Cook v. Robinson et al
MEMORANDUM OPINION AND ORDER GRANTING 113 PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING in part and DENYING in part 105 Defendants' Motion for Summary Judgment. Signed by Senior Judge Frederick P. Stamp, Jr on 10/4/11. (cc)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
Civil Action No. 5:11CV6
ROBERT M. ROBINSON,
ROBINSON AUTOMOTIVE GROUP, INC. and
BOB ROBINSON CHEVROLET-OLDSMOBILECADILLAC, INC.,
MEMORANDUM OPINION AND ORDER
GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
AND GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT1
On January 7, 2011, the plaintiff in the above-styled civil
action filed a declaratory judgment action requesting that the
legal rights of the parties with regard to the covenant not to
compete contained in the August 4, 2006 stock purchase agreement
(“SPA”) associated with the plaintiff’s purchase of stock in
Robinson Automotive Group (“RAG”) be established and that it be
determined that the covenant is unlawful and unenforceable.2
This memorandum opinion and order confirms the tentative
rulings set forth in the undersigned judge’s letter to counsel
dated September 28, 2011.
The covenant not to compete states:
During the course of Cook’s association with Buyer
[Robert M. Robinson] and Employer [RAG], Cook has become
aware of and familiar with Buyer’s and Employer’s methods
of operation and certain proprietary and confidential
plaintiff also alleges that the defendants intentionally acted to
prevent him from being employed by Straub Automotive (“Straub”),
where he has accepted a position as general manager for sales but
is not yet employed as a result of this litigation.
On January 25, 2011, the plaintiff filed a motion for a
preliminary injunction and a request for an expedited evidentiary
hearing. His request was granted, and this Court held a hearing on
the motion for a preliminary injunction on January 28, 2011. After
the parties submitted additional memoranda addressing the motion
for a preliminary injunction, this Court entered a memorandum
opinion and order denying the plaintiff’s motion for a preliminary
Cook agrees not to employ the business
expertise that he has acquired by virtue of his
association with Buyer and Employer in direct competition
with them as set forth herein. In consideration of the
mutual promises contained herein and the sum of Twenty
Thousand Dollars ($20,000.00) paid to Cook by Employer,
exclusively for this covenant not to compete, the receipt
of which is hereby acknowledged, Cook agrees that for a
period of ten (10) years following the date of this
Agreement, he shall not directly or indirectly own or
engage in the retail sale of new or used motor vehicles
for, or be a Director, officer or employee of any new or
used motor vehicle dealership in Ohio County, West
Virginia, or otherwise compete with Buyer and/or Employer
within a radius of fifty (50) miles of Wheeling, Ohio
County, West Virginia.
Defs.’ Mot. for Summ. J. Ex. M.
This ruling was made following the standards set forth in The
Real Truth About Obama, Inc. v. Federal Election Comm’n, 575 F.3d
342 (4th Cir. 2009), based upon the record made at that time.
On May 26, 2011, after the entry of a scheduling order and
while the parties were in the midst of conducting discovery, the
defendants filed a motion for summary judgment.
filed objections to the motion for summary judgment, in which he
argued that the defendants’ motion was premature as it was filed
before the plaintiff had an opportunity to conduct discovery. This
Court agreed, and on June 14, 2011, entered an order denying the
defendants’ motion for summary judgment as premature.4
Upon the completion of discovery, both parties filed motions
for summary judgment.
These cross-motions for summary judgment
have been fully briefed and are ripe for review.
For the reasons
set forth below, this Court grants the plaintiff’s motion for
summary judgment, and grants in part and denies in part the
defendants’ motion for summary judgment.
Defendant Robert M. Robinson (“Robinson”) is the principal
Cadillac, Inc. (“Bob Robinson COC”).
The plaintiff, Kevin Cook
This Court notes that the plaintiff’s objection to the
defendants’ first motion for summary judgment also argued that the
defendants’ filings had exceeded the allowable page limit set forth
in Local Rule of Civil Procedure 7.02. In an order dated August
17, 2011, this Court overruled the plaintiff’s objection.
Because the evidence in a summary judgment motion is to be
considered in the light most favorable to the party opposing the
motion, and because both parties in this case have filed opposing
motions for summary judgment, this Court considers the undisputed
facts as set forth by both parties.
(“Cook”), has been employed in the automotive sales industry since
1984, and he began working as the general sales manager for the Bob
Robinson COC dealership in 1998.
As the general sales manager,
Cook’s duties included managing the dealership, sales and marketing
of new and used vehicles, maintaining staff and sales personnel,
advertising, and inventory control.
After working at the Robinson dealership for some time, Cook
purchased five percent of the shares of stock in Bob Robinson COC,
pursuant to a stock purchase agreement dated June 1, 1998.
agreement provided that should Cook’s employment with Bob Robinson
COC be terminated, either voluntarily or involuntarily, Cook was to
first tender and offer all of his stock to Robinson at a price to
be reached pursuant to an agreed-upon formula set forth in the SPA.
Defs.’ Mot. for Summ. J. Ex. J.
Later, Cook increased his stock
ownership and became a fifteen percent shareholder in Bob Robinson
In September 2004, the defendants acquired Welty Buick, Inc.
(“Welty”), located directly across the street from Bob Robinson
Following the acquisition, the plaintiff became the general
manager of RAG, the entity that was created by the purchase of
Welty, and which was operated under the Welty name.
At this time,
pursuant to a stock purchase agreement dated August 22, 2004, Cook
sold his fifteen percent interest in Bob Robinson COC and purchased
a thirty percent interest in RAG.6
In 2006, Cook approached Robinson and asked to buy Robinson’s
shares of Welty in order to become the owner of the entire
After Robinson told Cook that the business was not for
sale, Cook decided to terminate his employment with RAG so that he
could purchase his own dealership.
Pursuant to a stock purchase
agreement dated August 4, 2006, Cook sold his thirty percent
interest and stock in RAG to Robinson.
Defs.’ Mot. for Summ. J.
According to a letter from Robinson dated July 24, 2006,
Defs.’ Mot. for Summ. J. Ex. L.
SPA states that the
The August 6, 2006
total price of the stock is $373,136.00.
parties ultimately reached their agreement as to the value of the
shares of stock based upon the formula set forth in the SPA and the
amount the plaintiff’s brother had recently been paid by Robinson
for his five percent interest in RAG.
In addition to, or possibly
as a part of the valuation of the shares of stock, the plaintiff
received a payment of $20,000.00, which was earmarked as payment
for the covenant not to compete.7
The August 4, 2006 SPA by which
The plaintiff does not have a copy of the August 22, 2004
SPA, and the defendants are also unable to locate this document.
Because the parties were unable to produce the 2004 SPA, this
Court is unable to definitively determine whether the $20,000.00
was paid as additional consideration for the covenant not to
compete. Instead, the $20,000.00 could be a fraction of the stock
Cook sold his thirty percent interest and stock in RAG to Robinson
contains the fifty-mile, ten-year covenant not to compete.
In August 2006, Cook purchased and began operating the Dan
Johnston Chevrolet dealership in Jeannette, Pennsylvania.
this time, Cook moved to Greensburg, Pennsylvania and purchased a
When the financial crisis of 2008-2009 occurred, Cook
was forced to close his dealership, but he was able to find
Automotive (“Smail”), in Greensburg, Pennsylvania.
In November 2010, Cook was approached by a representative of
Straub about becoming the general manager at Straub. After further
discussion, on December 5, 2010, Straub offered Cook the position.
On December 6, 2010, Cook called Robinson and told him about his
opportunity to work at Straub.
According to Cook, Robinson
approved of his acceptance of the position at Straub, and Cook
relied on Robinson’s statement of approval when he resigned from
his employment at Smail. On December 7, 2010, Robinson called Cook
and advised him that he would enforce the covenant not to compete.
While Cook contends that Robinson inexplicably changed his mind,
Robinson denies that he ever excused or relieved Cook from the
obligations of the non-compete agreement.
As of the filing of the
motions for summary judgment, Cook remained unemployed.
redemption price that was simply applied to the covenant not to
Under Rule 56(c) of the Federal Rules of Civil Procedure,
A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by:
(A) citing to particular parts of materials in the
record, including depositions, documents, electronically
stipulations . . . admissions, interrogatory answers, or
other materials; or
(B) showing that the materials cited do not
establish the absence or presence of a genuine dispute,
or that an adverse party cannot produce admissible
evidence to support the fact.
Fed. R. Civ. P. 56(c).
The party seeking summary judgment bears
the initial burden of showing the absence of any genuine issues of
See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
“The burden then shifts to the nonmoving party to come
forward with facts sufficient to create a triable issue of fact.”
Temkin v. Frederick County Comm’rs, 945 F.2d 716, 718-19 (4th Cir.
1991), cert. denied, 502 U.S. 1095 (1992) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). However, as the
United States Supreme Court noted in Anderson, “Rule 56(e) itself
provides that a party opposing a properly supported motion for
summary judgment may not rest upon the mere allegation or denials
of his pleading, but must set forth specific facts showing that
there is a genuine issue for trial.”
Id. at 256.
performed is the threshold inquiry of determining whether there is
the need for a trial -- whether, in other words, there are any
genuine factual issues that properly can be resolved only by a
finder of fact because they may reasonably be resolved in favor of
Id. at 250; see also Charbonnages de France v.
Smith, 597 F.2d 406, 414 (4th Cir. 1979)(Summary judgment “should
be granted only in those cases where it is perfectly clear that no
issue of fact is involved and inquiry into the facts is not
desirable to clarify the application of the law.” (citing Stevens
v. Howard D. Johnson Co., 181 F.2d 390, 394 (4th Cir. 1950))).
In Celotex, the Court stated that “the plain language of Rule
56(c) mandates the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who fails to make a
essential to that party’s case, and on which that party will bear
the burden of proof at trial.”
Celotex, 477 U.S. at 322.
judgment is not appropriate until after the non-moving party has
had sufficient opportunity for discovery.
See Oksanen v. Page
Mem’l Hosp., 912 F.2d 73, 78 (4th Cir. 1990), cert. denied, 502
U.S. 1074 (1992). In reviewing the supported underlying facts, all
inferences must be viewed in the light most favorable to the party
opposing the motion.
See Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).
The central question presented in both motions for summary
judgment is whether the covenant not to compete contained in the
August 4, 2006 SPA is enforceable. Therefore, this Court addresses
the enforceability of the covenant not to compete first, before
turning to the other issues raised in the motions for summary
Enforceability of the Covenant Not to Compete
In his motion for summary judgment, the plaintiff argues that
the covenant not to compete contained in the August 4, 2006 SPA is
In support of this contention, the plaintiff
states: (1) the type of knowledge and information acquired by the
plaintiff does not support the necessity of a covenant not to
compete; (2) the covenant not to compete is unreasonable on its
requisite protectable interest to justify a ten-year covenant not
In their response, filed on September 15, 2011, the defendants
argue that the covenant not to compete is valid, binding, and
enforceable because: (1) it is ancillary to the sale of Cook’s
stock and ownership; (2) it is supported by consideration; (3) it
is necessary to safeguard the defendants’ legitimate business
interests; and (4) the ten-year duration is reasonable.
September 22, 2011, the plaintiff filed a reply stating that the
defendants cannot argue that the covenant at issue is ancillary to
the sale of a business because this Court already found that the
covenant is ancillary to an employment contract.
The defendants’ motion for summary judgment presents similar
With regard to the covenant not to compete, the
(1) it was required to protect the defendants’
legitimate business interests; (2) it does not impose an undue
hardship upon the plaintiff; (3) it is not injurious to the public;
and (4) the plaintiff agreed to it.
In his response, filed on
September 15, 2011, the plaintiff argues: (1) the defendants have
failed to meet their burden of establishing the existence of a
protectable interest that warrants a ten-year covenant; (2) there
exists a genuine issue of material fact as to whether an oral
modification or waiver of the covenant occurred; and (3) the
behavior of the defendants warrants the submission of punitive
damages to the jury.
On September 22, 2011, the defendants filed
a reply in which they argue that the plaintiff has not sufficiently
carried his burden to oppose summary judgment.
Before delving into the question of enforceability of the
covenant, this Court first addresses whether the covenant is
ancillary to an employment contract or ancillary to the sale of a
Based upon the information presented in the parties’
initial pleadings and the testimony at the hearing on the motion
for a preliminary injunction, this Court previously found that this
covenant is ancillary to an employment agreement.
Mem. Op. and
Order Den. Pl.’s Mot. for Prelim. Inj. 13-14. Because the covenant
was meant to “prevent competitive use, for a time, of information
or relationships which pertain peculiarly to the employer and which
the employee acquired in the course of employment[,]” this Court
determined that the stricter employment agreement analysis was
applicable in this case.
Weaver v. Ritchie, 478 S.E.2d 363, 368
(W. Va. 1996).
Despite this finding, the defendants continue to argue in
their motion for summary judgment that the less stringent test for
covenants ancillary to the sale of a business applies in this case
because the covenant was inextricably tied to Robinson’s purchase
of Cook’s shares.
According to the defendants, a covenant signed
by an individual who is both an employee and a shareholder as part
of a sale of his stock is subject to lesser scrutiny than a
covenant that is ancillary to only an employment agreement. Defs.’
Mem. in Support of Mot. for Summ. J. 7-8.
In response, the
specifically correlated to the terminations of Cook’s employment
rather than to the sale of a business.
Pl.’s Mem. in Resp. to Mot.
for Summ. J. 10.
This Court reaffirms that the covenant in this case is
ancillary to an employment agreement because the motions for
summary judgment present no new evidence that would support a
finding that this covenant is ancillary to the sale of a business.
These two types of covenants achieve very different goals.
restriction imposed on the seller of a business ensures that the
seller receives the highest possible price for the business and
that the buyer will not risk losing what was purchased should the
seller become a competitor.
Weaver, 478 S.E.2d at 368 (citing
Morgan’s Home Equip. Corp. v. Martucci, 136 A.2d 838 (Pa. 1957)).
employment contract, on the other hand, “prevent[s] the competitive
use, for a defined period of time, of information, skills or
relationships which are distinctive to the employer and which the
employee acquired . . . in the course of employment.”
In this case, the covenant not to compete was included in the
August 4, 2006 SPA in which Cook sold back to Robinson his
ownership interest in RAG.
The purpose of the inclusion of the
covenant in the SPA was not to ensure that Cook could obtain the
highest price for his shares by precluding himself from entering
into competition with Robinson.
In reality, Cook was simply
selling back to Robinson a small piece of Robinson’s own business.
The covenant was included in the SPA to prevent Cook from competing
unfairly against Robinson.
Thus, the covenant must be analyzed
under the stricter test because it is ancillary to an employment
See also McGough v. Nalco Co., 496 F. Supp. 2d 729, 749
(N.D. W. Va. 2007) (“Generally, a covenant signed prior to,
contemporaneous with, or any time during employment is ancillary to
As this Court previously explained in the memorandum opinion
application of the rule of reason.
See Reddy v. Cmty. Health
Found. of Man, 298 S.E.2d 906, 915 (W. Va. 1982).
As the Reddy
court stated, “the very enforceability of the covenant will stand
or fall by the rule of reason.”
Id. at 912.
Application of the
rule of reason involves three inquiries that require the court to
look to the interests of the employer, the interests of the
Specifically, a covenant is reasonable only if it: (1) is no
greater than is required for the protection of the employer; (2)
does not impose undue hardship on the employee; and (3) is not
injurious to the public.
A threshold analysis leads this
Court to find that the covenant not to compete in the August 4,
2006 SPA is unreasonable on its face with respect to duration.
“An employee covenant is unreasonable on its face if its time
or area limitations are excessively broad, or where the covenant
appears designed to intimidate employees rather than to protect the
employer’s business[.]” Reddy, 298 S.E.2d at syl. pt. 2. The tenyear time limitation imposed by the covenant in this case is overly
broad and not tailored to protect Robinson’s business.8
West Virginia case law, this Court notes that Cook’s covenant not
to compete is significantly longer than those discussed in other
See Wood v. Acordia of West Virginia, Inc., 618 S.E.2d 415
(W. Va. 2005) (discussing a two-year covenant); Huntington Eye
(discussing a two-year covenant); Voorhees v. Guyan Mach. Co., 446
Appalachian Laboratories, Inc. v. Bostic, 359 S.E.2d 614 (W. Va.
1987) (discussing a five-year covenant); Torbett v. Wheeling Dollar
Sav. & Trust Co., 314 S.E.2d 166 (W. Va. 1983) (discussing a twoyear covenant); PEMCO Corp. v. Rose, 257 S.E.2d 885 (W. Va. 1979)
(discussing a two-year covenant).
But see Weaver v. Ritchie, 478
S.E.2d 363 (W. Va. 1996) (discussing a fifteen-year covenant not to
compete ancillary to the sale of a business).
This history is
significant in that it highlights the fact that the covenant not to
compete in this case is much more restrictive than others held
enforceable by the Supreme Court of Appeals of West Virginia.
In addition to comparing the length of Cook’s covenant not to
compete to other West Virginia covenants, this Court also considers
the fact that this covenant exists in the context of the automotive
In their pleadings, the parties focus on the ten-year time
limitation of the covenant not to compete rather than the fifty
mile geographic limitation. This Court also focuses its analysis
on the ten-year time limitation.
The plaintiff argues that there is considerable
sharing of information in this industry through participation in
defendants’ financial consultant, David Wadsworth, conceded that he
provides consulting services to other dealerships in the Wheeling
area that do not sell General Motors vehicles.
stated that in his opinion, only dealerships who sell General
Motors vehicles are direct competitors of Robinson COC.
Dep. 48:7-25, Aug. 4, 2011.
Because so much information regarding
the operation of a dealership is public knowledge, it cannot be
considered a trade secret worthy of the protection of a ten-year
covenant not to compete.
See Wharton Dep. 20:1-24; 21:1-7, July
28, 2011 (stating that when managers leave and take information out
into the market, there is no longer any need to protect that
information); Welty Dep. 10:1-9, Sept. 1, 2011 (stating that he has
no issue with Cook working at Straub).
Simply stated, there is no
competitors through other sources.
This Court finds that the Weaver case, in which the Supreme
Court of Appeals of West Virginia held that a fifteen-year covenant
was reasonable, is easily distinguishable from this case.
the covenant in Weaver was ancillary to the sale of a business -an
reasonableness of the covenant by considering: (1) the length of
time the purchaser required to recoup his investment; (2) the
period of time upon which the bank relied when providing financing
to complete the purchase; and (3) the percentage of business
Weaver, 478 S.E.2d at 370-71.
The Weaver court found that the
covenant’s duration of fifteen years was necessary to protect the
legitimate interests of the purchaser.
Because Weaver dealt with
the sale of a business, testing the reasonableness of the covenant
in Weaver involved considerations that are not at play in this
This Court finds that this case is more akin to Helms Boys,
Inc. v. Brady, in which the Supreme Court of Appeals of West
Virginia refused to enforce a five-year covenant not to compete.
Helms Boys, Inc. v. Brady, 297 S.E.2d 840, 843 (W. Va. 1982).
Cook, the employee in Helms Boys, Larry Brady, was a salesman.
Brady resigned from his job selling furniture and appliances when
he purchased a donut shop.
When Brady later began working for
another retail furniture store, his former employer, Helms Boys,
Inc., instituted an action to enforce the restrictive covenant.
Ultimately, the court held that the restrictive covenant contained
in the employment contract between Brady and Helms Boys was not
enforceable because Helms Boys did not demonstrate a protectable
interest in the nature of a trade secret or customer list.
Specifically, the court found that Brady had not acquired “any
information which might be characterized as confidential or unique
Cook may have acquired some general skills and
information while working for Robinson, but such skills cannot be
used to justify a covenant not to compete, particularly a ten-year
covenant that precludes Cook from working in any capacity in the
automotive sales industry within a fifty-mile radius of Wheeling,
interest requiring protection. See Reddy, 298 S.E.2d at 920 (“[T]o
the extent that the issue of reasonableness is not apparent from
the four corners of the contract alone, the burden of demonstrating
demonstrate a protectable interest by showing
that his industry operates in such a way that he could be
harmed by employees appropriating trade assets, and by
particularizing for the court the trade assets
susceptible of appropriation by the employee.
employer must show that the employee has acquired a trade
asset for which he has not paid, and the employer must
further show how the appropriation of this asset by the
employee can injure his business. The situations most
likely to give rise to such an injury are those where the
employer stands to lose his investment in employee
training, have his trade secrets or customer lists
converted by the employee, or have his market share
threatened by the employee’s risk-free entry into the
Id. at 916.
Significantly, the defendants in this case have
produced no documents to reflect any sensitive or confidential
information which was at any time provided to the plaintiff.
United States Magistrate Judge James E. Seibert highlighted this
dearth of evidence in his order granting in part and denying in
part the plaintiff’s motion to compel when he stated that because
the defendants cannot produce customer lists, marketing materials,
or promotional activities to the plaintiff for discovery purposes,
the defendants waived any claim that the plaintiff has valuable
knowledge regarding customer lists or marketing strategies that
could harm the defendants.
This Court reiterated the magistrate
judge’s finding as to the waiver of certain arguments of the
defendants in its memorandum opinion and order affirming as framed
the order of the magistrate judge.
Certainly, the defendants
cannot claim to have a protectable interest in customer lists or
strategies that are outdated, useless, or no longer exist.
Welty Dep. 46:9-17 (stating that Welty does not know whether Cook
holds any proprietary information that should be protected by
In support of their contention that the covenant was required
to protect their legitimate business interests, the defendants
claim that during his employment, Cook was privy to “various
forecasting and operating reports, financial statements, personnel
costs, advertising budgets, rent information and leasing lists,
inventory information, capitalization information, compensation
structure, salary information and pricing structures.” Defs.’ Mem.
in Supp. of Mot. for Summ. J. 9.
Further, the defendants argue
learned about structure of the retail business, their
volume of sales, how much Defendants plan to gross per
car and confidential salary information.
familiar with Defendants’ overall business model, how
they approach a customer and structure a purchase and how
they measure performance against the model, which has not
changed over the years.
The defendants assert that Cook was no mere manager, but was
a highly-compensated employee who was trained to run the day-to-day
information he obtained while performing his job would be very
damaging to them in the hands of a competitor such as Straub.
defendants, however, fail to meet their burden of establishing that
their concerns regarding Cook’s knowledge of their business rise to
the level of protectable interests.9
As stated above, any contention that the plaintiff possesses
important customer information or marketing strategies has been
waived by the defendants. Further, the argument that a protectable
The defendants also argue that Cook possesses knowledge of
their “play book,” meaning their business model and strategies.
According to the defendants, their “play book” warrants protection
via a non-compete. However, as the plaintiff notes, the defendants
fail to provide a meaningful definition of the “play book.” The
plaintiff also notes that other managers who were privy to the same
information as Cook were not subject to a covenant not to compete.
Pl.’s Reply to Defs.’ Mot. for Summ. J. 3-4.
undermined by the fact that in his role as the general sales
manager, Cook did not have significant interaction with customers.
As the plaintiff points out, when purchasing a vehicle, customers
typically work with a sales employee and the finance manager.
Pl.’s Mem. in Resp. to Mot. for Summ. J. 14-15.
emphasizes that no other employee of the defendants who interfaces
with customers has ever been the subject of a covenant not to
Id. at 15.
Although the defendants claim that the
covenant is needed to protect their relationships with their
customers, this Court finds that the defendants have failed to show
how, if at all, Cook would negatively impact Bob Robinson COC if he
were to join Straub.
Any future loss of sales of cars and revenues
would not necessarily be attributable to Cook’s employment with
Straub. See Robinson Dep. 114:12-115:14, Aug. 4, 2011 (stating that
Robinson cannot quantify how sales and revenues would be impacted
if Cook were to work at Straub).
According to the defendants, Cook “became the ‘face’ of [the
business] by virtue of his daily appearance in local television
commercials over the span of his 8 years of employment.”
Mem. in Supp. of Mot. Summ. J. 11.
This Court’s finds no merit in
the defendants’ argument that Cook’s participation in television
ads supports the imposition of a ten-year covenant not to compete.
The brand promoted by these advertisements was Bob Robinson or Bob
Thus, the only name associated with the dealership
is Bob Robinson’s. Although potential customers may recognize Cook
as someone who appeared in an advertisement for Bob Robinson COC,
this association is not confidential or proprietary information
worthy of protection of a ten-year covenant.
Undue Hardship and Injury to Public
unreasonable on its face, consideration of the final two Reddy
factors also supports this conclusion.
The defendants argue that
the covenant does not impose an undue hardship upon Cook and that
the covenant is not injurious to the public. This Court disagrees.
[R]estrictive covenants in employment contracts tend to
injure the parties making them; diminish their means of
procuring livelihoods and a competency for their
families; tempt improvident persons, for the sake of
present gain, to deprive themselves of the power to make
future acquisitions, and expose them to imposition and
oppression; tend to deprive the public of the services of
men in the employments and capacities in which they may
be most useful to the community as well as to themselves.
Weaver, 478 S.E.2d at 368 (quoting Barry v. Stanco Communications
Prod., Inc., 252 S.E.2d 491 (Ga. 1979)) (internal quotations
In this case, the covenant not to compete has prevented
Cook from obtaining the general manager job at Straub, which has
caused him financial difficulties.
Further, the covenant’s post-
employment restraints injure the public by depriving society of the
economic services offered by the labor of one of its members.
id. at 367.
For all of the above-described reasons, this Court
concludes that the covenant not to compete is unreasonable and
cannot be enforced.
Accordingly, the plaintiff’s motion for
summary judgment must be granted.
In addition to the question of enforceability of the covenant,
the parties raise the issue of whether consideration was provided
for the covenant not to compete.
This Court first notes that in
its memorandum opinion and order denying the plaintiff’s motion for
a preliminary injunction, it stated “that there appears to be
additional consideration for the covenant not to compete.”
Op. and Order Denying Mot. for Prelim. Inj. n.5.
The Court based
this finding on the July 24, 2006 letter from Robinson, which
stated that Cook would be paid an additional $20,000.00 for the
covenant not to compete.
Also, the Court considered the fact that
the $20,000.00 check paid to Cook is labeled as payment for the
covenant not to compete.
However, the parties have not presented
any evidence as to the exact amount that Cook received for his
shares of stock in RAG, nor have they produced evidence that would
enable this Court to determine whether the $20,000.00 was an
additional sum paid as consideration for the covenant not to
compete, or if it was simply part of the negotiated stock price.
additional evidence that would support a finding that the covenant
fails for lack of consideration, this Court holds that based upon
the record, there is consideration for the covenant not to compete.
See Defs.’ Mot. for Summ. J. Ex. L; Ex. M; Ex. N; Cook Dep. 91:1122, Sept. 2, 2011. Other than his own testimony, the plaintiff has
not provided any proof that he was otherwise owed the $20,000.00
that he received. Moreover, the plaintiff voluntarily accepted and
cashed the $20,000.00 check, just as he voluntarily entered into
the August 4, 2006 SPA.
Modification of the Covenant
In their motion for summary judgment, the defendants also
argue that Robinson did not orally waive or modify the covenant.
The defendants’ memorandum refers to the conversation between Cook
and Robinson on December 7, 2010, during which Cook claims Robinson
agreed to waive the covenant so that Cook could work at Straub.
Although Cook claims that a waiver occurred, Robinson denies that
“The burden of proving an oral modification of a written
contract is on the party seeking to establish such modification,
and such party must demonstrate by clear and positive evidence that
the minds of the parties definitely met on the alteration.”
Bischoff v. Francesca, 56 S.E.2d 865, 866 Syl. pt. 4 (W. Va. 1949).
In this case, the plaintiff has failed to prove that a meeting of
the minds regarding the modification of the covenant occurred.
Regarding the question of whether the covenant was modified or
waived during the telephone conversation on December 7, 2010, it is
Cook’s word against Robinson’s.
There is no other evidence in the
record that can positively prove that the covenant was either
modified or waived. Further, the August 4, 2006 SPA signed by Cook
provides: “No change, modification, amendment or addition will be
valid unless it is in writing and signed by the party against whom
enforcement of any change, modification, amendment or addition is
assigned.” Defs.’ Mot. for Summ. J. Ex. M. Therefore, despite the
modification or waiver took place, the August 4, 2006 SPA and the
covenant could not have been modified without a written, signed
defendants’ motion for summary judgment must be granted as to the
claim of oral modification or waiver of the covenant.
Detrimental Reliance and Estoppel10
According to the defendants, the plaintiff’s detrimental
reliance and estoppel claims must fail because they are premised
upon Robinson’s alleged oral waiver of the covenant, and no such
oral waiver occurred.
In response, the plaintiff contends that if
accepted, the defendants are estopped from enforcing the covenant
because Robinson’s oral waiver of the covenant caused him to quit
is job at Smail.
Again, there is no evidence in the record
definitively proving that the covenant was modified or waived
during the telephone conversation of December 6, 2010.
because this Court finds that the covenant not to compete is
unenforceable, the detrimental reliance/estoppel claim is now moot.
In his complaint, the plaintiff argues that the doctrines of
asserting the enforcement of the covenant not to compete.
Because the covenant not to compete does not pass judicial
In their motion for summary judgment, the defendants also
argue that the plaintiff’s detrimental reliance/estoppel claim must
fail because Cook previously admitted under oath at his
unemployment compensation hearing that he quit his job with Smail
on December 7, 2010, after he knew the covenant would be enforced
and that he would not be released to work at Straub. In response,
the plaintiff argues that the date he provided at the unemployment
hearing was incorrect and that he actually resigned from his
position at Smail on December 6, 2010. Because this Court holds
that the covenant not to compete is unenforceable, there is no need
to further analyze this discrepancy in the date of Cook’s
resignation from Smail.
scrutiny, these doctrines are not needed to bar the defendants from
asserting the enforcement of the covenant.
In arguing that summary judgment is warranted as to the
plaintiff’s tortious interference claim, the defendants assume that
the covenant not to compete is enforceable.
They acknowledge that
a tortious interference claim can only succeed if the covenant not
to compete is found to be unenforceable.
Because this Court finds
the covenant not to compete to be unenforceable, the plaintiff’s
tortious interference claim must be permitted to proceed.
plaintiff must show to establish prima facie proof of tortious
The court in Voorhees also explained that when a
former employer intentionally contacts the prospective employer and
threatens to involve the new employer in a lawsuit if the terms of
the purportedly enforceable covenant not to compete are violated,
and that threat caused the former employee to lose his new job,
malice is inferred from this action and punitive damages are to be
properly considered by the jury.
Id. at 678.
defendants’ motion for summary judgment must be denied as to the
claim of tortious interference and the claim for punitive damages.
For the reasons stated above, the plaintiff’s motion for
summary judgment is GRANTED.
The defendants’ motion for summary
judgment is GRANTED IN PART and DENIED IN PART.
defendants’ motion for summary judgment is GRANTED as to the claim
of oral modification or waiver of the covenant.
motion for summary judgment is DENIED as to the claim of tortious
interference with a contract and the claim for punitive damages.
Because this Court finds the covenant not to compete unenforceable,
the plaintiff’s tortious interference claim, the claim for damages
on the declaratory judgment action, and the claim for punitive
damages survive summary judgment.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
October 4, 2011
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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