A.E.P. Industries, Inc. v. McClure

302 S.E.2d 754, 308 N.C. 393, 1983 N.C. LEXIS 1214
CourtSupreme Court of North Carolina
DecidedMay 31, 1983
Docket445A82
StatusPublished
Cited by183 cases

This text of 302 S.E.2d 754 (A.E.P. Industries, Inc. v. McClure) is published on Counsel Stack Legal Research, covering Supreme Court of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
A.E.P. Industries, Inc. v. McClure, 302 S.E.2d 754, 308 N.C. 393, 1983 N.C. LEXIS 1214 (N.C. 1983).

Opinions

MEYER, Justice.

A preliminary injunction is interlocutory in nature, issued after notice and hearing, which restrains a party pending final determination on the merits. G.S. § 1A-1, Rule 65. Pursuant to G.S. § 1-277 and G.S. § 7A-27, no appeal lies to an appellate court from an interlocutory order or ruling of a trial judge unless such order or ruling deprives the appellant of a substantial right which he would lose absent a review prior to final determination. As we recently stated in State v. School, 299 N.C. 351, 357-58, 261 S.E. 2d 908, 913, appeal dismissed, 449 U.S. 807 (1980):

The purpose of a preliminary injunction is ordinarily to preserve the status quo pending trial on the merits. Its issuance is a matter of discretion to be exercised by the hearing judge after a careful balancing of the equities. Its impact is temporary and lasts no longer than the pendency of the action. Its decree bears no precedent to guide the final determination of the rights of the parties. In form, purpose, and effect, it is purely interlocutory. Thus, the threshold question presented by a purported appeal from an order granting a preliminary injunction is whether the appellant has been deprived of any substantial right which might be lost should the order escape appellate review before final judgment. If no such right is endangered, the appeal cannot be maintained. (Citations omitted.)

[401]*401See Waters v. Personnel, Inc., 294 N.C. 200, 240 S.E. 2d 338 (1978); Pruitt v. Williams, 288 N.C. 368, 218 S.E. 2d 348 (1975).

The Court of Appeals did not consider the appealability of this interlocutory order. There is little doubt that the denial of the motion for a preliminary injunction in this case deprived plaintiff of a substantial right. In fact, as of the filing of this opinion, plaintiff has essentially lost its case because the eighteen month time limitation under the employment agreements expired in March of 1983. Likewise, as the trial judge noted in his order, had the preliminary injunction been granted, “the plaintiff would in effect have prevailed in the action no matter what the final determination might be.” Thus, it appears that in a case such as the one now under consideration, although involving a substantive right of the appealing party, where time is of the essence, the appellate process is not the procedural mechanism best suited for resolving the dispute. The parties would be better advised to seek a final determination on the merits at the earliest possible time. Nevertheless, because this case presents an important question affecting the respective rights of employers and employees who choose to execute agreements involving covenants not to compete, we have determined to address the issues.

As a general rule, a preliminary injunction

is an extraordinary measure taken by a court to preserve the status quo of the parties during litigation. It will be issued only (1) if a plaintiff is able to show likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain irreparable loss unless the injunction is issued, or if, in the opinion of the Court, issuance is necessary for the protection of a plaintiffs rights during the course of litigation. Waff Bros., Inc. v. Bank, 289 N.C. 198, 221 S.E. 2d 273; Pruitt v. Williams, 288 N.C. 368, 218 S.E. 2d 348; Conference v. Creech, 256 N.C. 128, 123 S.E. 2d 619.

Investors, Inc. v. Berry, 293 N.C. 688, 701, 239 S.E. 2d 566, 574 (1977).

The first stage of the inquiry is, therefore, whether plaintiff is able to show likelihood of success on the merits. In the present case, the trial judge conceded “that there is probable cause to believe the plaintiff may prevail at the hearing” and that “plain[402]*402tiff makes out an apparent case for issuance of a temporary injunction by showing some recognized equity.” Thus the trial court found that there was a reasonable likelihood that the agreements were reasonable and valid and that plaintiff would likely prevail on the merits.

We note that on appeal from an order of superior court granting or denying a preliminary injunction, an appellate court is not bound by the findings, but may review and weigh the evidence and find facts for itself. Pruitt v. Williams, 288 N.C. 368, 218 S.E. 2d 348; Telephone Co. v. Plastics, Inc., 287 N.C. 232, 214 S.E. 2d 49 (1975); Huskins v. Hospital, 238 N.C. 357, 78 S.E. 2d 116 (1953). Plaintiff questioned before the trial court and before the Court of Appeals the effect of a provision in the employment agreements that the agreements would be “governed by the laws of the State of New Jersey.” Thus, we must first consider 1) whether the agreements, are, in fact, governed by New Jersey law, and 2) if so, whether there is a likelihood that plaintiff will prevail on the merits in light of New Jersey law.

As to the first question, we stated in Land Co. v. Byrd, 299 N.C. 260, 262, 261 S.E. 2d 655, 656 (1980), that “where parties to a contract have agreed that a given jurisdiction’s substantive law shall govern the interpretation of the contract, such a contractual provision will be given effect.” We note that plaintiff is a New Jersey corporation with headquarters in New Jersey and that during his employment, the defendant had numerous contacts with the New Jersey office. We therefore hold that the substantive law of New Jersey is applicable to the interpretation of the agreements.

Our review of New Jersey law in the area of the validity and enforceability of covenants not to compete indicates that the governing principles are similar to those in North Carolina. In this State a covenant not to compete is valid and enforceable upon a showing that it is:

1. In writing.
2. Made part of a contract of employment.
3. Based on reasonable consideration.
[403]*4034. Reasonable both as to time and territory.
5. Not against public policy.

U-Haul Co. v. Jones, 269 N.C. 284, 152 S.E. 2d 65 (1967); Exterminating Co. v. Griffin and Exterminating Co. v. Jones, 258 N.C. 179, 128 S.E. 2d 139 (1962); Asheville Associates v. Miller and Asheville Associates v. Berman, 255 N.C. 400, 121 S.E. 2d 593 (1961); Scott v. Gillis, 197 N.C. 223, 148 S.E. 315 (1929).

The seminal ease in New Jersey recognizing the validity and enforceability of noncompetitive clauses in employment agreements is Solari Industries, Inc. v. Malady, 55 N.J. 571, 264 A. 2d 53 (1970), where that court stated that:

. . . while a covenant by an employee not to compete after the termination of his employment is not, because of the countervailing policy considerations, as freely enforceable, it will nonetheless be given effect if it is reasonable in view of all the circumstances of the particular case. It will generally be found to be reasonable where it simply protects the legitimate interests of the employer, imposes no undue hardship on the employee, and is not injurious to the public ....

Id. at 576, 264 A. 2d at 56.

As in North Carolina, the New Jersey courts have considered, as a prerequisite to the enforceability of noncompetitive employment agreements:

1.

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Bluebook (online)
302 S.E.2d 754, 308 N.C. 393, 1983 N.C. LEXIS 1214, Counsel Stack Legal Research, https://law.counselstack.com/opinion/aep-industries-inc-v-mcclure-nc-1983.