Costanzo v. EMS USA, Inc.
Filing
9
MEMORANDUM OPINION AND ORDER DENYING 4 PLAINTIFF'S MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS. Signed by Senior Judge Frederick P. Stamp, Jr. on 9/21/2017. (copy to counsel via CM/ECF) (nmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
ZACHARY COSTANZO,
Plaintiff,
v.
Civil Action No. 5:16CV168
(STAMP)
EMS USA, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFF’S MOTION FOR
PARTIAL JUDGMENT ON THE PLEADINGS
I.
Background
This civil action was removed to this Court from the Circuit
Court of Ohio County, West Virginia, on the basis of diversity
jurisdiction.
The case is an employment dispute arising out of a
covenant not to compete that the plaintiff, Zachary Costanzo,
entered into with the defendant, EMS USA, Inc., a corporation that
provides
industry.
energy
maintenance
services
within
the
oil
and
gas
The plaintiff is a resident of Ohio County, West
Virginia, and the defendant is a Texas corporation authorized to
conduct business in West Virginia.
On June 18, 2015, the parties
executed an offer letter in Ohio County, West Virginia, by which
the plaintiff became an office manager for the defendant.
covenant
not
to
Confidentiality,
compete
is
contained
Non-Competition,
within
the
Non-Solicitation,
The
defendant’s
and
Non-
Disparagement Agreement (“Restrictive Covenant Agreement”) and
prevents the plaintiff from working for a competing company in the
territory for 12 months following his employment term with the
defendant.
The covenant not to compete states, in relevant part, as
follows:
Employee agrees that during the Employment Term and for
a period of twelve (12) months thereafter (the
“Restrictive Covenant Term”), Employee shall not directly
or indirectly, whether for Employee’s account or for any
other person or entity, engage in or participate in the
ownership, management, operations or control of, or be
employed by or connected in any manner with, any business
that competes with the Company in the Territory by
offering services that are the same or similar to those
Employee performed on behalf of the Company during the
Employment Term . . . .
“Territory” shall mean the
geographic area served by the Location and any other
Company facility: (1) that Employee regularly works out
of, supervises or manages (in whole or in part), (2) that
is assigned to Employee as part of his or her designated
territory, or (3) about which Employee receives
confidential information. As used here, the “geographic
area served” is understood to be the area within a one
hundred (100) mile radius of the Location or Company
facility, except where Employee can prove the market area
served is smaller by clear and convincing evidence, in
which case such smaller area shall apply. As used here,
Location means Employee’s work address. Notwithstanding
the foregoing, this Section 2 shall not apply if
Employee’s employment is terminated by the Company
without Cause.
ECF No. 1-1 at 13-14.
The plaintiff states in his complaint that the defendant
terminated his employment for cause on August 16, 2016, at which
time the defendant informed him that it would enforce the covenant
not to compete contained in the Restrictive Covenant Agreement
against him.
The plaintiff makes claims for breach of contract,
tortious interference with prospective employment, and breach of
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West Virginia’s Wage Payment and Collection Act.
The plaintiff
also seeks declaratory judgment regarding the enforceability of the
covenant not to compete contained in the Restrictive Covenant
Agreement.
The plaintiff filed the present motion for partial judgment on
the pleadings, which seeks judgment on the pleadings as to the
question of whether the covenant not to compete is enforceable.
The issues presented in the plaintiff’s motion are fully briefed
and ripe for decision.
After a review of the parties’ memoranda
and the applicable law, this Court finds that the plaintiff’s
motion for partial judgment on the pleadings must be denied.
II.
Applicable Law
A motion for judgment on the pleadings is permitted under
Federal Rule of Civil Procedure 12(c).
Such a motion is intended
as an avenue by which parties may dispose of a case on the basis of
the underlying substantive merit of the parties’ claims as they are
revealed in the formal pleadings “after pleadings are closed, but
early enough not to delay trial.”
Fed. R. Civ. P. 12(c); 5C Wright
& Miller, Federal Practice and Procedure Civil 3d § 1367 (2007).
When considering a motion for judgment on the pleadings pursuant to
Rule
12(c),
a
court
should
apply
the
same
standard
as
when
considering a motion to dismiss pursuant to Rule 12(b)(6).
See
Burbach Broadcasting Co. of Del. v. Elkins Radio Corp., 278 F.3d
401, 405-06 (4th Cir. 2002).
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As with a motion to dismiss, a motion for judgment on the
pleadings “tests the sufficiency of a complaint; importantly, it
does not resolve contests surrounding the facts, the merits of a
claim, or the applicability of defenses.” Republican Party of N.C.
v. Martin, 980 F.2d 943, 952 (4th Cir. 1992).
Hence, in assessing
a motion for judgment on the pleadings, a court must accept as true
the factual allegations contained in the complaint.
Advanced
Health-Care Servs., Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143
(4th Cir. 1990).
Further, as a general matter, no information
outside of the pleadings may be considered.
See Fed. R. Civ. P.
12(d). However, documents “integral to and explicitly relied on in
the complaint” may be considered. Phillips v. LCI Int’l, Inc., 190
F.3d 609, 618 (4th Cir. 1999).
III.
Discussion
Covenants not to compete are generally enforceable in West
Virginia, subject to a rule of reasonableness.
See Reddy v. Cmty.
Health Found. of Man, 298 S.E.2d 906, 910 (W. Va. 1982) (“[A]n
anticompetitive
covenant
will
be
upheld
if
supported
by
consideration, ancillary to a lawful contract, and both reasonable
and consistent with the public interest.”).
“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
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employee,
and
him
from
employer’s business.”
leaving,
rather
than
to
protect
the
Id. at 915.
If a covenant not to compete is reasonable on its face, the
employer must show that it has an interest requiring protection.
See id. at 916 (stating that an employer may demonstrate its
interest requiring protection “by showing that [its] industry
operates in which a way that [it] could be harmed by employees
appropriating trade assets, and by particularizing for the court
the trade assets susceptible of appropriation by the employee”).
If the employer shows that it has a protectable interest, “the
covenant in its entirety is presumptively enforceable.”
Id.
(emphasis in original).
The employee may then “rebut the presumptive enforceability of
the covenant by showing either that he has no company trade assets
to abuse, or that the assets made available to him properly belong
to him, or that the interests asserted by the employer may be
protected by a partial enforcement of the covenant.”
Id. at 917.
If the employee does rebut the presumptive enforceability of the
covenant, “the covenant may be tailored by the court to comport
with the equities of the case.”
As
covenant
a
preliminary
not
to
matter,
compete
is
Id.
the
plaintiff
unenforceable
ancillary to a lawful contract.
argues
because
that
it
is
the
not
Specifically, the plaintiff
contends that the defendant “categorically denies the existence of
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a contract between it and Plaintiff.”
ECF No. 4-1 at 3.
However,
while the plaintiff’s employment was at-will, the pleadings show
that the plaintiff’s at-will employment was nonetheless subject to
the terms included in the offer letter and the parties’ Restrictive
Covenant
Agreement.
The
plaintiff’s
access
to
confidential
information in the course of his employment by the defendant
appears to provide the consideration necessary to enforce the
covenant not to compete, even though the employment was at will.
See Reddy, 298 S.E.2d at 910 (“[The contract] contains mutual
promises, and that is adequate consideration on its face.”).
The
defendant’s answer indicates that the offer letter did not prevent
the application of the employment-at-will doctrine and that the
defendant never denied the enforceability of all terms of the
Restrictive Covenant Agreement.
ECF No. 2.
The pleadings contain
no factual assertions that support the plaintiff’s contention that
the covenant not to compete was not ancillary to a lawful contract.
Given that the covenant not to compete appears to be ancillary
to a lawful contract, the Court must next determine whether the
covenant is reasonable on its face.
The plaintiff has not pled
sufficient facts for this Court to determine that the covenant not
to compete is unreasonable on its face.
Although the plaintiff
asserts that the covenant is designed to intimidate him, he has not
pled any facts in support that assertion.
The plaintiff states
that “the covenant at issue is designed to intimidate Plaintiff
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rather than protect any interest of Defendant.”
ECF No. 4-1 at 2.
The plaintiff’s only support for that assertion is that the
defendant notified him that it intended to close the office in
which he worked.
ECF No. 1-1 at 4.
Even accepting that allegation
as true, the Court cannot determine from the allegation that the
covenant was designed to intimidate the plaintiff.
The
Court
also
cannot
determine
that
the
covenant
is
unreasonable on its face by virtue of any excessively broad
restriction with respect to time or area.
The covenant not to
compete is limited to a period of twelve months and to a 100-mile
radius of the company’s facility, and does not apply if the
employee is terminated without cause.
See Panhandle Cleaning &
Restoration, Inc. v. Vannest, No. 5:11CV178, 2012 WL 4757906, at *4
(N.D. W. Va. Oct. 5, 2012) (finding that a two-year restrictive
covenant was valid and enforceable); Wyckoff v. Painter, 115 S.E.2d
80, 87 (W. Va. 1960) (upholding a restrictive covenant covering all
of the state of West Virginia); Huntington Eye Assocs., Inc. v.
LoCascio, 553 S.E.2d 773, 774 (W. Va. 2001) (finding that a fiftymile competition restriction was not facially overbroad).
The
plaintiff does not allege that any of those limitations are
unreasonable.
Furthermore, the covenant provides that, if the
“[e]mployee can prove the market area served is smaller by clear
and convincing evidence, . . . such smaller area shall apply.” ECF
No. 1-1 at 13.
The plaintiff offers no such clear and convincing
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evidence.
pled
in
Thus, the Court cannot conclude from the allegations
the
complaint
that
the
covenant
not
to
compete
is
unreasonable on its face.
Because the covenant not to compete appears to be ancillary to
a lawful contract and reasonable on its face, the defendant must
next show that it has an interest requiring protection.
matter
that
must
be
developed
in
discovery.
This is a
There
are
not
sufficient factual allegations at this stage in the proceedings to
determine
protection.
whether
the
defendant
has
an
interest
requiring
And, if the Court were to find that the defendant has
an interest requiring protection, then the plaintiff would have an
opportunity to rebut the resulting presumption that the covenant
not to compete is enforceable.
Any facts that might rebut a
presumption of enforceability would also have to be developed in
discovery.
For example, the plaintiff asserts that he was not
terminated for cause, in which case the covenant not to compete
would
not
apply
to
him.
However,
whether
the
plaintiff’s
termination was for cause is a factual issue that cannot be
determined at this stage.
Thus, even accepting the factual
allegations in the complaint as true for the purposes of this
motion, this Court finds that the motion must be denied.
IV.
Conclusion
For the reasons set forth above, the plaintiff’s motion for
partial judgment on the pleadings (ECF No. 4) is DENIED.
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IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
September 21, 2017
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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