORT OF MOTION FOR TEMPORARY INJUNCTION:

JUDGE

--109-

l


JOHNE'ITAR. STINNETT,

Plaintiff,

v. IN CHANCERY NO. CHOl-607

MODERN ENVIRONMENTS, IN'C.,

Defendant.

NOTICE OF APPEAL

Modem Environments, Inc., Defendant, hereby appeals to the Supreme Court of

Virginia from the Decree entered on Apri117, 2001.

CERTIFICATE

Pursuant to Rule 5:9 of the Rules of the Supreme Court of Virginia, the

undersigned certifies as follows:

(1) Counsel for appellant has ordered from the court reporter who reported the

case a copy of the transcript.

(2) A copy of this Notice of Appeal has been mailed or delivered to all

opposing counsel this 25th day of April2001.

MODERN ENVIR.O~'MENTS, ~C~

By: &..cJ.u;_ C1.-.u Wt?r..-~L ___ __

Cecelia Ann W eschler Virginia State Bar #28245 WE1NBERG & STE1N Dominion Tower 999 Waterside Drive, Suite 1825 Post Office Box 3789 Norfolk, VA 23514-3789 (757) 627-1066 (757) 622-6870 (facsimile)

Of Counsel

FILED V ~ •. B~;'.CH CI~CUI1 \i:!1H~T

OlAPR26 AH9:43

-110-I ' . J

ASSIGNMENTS OF ERROR

1. The circuit court erred in declaring that a covenant-not-to-compete, reasonable as to time and place, was facially overbroad because the former employee could not work in any capacity for a competitor of her former employer.

2. The circuit court erred in refusing to enforce a provision· in an employment agreement in which the former employee agreed to the entry of an injunction if she violated the covenant-not-to-compete.

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22, 2001...

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