KHOSROW DANESHGARI v. PATRIOT TOWING SERVICES, LLC

• Court: Court of Appeals of Georgia
• Decided: November 8, 2021
• Docket: A21A0887
• Status: Published

Opinion

FOURTH DIVISION DILLARD, P. J., MERCIER and PINSON, 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

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October 21, 2021

In the Court of Appeals of Georgia A21A0887. DANESHGARI et al v. PATRIOT TOWING SERVICES, LLC.

DILLARD, Presiding Judge.

Patriot Towing Services, LLC, filed a lawsuit against Khosrow Daneshgari and

Leslie Zotti, seeking monetary damages and injunctive relief based on allegations that

they breached a noncompete agreement executed in connection with the sale of their

towing service business to PTS. Following the defendants’ failure to comply with a

preliminary injunction and contempt order, the trial court struck Daneshgari’s answer

and extended its injunction as to both defendants. On appeal, the defendants contend

that the trial court erred in extending its injunction beyond the contractual expiration

of the noncompete agreement. For the reasons set forth infra, we agree and reverse. The record shows that, on June 23, 2016, PTS entered into an agreement to

purchase the majority of assets belonging to D&D Autow’s, Inc., which was a full-

service emergency road service and towing company owned and operated by

Daneshgari and Zotti. And with the execution of that purchase agreement, the parties

also entered into a “Non-Competition, Non-Disclosure and Non-Solicitation

Agreement.” Specifically, paragraph 2 of that agreement provided:

Agreement Not to Compete. For a period of four (4) years, commencing on the date hereof Seller and Principal shall not . . . either directly or indirectly, as an owner, partner, joint venture, employee engaged in a managerial or supervisory capacity, independent contractor, consultant, distributor, or shareholder of a corporation . . . engage in, establish, invest in, have an interest in, or associate in any fashion with, or perform any professional services on behalf or, a Competing Business within the Area.

The agreement also defined the “Area” as being within “a one hundred and fifty (150)

mile radius of 1830-A Airport Industrial Park Drive, GA 30062,” and defined

“Competing Business” as a business engaged in substantially the same business as

PTS. In addition, paragraph 3—titled “Agreement Not to Solicit

Customers”—similarly established a four-year term, during which the defendants

would not “(a) solicit on behalf of a Competing Business, any business from any

2 Customer of [PTS]; or (b) attempt to Solicit on behalf of a Competing Business, any

business from any Customer of [PTS].”

Given the terms of the agreement, the parties understood that the noncompete

period would expire on June 22, 2020; but within a month of the execution of the

purchase agreement, the defendants began operating another competing towing

business through a company called E-Motorworks, Inc. Consequently, on March 1,

2018, PTS filed a lawsuit against the defendants, seeking monetary damages for

breach of contract and injunctive relief to enforce compliance with the noncompete

provision. The defendants filed separate answers, but on June 26, 2018, the trial court

granted PTS’s motion for a preliminary injunction, ordering the defendants to cease

violating the noncompete provision.

Despite the preliminary injunction order, the defendants continued violating

the noncompete provision. As a result, on February 16, 2019, PTS filed a motion for

contempt. A hearing on this motion was delayed after Daneshgari filed a bankruptcy

petition in federal court, but the petition was dismissed shortly thereafter. Then, on

July 12, 2019, following a hearing, the trial court found Daneshgari in willful civil

contempt of the preliminary injunction and ordered him to be incarcerated until he

3 paid PTS $20,000 in attorney fees. Less than one week later, Daneshgari paid the

$20,000 and was released from incarceration.

Nevertheless, following Daneshgari’s release, the defendants continued to

violate the noncompete provision, and consequently, the trial court’s preliminary

injunction order. As a result, on January 21, 2020, PTS filed a second motion for

contempt and attorney fees. The trial court then held a hearing on this motion on

August 10, 2020 (nearly two months after the noncompete period lapsed under the

terms of the agreement), during which PTS requested that the court strike

Daneshgari’s answer, award attorney fees, and further enjoin both defendants from

At the close of the hearing, the trial court ruled in favor of PTS, and on

September 3, 2020, it issued two orders affirming that ruling. The first order found

Daneshgari in contempt, struck his answer, entered a default judgment, and ordered

him to pay attorney fees. Additionally, the order extended the court’s June 26, 2018

injunction, enjoining Daneshgari from violating the noncompete provision “until

further order of this Court.” The second order found that Zotti had also violated the

noncompete provision and similarly enjoined her from violating that provision “until

further order of this Court.” This appeal follows.

4 In two enumerations of error, the defendants contend the trial court erred in

extending its injunction as to both Daneshgari and Zotti beyond the contractual

expiration of the noncompete agreement.1 We agree.

It is well established that the purpose for granting interlocutory injunctions is

“to preserve the status quo, as well as balance the conveniences of the parties,

pending a final adjudication of the case.”2 Furthermore, the decision of whether to

grant equitable relief—such as an interlocutory injunction—is “generally a matter

within the sound discretion of the trial court, and the trial court’s decision should be

sustained on appeal when there has been no abuse of that discretion.”3 Nevertheless,

1 The defendants do not contend the trial court erred in finding Daneshgari in contempt, striking his answer, or awarding PTS attorney fees, and so we do not address those aspects of the trial court’s September 3 orders. See Grogan v. City of Dawsonville, 305 Ga. 79, 89 (4) n.7 (823 SE2d 763) (2019) (explaining that the Court will not address potential issue or argument that appellant did not raise on appeal); Rollins v. Legg, 179 Ga. 85, 85 (2) (175 SE 382) (1934) (“The plaintiff in his brief does not argue his alleged right to an award of attorney’s fees, and this feature of the case is treated as having been abandoned.” (emphasis supplied)); Jones v. Bd. of Regents of Univ. Sys. of Ga., 262 Ga. App. 75, 79 (3) (585 SE2d 138) (2003) (deeming issue not argued on appeal abandoned). 2 Grossi Consulting, LLC v. Sterling Currency Grp., LLC, 290 Ga. 386, 388 (1) (722 SE2d 44) (2012) (punctuation omitted); accord Benton v. Patel, 257 Ga. 669, 672 (362 SE2d 217) (1987). 3 Murphree v. Yancey Bros. Co., 311 Ga. App. 744, 746-47 (716 SE2d 824) (2011) (punctuation omitted); accord Essex Grp., Inc. v. Southwire Co., 269 Ga. 553,

5 the reasonableness of a restrictive covenant is “a question of law, which is subject to

de novo review.”4

Here, in both of its September 3, 2020 orders, the trial court extended its June

26, 2018 injunction order to continue enjoining both defendants from violating the

noncompete provision “until further order of this Court[,]” despite the fact that, under

the terms of the agreement, that provision expired on June 22, 2020. But the Supreme

Court of Georgia has rejected—at least implicitly—the idea that “equity permits a

court to extend the period of a non-compete agreement.”5

557 (2) (501 SE2d 501) (1998). 4 Murphree, 311 Ga. App. at 747 (punctuation omitted); see also McKinley v. Coliseum Health Grp., LLC, 308 Ga. App. 768, 770 (1) (708 SE2d 682) (2011) (“The construction of a contract . . . presents a question of law for the court, which this Court reviews de novo.” (citations omitted)). 5 Bearoff v. Craton, 350 Ga. App. 826, 833 (1) (830 SE2d 362) (2019); see Elec. Data Sys. Corp. v. Heinemann, 268 Ga. 755, 757 (4) (493 SE2d 132) (1997) (holding that litigation did not toll a nonsolicitation covenant such that trial court could only grant three-day injunction for remaining time before covenant expired); Coffee Sys. of Atlanta v. Fox, 227 Ga. 602, 602 (182 SE2d 109) (1971) (dismissing appeal of trial court’s denial of employer’s motion to enjoin former employee from violating noncompetition covenant because term of covenant had expired during litigation and the issue was now moot); Hogan Mgmt. Servs., P.C. v. Martino, 242 Ga. App. 791, 793 (1) (530 SE2d 508) (2000) (holding that the duration of a covenant not to compete is not tolled during litigation, and when the duration of that covenant has expired, an action seeking injunctive relief under the covenant is moot).

6 Specifically, in Coffee Systems of Atlanta v. Fox,6 a noncompete agreement

prohibited an employee from engaging in competitive acts for 12 months following

the termination of his employment.7 After the employee left his job and began

engaging in competitive activities almost immediately, the employer sought a

preliminary injunction—but during the pendency of the litigation, the noncompete

period expired.8 The employer argued that the litigation tolled the running of the

noncompete period, but our Supreme Court rejected this argument, reasoning that

“[s]uch an extension would in effect rewrite the one-year feature of the agreement.”9

It then further admonished that “[c]ourts do not make contracts for the parties.”10

More than 25 years later in Electronic Data Systems Corp. v. Heinemann,11 the

Supreme Court of Georgia refused to overrule Coffee Systems, and again rejected the

argument that when a party sues to enforce a noncompete agreement, the litigation

6 227 Ga. 602 (182 SE2d 109) (1971). 7 See id. at 602. 8 See id. 9 Id. 10 Id. 11 268 Ga. 755 (493 SE2d 132) (1997).

7 itself should toll the terms of the agreement.12 To the contrary, remaining convinced

that Coffee Systems represented sound jurisprudence, our Supreme Court expressly

reiterated that “[t]he courts should hesitate to rewrite private contracts,”13 and once

again warned that “[j]udicially providing a tolling provision would effect such a

rewrite.”14

In this case, it is undisputed that, under the purchase agreement’s explicit

terms, the noncompete provision expired on June 22, 2020. Nonetheless, in its two

September 3 contempt orders, the trial court extended its June 26, 2018 order,

indefinitely enjoining the defendants from violating the noncompete provision. But

in doing so, the court essentially rewrote the parties’ contract exactly as our Supreme

Court has proscribed.15 And although PTS argues that Coffee Systems and Heinemann

are not applicable because—in contrast to the trial court’s ruling in this matter—those

cases did not involve a trial court exercising its contempt power, we are not

persuaded that this distinction is a meaningful one. Indeed, PTS’s narrow reading of

12 See id. at 757 (4). 13 Id. 14 Id. 15 See supra note 5 & accompanying text.

8 Supreme Court of Georgia precedent elides the fact that Coffee Systems and

Heinemann specifically involved the exercise of the trial courts’ equitable powers and

concluded that rewriting a contract exceeded such powers.16 Moreover, while we

certainly understand PTS’s (and the trial court’s) frustration with the defendants’

willful violation of an agreement they entered into voluntarily, we do not agree with

its contention that adhering to our Supreme Court’s directive that “[c]ourts do not

make contracts for the parties”17 significantly impairs a trial court’s contempt power.18

In fact, as this case aptly demonstrates, a trial court is not without other means to

address a party’s contempt. Given these circumstances, the trial court abused its

16 See id. 17 Coffee Sys. of Atlanta, 227 Ga. at 602; accord Bearoff, 350 Ga. App. at 833 (1); see Benton v. Gailey, 334 Ga. App. 548, 550 (1) (779 SE2d 749) (2015) (“It is the duty of courts to construe and enforce contracts as made, and not to make them for the parties” (punctuation omitted)). 18 Even if we were inclined to agree with PTS, we are not at liberty to disregard binding precedent merely because PTS disagrees with the results of its straightforward application in this case. See Ga. Const., art. VI, § VI, ¶ VI (1983) (“The decisions of the Supreme Court [of Georgia] shall bind all other courts as precedents.”); Whorton v. State, 321 Ga. App. 335, 339 (1) (741 SE2d 653) (2013) (holding that “vertical stare decisis dictates that we faithfully adhere to the precedents established by the Supreme Court of Georgia”); Bryan A. Garner et al., THE LAW OF JUDICIAL PRECEDENT 155 (“When dealing with binding vertical precedent, a court has no room to decide how much weight or value to give each case.”).

9 discretion in indefinitely enjoining the defendants from violating the noncompete

provision beyond its June 22, 2020 expiration.19 Accordingly, we reverse that aspect

of the trial court’s September 3, 2020 contempt orders.

Judgment reversed. Mercier and Pinson, JJ., concur.

19 See Heinemann, 268 Ga. at 757 (4) (holding that litigation did not toll a nonsolicitation covenant such that trial court could only grant three-day injunction for remaining time before covenant expired); Coffee Sys. of Atlanta, 227 Ga. at 602 (dismissing appeal of trial court’s denial of employer’s motion to enjoin former employee from violating noncompetition covenant because term of covenant had expired during litigation and the issue was now moot); Bearoff, 350 Ga. App. at 832- 34 (1) (citing Coffee Systems and Heinemann in finding that trial court did not err in refusing to grant an equitable extension of the time period covered by a noncompete agreement).