Protz v. Bock & Clark Corporation
Filing
12
ORDER AND OPINION directing that each party should submit a supplemental brief that will better educate the court on the caselaw regarding this case by Friday, May 10, 5:00 p.m. The Court will hear argument from counsel on the pending Motion to Dismi ss and, if that motion is denied, on plaintiffs pending Motion for Injunctive Relief, on TUESDAY, MAY 14, 1:30 p.m. The Court urges the parties to attempt to find a way to resolve this case by narrowing the restrictive covenants in a way that will substantially protect the defendant, while at the same time giving the plaintiff a right to earn a living. Signed by Judge Julie E. Carnes on 5/7/13. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
STEVEN P. PROTZ,
Plaintiff,
CIVIL ACTION NO.
v.
1:13-cv-1281-JEC
BOCK & CLARK CORPORATION,
Defendant.
ORDER AND OPINION
This
case
is
before
the
Court
on
plaintiff’s
Motion
for
Preliminary Injunction [6] and Motion to Expedite Hearing on Motions
to Dismiss and for Preliminary Injunction [8] and on defendant’s
Motion to Dismiss [3].
I.
BACKGROUND
Plaintiff was employed by defendant and terminated in February
of this year.
When initially hired, he had signed an employment
agreement that greatly restricted, if not totally eliminated, his
ability to work for any business entity that might compete with
defendant for a year after his departure from the company. Plaintiff
now has an opportunity to work for a company that performs the same
type
of
work
that
defendant
does
and
in
the
same
multi-state
geographic region, including Georgia, where plaintiff had previously
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worked.
Unless these restrictions are removed, however, plaintiff
will be unable to accept such a position.
Accordingly, plaintiff, who is a resident of Georgia, filed suit
in the Fulton County Superior Court seeking a declaratory judgment
striking these restrictions that will prevent him from accepting this
pending position.
Defendant removed the action to federal court.
The parties appear to agree that, were the merits of this case
to be judged by Georgia law in effect at the time that plaintiff
executed the agreement, plaintiff would certainly have shown a
likelihood
of
success
under
that
law,
as
the
breadth
of
the
employment agreement runs afoul of Georgia law and renders all of the
restrictive covenants in the agreement subject to being struck.
Likewise, plaintiff has a solid claim for irreparable injury as he is
unemployed, and may remain in that status for as long as the
restrictions are applied to him.
Plaintiff’s
problem,
however,
is
that
the
agreement
also
indicated that any legal action concerning the agreement could only
be brought in the Summit County, Ohio1 Court of Common Pleas.
Further, the agreement states that Ohio law governs any disputes
concerning the agreement.
Given this mandatory forum-selection
clause, defendant has filed a motion to dismiss the case, arguing
1
Akron is the seat of Summit County.
2
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that, by filing in Georgia, plaintiff has filed this case in the
wrong venue.
If defendant is correct, then this Court should not be the body
considering plaintiff’s law suit, and the case should be dismissed
without prejudice to allow plaintiff to refile in Ohio state court,
absent some procedural mechanism by the Court (which defendant says
is lacking) to transfer the case there.
For this reason, the Court
must first decide defendant’s motion to dismiss before it can reach
the question of plaintiff’s motion for injunctive relief.
II.
MOTION TO DISMISS
The construction of forum-selection clauses by federal courts is
a matter of federal common law, not the state law of the state in
which the federal court sits.
841,
842
(11th
Cir.
Cornett v. Carrithers, 465 Fed. App’x
2012).
A
forum-selection
clause
is
“presumptively valid” and will be enforced unless the plaintiff makes
a
“‘strong
showing’
unreasonable.”
that
enforcement
would
be
unfair
or
Krenkel v. Kerzner Int’l Hotels Ltd., 579 F.3d 1279,
1281 (11th Cir. 2009).
In the Eleventh Circuit, such a showing is
made
the
only
when:
(1)
agreement
was
induced
by
fraud
or
overreaching; (2) the plaintiff would be deprived of his day in court
because of inconvenience or unfairness, if the designated venue were
honored; (3) the chosen law would deprive the plaintiff of a remedy;
and (4) enforcement of the policy would contravene public policy.
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Id.
In his response to defendant’s motion to dismiss, plaintiff has
not sufficiently asserted the first two grounds, but has, in effect,
argued the latter two: that is, litigating in Ohio would deprive the
plaintiff of a remedy and would contravene the public policy of
Georgia, which is the
state in which plaintiff brought suit, in
which he lives, and in which he would be employed.
In arguing against enforcement of the forum-selection clause,
plaintiff cites to Georgia cases holding that, even where there is a
choice-of-law clause in a non-compete agreement, Georgia courts
refuse to adhere to that clause and they instead evaluate these
clauses according to Georgia law.
As it is clear that a Georgia
court would not enforce the restrictive covenants at issue here, at
least under the Georgia law in effect at the time the employment
agreement was made, plaintiff argues that it would contravene Georgia
public policy (and perhaps also deprive plaintiff of a remedy) if
plaintiff were forced to litigate this action in Ohio.
In reply,
defendant argues that plaintiff has failed to show that an Ohio court
would likely ignore Georgia law–-and its stronger public policy
stance against enforcement of restrictive covenants, such as those
present in this case–-in the Ohio court’s substantive evaluation of
this case.
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III. NEED FOR FURTHER BRIEFING
The legal issues that arise from plaintiff’s challenge to
enforcement of the forum-selection clause (Ohio county court) and its
companion choice-of-law clause (Ohio law) are extremely complex, and
will require more briefing and analysis than plaintiff has thus far
presented in his limited brief on this topic. In spending many hours
of its own time trying to get beyond the sparse briefing to unravel
this multi-layered question, the Court has found that the task
becomes more complex with additional research, not easier. Plaintiff
signed the contract here and its provisions are presumed to be
enforceable.
Thus, it is plaintiff who must shoulder the heavy
burden of persuading the court that the parties’ forum-selection
clause should be ignored.
The time pressure created by the need to render as quick a
decision as possible, given the possibility that plaintiff’s job
opportunity could disappear without a reasonably timely resolution of
this case, means that this Court has not had the time to thoroughly
analyze the cases that it has thus far found in its own research.
That is the job of the parties, not the Court, as the undersigned has
many time-sensitive matters for many other litigants and cannot stop
everything it is doing to take on the role of general counsel for
either side. Accordingly, the following discussion gives the parties
the Court’s shorthand interpretation of the many cases that it has
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thus far quickly read, as a beginning point for them in submitting a
more comprehensive brief on this matter.
The Court makes certain assumptions from the briefing thus far.
Defendant does not disagree that the “old” Georgia law on non-compete
type clauses controls here. That old law forbade “blue-penciling” of
any overly broad restrictive covenant clauses in an employment
contract.
This meant that one drafting misstep by an employer, and
the entire agreement would be struck, without the ability of the
reviewing court to narrow the overly broad restrictive clause.
The
Court further assumes that the agreement at issue here was overly
broad in some respects. Therefore, had there been no forum-selection
clause, which means that this case could have been properly brought
before a Georgia court, the latter (or a Georgia federal district
court on removal) would have struck the agreement, or at least the
violative provisions, and would have granted some type of injunctive
relief.
The problem is that there is a forum-selection clause, as well
as a choice-of-law clause. Were there no forum-selection clause, but
only a choice-of-law provision, the answer would appear to be pretty
straight-forward.
In Keener v. Convergys, 342 F.3d 1264 (11th Cir.
2003), the Eleventh Circuit was reviewing a case that had been
certified by the district court to the Georgia Supreme Court.
As in
this case, the Georgia district court was dealing with a non6
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competition employment agreement which specified that Ohio law would
control.
Applying Georgia conflicts of law rules, as clarified by
the Georgia Supreme Court on certification, the district court
concluded that the agreement violated Georgia public policy and that,
as the plaintiff was living and working in Georgia, where the effects
would be felt, Georgia’s public policy concerns trumped Ohio law,
even though the parties had contracted to apply that law.
1268.
Id. at
The Eleventh Circuit affirmed that part of the decision, but
reversed the district court’s nation-wide injunction, finding it to
be too broad.
So, if we were facing only a choice-of-law clause, plaintiff
would seem the likely victor.
first
faces
a
challenge
to
As stated before, though, plaintiff
venue
in
Georgia,
as
the
contract
specified that the case may be filed only in a Summit County, Ohio
state court.
The question then becomes whether an Ohio court will
recognize and adhere to the Georgia public policy or whether it will
instead apply its own law,2 without regard to Georgia law, to hold
2
Another unanswered question that may or may not become
important: does plaintiff have the right to remove the action filed
by defendant in the Summit County court to the appropriate federal
court in Ohio, if diversity jurisdiction so authorizes a removal,
which it will, and notwithstanding the forum-selection clause setting
out the state court as the forum in any dispute?
If so, and if
plaintiff did decide to remove the case, this Court could then
transfer this action to the federal court in Ohio where the
defendant’s state court action had been removed.
But absent a
transfer, it is unclear that plaintiff will be able to open the door
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that the agreement can be blue-pencilled.3
The parties should more thoroughly brief how an Ohio state court
would determine which state’s substantive law were to apply–-Ohio or
Georgia–-were plaintiff’s claims here dismissed without prejudice to
plaintiff’s
right
to
refile
in
Summit
County
counterclaim in the action filed by defendant there.
or
to
file
a
This analysis
should first look to how the Ohio court would apply its own conflict
of law rules in determining the degree of deference that it will give
to the parties’ agreement that Ohio law will control all disputes.
That is, will an Ohio court simply apply its own substantive law
on these non-compete employment agreements, which may or may not
prejudice the plaintiff’s ultimate prospects of success, or will the
Ohio court instead go behind the parties’ specification of Ohio law
as controlling to determine whether its conflicts rules would give
deference to Georgia law and to the latter state’s former public
policy disfavoring these types of employment contracts?
to Ohio’s conflict rules. See Rode v. St. Jude Med., S.C., Inc., No.
1:06-cv-02448-WSD, 2006 WL 3762065 (N.D. Ga. Dec. 20, 2006)(Duffey,
J.)(where defendant employer sought a tranfer to the designated forum
of Minnesota, court suggested that Minnesota’s duty to examine its
own conflicts rules might not arise were the case not being
transferred there.) Id., at *4.
3
Another question is whether Ohio law concerning the proper
breadth of a non-competition clause is equivalent to Georgia’s, and
does that matter in this analysis if it turns out that Ohio is deemed
the proper forum?
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Plaintiff should attempt to identify cases that will support his
argument that Ohio will ignore the Georgia law, in its construction
of non-competition clauses as well as in its expressed public policy
of striking over-broad agreements.4
Similarly, defendant should
explore the area to support its argument that Ohio would defer to
Georgia law in this area.
IV.
TIMELINE
Each party should submit a supplemental brief that will better
educate the court on the caselaw in this area by FRIDAY, MAY 10, 5:00
p.m.
The Court will hear argument from counsel on the pending motion
to dismiss and, if that motion is denied, on plaintiff’s pending
motion for injunctive relief, on TUESDAY, MAY 14, 1:30 p.m.
Given the complexity and uncertainty of these issues, and the
expense that each party will incur should it continue to litigate
them, the Court urges the parties to attempt to find a way to resolve
this case by narrowing the restrictive covenants in a way that will
substantially protect the defendant, while at the same time giving
the plaintiff a right to earn a living.
4
Counsel should explain the cases, and not just offer a cite
for the court to have to then figure out the argument being made.
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SO ORDERED, this 7th day of MAY, 2013.
/s/ Julie E. Carnes
JULIE E. CARNES
CHIEF UNITED STATES DISTRICT JUDGE
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