Pickvet v. Viking Group, Inc. et al
OPINION AND ORDER granting Defendants Motion to Transfer Venue 3 . This action is hereby TRANSFERRED to the United States District Court for the Western District of Michigan. Signed by Judge William S. Duffey, Jr on 2/3/17. (ddm)[Transferred from Georgia Northern on 2/3/2017.]
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
VIKING GROUP, INC., and
SUPPLY NETWORK, INC.,
OPINION AND ORDER
This matter is before the Court on Defendants Viking Group, Inc. (“Viking
Group”) and Supply Network, Inc.’s (“Supply Network”) (together, “Defendants”)
Motion to Transfer Venue .
Plaintiff, a citizen of Georgia, was employed by Defendant Supply
Network.1 In 2009, he entered into an employment agreement (“Employment
Agreement”) with Viking Group. ( at 22-27). The Employment Agreement
has, in paragraph 2, a section entitled “Noncompetition,” which contains certain
The parties dispute whether Plaintiff was an employee of Supply Network,
Viking Group, or both. Supply Network is a subsidiary of Viking Group.
restrictive covenants (“Restrictive Covenants”). The Restrictive Covenants are
During the term of Employee’s employment and for a period of two
(2) years after that employment ends, Employee will not compete in
any way with the business of the Company in the Southeastern US
Sales Region. This area will include the states of North Carolina,
South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana,
Arkansas, Tennessee and Texas. This promise not to compete
includes, but is not limited to, a promise that Employee will not
engage in any of the following activities:
Employee will not work with, for, or have any interest in, any
organization that competes with the Company.
Employee will not attempt to persuade any customer, supplier,
or potential customer or supplier of the Company that they
should not do business with the Company, should reduce their
purchases of the Company’s products or services, or should do
business with a competitor of the Company.
Employee will not sell or aid in the sale of any products or
services that are competitive with any services or products of
the Company to any customer or potential customer of the
Employee will not solicit, encourage or persuade any employee
of the Company to terminate their employment with the
Company or to take any action that adversely affects their
ability to carry out their employment duties with the Company.
( at 25).
The Employment Agreement provides that any dispute arising under the
agreement shall be filed in either Kent County Circuit Court or the Western
District of Michigan (“Forum Selection Provision”). (Id. at 27). The agreement
provides further that it shall be governed by Michigan law (“Choice of Law
On January 23, 2017, Plaintiff terminated his employment with his employer
and began working for Winsupply, Inc. (“Winsupply”), a company that competes
with Viking Group in the sprinkler products business.
On January 23, 2017, Plaintiff filed a Complaint [1.1] in the Superior Court
of Fulton County, Georgia (the “Georgia Action”), seeking a declaratory judgment
that the Restrictive Covenants are not enforceable against him and do not restrict
his employment with Winsupply. It was not served on Viking Group until
January 26, 2017.
On January 26, 2017, Defendant Viking Group filed a complaint in the
Circuit Court in Kent County, Michigan, alleging that Plaintiff breached his
employment agreement and seeking to enforce the agreement against Plaintiff.
See Viking Grp., Inc. v. Pickvet, No. 1:17-cv-103-PLM-PJG (W.D. Mich. 2017)
(Dkt. No. 1.1) (“Michigan Action”). Viking Group asserts that it did not know
about the Georgia Action until after the Michigan Action was filed.
On January 27, 2017, Defendants removed the Georgia Action to this Court
and Paintiff filed his Motion for Injunctive Relief and Motion for Expedited
Hearing . In the motion, Plaintiff seeks to enjoin the Restrictive Covenants on
the ground that they are not enforceable in Georgia. He contends that the Forum
Selection Provision should not be enforced, and that he was permitted to file the
Georgia Action in Georgia because enforcing the Forum Selection Provision and
the Restrictive Covenants would violate Georgia law and Georgia public policy.
On January 30, 2017, Plaintiff removed the Michigan Action to the United States
District Court for the Western District of Michigan.
On January 31, 2017, Defendants filed their Motion to Transfer Venue,
seeking to transfer the now-removed Georgia Action to the Western District of
Michigan. Defendants argue that the Forum Selection Provision is enforceable,
Plaintiff was required to file his action in Michigan, and this action should be
transferred to Michigan because Plaintiff cannot meet his burden to show that the
Western District of Michigan would enforce the Restrictive Covenants even if it
would offend the laws and public policy of Georgia.
On February 2, 2017, the Court held a hearing on the Motion to Transfer
Venue and Motion for Injunctive Relief.
Defendants move to transfer this case to the Western District of Michigan
pursuant to 28 U.S.C. § 1404(a). A forum selection clause “may be enforced
through a motion to transfer under § 1404(a).” Atl. Marine Constr. Co. v. U.S.
District Court for W. Dist. of Tex., 134 S. Ct. 568, 579 (2013). “[A] proper
application of § 1404(a) requires that a forum-selection clause be ‘given
controlling weight in all but the most exceptional cases.’” Id. (citing Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy, J., concurring)).
“In the typical case not involving a forum-selection clause, a district court
considering a § 1404(a) motion . . . must evaluate both the convenience of the
parties and various public-interest considerations. Ordinarily, the district court
would weigh the relevant factors and decide whether, on balance, a transfer would
serve ‘the convenience of the parties and witnesses’ and otherwise promote ‘the
interest of justice.’” Id. (quoting 28 U.S.C. § 1404(a)). The presence of a valid
forum-selection clause requires, among other things, that a court not consider
arguments about the parties’ private interests. Id. “[A] district court may consider
arguments about public-interest factors only.” Id. These public interest
considerations “will rarely defeat a transfer motion,” and a forum-selection clause
“should control except in unusual cases.” Id. The party acting in violation of the
forum-selection clause “bear[s] the burden of showing that public-interest factors
overwhelmingly disfavor a transfer.” Id. at 583.
Plaintiff argues that the Forum Selection Provision and the Choice of Law
Provision would produce a result that is contrary to Georgia public policy.
Forum-selection clauses in employment contracts are “prima facie valid” under
Georgia law. Carson v. Obor Holding Co., LLC, 734 S.E.2d 477, 481 (Ga. Ct.
App. 2012). Georgia courts, however, “have held that if a party can show both that
a restrictive covenant violates Georgia public policy and that a court in the selected
forum likely would find the restrictive covenant enforceable, a compelling reason
exists to avoid the contractual forum selection clause.” Id. To make this showing,
the party seeking to invalidate a forum selection clause “must demonstrate that a
[foreign] court likely would apply [foreign] law and that, under [the foreign] law,
the covenants likely would be enforceable.” Id.
Georgia is one of the very few states that has a public policy that historically
disfavors restrictive covenants.2 See Atlanta Bread Co. Intern., Inc.
In November 2010, Georgia voters approved a constitutional amendment
that substantially altered Georgia’s public policy on restrictive covenants. As a
result of the constitutional amendment, Georgia enacted new statutory provisions
governing restrictive covenants in employment contracts. See O.C.G.A. § 13-8-50,
et seq. Georgia law provides that the new law “shall not apply in actions
determining the enforceability of restrictive covenants entered into before” the
ratification of the constitutional amendment. Carson v. Obor Holding Co., LLC,
734 S.E.2d 477, 480 n.1 (Ga. Ct. App. 2012). Accordingly, for pre-ratification
contracts, Georgia courts will “apply the law of restrictive covenants as it existed
before [ratification].” Id. (citation omitted).
v. Lupton-Smith, 679 S.E.2d 722, 724 (Ga. 2009) (“Contracts in unreasonable
restraint of trade are contrary to public policy and void, because they tend to injure
the parties making them . . . .; tend to deprive the public of services of people in
the employments and capacities in which they may be most useful to the
community as well as themselves; discourage industry and enterprise, and diminish
the products of ingenuity and skill; prevent competition and enhance prices, and
expose the public to all the evils of monopoly.” (alterations omitted) (quoting
Rakestraw v. Lanier, 30 S.E. 735 (Ga. 1898))). Restrictive covenants in an
employment agreement “will be upheld if the restraint imposed is not
unreasonable, is founded on a valuable consideration, is reasonably necessary to
protect the interest of the party in whose favor it is imposed, and does not unduly
prejudice the interests of the public.” W.R. Grace & Co. v. Mouyal, 422 S.E.2d
529, 531 (Ga. 1992). Georgia courts generally look to three factors to determine
whether a restrictive covenant is reasonable: (i) the duration of the restrictions,
(ii) their territorial coverage, and (iii) the scope of restricted activities. See id.
Georgia courts have established certain strict reasonableness standards. For
example, restrictive covenants are reasonable if (i) the restriction period does not
exceed two (2) years following contract termination, and (ii) the restriction only
applies to clients the employee actually served during the contract term. See
Murphree v. Yancey Bro. Co., 716 S.E.2d 824, 827 (Ga. Ct. App. 2011). Periods
of restriction exceeding two years following a contract’s termination are generally
unreasonable and unenforceable. See Swartz Inv., LLC v. Vion Pharm., Inc.,
556 S.E.2d 460, 464-65 (Ga. Ct. App. 2001). If the person subject to the covenant
is prohibited from serving or seeking business from clients that the person did not
serve during the contract term, the restrictive covenant must contain a reasonable
territorial restriction to be enforceable. See Carson, 734 S.E.2d at 482. Finally,
where a restrictive covenant seeks to prohibit post-termination business activities
in which a former employee did not engage and otherwise is unrelated to the
former employee’s business, the restriction is considered unreasonable. Mouyal,
422 S.E.2d at 532
Assuming, for the purposes of this Order, that application of Michigan law
to the Restrictive Covenants would be contrary to Georgia public policy, Plaintiff
fails to meet his burden to demonstrate that the Western District of Michigan likely
would apply Michigan law rather than the apparently more restrictive policy in
Georgia. Michigan courts and the Sixth Circuit follow Section 187 of the
Restatement (Second) of Conflict of Laws. See Delphi Auto. PLC v. Absmeier,
167 F. Sup. 3d 868, 875 (E.D. Mich. 2016) (citing Kipin Indus., Inc. v. Van Deilen
Intl’l, Inc., 182 F.3d 490, 493 (6th Cir. 1999)); see also Performance Contracting,
Inc. v. DynaSteel Corp., 750 F.3d 608, 611 (6th Cir. 2014). Section 187 provides
that a contractual choice of law provision is binding unless either:
(a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties’
(b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest
than the chosen state in the determination of the particular issue and
which, under the rule of § 188, would be the state of the applicable
law in the absence of an effective choice of law by the parties.
Restatement (Second) of Conflict of Laws § 187(2).
Here, the Court finds Michigan is likely to apply Georgia law under Section
187(2)(b). Crump Ins. Servs. v. All Risks, Ltd., 727 S.E.2d 131 (Ga. Ct. App.
2012) is instructive here. In Crump, the Georgia Court of Appeals considered the
validity of a forum-selection clause in a restrictive covenant requiring that any
dispute be heard in Maryland court and governed by Maryland law. Judge
Blackwell,3 in a special concurrence, found that the parties seeking to invalidate
the forum-selection clause failed to show a likelihood that a Maryland court would
apply Maryland law to the covenant. He explained that, even assuming that the
restrictive covenants violate Georgia law and that they would be enforceable under
Maryland law, “[t]here is some reason to believe that a Maryland court would
Judge Blackwell now is a justice on the Supreme Court of Georgia.
apply Georgia law to the restrictive covenants in this case . . . [because] Maryland
follows Section 187 of the Restatement (Second) of Conflict of laws[.]” Id. at
134-35. In reaching this conclusion, Judge Blackwell relied in part on Hunter
Grp., Inc. v. Smith, 9 F. App’x 215, 219 (4th Cir. 2001), a case in which the Fourth
Circuit applied Section 187 to refuse to honor the contractual choice of Maryland
law and instead applied Georgia law because “Georgia had a far greater
relationship to the employment contracts and . . . the noncompete agreements
violated Georgia’s fundamental public policies.”
Because the Employment Agreement at issue in this case was entered into in
Georgia, Plaintiff lives in Georgia and worked under the contract in Georgia,
several of the customers allegedly covered by the Restrictive Covenant do business
in Georgia, and the geographic territory covered by the Restrictive Covenants
includes Georgia—and not Michigan—it appears Georgia has a far greater
relationship to the Employment Agreement than Michigan. To the extent applying
Michigan law to the Restrictive Covenants would, as Plaintiff claims, offend
Georgia’s fundamental policy regarding restrictive covenants, the Court predicts
the Western District of Michigan, pursuant to Section 187(2)(b), would apply
Georgia law.4 The Court finds Plaintiff fails to show that the Western District of
Michigan is likely to apply law contrary to Georgia’s public policy on restrictive
covenant enforceability. Because Plaintiff, the party in violation of the Forum
Selection Provision, fails to meet his burden to show that public-interest
considerations “overwhelmingly disfavor a transfer,” Atl. Marine, 134 S. Ct. at
583, Defendants’ Motion to Transfer is granted.
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendants’ Motion to Transfer
Venue  is GRANTED. This action is hereby TRANSFERRED to the United
States District Court for the Western District of Michigan.
SO ORDERED this 3rd day of February, 2017.
To the extent applying Michigan law would not produce a result contrary to
the result under Georgia law, Plaintiff does not present any compelling
public-interest rationale why the Forum Selection Provision should not be
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