Integrity Auto Specialists, Inc. v. Meyer

83 Va. Cir. 119, 2011 Va. Cir. LEXIS 260
CourtChesapeake County Circuit Court
DecidedJune 28, 2011
DocketCase No. (Civil) CL10-114
StatusPublished

This text of 83 Va. Cir. 119 (Integrity Auto Specialists, Inc. v. Meyer) is published on Counsel Stack Legal Research, covering Chesapeake County Circuit Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Integrity Auto Specialists, Inc. v. Meyer, 83 Va. Cir. 119, 2011 Va. Cir. LEXIS 260 (Va. Super. Ct. 2011).

Opinion

By Judge John W. Brown

The Court issues this letter opinion following a bench trial in this matter on November 15-16, 2010, and the submission of post-trial briefs by counsel in January 2011. Upon consideration of the authorities presented and the arguments of counsel, the Court denies the defendant’s plea in bar, but rules for the defendant on the merits with regard to all counts.

I. Background

This is another Virginia case arising from the machinations of the “rough-and-tumble world comprising the competitive marketplace.” E.g., [120]*120Commercial Bus. Sys., Inc. v. Halifax Corp., 253 Va. 292, 294 (1997). Plaintiff Integrity Auto Specialists (“Integrity”) is in the business of automotive reconditioning or detailing, preparing vehicles for sale at various automobile dealerships. On April 18, 2005, Phillip Meyer, the defendant, entered into an employment contract with plaintiff, the provisions of which are focal to this litigation. While employed by Integrity, Meyer serviced four dealership accounts: (1) Colonial Auto Center, (2) Battlefield Ford, (3) Jim Price Chevrolet, and (4) Cross Roads Chrysler Jeep, all located within the Hampton Roads market. Said market covers an area beyond what is traditionally recognized as Southeast Virginia and encompasses greater Richmond, Charlottesville, and Fredericksburg as well.

After formulating a plan to begin his own auto detailing business, Meyer contacted the managers of the aforementioned automobile dealers, informing them that he was leaving Integrity. Upon the dealers’ inquiries, Meyer revealed that he was leaving to start his own auto detailing company, which would be “up and running” within a month.

Defendant subsequently ended his employment with Integrity on June 18, 2009, to begin management of A Clear Solution, L.L.C., the detailing company he previously formed on May 27, 2009. Subsequent to terminating his employment with Integrity, defendant performed work for two of the dealerships, Colonial Auto Center and Battlefield Ford.

This litigation commenced thereafter, with plaintiff filing a five-count complaint alleging: (1) breach of contract; (2) breach of fiduciary duty; (3) breach of duty of loyalty; (4) tortious interference with contract and/ or contract expectancy; and (5) violation of the Virginia Uniform Trade Secrets Act. Plaintiff voluntarily dismissed Count V: Virginia Uniform Trade Secrets Act on the first day of trial.

The defendant filed a demurrer, which was overruled, followed by a plea in bar, which the Court addresses below, in addition to the remaining four counts of the complaint.

II. Analysis

In the wake of trial, the Court recognizes the following major issues, addressed in relevant order.

A. Defendant’s Plea in Bar: Application of the Virginia Anti-Trust Act

At oral argument and on brief, defendant maintains that the Virginia Anti-TrustAct, Virginia Code § 59.1-9.1 et seq. prohibits plaintiff’s recovery for breach of contract because the statute provides “every contract... in restraint of trade or commerce in this Commonwealth is unlawful.” Va. Code § 59.1-9.5. As defendant properly notes, post-employment restrictive covenants, such as those at issue in the instant matter, are considered [121]*121“restraints of trade.” See, e.g., Modern Env’ts v. Stinnett, 263 Va. 491, 493 (2002). As a consequence, defendant argues that the statute is an alteration of the common law governing restrictive covenants,1 and as such, should be given effect to invalidate all post-employment restrictions, particularly the ones at bar.

While defendant is correct in noting that the courts of the Commonwealth are not free to ignore to the plain language employed by the General Assembly, the legislature was not so parsimonious as to leave the courts perplexed as to whether § 59.1-9.5 invalidates all restrictive covenants, not to mention a substantial body of private contract law. As plaintiff ably notes, the Virginia Antitrust Act is to be “applied and construed to effectuate its general purpose in harmony with judicial interpretation of comparable federal statutory provisions,” to wit, the Sherman Antitrust Act.2 Va. Code § 59.1-9.17.

The Sherman Act similarly prohibits all agreements “in restraint of trade,” and federal courts, including the Supreme Court of the United States, have long held that this language is not to be applied literally. See, e.g., Texaco, Inc. v. Dagher, 547 U.S. 1, 5 (2006); National Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 687-88 (1978); Net Realty Holding Trust v. Franconia Props., Inc., 544 F. Supp. 759, 764 (E.D. Va. 1982) (“Congress did not intend § 1 to eliminate all commercial arrangements. . . .”). Rather, federal courts focus on the anti-competitive consequences of activities “in restraint of trade” on the affected market. See, e.g., National Soc’y of Prof’l Eng’rs, 435 U.S. at 688-92.

Correspondingly, as plaintiff again observes, where the Sherman Act has not been previously applied to a given practice, federal courts apply the “rule of reason,” which mandates analysis of all factual circumstances to determine whether a business arrangement is properly prohibited as an unreasonable restraint on competition. See Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49 (1977); Franconia Props., Inc., 544 F. Supp. at 768.

Under § 59.1-9.17 of the Virginia Anti-Trust Act, this Court thus examines the federal decisions construing the Sherman Act and applies the rule of reason to § 59.1-9.5, as no reported Virginia opinions located by counsel or the Court precisely address the issue at bar. Balancing the anti-competitive nature of employment covenants against their market benefits and considering the relevant precedents of the Supreme Court of Virginia [122]*122“strictly construing” such employment agreements,3 the Court nevertheless finds that such agreements, in the abstract, as argued by defendant, are not prohibited by Virginia Code § 59.1-9.5.

Accordingly, the defendant’s plea in bar is denied, and the Court considers the remaining merits of the case as presented at trial.

B. Plaintiff’s Election To Litigate and Forego Arbitration

Among the provisions of the employment contract at issue, paragraph seventeen stipulates that all disputes arising under the agreement shall be resolved through mediation and arbitration, save for suits by the employer necessary to enforce the restrictive covenants of the agreement or to enforce an arbitration award. Defendant maintains that plaintiff, by filing the instant suit, violated its own agreement, in which both parties “waived the[] right to file a lawsuit or claim” except as noted above.

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Bluebook (online)
83 Va. Cir. 119, 2011 Va. Cir. LEXIS 260, Counsel Stack Legal Research, https://law.counselstack.com/opinion/integrity-auto-specialists-inc-v-meyer-vaccchesapeake-2011.