Hix v. Aon Risk Services South, Inc. et al

Filing 25

ORDER granting 22 Defendants Aon Risk Services South, Inc. and Aon Group, Inc.'s Motion for Leave to File A Supplemental Memorandum in Opposition to Plaintiff's Motion for Preliminary Injunction and, having considered the additional authorities cited in Defendants' Supplemental Memorandum [22-1], GRANTS Plaintiff's 2 Motion for Preliminary Injunction Enjoining Enforcement of the Aon Convenants. Signed by Judge Richard W. Story on 11/22/11. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
W. PARKER HIX,
Plaintiff,
v.
AON RISK SERVICES SOUTH,
INC. and AON GROUP, INC.,
Defendants.

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CIVIL ACTION NO.
1:11-CV-3141-RWS

ORDER
This case is before the Court on Plaintiff’s Motion for Preliminary
Injunction Enjoining Enforcement of the Aon Covenants [2] and Defendants
Aon Risk Services South, Inc. and Aon Group, Inc.’s (collectively
“Defendants” or “Aon”) Motion for Leave to File a Supplemental
Memorandum in Opposition to Plaintiff’s Motion for Preliminary Injunction
[22]. After conducting a hearing and reviewing the Record, the Court enters the
following Order.
Background
Plaintiff filed this action on September 16, 2011, seeking a declaratory
judgment that restrictive covenants contained in Plaintiff’s Employment

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Agreement are unenforceable under Georgia law, and seeking preliminary and
permanent injunctive relief barring enforcement of those covenants. Compl.,
Dkt. [1] at 1.1 Specifically, Plaintiff challenges the non-competition, nonsolicitation, and non-disclosure covenants (the “Aon Covenants”) contained in
the Employment Agreement as overly broad. Id. ¶ 12; Pl.’s Mot. Prelim.
Injunc., Dkt. [2] at 2. The facts relevant to Plaintiff’s employment with Aon
and the resulting Employment Agreement are as follows:
Prior to December 2009, Plaintiff worked for Allied North America
Insurance Brokerage of Georgia, Inc. (“Allied of Georgia”), an affiliate of
Allied North America (“Allied”). W. Parker Hix Decl. in Supp. Pl.’s Mot.
Prelim. Inj. (“Hix Declaration”), Dkt. [2-1] ¶¶ 3-4. He also owned a twentyfive percent (25%) interest in Allied of Georgia at that time. Id. ¶ 4. In
December 2009, Aon Risk Services, Inc. (“Aon Risk Services”) entered into an
agreement to purchase Allied, and the acquisition was completed on January 1,
2010. Paul Henmueller Decl. in Supp. Defs.’ Opp’n to Pl.’s Mot. Prelim. Inj.
(“Henmueller Declaration”), Dkt. [14-1] ¶ 2. In anticipation of this acquisition,

1

Plaintiff also seeks damages for breach of contract stemming from
Defendants’ alleged wrongful termination of Plaintiff’s employment. Compl., Dkt.
[1] at 1. This breach of contract claim, however, is not at issue in the motions
currently before the Court.
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Plaintiff sold his 25% ownership interest in Allied of Georgia to Allied Group
Holdings, LLC (“Allied Group Holdings”). Hix Decl., Dkt. [2-1] ¶ 4. This sale
was memorialized in a purchase agreement entered into on December 6, 2009
(the “Purchase Agreement”). Id. The Purchase Agreement contains restrictive
covenants preventing Plaintiff from soliciting clients, hiring or soliciting
employees, and disclosing confidential information and trade secrets, which
covenants, by their terms, remain in force through December 31, 2011.
Henmueller Decl., Dkt. [14-1] ¶¶ 7-9 (citing Purchase Agreement §§ 9.1-9.3,
Dkt. [2-1] at 12-13). Plaintiff does not challenge the validity of these restrictive
covenants. Compl., Dkt. [1] ¶ 8; Pl.’s Mot. Prelim. Inj., Dkt. [2] at 5.
In addition to the Purchase Agreement, on December 4, 2009, Plaintiff
entered into an employment agreement with Allied Group Holdings, LLC (the
“Employment Agreement”). Henmueller Decl., Dkt. [14-1] ¶ 4. Like the
Purchase Agreement, the Employment Agreement contains a set of restrictive
covenants–a “Covenant Not to Compete,” “Covenant Not to Hire,” and
provision governing the non-use or -disclosure of “Trade Secrets and
Confidential Information.” Employment Agreement §§ 4(d), 4(e), 6(a), Dkt. [21] at 23-26. These covenants are to remain in force for two years following the
termination of Plaintiff’s employment, or until August 16, 2013 (with the non3
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disclosure provision continuing to remain in force indefinitely). Id.;
Henmueller Decl., Dkt. [14-1] ¶ 9.
On August 16, 2011, Aon terminated Plaintiff’s employment and
informed Plaintiff that it would seek to enforce the restrictive covenants
contained in the Employment Agreement.2 Hix Decl., Dkt. [2-1] ¶¶ 8, 10.
Plaintiff currently is unemployed but wants to continue working in the
insurance business and anticipates that former customers will seek to do
business with him again. Id. ¶ 9. He also anticipates that Aon will sue to
enforce the Aon covenants to prevent him from transacting business with his
former clients. Id. ¶ 10. Accordingly, arguing that the restrictive covenants are
overbroad and unenforceable, Plaintiff seeks a “preliminary injunction to
remove any obstacle to [his] engaging in gainful economic activity in Georgia
without uncertainty about his rights.” Pl.’s Mot. Prelim. Inj., Dkt. [2] at 3-4.
The Employment Agreement restrictive covenants provide as follows:
First, the Covenant Not to Compete provides:
The Employee hereby covenants and agrees that, except with the
prior written consent of Aon Group, the Employee (on the
Employee’s own behalf or on behalf of any other person or entity)
2

The Aon Defendants purport to be successors in interest to Allied Group
Holdings, LLC and on that basis seek to enforce the Employment Agreement.
Compl., Dkt. [1] ¶ 10.
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will not, during the course of employment, and for two (2) years
after the end of employment, or the period during which the
Company is making Base Salary payment to the Employee
pursuant to Section 3(b)(ii), compete directly or indirectly in any
way with the Business. For the purposes of this Agreement,
“compete directly or indirectly in any way with the Business”
means to enter into or attempt to enter into (on Employee’s own
behalf or on behalf of any other person or entity) any business
relationship of the same type or kind as the business relationship
which exists between Aon Group and its clients or customers to
provide services related to the Business for any individual,
partnership, corporation, association or other entity who or which
was a client or customer for whom the Employee worked or
became familiar with during the twenty-four (24) months prior to
the end of employment. “Client” or “customer” means any person
or entity listed on the books of Aon Group as such.
The Employee acknowledges that there is no general geographical
restriction contained in the preceding paragraph because the
restriction applies only to the specified clients of Aon Group.
Nothing in this Agreement shall prohibit Employee from obtaining
a livelihood for himself or his family by being engaged in the
Business. The intent of the parties is that the Employee’s
restrictive covenant is limited to only to those clients as above
specified.
Employment Agreement § 4(d), Dkt. [2-1] at 24-25. The Covenant Not to Hire
provides:
The Employee hereby also agrees, for the duration of the term of
the covenant set forth in Section 4(d) of this Agreement, not to
induce or attempt to induce, or to cause any person or other entity
to induce or attempt to induce, any person who is an employee of
Aon Group to leave the employ of Aon Group during the term of
the covenant set forth in Section 4(d).
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Id. § 4(e), Dkt. [2-1] at 25. Finally, the provision governing the non-use or disclosure of trade secrets and confidential information reads:
The Employee acknowledges that Aon Group’s business depends
to a significant degree upon the possession of confidential,
proprietary and trade secret information which is not generally
known to others, and that the profitability of the Business of Aon
Group requires that this information remain proprietary to Aon
Group. The Employee recognizes that, by virtue of his
employment by the Company, and to assist him in the solicitation,
production and servicing of client business, he will be granted
otherwise prohibited access to such information. This information
(hereinafter referred to as “Confidential Information”) includes,
without limitation: lists of clients and prospective clients; contract
terms and conditions; client information relating to services,
insurance, benefits programs, employees, finances, and
compensation; copyrighted materials; corporate, management and
business plans and strategies; compensation and revenues; methods
and strategies of marketing; market research and data; technical
know-how; computer software and manuals; policies and
procedures; and the conduct of the affairs of Aon Group.
The Employee shall not, except as required in the course of
employment hereunder, disclose or use during or subsequent to the
course of employment, any Confidential Information which has not
been publicly disclosed (other than by Employee in breach of this
provision). All Confidential Information and all records and
equipment and other materials relating in any way to Confidential
Information shall be and remain the sole property of Aon Group
during and after the end of employment.
Id. § 6(a), Dkt. [2-1] at 25-26.
Discussion
I.

Plaintiff’s Motion for Preliminary Injunction Enjoining Enforcement
of the Aon Covenants [2]
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A preliminary injunction is an “extraordinary and drastic remedy[.]”
Zadui-Quintana v. Richard, 768 F.2d 1213, 1216 (11th Cir. 1985). To obtain
such relief, a movant must demonstrate:
(1) a substantial likelihood of success on the merits of the
underlying case, (2) the movant will suffer irreparable harm in the
absence of an injunction, (3) the harm suffered by the movant in
the absence of an injunction would exceed the harm suffered by the
opposing party if the injunction issued, and (4) an injunction would
not disserve the public interest.
Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242,
1246-47 (11th Cir. 2002). The Court considers whether Plaintiff has made each
of the above showings so as to be entitled to preliminary injunctive relief.
A.

Substantial Likelihood of Success
1.

Legal Standard

The Court must first consider whether Plaintiff has shown a substantial
likelihood of success on the merits of his claim that the Aon covenants are
overbroad and unenforceable. The parties do not dispute that the enforceability
of the covenants is determined with reference to Georgia law, notwithstanding
the Employment Agreement’s choice of Illinois law as the law governing the
Agreement (§ 8(d), Dkt. [2-1] at 27). Indeed, it is well settled that courts in
Georgia apply Georgia law to determine the validity of restrictive covenants in

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a contract, even if the contract has a choice-of-law provision requiring the
application of foreign law. See, e.g., Manuel v. Convergys Corp., 430 F.3d
1132 (11th Cir. 2005) (affirming district court application of Georgia law to
determine enforceability of non-compete agreement despite choice-of-law
provision requiring application of Ohio law); Bunker Hill Int’l Ltd. v.
Nationsbuilder Ins. Serv., Inc., 710 S.E.2d 662, 666 (Ga. Ct. App. 2011)
(applying Georgia law to determine validity of restrictive covenants in
employment contract, notwithstanding choice-of-law provision designating
Illinois law to govern the contract).
Although the parties agree that Georgia law governs the analysis in this
case, they dispute which legal standard under Georgia law applies. Under
Georgia law, “[i]n considering whether a restrictive covenant is enforceable, a
court must first determine the level of scrutiny to apply.” Dent Wizard Int’l
Corp. v. Brown, 612 S.E.2d 873, 875 (Ga. Ct. App. 2005). “There are three
levels: strict scrutiny, which applies to employment contracts; middle or lesser
scrutiny, which applies to professional partnership agreements; and much less
scrutiny, which applies to sale of business agreements.”3 Id. Under the strict
3

The Court applies the law of restrictive covenants as it existed at the time the
Employment Agreement was entered into. In 2009, the Georgia legislature passed a
new restrictive covenant law, O.C.G.A. § 13-8-2.1(a), permitting covenants “that
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scrutiny analysis applicable to restrictive covenants in employment contracts,
the covenants will not be enforced unless “strictly limited as to time, territorial
effect, capacity in which the employee is prohibited from competing, and as to
overall reasonableness.” Gordon Document Prods., Inc. v. Serv. Techs., Inc.,
708 S.E.2d 48, 52 (Ga. Ct. App. 2011) (quotations and citation omitted).
Furthermore, the “blue pencil theory of severability” is inapplicable, such that if
any provision of a restrictive covenant is found to be invalid, the entire
covenant will be held unenforceable. Id. at 52 n.4. By contrast, restrictive
covenants ancillary to the sale of a business “can generally be drafted more
broadly.” Drumheller v. Drumheller Bag & Supply, Inc., 420 S.E.2d 331, 334
(Ga. Ct. App. 1992). Under the lesser scrutiny afforded to these covenants, if a
portion of the covenant is found to be invalid, “the court has tended . . . to

restrain in a reasonable manner,” which went into effect on November 2, 2010 as a
result of the ratification of an amendment to the Georgia constitution adopting that
provision into law. Cox v. Altus Healthcare & Hospice, Inc., 706 S.E.2d 660, 663-64
(Ga. Ct. App. 2011). Plaintiff signed the Employment Agreement on December 4,
2009, before this constitutional amendment had been ratified. Accordingly, the new
law on restrictive covenants in Georgia does not apply in this case. See Bunker Hill,
710 S.E.2d at 665 n.1 (“Because the agreement at issue was entered into in 2008, we
apply the law of restrictive covenants as it existed before the November 2010
ratification of an amendment to the Constitution of Georgia adopting O.C.G.A. § 138-2.1(a) into law.”).
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uphold the remaining portions of the covenant by ‘blue-penciling’ or severing
the overly broad restrictions.” Id.
As a threshold matter, the Court must decide which level of scrutiny to
apply. This issue is the crux of the parties’ dispute, as Defendants conceded at
oral argument that should the Court apply strict scrutiny, the restrictive
covenants at issue necessarily will fall. The Court thus devotes considerable
attention to this issue.
Defendants contend that although the restrictive covenants appear in an
employment agreement, they are nonetheless “ancillary to the sale of a
business” and thus “subject to less scrutiny than those that merely are
conditions to employment.” Def.’s Opp’n to Pl.’s Mot. Prelim. Inj., Dkt. [14] at
11. Defendants argue that the Purchase Agreement and Employment
Agreement are part of a single integrated transaction by which Defendants
acquired Allied Group Holdings, LLC and Plaintiff received compensation for
the sale of his shares, thus making the restrictive covenants in the Employment
Agreement “ancillary to the sale of a business.” Id. at 12. Plaintiff, on the other
hand, argues that “where, as a part of a sale of a business, the parties enter into a
contract for the sale of the business and a separate employment contract, and
both contracts contain restrictive covenants, the restrictive covenants in the
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employment agreement are subject to strict scrutiny.” Pl.’s Reply in Supp. Mot.
Prelim. Inj., Dkt. [19] at 1. The Court agrees with Plaintiff and finds that strict
scrutiny applies in this case.
As Plaintiff argues, it appears settled that Georgia courts, when faced
with an employment contract and a separate contract for the sale of a business,
both of which contain their own restrictive covenants, apply strict scrutiny to
determine the validity of the restrictive covenants in the employment
agreement. The Georgia Court of Appeals stated this to be the rule in Hilb,
Rogal & Hamilton Co. v. Holley, 644 S.E.2d 862, 866 (Ga. Ct. App. 2007). In
Hilb, the defendant, Holley, owned and operated an insurance business that he
later sold to Hilb, Rogal & Hamilton Company of Atlanta (“HRH”). Id. at 864.
As part of this transaction, the parties entered into two separate agreements, one
for the sale of Holley’s business and the other for Holley’s continued
employment with HRH. Id. at 864-65. The two agreements contained different
restrictive covenants precluding Holley from competing with HRH or soliciting
its business. Id. When HRH later brought suit against Holley alleging breach
of the restrictive covenants in his employment contract, the trial court applied
strict scrutiny to determine the covenants’ validity. Id. at 866. The Court of
Appeals affirmed, rejecting HRH’s argument that strict scrutiny should not have
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been applied. Id. In doing so, the Court stated, “This Court has consistently
held that when parties execute separate contracts for the seller’s sale of the
business and the seller’s subsequent employment and each contract contains
different restrictive covenants, the restrictive covenants in the employment
contract are subject to strict scrutiny.” Id.
The court reached the same result in Arnall Insurance Agency, Inc. v.
Arnall, 396 S.E.2d 257, 261 (Ga. Ct. App. 1990). In Arnall, the defendant had
served as one of two general partners of an insurance business that was later
acquired by the plaintiff. 396 S.E.2d at 258. On the same day that the
defendant executed the purchase and sales agreement with plaintiff’s service
corporation (acting as guarantor), he also entered into an employment
agreement with the plaintiff. Id. at 258-59. The two agreements contained
different restrictive covenants. Id.
When the plaintiff later sued alleging breach of the restrictive covenant
contained in the employment contract, the trial court applied strict scrutiny and
found the covenant to be unenforceable. Id. at 258. Affirming the trial court’s
judgment, the Court of Appeals rejected the plaintiff’s argument that the
restrictive covenant was entered into “in connection with a sales agreement”
such that strict scrutiny should not have applied. Id. at 261. The court
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reasoned, “In the case sub judice . . . the employment contract is part of a larger
transaction. (Indeed . . . the employment contract makes reference to the sales
agreement.)4 Nevertheless, we must construe the restrictive covenant contained
in the employment contract as just that–a covenant contained in an employment
contract.” Id. (emphasis added).
Applying different levels of scrutiny to restrictive covenants contained in
two separate agreements, albeit entered into as part of a single, larger
transaction, is not without justification. As the Georgia Court of Appeals
explained:
Subjecting two restrictive covenants to different treatment, even
though found in agreements executed as part of the same
transaction, is consistent with the rationale behind the different
levels of scrutiny. When one is selling a business . . ., more
weighty consideration is being offered in exchange for the noncompete covenant. The business seller is receiving substantial
consideration for the business he has built up, the value of which
would be significantly diminished to the buyer if he were allowed
to compete in the same market. . . . Thus, non-compete covenants
found in sale of business . . . agreements are generally afforded

4

This case also forecloses Defendants’ argument that because the Purchase
Agreement and Employment Agreement both reference the other, the restrictive
covenants in the two agreements must be considered together as part of the sale of a
business. See Defs.’ Opp’n to Pl.’s Mot. Prelim. Inj., Dkt. [14] at 12. The fact that
the sales contract and employment contract cross-referenced each other did not
compel the court in Arnall to treat the restrictive covenants in the employment
contract as ancillary to the sale of a business, nor does it compel the Court to do so
here.
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greater degrees of latitude. If the business seller . . . also enters
into a separate employment agreement with its own additional noncompete covenant, then the consideration received for that
covenant is usually less (generally employment benefits such as
salary and insurance coverage), subjecting it to a stricter level of
scrutiny. The context and consideration of the two restrictive
covenants being different, they are subject to different levels of
scrutiny.
Russell Daniel Irrigation Co., Ltd. v. Coram, 516 S.E.2d 804, 805 (Ga. Ct. App.
1999) (emphasis added). Furthermore, it would make little sense to treat the
Employment Agreement restrictive covenants as covenants made ancillary to
the Purchase Agreement, which contains its own, separate covenants. As the
Court of Appeals remarked in Arnall, “If, as [Defendants] contend[ ], the
restrictive covenant in the employment contract should be considered part and
parcel of the sales contract, why was the restrictive covenant in the sales
contract necessary?” 396 S.E.2d at 261. The obvious answer is that “each
covenant stands on its own. Each covenant is separate and distinct.” Id.
The cases cited by Defendants at oral argument do not compel a different
conclusion.5 In American Control Systems, Inc. v. Boyce, the defendant sold
his ownership interest in American Control Systems, Inc. (“ACS”) to Barnes
5

Nor do the cases cited by Defendants in their Supplemental Memorandum in
Opposition to Plaintiff’s Motion for Preliminary Injunction [22-1]. See Part II, infra
(addressing Defendants’ Motion for Leave to File a Supplemental Memorandum in
Opposition to Plaintiff’s Motion for Preliminary Injunction [22]).
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Family Holdings, Inc., which, partly as a result of this transaction, obtained a
fifty-one percent (51%) interest in ACS. 694 S.E.2d 141, 143 (Ga. Ct. App.
2010). On the same day that Boyce signed the Stock Purchase Agreement
memorializing the sale of his ACS shares, he signed an employment agreement
with ACS, pursuant to which he agreed to serve as its vice president and
secretary. Id. The employment agreement contained several restrictive
covenants. Id. When ACS later sued Boyce for breach of these restrictive
covenants, the trial court applied strict scrutiny to find the covenants invalid.
Id. at 144.
The Court of Appeals reversed on the basis that the restrictive covenants,
although contained in an employment contract, were nonetheless “ancillary to
the sale of a business” and thus subject to much less scrutiny. Id. at 145. In
reaching this conclusion, however, the court cast no doubt on the validity of
Hilb or Arnall. On the contrary, the court specifically cited Hilb for the general
rule that “when parties execute separate contracts for the seller’s sale of the
business and the seller’s subsequent employment and each contract contains
different restrictive covenants, the restrictive covenants in the employment
contract are subject to strict scrutiny.” Id. (emphasis added). The court found

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that this general rule did not apply, however, because “the contracts [before the
court] [did] not contain different restrictive covenants.”6 Id.
Drumheller v. Drumheller Bag & Supply, Inc., 420 S.E.2d 331 (Ga. Ct.
App. 1992) is distinguishable on the same ground as Boyce. In Drumheller, the
parties entered into multiple agreements in connection with the plaintiffs’ sale
of their business, only one of which contained restrictive covenants. 420 S.E.2d
at 333. Under these circumstances, the court analyzed whether the restrictive
covenants were “entered into as part of a sale of business” or merely as part of
the employment contract. Id. at 334-35.

The Court finds that the inquiry undertaken by the Court of Appeals in
6

Accordingly, faced with two agreements entered into on the same day and in
connection with the sale of a business, only one of which contained restrictive
covenants, the court considered whether the restrictive covenants should be treated as
“ancillary to the sale of a business,” even though they appeared in the employment
agreement. As stated above, the court answered this inquiry in the affirmative,
reasoning that as Boyce was a co-owner of ACS when he signed the stock purchase
and employment agreements, and thus of equal bargaining power as ACS, he agreed
to the restrictive covenants not solely in return for employment (as a “mere
employee”), but rather in return for the relinquishment of his interest in the business.
Id. at 144-45. Contrary to Defendants’ suggestion at oral argument, the analysis of
whether Plaintiff was a “mere employee” is not appropriate in this case because here,
as in Hilb and Arnall, Plaintiff entered into a purchase agreement and employment
agreement, both of which contain their own restrictive covenants. Given these facts,
the Court must treat the covenants in the employment contract “as just that–[ ]
covenant[s] in an employment contract.” Arnall, 396 S.E.2d at 261.
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Boyce and Drumheller is not appropriate where, as here, separate agreements
each contain their own restrictive covenants. Indeed, the rationale underlying
the inquiry in those cases is inapplicable in cases concerning separate
agreements with their own restrictive covenants. In White v.
Fletcher/Mayo/Assocs., Inc., the Georgia Supreme Court explained that when
confronted with a restrictive covenant contained in an agreement that serves
both as a stock purchase agreement and employment contract, “it is
problematical whether [plaintiff’s] profit constituted consideration for his
covenants not to compete, or whether the sole consideration flowing to
[plaintiff] in return for those covenants was his continued employment.” 303
S.E.2d 746, 750 (Ga. 1983). It likewise is problematical where the court faces a
purchase agreement and separate employment agreement, both entered into as
part of a single transaction, but only one of which contains restrictive
covenants. Accordingly, on those facts, it is appropriate for the court to inquire
whether the restrictive covenants were entered into ancillary to the sale of a
business or merely ancillary to employment.
Where the employment agreement and stock purchase agreements are
separate, however, and each contains its own restrictive covenants, identifying
the consideration given for those covenants is not problematical. On those
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facts, each restrictive covenant must be considered in the context of the specific
agreement in which it is found. Accordingly, in this case, the restrictive
covenants in the Purchase Agreement must be treated as part of the
consideration given by Plaintiff in exchange for the purchase of his stock. The
restrictive covenants in the Employment Agreement, on the other hand, must be
treated as part of the consideration given by Plaintiff in exchange for his
continued employment.
At oral argument Defendants also cited Annis v. Tomberlin & Shelnutt
Assoc., Inc., 392 S.E.2d 717 (Ga. Ct. App. 1990) in support of its position that
the Court must determine as a threshold factual matter whether the Aon
covenants are ancillary to the sale of a business or merely ancillary to Plaintiff’s
employment. The Annis court was presented with two separate agreements, a
stock purchase agreement and employment contract, both of which contained a
restrictive covenant. Id. at 719-20. The court stated, “It is unnecessary to
categorize the covenant at issue as one ancillary to the sale of the business or to
the employment contract because even under the narrower employment contract
scope, the covenant is not overbroad.” Id. at 721. The court went on to say,
Even if the covenant were overbroad, it would be possible to blue
pencil the agreement so as to make it enforceable. . . . The
Supreme Court has recently determined that if a contract for the
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sale of a business and an employment contract are part of the same
transaction they may be construed together to supply missing
elements and blue penciled to make overbroad terms valid.
Id. at 722 (citation omitted). Annis thus appears to support the proposition that
even where an employment agreement and purchase agreement both contain
restrictive covenants, the court may treat the covenants in the employment
contract as “ancillary to the sale of the business” and thus subject to much less
scrutiny.
The Court of Appeals decision in Hilb, however, forecloses Defendants’
reliance on Annis for this proposition. The court in Hilb stated as follows:
This Court has consistently held that when parties execute separate
contracts for the seller’s sale of the business and the seller’s
subsequent employment and each contract contains different
restrictive covenants, the restrictive covenants in the employment
contract are subject to strict scrutiny. We note that any statements
to the contrary found in Annis v. Tomberlin & Shelnutt Assocs.
are nonbinding dicta.
644 S.E.2d at 866 (emphasis added).
Finally, Defendants cited Mohr v. Bank of New York Mellon Corp., 371
F. App’x 10 (11th Cir. 2010) at oral argument. Mohr gives the Court the most
pause but does not change the Court’s conclusion that strict scrutiny applies in
this case. In Mohr, the parties entered into two agreements, one for the
purchase of the plaintiffs’ business, and the other for the plaintiffs’ continued
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employment with defendant. 371 F. App’x at 11. Both agreements contained a
restrictive covenant: the purchase agreement contained a covenant not to
compete, and the employment agreement contained non-disclosure and nonsolicitation provisions. Id. at 11-13. The employment agreement also
referenced the non-compete provision in the purchase agreement, and explicitly
stated that the restrictive covenants were given as part of the consideration for
the purchase of the business. Id.
Relying on Drumheller, the Eleventh Circuit Court of Appeals held that
the restrictive covenants were “interdependent” and thus made ancillary to the
sale of the business. Id. at 16. In doing so, the court rejected the plaintiffs’
argument (made on the basis of Arnall) that the restrictive covenants in the
employment agreement were made only ancillary to their employment. Id. at
17. This conclusion, however, was premised on facts that are not present in this
case. As stated above, the employment agreement in Mohr stated that the
restrictive covenants were executed as part of the consideration for the purchase
of the business. Id. at 17 (“The Employment Agreement cross-referenced the
covenant not to compete in the Purchase Agreement, contained additional
restrictive covenants, and provided that those covenants were part of the
consideration for the transaction.”). In this case, although the Employment
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Agreement is explicitly “contingent upon[ ] the acquisition of Allied Group
Holdings, LLC by Aon Group, Inc.” (page 1, Dkt. [2-1] at 19), it does not
provide that the restrictive covenants in the Employment Agreement have been
given in consideration for the purchase of Plaintiff’s business interest.
The facts of this case are thus akin to Arnall and distinguishable from
Mohr. Indeed, the Mohr court distinguished the facts of Arnall as follows: “In
Arnall . . . the covenantors executed separate employment and sales agreements
with independent restrictive covenants, such that each covenant stood on its
own.” Id. at 17 (citations omitted). Here, the restrictive covenants in the
Employment Agreement are wholly separate from the covenants in the Purchase
Agreement and thus must be considered on their own–as restrictive covenants
in an employment contract.
Based on the foregoing, the Court concludes that strict scrutiny must be
applied to determine the validity of the restrictive covenants in the Employment
Agreement.
2.

Analysis

Having determined that the Aon covenants are subject to strict scrutiny,
little analysis is required to determine whether Plaintiff has shown a substantial
likelihood of success on the merits. Defendants conceded at oral argument that
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should the Court apply strict scrutiny to the covenants, the covenants
necessarily will be held invalid.7 Given this concession by Defendants, and the
Court’s determination that strict scrutiny applies, it necessarily follows that
Plaintiff has shown a substantial likelihood of success on the merits of his claim
that the Aon covenants are unenforceable under Georgia law.
B.

Irreparable Harm and Balance of the Harms

The Court also finds that Plaintiff has shown a threat of irreparable harm
should the Court not issue a preliminary injunction, and that the harm he would
suffer in the absence of a preliminary injunction would outweigh the harm
Defendants would suffer as a result of its issuance. The Court agrees with
Plaintiff that should a preliminary injunction not issue, Plaintiff will suffer
irreparable harm in the form of lost employment opportunities. Contrary to
Defendants’ argument, this harm is not diminished by the fact that Plaintiff still
is bound by the Purchase Agreement restrictive covenants through December
31, 2011. In the absence of a preliminary injunction, Plaintiff could not
represent to prospective employers, with any degree of certainty, that he will be
available for employment after December 31, 2011, despite having shown a

7

Defendants do not argue in their briefs, either, that the Aon covenants could
survive strict scrutiny.
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substantial likelihood that the restrictive covenants in the Employment Contract
will be held unenforceable. The employment opportunities Plaintiff would lose
as a result of this uncertainty constitutes irreparable harm.
Furthermore, this harm outweighs the harm Defendants would suffer as a
result of a preliminary injunction. The Court has determined that strict scrutiny
applies to determine the validity of the Aon covenants, and Defendants
conceded at oral argument that the covenants cannot survive a strict scrutiny
analysis. Accordingly, it cannot harm Defendants to enjoin covenants that
Defendants have conceded are invalid.
C.

Public Interest

Finally, the Court also finds that enjoining the restrictive covenants
would not disserve the public interest. Given Defendants’ concession that the
covenants are invalid, the public cannot possibly be disserved by an injunction
barring their enforcement.
D.

Conclusion

Because the Court finds that Plaintiff has shown (1) a substantial
likelihood of success on the merits; (2) that he will suffer irreparable harm in
the absence of a preliminary injunction; (3) that Defendants will suffer no harm
as a result of the issuance of a preliminary injunction; and (4) that the public
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interest will not be disserved by the issuance of a preliminary injunction, the
Court hereby GRANTS Plaintiff’s Motion for Preliminary Injunction Enjoining
Enforcement of the Aon Covenants [2].
II.

Defendants’ Motion for Leave to File a Supplemental Memorandum
in Opposition to Plaintiff’s Motion for Preliminary Injunction [22]
The Court also GRANTS Defendants’ Motion for Leave to File a

Supplemental Memorandum in Opposition to Plaintiff’s Motion for Preliminary
Injunction [22]. In its Supplemental Memorandum [22-1], Defendant cites
three additional cases that purportedly support its argument that strict scrutiny
does not automatically apply to the Aon Covenants, but rather that the Court
must make the threshold factual determination of whether the covenants were
entered into ancillary to the sale of Plaintiff’s business interest or merely
ancillary to his employment. These authorities, however, do not change the
Court’s conclusion that strict scrutiny applies.
First, two of the cases, Rinks v. Courier Dispatch Group, Inc., No. 01CV-0678, 2001 WL 34090167 (N.D. Ga. Apr. 11, 2001) and Dalrymple v.
Hagood, 271 S.E.2d 149 (Ga. 1980), are factually distinguishable in that neither
case involved separate purchase and employment agreements that each
contained its own restrictive covenants. Instead, these cases fall under the

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rubric of Boyce and Drumheller, distinguished above, and do not alter the
Court’s analysis in this case. The third case cited by Defendants, Clower v.
Orthalliance, Inc., 337 F. Supp. 2d 1332 (N.D. Ga. 2004) is similarly
unpersuasive as it relies on Drumheller and was decided before the court’s later
decision in Hilb.
Conclusion
Based on the foregoing, the Court GRANTS Defendants Aon Risk
Services South, Inc. and Aon Group, Inc.’s Motion for Leave to File A
Supplemental Memorandum in Opposition to Plaintiff’s Motion for Preliminary
Injunction [22] and, having considered the additional authorities cited in
Defendants’ Supplemental Memorandum [22-1], GRANTS Plaintiff’s Motion
for Preliminary Injunction Enjoining Enforcement of the Aon Covenants [2].
SO ORDERED, this 22nd day of November, 2011.

________________________________
RICHARD W. STORY
United States District Judge

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