EDMUND BURBACH v. MOTORSPORTS OF CONYERS, LLC D/B/A FALCONS FURY HARLEY-DAVIDSON

• Court: Court of Appeals of Georgia
• Decided: March 10, 2022
• Docket: A21A1420
• Status: Published

Opinion

SECOND DIVISION MILLER, P. J., REESE and HODGES, JJ.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules

March 10, 2022

In the Court of Appeals of Georgia A21A1420. BURBACH v. MOTORSPORTS OF CONYERS, LLC et al.

REESE, Judge.

Edmund Burbach appeals from the trial court’s order granting injunctive relief

to Motorsports of Conyers, LLC d/b/a Falcons Fury Harley-Davison (“Falcons Fury

H-D”) and Motorsports of Durham, LLC d/b/a Raging Bull Harley-Davidson

(“Raging Bull H-D”) (collectively, “the Appellees”), which enforced restrictive

covenants in his two employment agreements. Burbach argues that the trial court

erred, inter alia, in applying Florida law to the restrictive covenants, applying

collateral estoppel against him, and in granting the Appellees injunctive relief. For

the reasons set forth infra, we reverse. Viewed in the light most favorable to the ruling below, the evidence shows the

following.1 Falcons Fury H-D and Raging Bull H-D are in the business of selling

Harley-Davidson motorcycles, parts, and merchandise, in addition to providing repair

and other services for new and used Harley-Davidson motorcycles. Falcons Fury H-D

is located in Morrow, Georgia and Raging Bull H-D is located in Durham, North

Carolina. These two entities, along with four other Harley-Davidson dealerships

located in Florida and California, exist under a common ownership.

Falcons Fury H-D hired Burbach as general manager in January 2016. Burbach

was promoted in September 2016 to COO over Falcons Fury H-D, Raging Bull H-D,

and the other affiliate dealerships. He then executed two employment agreements, one

for Falcons Fury H-D and one for Raging Bull H-D. The Appellees alleged in their

complaint that Burbach was required to execute these agreements as a condition of

his continued employment and to reflect his new management role as COO, even

though both agreements refer to him as “General Manager.”

Both agreements contained identical restrictive covenants that limited

Burbach’s ability to solicit employees or customers, and accept alternative

1 See Srisovana v. Cambodian Buddhist Society, 269 Ga. App. 600 (604 SE2d 637) (2004).

2 employments, and that addressed his responsibilities regarding confidential

information. Specifically, the agreements stated under the provision entitled

“Covenant Not to Solicit and Not to Accept Employment with Competitor[ ]” the

following:

General Manager covenants and agrees that during the Employment Period, including any renewal thereof, and for a period of three (3) years from the date of termination of General Manager’s employment, as the case may be, General Manager shall not, directly, or indirectly: a. solicit or approach any employees or customers of Employer or its affiliates or request any employees or customers of Employer or its affiliates to transfer employment or business from Employment or its affiliates to any other person, firm, partnership, corporation, or other entity. b. solicit or approach, or accept, employment from any person, firm, partnership, corporation or other entity who competes with the business of Employer as of such date within 120 miles of Employer and affiliates thereof operate.

The agreements also stated, in reference to confidential information, that:

General Manager shall regard and preserve as confidential all Confidential Information pertaining to Employer’s business . . . . General Manager shall not, without the prior written consent of Employer, use for his own benefit or purposes, or disclose to others, either during his employment or at any time thereafter, and except as

3 required in connection with his employment with Employer, any Confidential Information connected with the business operations and developments of Employer. General Manager shall not, without such prior written consent, take or retain or copy any Confidential Information of Employer.

The agreements also included choice-of-law clauses that stated the agreements

would be “governed by, and construed in accordance with, the laws of the State of

Florida applicable to contracts executed in and to be performed in that State.”

On December 11, 2019, Burbach’s employment terminated with the Appellees,

and he subsequently accepted a role at Preston Cycles West, LLC d/b/a Thunder

Tower West Harley-Davidson (“Thunder Tower H-D”), which was a competitor of

the Appellees and their affiliates.

The Appellees filed suit against Burbach and Thunder Tower H-D seeking,

inter alia, temporary and permanent injunctions to enforce the restrictive covenants

in Burbach’s employment agreements related to soliciting customers and employees,

accepting employment, and using confidential information and trade secrets. The

Appellees subsequently filed a motion requesting that the trial court grant an

expedited temporary interlocutory injunction. Following a hearing on the matter, the

trial court granted the Appellees’ motion, and Burbach appeals.

4 “A trial court has broad discretion to decide whether to grant or deny a request

for an interlocutory injunction. We will not disturb the result reached below unless

we find a manifest abuse of discretion, a total lack of evidence to support that ruling,

or an erroneous interpretation of the law.”2 With these guiding principles in mind, we

now turn to Burbach’s claims of error.

1. Burbach argues that the trial court erred in ruling that the Florida choice-of-

law provision in the restrictive covenants was enforceable. Specifically, Burbach

asserts that because the enforcement of the restrictive covenants in Burbach’s

employment agreements would contravene Georgia public policy, the trial court erred

in applying Florida law. We agree.

As a preliminary matter, “[b]ecause forum selection clauses involve procedural

and not substantive rights, we apply Georgia law to determine the enforceability of

the [forum-selection] clause here, even though it contains a choice of law provision

requiring that the laws of Florida shall govern.”3

2 Fortress Investment Group v. Holsinger, 354 Ga. App. 405, 408 (841 SE2d 55) (2020) (citation and punctuation omitted). 3 Carson v. Obor Holding Co., 318 Ga. App. 645, 647-648 (734 SE2d 477) (2012) (citation, punctuation, and footnote omitted).

5 Even though forum-selection clauses “are prima facie valid[,]”4 “[i]f a party can

show both that a restrictive covenant violates Georgia public policy and that a court

in the selected forum likely would find the restrictive covenant enforceable, a

compelling reason exists to avoid the contractual forum selection clause.”5

Concerning the enforceability of restrictive covenants, OCGA § 13-8-54 (b) states

that “[i]n any action concerning enforcement of a restrictive covenant, a court shall

4 Carson, 318 Ga. App. at 648. 5 Fortress Investment Group, 354 Ga. App. at 413 (5) (citation and punctuation omitted). The Appellees argue that the trial court was correct in finding that the Georgia Supreme Court’s decision in Auld v. Forbes, 309 Ga. 893 (848 SE2d 876) (2020) should serve as the framework for analyzing this choice-of-law clause and that Auld foreclosed Burbach’s argument on this point; we disagree. In Auld, the issue before the Georgia Supreme Court was whether Belize law should apply in a wrongful death case when a 14-year-old boy had drowned while on a trip with the Cobb County School District in Belize. Auld, 309 Ga. at 893-894. The Supreme Court stated that Georgia courts “will not apply the law of the place where the injury was sustained if it would conflict with Georgia’s public policy[,]” and proceeded to analyze whether the out-of-state law was radically dissimilar to anything existing in our system of jurisprudence. Auld, 309 Ga. at 896 (2) (b). In relying on Auld, the trial court focused its analysis on whether Florida’s law regarding restrictive covenants was radically dissimilar to that of Georgia. However, the present case involves a contractual dispute including a mutually negotiated, forum-selection clause, which differs from Auld, where the Supreme Court considered “Georgia’s public policy concerning wrongful death claims[ ]” in the context of a tort that occurred in another country. Auld, 309 Ga. at 896 (2) (b). Moreover, Georgia courts have consistently applied the two-prong analysis discussed in Division 1, when examining forum- selection clauses related to restrictive covenants. See Holsinger, 354 Ga. App. at 413 (5).

6 not enforce a restrictive covenant unless it is in compliance with the provisions of

Code Section 13-8-53[,]” which in turn states that contracts restricting competition

are enforceable “so long as such restrictions are reasonable in time, geographic area,

and scope of prohibited activities[.]”

In the present case, Burbach’s employment agreements contained restrictive

covenants that stated he could not “solicit or approach, or accept employment from

any person, firm, partnership, corporation or other entity who compete[d] with the

business of Employer . . . within 120 miles of Employer and affiliates thereof” for

three years following the termination of his employment. However, OCGA § 13-8-57

(b) states that restraints against former employees for more than two years in duration

are presumptively unreasonable.6

Further, while the covenants stated that Burbach could not work for the

Appellees’ competitors, they did not specify the types of activities that would be

prohibited. Although OCGA § 13-8-56 (3) states that “[t]he scope of competition

6 The Appellees correctly note that the trial court’s order granted interlocutory relief that remains in effect until further order of the court and did not explicitly enforce the three-year period. However, when analyzing the validity of a forum- selection clause, this Court has looked to the underlying restrictive covenants themselves and whether a court in the chosen forum is likely to enforce them. See Holsinger, 354 Ga. App. at 413 (5).

7 restricted is measured by the business of the employer[,]” covenants that do not list

specific limits on the type of activity, and effectively bar former employees from

working in any capacity for competitors, have been deemed overbroad and

unreasonable.7

Finally, these restrictive covenants prohibit Burbach from accepting

employment within 120 miles of Falcons Fury H-D and Raging Bull H-D, which were

located in Georgia and North Carolina respectively, or their affiliates. However, at

the hearing, testimony was offered that each Harley-Davidson dealership had an

assigned territory which encompassed approximately ten miles. Testimony at the

hearing also showed that the covenants’ geographic restrictions would reach into

approximately eight states, and exclude several competing locations. This Court has

found expansive territorial restrictions to be unreasonable.8 Thus, based on the above,

7 See Carson, 318 Ga. App. at 652 (1) (c) (“[T]he clause is overbroad because it effectively bars [the former employee] from working in any capacity for . . . any competitor of [the former employer].”); Stultz v. Safety & Compliance Mgmt., 285 Ga. App. 799, 802 (648 SE2d 129) (2007) (“A non-competition covenant which prohibits an employee from working for a competitor in any capacity, that is, a covenant which fails to specify with particularity the activities which the employee is prohibited from performing, is too broad and indefinite to be enforceable.”). 8 See Gale Indus. v. O’Hearn, 257 Ga. App. 220, 223 (2) (570 SE2d 661) (2002) (holding a limitation of 100 miles was unreasonable); Brunswick Floors v. Guest, 234 Ga. App. 298, 301 (506 SE2d 670) (1998) (holding a limitation of 80

8 we conclude that the restrictive covenants in Burbach’s employment agreements are

unreasonable under Georgia law.

We now turn to the second prong of the analysis and consider whether it is

likely that these covenants would be enforced by a Florida court.9 Florida courts will

enforce a choice of law provision if there is “a reasonable relationship between the

contract and the state whose law is selected and the selected law does not conflict

with Florida law or confer an advantage on a non-resident party which a Florida

resident does not have.”10 Here, as the evidence shows that the Appellees do business

in Florida, and as the choice of law provision calls for the application of Florida law,

thereby avoiding any conflicts with Florida public policy, we conclude that a Florida

court would honor the forum-selection clause.11

miles was unreasonable). Although Georgia courts may apply the “blue pencil” doctrine and modify unreasonable restrictive covenants, Georgia courts are not required to do so. OCGA § 13-8-54 (b) (“[T]he court may modify the restraint provision[.]”) (emphasis supplied); see Belt Power v. Reed, 354 Ga. App. 289, 294- 295 (2) (b) (840 SE2d 765) (2020) (holding the trial court did not abuse its discretion in declining to apply the “blue pencil” provision in the Restrictive Covenants Act). 9 See Carson, 318 Ga. App. at 653 (2). 10 Id. (citation and punctuation omitted). 11 See id.

9 In terms of the enforceability of the restrictive covenants themselves, Florida

law differs from that of Georgia. While Georgia courts may consider the employee’s

right to earn a living, Florida courts can only consider the legitimate business

interests of the party seeking to enforce the covenant and cannot consider the impact

on the party against whom is it being enforced.12 Thus, it is likely that a Florida court

will find the covenants enforceable even though they prohibit Burbach from working

for a competitor in any capacity.13 Further, as Appellees note in their brief, Florida

12 Compare OCGA § 13-8-58 (d) (“In determining the reasonableness of a restrictive covenant between an employer and an employee . . . a court may consider the economic hardship imposed upon an employee by enforcement of the covenant[.]”), with Fla. Stat. Ann. § 542.335 (1) (g) (1) (“In determining the enforceability of a restrictive covenant, a court [s]hall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought.”). 13 See Gold Coast Media v. Meltzer, 751 S2d 645, 646 (Fla. App. 1999) (upholding a non-compete clause that prevented a former employee from working in any capacity for a business competitor, directly or indirectly, with the former employer anywhere in the United States or Puerto Rico); see also DePuy Orthopaedics v. Waxman, 95 S3d 928, 940 (III) (D) (Fla. App. 2012) (noting that claims of harm due to an injunction enforcing a non-compete clause conflicts with the Fla. Stat. Ann. § 542.335 (1) (g) (1)).

10 courts have found a geographic restriction of 120 miles enforceable, and would be

likely to enforce the covenants despite their reach.14

Therefore, based on the above, we conclude that a Florida court would apply

Florida law in reviewing Burbach’s restrictive covenants, and would enforce the

covenants even though they are unreasonable under Georgia law. Accordingly, we

conclude that the trial court erred in upholding the forum-selection clauses in

Burbach’s restrictive covenants.15

2. Burbach argues that the trial court erred in ruling that Burbach was bound

by a previous ruling enforcing an employment agreement between the Appellees and

another employee that also contained restrictive covenants. We agree.

“The doctrine of collateral estoppel precludes the re-adjudication of an issue

that has previously been litigated and adjudicated on the merits in another action

between the same parties or their privies.”16 However, the restrictive covenants in the

prior litigation differ from Burbach’s agreements. The covenants at issue in the

14 Allied Universal Corp. v. Given, 223 S3d 1040, 1042-1044 (Fla. App. 2017) (upholding 150-mile geographic restriction). 15 See Carson, 318 Ga. App. at 654 (2). 16 See Minnifield v. Wells Fargo Bank, 331 Ga. App. 512, 515 (3) (771 SE2d 188) (2015) (citation and punctuation omitted).

11 previous litigation stated that Georgia law would apply to the agreement, limited

competition to two years following the termination of employment, and actually listed

the types of activities that would be prohibited and limited the scope of the restriction

to those activities performed within two years prior to termination. As the restrictive

covenants in the previous matter differ in significant aspects from the present case,

the issues addressed in that litigation are not the same.

Moreover, even though the previous litigation referenced by the Appellees

included Burbach’s new employer, Thunder Tower H-D, a different employee was

involved who was not in privity with Burbach.17 Thus, for these reasons, the doctrine

of collateral estoppel does not apply to the present matter.18

3. Burbach argues that the trial court erred in granting the Appellees an

interlocutory injunction. As discussed in Division 1, supra, Georgia law, rather than

Florida law, should have been used to analyze the validity of Burbach’s restrictive

covenants when issuing injunctive relief. Additionally, the trial court’s analysis of the

forum-selection clause should have centered on whether the restrictive covenants

17 Id. at 516 (3) (“Privity connotes those who are in law so connected with a party to the judgment as to have such an identity of interest that the party to the judgment represented the same legal right[.]”). 18 See id.

12 violated Georgia public policy, and then whether the restrictive covenants would be

enforced by Florida courts, rather than whether the laws of Florida and Georgia are

radically different. For these reasons, we conclude the trial court’s order was based

on an erroneous application of the law, and that it abused its discretion in granting the

Appellees’ motion.19

4. In light of our rulings in Divisions 1 through 3, supra, we need not reach the

remainder of Burbach’s claims of error.

Judgment reversed. Miller, P. J., and Hodges, J., concur.

19 See Atlanta Area Broadcasting v. James Brown Enterprises, 263 Ga. App. 388, 393 (587 SE2d 853) (2003).