A Way of Life, Inc. v. Schulda, Unpublished Decision (11-25-2005)

2005 Ohio 6288
CourtOhio Court of Appeals
DecidedNovember 25, 2005
DocketNo. 2004-P-0032.
StatusUnpublished
Cited by1 cases

This text of 2005 Ohio 6288 (A Way of Life, Inc. v. Schulda, Unpublished Decision (11-25-2005)) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
A Way of Life, Inc. v. Schulda, Unpublished Decision (11-25-2005), 2005 Ohio 6288 (Ohio Ct. App. 2005).

Opinion

OPINION
{¶ 1} Appellants, A Way of Life, Inc., Rick Lopez, and Christine E. Lopez (hereinafter collectively referred to as "Lopez"), own a hair styling salon in Ravenna, Ohio. They sued under a covenant not to compete to halt operations at a competing hair salon in Kent, Ohio. The trial court held that the covenant not to compete was not breached and that the hair salon in Kent, Ohio could continue to operate. We affirm the judgment entry of the trial court.

{¶ 2} Appellees Kathleen S. Schulda and Wendell P. Schulda (collectively "Schuldas") sold their hair salon business to Lopez on March 4, 1999. Schuldas operated the business under the name of Sheridan's Hair Salon and Day Spa, Inc. ("Sheridan's). The sale of the business was accomplished by means of an asset purchase agreement. The agreement reflected four items being sold to Lopez: business equipment, supplies, and inventory; the name "Sheridan's" and the phone number; goodwill; and a covenant not to compete.

{¶ 3} On the same day, Schuldas and Lopez executed a separate real estate purchase agreement for the property at 658 West Main Street, Ravenna, Ohio. In toto, Lopez agreed to pay to Schuldas for the business and the real estate the sum of $310,000.

{¶ 4} The next day, March 5, 1999, Schuldas executed a covenant not to compete. The terms of this covenant were as follows:

{¶ 5} "Wendell P. Schulda, Kathleen S. Schulda and Sheridan's Hair Salon and Day Spa, Inc. agree that for a period of five (5) years from the date of the closing of the sale of the real property and business at West Main Street, Ravenna, Ohio, that they will not directly or indirectly manage, operate, or participate in the ownership, management or operation of any business within a fifteen mile radius of 658 West Main Street, Ravenna, Ohio that will in any respect be in competition with the business that Sheridan's Hair Salon and Day Spa, Inc. is currently operating at 658 West Main Street, Ravenna, Ohio. It is stipulated that the business that is subject to the covenant not to compete includes hair styling, manicuring, massage and tanning services."

{¶ 6} Shawna Martin ("Martin") is the daughter of Kathleen S. Schulda and the stepdaughter of Wendell P. Schulda. She also works in the beauty salon business. At various times, she has worked for her parents, the Schuldas, as well as for Lopez. Until Sheridan's was sold in March 1999, she was working there as well as at a beauty salon in Boardman, Ohio. In 2001, she investigated the possibility of buying a beauty salon business in Canfield, Ohio. Later that year, in August 2001, she bought the business formerly known as Nancy's V.I.P. Look, in Kent, Ohio, for $8,000. She made a down payment of $1,000 on August 20, 2001, and paid the balance of $7,000 by the required date (Sept. 15, 2001). The $7,000 balance of the purchase price came from a gift to her by Schuldas, with no strings attached.

{¶ 7} On October 1, 2001, Martin opened her beauty salon in Kent, Ohio, within fifteen miles of the location where Sheridan's formerly operated. Her trade name for her new business was The V.I.P. Look. Her salon and Lopez' salon were in competition with each other. Within weeks of opening her salon in Kent, Ohio, seven of Lopez' stylists left the Ravenna salon and went to work for Martin in Kent, Ohio.

{¶ 8} The record reflects that at various times Schuldas provided additional financial and other assistance to Martin for her Kent salon. For example, she used their credit card to purchase supplies for her salon; they bought furniture for the salon; they advanced monies to a handyman who did work at her salon; they paid $2,429.79 for an improvement to the salon in December 2001; they used Wendell P. Schulda's name on a building permit for salon improvements; they helped paint and clean the salon; and they paid $1,000 to a newly hired salon manager two days after opening. They also wrote three personal checks to Martin in the total amount of $5,850 within the first week of the salon opening. However, Schuldas did not execute the lease for the V.I.P. Look salon, they did not negotiate for or on behalf of Martin to purchase the V.I.P. Look salon, they derived no income from the operation of the salon, and they are not involved with the day-to-day operation of Martin's salon. The record also reflects that they made substantial cash gifts to their other children.

{¶ 9} Lopez filed a motion for a preliminary injunction. Schuldas consented to the entry of a preliminary injunction such that they agreed not to operate, manage, or own Martin's salon business in Kent during the pendency of the case. The motion for preliminary injunction against Martin went to hearing on the issue whether Martin converted trade secrets, to wit, customer lists, for which a preliminary injunction should issue. The trial court found that the customer lists were not protected by measures reasonably calculated to safeguard them, and were, therefore, not entitled to protection otherwise accorded to trade secrets. It denied the motion for preliminary injunction against Martin for that reason.

{¶ 10} The hearing on the merits took place before a magistrate and lasted three days. Lopez proceeded against Schuldas on the theory of a breach of contract for violating the terms of the covenant not to compete. They proceeded against Martin on the theory of tortious interference of a contract by establishing her business in concert with her parents so as to violate the covenant not to compete. The magistrate stated that liability against Martin could only be achieved if liability was first established against Schuldas: "[i]f I find that there has been no breach of contract, then [Martin] couldn't have interfered with the contract and there couldn't have been a conspiracy to breach the contract."

{¶ 11} The magistrate's order held in favor of all the defendants on Lopez' claims. Lopez filed objections to the magistrate's order. The trial court overruled the objections, adopted the conclusions of the magistrate, and entered judgment for all the defendants. Lopez timely filed an appeal to this court from the trial court's judgment.

{¶ 12} Lopez assigned seven assignments of error to this court for review. Four of those assignments deal with the enforceability of the covenant not to compete and will be treated together. They are as follows:

{¶ 13} "[First assignment of error:] The trial court erred as a matter of law and abused its discretion by adopting the magistrate's decision and journal entry finding the actions of the defendant-appellees [sic] Kathleen and Wendell Schulda did not constitute a violation of the written covenant not to compete dated March 5, 1999.

{¶ 14} "[Second assignment of error:] The magistrate and trial court erred as a matter of law in applying an unreasonable and unduly restrictive interpretation of the covenant not to compete entered into between the parties.

{¶ 15} "[Third assignment of error:] The trial court erred by adopting the magistrate's decision to the prejudice of the plaintiff-appellants [sic] by failing to find that the check dated October 3, 2001 in the amount of one thousand dollars ($1,000.00) payable to Loretta Iarussi (plaintiff's trial exhibit 26) directly from defendant-appellee Kathy Schulda was evidence of the breach of the covenant not to compete since Loretta Iarussi, in effect, managed Shawna Martin's VIP, ordered supplies, did scheduling, etc.

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Bluebook (online)
2005 Ohio 6288, Counsel Stack Legal Research, https://law.counselstack.com/opinion/a-way-of-life-inc-v-schulda-unpublished-decision-11-25-2005-ohioctapp-2005.