AUDIOLOGY DISTRIBUTION, LLC v. HAWKINS

Filing 43

MEMORANDUM OPINION AND ORDER CONFIRMING THE PRONOUNCED ORDER OF THE COURT DENYING WITHOUT PREJUDICE 4 PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION. Plaintiff's Motion is DENIED WITHOUT PREJUDICE. Signed by Senior Judge Frederick P. Stamp, Jr. on 12/16/2013. (copy to counsel of record via CM/ECF) (nmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
AUDIOLOGY DISTRIBUTION, LLC
d/b/a HEARUSA,
Plaintiff,
v.

Civil Action No. 5:13CV154
(STAMP)

JILL K. HAWKINS, individually
and d/b/a HAWKINS HEARING, LLC,
Defendant.
MEMORANDUM OPINION AND ORDER
CONFIRMING THE PRONOUNCED ORDER OF THE COURT
DENYING WITHOUT PREJUDICE PLAINTIFF’S
MOTION FOR A PRELIMINARY INJUNCTION
I.

Procedural History

On November 6, 2013, the plaintiff in the above-styled civil
action filed a complaint against the defendant alleging claims for
breach of contract, breach of the duty of loyalty, and tortious
interference with prospective contractual relations resulting from
the defendant’s alleged violation of a covenant not to compete
(“the covenant”).

Thereafter, the plaintiff filed a motion for a

temporary restraining order and preliminary injunction and a motion
to

expedite

discovery,

to

which

the

opposition and the plaintiff replied.

defendant

responded

in

This Court then held a

hearing on the motion for temporary restraining order on November
12, 2013.

At the hearing, this Court granted the plaintiff’s

motion for temporary restraining order, finding at that time that
the plaintiff had satisfied the requirements for such order.

This

Court

entered

confirming

the

injunction.

an

order

date

confirming

for

the

the

hearing

pronounced

regarding

a

order

and

preliminary

On December 10, 2013, this Court held the hearing on

the preliminary injunction.

At this hearing, the Court denied the

plaintiff’s motion for a preliminary injunction without prejudice
to refiling upon the completion of further discovery as to the
irreparable harm requirement.

This order confirms the pronounced

order of the Court in more detail for the reasons set forth below.
II.

Facts1

Defendant, Jill K. Hawkins, is a licensed audiologist in West
Virginia.

She has her masters and doctorate degrees in audiology.

After the company she worked for from 2000 to 2004 closed, she and
a colleague opened TriState Audiology in Weirton, West Virginia.
Initially,
Audiology.

the

defendant

was

a

49%

shareholder

of

TriState

In October 2007, the defendant no longer owned any

portion of TriState Audiology but stayed with the company as an
employee and sole audiologist.2

At some point in late 2011 or

early 2012, the defendant learned that TriState Audiology may be
sold.

In Spring 2012, the defendant met with Richard Whitman

1

For purposes of deciding this motion for a preliminary
injunction, this Court, for the most part, adopts the facts as set
forth in the plaintiff’s complaint and as developed by testimony at
the hearing on the motion for a preliminary injunction.
2

The defendant indicated during her testimony that TriState
Audiology also employed “a couple doctoral residents two years in
a row” but that she was the main audiologist.
2

(“Whitman”), HearUSA’s Vice President of Business Development,
where she learned that HearUSA was considering purchasing TriState
Audiology.

HearUSA did acquire TriState Audiology on or about

September 27, 2012.
Prior to the acquisition, the defendant met with Whitman at
HearUSA’s

corporate

offices

in

Florida

to

discuss

potential

employment with HearUSA upon its purchase of TriState Audiology.
At this meeting, the defendant and Whitman discussed the terms of
her potential employment, which included a discussion of the
covenant not to compete.

Whitman explained to the defendant that

signing the covenant not to compete was a requirement of employment
with HearUSA.

The covenant states in pertinent part:

For and in consideration of employment with the Company
Employee hereby covenants and agrees that for a period of
twelve months following the termination of employment for
Audiology Distribution,[3] Employee shall not, directly
or indirectly, compete with Audiology Distribution within
a 10 mile radius wherein Employee performed services
under its employment with the Company for or on behalf of
Audiology Distribution, and that this non-compete
covenant specifically includes, but is not limited to,
contacting the customers, clients and prospective
customers and clients of Audiology Distribution.
Employee
acknowledges
that
the
restrictions
and
obligations set forth and imposed herein will not prevent
Employee from obtaining gainful employment in Employee’s
field of expertise or cause Employee undue hardship, and
that the restrictions imposed herein are reasonable and
necessary to protect the legitimate business interests of
Audiology Distribution. Employee further acknowledges
that it is impossible to measure the monetary damages to
Audiology Distribution by reason of breach of any of the

3

This Court notes that Audiology
business under the name HearUSA.
3

Distribution,

LLC

does

provisions contained herein, and that in the event of a
breach by Employee, Audiology Distribution shall be
entitled to equitable relief, including the right to
enjoin any party in violation of this agreement.
Employee further understands and agrees that if a court
shall hold any part of this covenant not to compete as
unenforceable due to its general scope, duration or
geographic restriction, then in such event Employee
agrees that the scope, duration or geographic restriction
shall be amended to the greatest scope, longest period of
time and the largest geographical area enforceable under
the applicable law of the state.
ECF No. 38 Ex. 3.

The defendant’s employment with HearUSA started

on Friday, September 28, 2012. She signed her employment offer and
the covenant the following Monday, October 1, 2012. Her employment
offer contained her salary, a bonus provision, and a commission
provision for the products she sold to her patients.
In Summer 2013, the defendant started to look into opening her
own audiology business. On August 15, 2013, the defendant obtained
a certificate of limited liability company for “Hawkins Hearing.”
On September 6, 2013, on behalf of Hawkins Hearing, the defendant
obtained

a

business

loan.

Then

on

September

10,

2013,

the

defendant, again on behalf of Hawkins Hearing, obtained a business
property lease for a property that was less than three miles from
HearUSA’s Weirton, West Virginia location. A little over two weeks
later, on September 27, 2013, the defendant faxed her resignation
letter to her direct supervisor at HearUSA, and her last day of
employment with HearUSA was October 11, 2013.

Prior to leaving

HearUSA, the defendant told some of her patients that she was
planning to leave and possibly open her own business.
4

After

leaving, the defendant asserts that she received approximately 25
phone calls at her home from patients asking where she was, to
which

she

responded

she

was

opening

her

own

business.

The

defendant started seeing patients at her new location on November
7, 2013. From November 7, 2013 through November 19, 2013, when the
temporary restraining order became effective, the defendant had 25
appointments scheduled with 21 different patients. Twenty of these
patients were prior patients of HearUSA.
III.

Applicable Law

The United States Court of Appeals for the Fourth Circuit has
recognized that “preliminary injunctions are extraordinary remedies
involving the exercise of a very far-reaching power to be granted
only sparingly and in limited circumstances.”

MicroStrategy Inc.

v. Motorola, Inc., 245 F.3d 335, 339 (4th Cir. 2001) (quoting Direx
Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 816 (4th
Cir. 1992)) (internal quotations omitted).
Until

2008,

the

Fourth

Circuit

followed

the

four-factor

Blackwelder test in determining whether a preliminary injunction
should be granted.

See Blackwelder Furniture Co. v. Seilig Mfg.

Co., Inc., 550 F.2d 189 (4th Cir. 1977).
the

likelihood

of

irreparable

harm

to

These factors were: “(1)
the

plaintiff

if

the

preliminary injunction is not granted; (2) the likelihood of harm
to the defendant if the preliminary injunction is granted; (3) the
likelihood that plaintiff will succeed on the merits; and (4) the

5

public interest.”

Id. at 193.

In light of the Supreme Court’s

ruling in Winter v. Natural Resources Defense Council, Inc., 55
U.S. 7 (2008), however, the Fourth Circuit has abandoned this
Blackwelder test in favor of the stricter approach in Winter.
In The Real Truth About Obama, Inc., the Fourth Circuit set
forth the equitable factors that a district court must consider
when

determining

whether

a

temporary

restraining

order

or

preliminary injunction should issue based on the Supreme Court’s
ruling in Winter.

The four factors that the plaintiff must

establish to obtain a preliminary injunction under this test are:
(1) that he is likely to succeed on the merits, (2) that
he is likely to suffer irreparable harm in the absence of
preliminary relief, (3) that the balance of equities tips
in his favor, and (4) that an injunction is in the public
interest.
Id. at 346 (citing Winter v. Natural Resources Defense Council,
Inc., 555 U.S. 7, 20 (2008)).

As to the first two factors, Winter

requires that the plaintiff clearly demonstrate that he will likely
succeed on the merits and that he will likely be irreparably harmed
absent preliminary relief. See The Real Truth About Obama, Inc. v.
Federal Election Commission, 575 F.3d 342, 346-47 (4th Cir. 2009)
(emphasis added).
The issuance of a preliminary injunction is committed to the
sound discretion of the district court.

Conservation Council of

North Carolina v. Costanzo, 505 F.2d 498, 502 (4th Cir. 1974).

If

a preliminary injunction is granted, the order granting the same

6

must “(A) state the reasons why it issued; (B) state its terms
specifically; and (C) describe in reasonable detail -- and not by
referring to the complaint or any other document -- the act or acts
restrained or required.”

See Fed. R. Civ. P. 65(d).
IV.

A.

Discussion

Likelihood of Success on the Merits
The defendant asserts that the covenant not to compete is

invalid and, even if it is valid, it is unenforceable because the
contract was entered into under duress and is a contract of
adhesion.

Thus, she asserts that the plaintiff is not likely to

succeed on the merits.

This Court, however, finds that the

plaintiff is likely to succeed on the merits based on the current
record, as the covenant not to compete seems at this time to be
enforceable and the contract, which the covenant is a part of,
seems to also be valid.
Before determining whether a covenant not to compete is
enforceable, it must first be determined whether the contract in
which

it

is

contained

is

valid.

Reddy

v.

Community

Foundation of Man, 298 S.E.2d 906, 915 (W. Va. 1982).

Health

“[I]f the

entire contract fails, for lack of consideration, fraud, duress,
adhesion or other contractual excuse, the covenant is also without
effect.”

Id.

The defendant contends that the contract lacks

consideration, is fraudulent, was made under duress, is a contract
of adhesion, and is unconscionable.

7

The defendant, however, at

this time, has not provided this Court with sufficient evidence to
support

such

findings.

Instead,

this

Court

finds

that

the

requirements of offer, acceptance, and consideration under West
Virginia law have been met.

As consideration for accepting the

offer of employment, the defendant was provided a $65,000.00
salary, a bonus, and a commission provision for the equipment that
she sold.

While, these provisions are considered similar to those

which were contained in her employment agreement with TriState
Audiology, such provisions are not exactly the same. Further, this
Court does not believe that the acceptance of an offer from HearUSA
can be said to be continued employment.

A covenant not to compete

contained in an offer of continued employment requires additional
consideration for the covenant besides that consideration offered
in the employment contract.

See Environmental Products Co. v.

Duncan, 285 S.E.2d 889, 890 (W. Va. 1981) (finding that under West
Virginia law, continued employment is not adequate consideration
for a new contract).

Here, the offer of employment was offered by

HearUSA, a different employer than TriState Audiology, and thus,
this Court does not find that it was an offer of continued
employment.
Furthermore, as stated above, this Court believes that, based
on the record at this time, the covenant is an enforceable convent
not to compete.

According to West Virginia law, after a contract

that contains covenants not to compete is deemed valid, the first

8

step in this Court’s analysis of the enforceability of those
covenants requires the 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 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

9

shown that it has interests that require protection.

Gant v.

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

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). If the employer does have interests that
require protection, the restrictive covenant is presumptively
enforceable in its entirety.

Syl. pt. 3, Reddy.

In applying this law to the circumstances at hand, this Court
first notes, that the covenant is reasonable on its face.

It is

extremely limited in time and geographical scope -- one year within
a ten mile radius.

Such a restriction does not seem to impose any

undue hardship on the defendant, and further there is no indication
it is injurious to the public. This covenant does not restrict the

10

defendant’s ability to pursue her profession to any great extent,
rather it seems to only try to protect the plaintiff’s local
business.

It cannot be said that a ten mile radius, and one year

time limit was placed on the defendant to only prevent her from
leaving.
As this Court finds that the covenant seems reasonable on its
face, the second issue is whether the plaintiff’s interests require
protection.

Based on the evidence presented at the hearing, it is

clear that the plaintiff’s market share may be threatened by the
employee’s entry into the defendant’s market.

The defendant

testified that within the short period between November 7, 2013 and
November 18, 2013, she saw 21 different patients at her business,
20

of

these

patients

being

prior

patients

with

HearUSA.

Accordingly, this Court finds that it is likely that the plaintiff
will

succeed

on

the

merits

of

its

breach

of

contract

claim

concerning the covenant not to compete, as such covenant is
presumptively enforceable.
B.

Irreparable Harm
As the Fourth Circuit has stated, “[g]enerally, irreparable

injury is suffered when monetary damages are difficult to ascertain
or are inadequate.”

Multi-Channel TV Cable Co. V. Charlottesville

Quality Cable Operating Co., 22 F.3d 546, 551 (4th Cir. 1994)
(internal quotations and citations omitted).

If, however, “the

record indicates that plaintiff’s loss is a matter of simple

11

mathematic calculation, a plaintiff fails to establish irreparable
injury for preliminary injunction purposes.”

Id. at 551-52.

The Fourth Circuit stated in the past that “when the failure
to grant preliminary relief creates the possibility of permanent
loss of customers to a competitor or the loss of goodwill, the
irreparable injury prong is satisfied.”

Id. (emphasis added).

Winter, however, “requires that the plaintiff make a clear showing
that it is likely to be irreparably harmed absent preliminary
relief.”
added).

Real Truth About Obama, Inc., 575 F.3d at 347 (emphasis
Thus, it is no longer adequate to show a mere possibility

of irreparable harm. In this instance, the plaintiff has not shown
more than a possibility.

The plaintiff failed to provide this

Court with sufficient evidence of the financial impact that the
defendant’s actions have caused as to its business, such as a
decrease in patient appointments or sales. While the plaintiff has
shown that the defendant has seen at least 20 patients at her new
location

which

were

prior

patients

of

HearUSA

and

received

approximately 25 calls from prior patients of HearUSA asking about
her whereabouts, this Court does not find that such evidence is
sufficient to provide a clear showing of irreparable harm.
Further, this Court is also not convinced that such harm is
not

subject

to

mathematical

calculation.

Specifically,

the

plaintiff has requested in its complaint compensatory damages
related to each of its claims, and further in its prayer for relief

12

states that it is requesting “compensatory damages, including
business costs and resulting lost revenue and profits, in an amount
to be determined by the evidence presented at trial.”
*11.

ECF No. 1

Accordingly, as it seems that the harm may be mathematically

calculated and a clear showing of irreparable harm has not been
made, this Court finds that it cannot at this time grant a
preliminary injunction.
C.

Balance of Equities
When weighing the parties’ respective injuries and balancing

the equities to determine whether a preliminary injunction should
issue, the court should consider: (1) the relative importance of
the rights asserted and the act sought to be enjoined; (2) the
preservation of the status quo; and (3) the balancing of damage and
convenience generally.

See Sinclair Refining Co. v. Midland Oil

Co., 55 F.2d 42, 45 (4th Cir. 1932).

In this instance, the Court

has found that the plaintiff “failed to show that [it] will suffer
irreparable harm in the absence of a preliminary injunction;
therefore, the balance of equities does not favor [the plaintiff].”
Z–Man Fishing Products, Inc. v. Renosky, 790 F. Supp. 2d 418, 434
(D.S.C. 2011).
D.

Public Interest
In Winter, “the Supreme Court emphasized the public interest

requirement, stating, ‘In exercising their sound discretion, courts
of equity should pay particular regard for the public consequences

13

in employing the extraordinary remedy of injunction.’”

Real Truth

About Obama, 575 F.3d at 347 (quoting Winter, 555 U.S. at 24).

As

this Court noted in its order granting the plaintiff’s request for
a temporary restraining order, the public certainly has an interest
in enforcing valid contracts and ensuring that defendant does not
profit from her own wrongdoing.

The public, however, also has an

interest in not imposing injunctive relief where there has not been
a

sufficient

showing

of

the

likelihood

of

irreparable

harm.

Accordingly, this Court must deny the request for a preliminary
injunction

at

this

time.

This

denial,

however,

is

without

prejudice so as to allow the plaintiff, if it decides to do so, to
renew

the

motion

upon

the

completion

of

further

discovery

concerning irreparable harm.
V.

Conclusion

For the reasons stated above, the plaintiff’s motion for a
preliminary injunction (ECF No. 4) is DENIED WITHOUT 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:

December 16, 2013

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

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