Panhandle Cleaning & Restoration, Inc. v. Vannest et al

Filing 55

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS MOTION 35 FOR PARTIAL SUMMARY JUDGMENT AS TO DEFENDANT GOLEC, DENYING DEFENDANT GOLECS MOTION 33 FOR SUMMARY JUDGMENT, AND DISMISSING DEFENDANTS VANNEST AND WYCKOFF. Defendants Charles W. Wyckoff and Ronald W. Vannest DISMISSED WITH PREJUDICE. Signed by Senior Judge Frederick P. Stamp, Jr on 10/5/12. (cc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
PANHANDLE CLEANING & RESTORATION, INC.,
Plaintiff,
v.

Civil Action No. 5:11CV178
(STAMP)

RONALD W. VANNEST, CHARLES W. WYCKOFF,
and SHAHN GOLEC,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT AS TO DEFENDANT GOLEC,
DENYING DEFENDANT GOLEC’S MOTION FOR SUMMARY JUDGMENT,1
AND DISMISSING DEFENDANTS VANNEST AND WYCKOFF
I.

Background

The above-styled civil action is before this Court as a result
of a notice of removal filed by the defendants, in which they
assert federal jurisdiction pursuant to 28 U.S.C. § 1332(a).

The

plaintiff, Panhandle Cleaning & Restoration (“Panhandle”) commenced
this civil action in the Circuit Court of Ohio County, West
Virginia, alleging that the defendant, Shahn Golec (“Golec”), was
in breach of the non-competition and non-solicitation covenant

1

This Court originally gave its tentative rulings regarding
all defendants by letter in this civil action on September 18,
2012.
Since that time, however, the plaintiff has settled its
claims against defendants, Ronald W. Vannest and Charles W.
Wyckoff. The civil action against these defendants is dismissed by
this order, and the opinion reflects only the complaint against
defendant Golec.

contained within the employment agreement he allegedly signed. The
employment agreement specifically states the following:
Employee hereby agrees that for a period of two (2) years
from and after the date on which the Employee ceases to
be employed with the Employer for whatever reason,
Employee will not, within a radius of fifty (50) miles of
the Employer’s then current business address, directly or
indirectly: (i) be employed by, or work as a consultant
or other independent contractor, for another Employer
which is in competition with the Employer; (ii) directly
or indirectly, own, manage, finance, or control any
person, firm or corporation engaged in a similar line of
business and in competition with the Employer; (iii)
solicit the Employer’s customers and clients, or (iv)
directly or indirectly solicit any of the Employer’s
employees to leave employment with the Employer. The
Employee expressly acknowledges that this covenant is
reasonable and will not prevent or impose an undue
hardship or otherwise prevent the Employee from earning
a livelihood during the time it is in effect.
ECF No. 1 Ex. 4 *4.

Additionally, the agreement contains a

reimbursement provision for training and certifications, and a
provision

regarding

the

plaintiff’s

entitlement

to

seek

an

injunction and costs associated with enforcing the agreement,
including attorney’s fees.

Id.

The plaintiff claims that defendant Golec is engaging in the
same line of business as the plaintiff by operating a business that
provides construction, restoration, and remodeling of residential
and commercial structures. Panhandle alleges that this business is
operated within fifty miles of Panhandle’s address and within the
two-year
solicited

period.
Panhandle

Panhandle
employees

also
to

claims
leave

their

Panhandle and begin work for the defendant.
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that

the

defendant

employment

with

As a result of these

actions, Panhandle claims the defendant breached his employment
contract, specifically the non-competition and non-solicitation
covenant. Panhandle seeks injunctive relief, compensatory damages,
and reasonable attorney’s fees.
The parties both filed motions for summary judgment in this
action.

The plaintiff’s motion was only a motion for partial

summary judgment.
non-competition

In this motion, the plaintiff argues that the

and

non-solicitation

covenants

are

valid

and

enforceable because they are limited in scope and geography.
Plaintiff did not argue that this Court should find the defendant
violated these covenants, but instead stated that this question
should be left for the jury to determine at trial. Defendant Golec
responded to plaintiff’s motion by alleging that he did not sign
the employment agreement, and thus, the covenants cannot apply to
him.

Nevertheless, the defendant also claims that the covenants

are generally not enforceable because Panhandle has no specific
business interests it is seeking to protect and the covenant is too
broad in both scope and geography.

In plaintiff’s reply, it

contests the defendant’s allegation that he did not sign the
employment agreement and the plaintiff also reiterates its argument
regarding the reasonableness and enforceability of the covenants.
Defendant Golec argues in his motion for summary judgment that
the defendant did not breach the employment agreement and there is
no evidence to the contrary.

Alternatively, even if defendant

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Golec did breach his employment agreement, the plaintiff provided
no evidence of monetary losses as a result of such breach.

The

plaintiff responded to these arguments by stating that it has
disclosed multiple individuals with first-hand knowledge of the
defendant’s

actions

constituting

a

breach

of

the

employment

agreements.

Also, the plaintiff argues that regardless of whether

it has produced evidence of compensatory damages, this fact alone
does not entitle defendant Golec to summary judgment.

Defendant

Golec replies, arguing that the pieces of evidence Panhandle refers
to as establishing a breach of the covenants are merely unsworn
statements from possible witnesses and such unsworn statements
cannot be properly considered on summary judgment.

In addition,

Golec again argues that the plaintiff failed to produce evidence of
compensatory damages and that the plaintiff has failed to identify
case law to support the argument that the defendant is not entitled
to summary judgment as a result.
For the reasons stated below, this Court finds that the
plaintiff’s motion for partial summary judgment is granted in part
and denied in part and defendant Golec’s motion for summary
judgment is denied.
II.

Applicable Law

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,
4

documents, electronically stored information,
affidavits or declarations, 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
material fact.
(1986).

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.

“The inquiry

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
either party.”

Id. at 250; see also Charbonnages de France v.

Smith, 597 F.2d 406, 414 (4th Cir. 1979)(stating that summary

5

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
showing

sufficient

to

establish

the

existence

of

an

element

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.

Summary

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).
III.
A.

Discussion

Enforceability of the Restrictive Covenants
According to West Virginia law, after a contract that contains

covenants not to compete is deemed valid, the first step in this
Court’s analysis of the enforceability of those covenants requires
the application of the rule of reason.

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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 911.

Application of the

rule of reason involves three inquiries that require this Court to
look to the interests of the employer, the interests of the
employee, and the interests of society at large.

Id. at 911.

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.

Id. (citations omitted).

This Court must determine whether the covenant is reasonable
on its face “if judicial scrutiny of it is to continue.”
915.

Id. at

If this Court determines it is unreasonable on its face, the

covenant is deemed “void and unenforceable.”

Id.

As the court in

Reddy stated:
A covenant is unreasonable on its face when the
restriction is excessively broad with respect to time or
area, or if in the circumstances the true purpose of the
covenant appears to be merely to repress the employee,
and prevent him from leaving, rather than to protect the
employer’s business. Good faith, on the other hand, is
evidence of reasonableness.
Id. at 915-916.
If this Court determines that the covenant is reasonable on
its face, this Court must then determine whether the employer has
shown it has interests that require protection.

Gant v. Hygeia

Facilities Found, 384 S.E.2d 842, 845 (W. Va. 1989).

7

To determine

whether an employer has interests that need protection, a court
must examine “the extent to which the employee may unjustly enrich
himself by appropriating an asset of the employer for which the
employee has not paid and using it against that very employer.”
Reddy, 298 S.E.2d at 916.

Examples of situations where this may

occur “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 employer’s market.”

Id.

Protectable interests do not include a former employee’s acquired
skills and information that “are of a general managerial nature,
such as supervisory, merchandising, purchasing and advertising
skills and information.”

Syl., Helms Boys, Inc. v. Brady, 297

S.E.2d 840 (W. Va. 1982).

When a customer list “is readily

available to employees or ascertainable by independent sources,” it
is also not considered a protectable interest.

Appalachian Labs.,

Inc. v. Bostic, 359 S.E.2d 614, 616 (W. Va. 1987).
does

have

interests

that

require

protection,

If the employer
the

restrictive

covenant is presumptively enforceable in its entirety. Syl. pt. 3,
Reddy.
Provided that this Court determines that the covenant is
presumptively enforceable in its entirety, the Court then must
determine whether the employee demonstrated the covenant should not
be enforced in its entirety.

Syl. pt. 5, Reddy.

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To accomplish

this, the Court must decide whether based on the employer’s
interest requiring protection, the employee has shown:
(1) that he has no “trade assets” of the employer to
convert; (2) that such “trade assets” as he has belong to
him and not to the employer; (3) that the employer could
be equally well protected by a narrowed covenant; or (4)
that the employer has had time to recoup any
extraordinary investment in the employee.
Syl. pt. 4, Reddy.
Following the procedure outlined above, this Court finds that
the restrictive covenants are at least valid and enforceable as to
time (two years) and geography (fifty miles). This Court, however,
finds that further inquiry into the facts is needed to determine
whether the covenants are completely valid and enforceable in this
instance.

The covenant places a two-year, fifty mile restriction

on the employees after leaving the plaintiff’s employment.

This

restriction is not excessively broad. Courts in West Virginia have
found covenants containing similar time and geographic limits to be
reasonable.

Huntington Eye Associates, Inc. v. LoCascio, 553

S.E.2d 773 (W. Va. 2001) (discussing a two-year, fifty mile limit);
Reddy, 298 S.E.2d 906 (discussing a two-year, thirty mile limit);
Wyckoff v. Painter, 115 S.E.2d 80 (1960) (discussing a one-year,
statewide limit).
The

defendant

argues

that

he

never

signed

a

document

purporting to be an employment agreement and the signature found on
the employment agreement presented by the plaintiff was not placed
there by him. In the alternative, this defendant contends that the
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covenant is too broad in scope and thus unreasonable because it
would prevent the employee from working in any capacity in the
construction industry.
covenants

only

competition

prevent

with

The plaintiff contends, however, that the
the

Panhandle,

defendant

from

soliciting

working

its

in

direct

customers,

and

soliciting its employees to leave Panhandle, and even then the
employees are only restricted to working within a fifty mile
radius.

The plaintiff claims as a result other jobs in the

construction business are still open to defendant, for instance
jobs with construction suppliers, or merely working outside the
restricted radius in any capacity.
This Court asserts that genuine issues of material fact exist
as to whether the defendant did sign the employment agreement.
Furthermore, inquiry into what exactly Panhandle’s business is and
thus, what type of work constitutes being in direct competition
with Panhandle is necessary in this matter to determine whether the
restrictive covenants are in fact reasonable.

Based on this

finding, further application of the procedure to determine the
validity and enforceabilty of the covenants cannot proceed and must
be determined at trial.
B.

Evidence Necessary to Establish a Breach of the Covenants and
Injury to the Plaintiff
To state a breach of contract claim under West Virginia law,

a plaintiff must show: (1) existence of a valid enforceable

10

contract; (2) plaintiff performed under the contract; (3) defendant
breached or violated a duty under the contract; and (4) the
plaintiff was injured by this breach.

Wince v. Easterbrooke

Cellular Corp., 681 F. Supp. 2d 688, 693 (N.D. W. Va. 2010).

As

stated above, the party seeking summary judgment bears the initial
burden of showing the absence of any genuine issues of material
fact.

See Celotex Corp., 477 U.S. at 322-23.

The nonmoving party

then has the burden “to come forward with facts sufficient to
create a triable issue of fact.”

Temkin, 945 F.2d at 718-19

(citing Anderson, 477 U.S. at 247-48).

The defendant asserts that

Panhandle is unable to establish two of the breach of contract
elements: (1) breach of the contract; and (2) injury in the form of
damages.

Panhandle, however, has produced “facts sufficient to

create a triable issue of fact” for these elements.
1.

Id.

Breach

First, regarding the issue of breach, the plaintiff provided
the defendant with the names of Panhandle employees that it claims
have

knowledge

employees.

of

the

defendant’s

ECF No. 38 Ex. 1 *2.

solicitation

of

Panhandle

The solicitation of Panhandle

employees to leave their employment with Panhandle violates the
restrictive

covenants

contained

in

the

employment

agreement.

Defendant argues that this Court cannot properly consider these
statements on summary judgment because they are unsworn hearsay.
Rohrbough v. Wyeth Laboratories, Inc., 916 F.2d 970, 973 n.8 (4th

11

Cir.

1990).

These

statements

defendant

Golec

made

during

conversations with possible witnesses, however, are not hearsay.
Instead, the plaintiff may call the possible witnesses to testify
regarding

these

party-opponent

statements

Federal Rule of Evidence 801(d)(2).

in

accordance

with

Thus, this Court may properly

consider these statements on summary judgment.
2.

Injury

Next, the defendant claims that the plaintiff did not produce
any evidence of damages or monetary losses as a result of any
breach and thus, the plaintiff cannot state a claim for breach of
contract.

Defendant’s assertion is incorrect.

Regardless of

whether the plaintiff produced evidence of monetary losses or
damages, the plaintiff may still be entitled to nominal damages if
proven.

“Nominal damages arise where there is breach of a duty

owed the plaintiff or an infraction of his right, though the amount
of actual damages is not shown.” Harper v. Consolidated Bus Lines,
185 S.E. 225, 230 (W. Va. 1936) (citation omitted).

A plaintiff

may recover nominal damages in a contract action “[w]here an
actionable wrong by the defendant is shown.”

Harper, 185 S.E. at

231 (citing Watts v. Norfolk & W. R. Co., 19 S.E. 521 (W. Va.
1894)).

In such an instance, the “damages are inferred from the

fact of a wrong done.”

Id. (citation omitted).

Therefore, if the

plaintiff

the

fact

shows

that

defendant

did

in

breach

his

employment agreement, Panhandle will be entitled to at least

12

nominal damages because damages and thus injury will be inferred.
Even so, the plaintiff has incurred attorney’s fees and costs in
its attempt at enforcing the employment agreement.

The employment

agreement contains reimbursement provisions regarding such fees and
costs.

Due to this provision, the plaintiff may be entitled to

some monetary damages in the form of nominal damages and attorney’s
fees and costs if it prevails on its breach of contract claim.
Therefore, whether the plaintiff is entitled to nominal damages or
also whether it is entitled to attorney’s fees and costs, the
plaintiff has set forth facts establishing the possibility of
recovery of such damages.
IV.

Conclusion

For the reasons stated above, the plaintiff’s partial motion
for summary judgment is GRANTED IN PART and DENIED IN PART, the
defendant Shahn Golec’s motion for summary judgment is DENIED, and
defendants Ronald W. Vannest and Charles W. Wyckoff are DISMISSED
WITH PREJUDICE.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

October 5, 2012

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

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