Lindsey Constr. & Design, Inc. v. Luttrell

2014 Ohio 1720

Opinion

[Cite as Lindsey Constr. & Design, Inc. v. Luttrell, 2014-Ohio-1720.]

COURT OF APPEALS STARK COUNTY, OHIO FIFTH APPELLATE DISTRICT

LINDSEY CONSTRUCTION & : JUDGES: DESIGN, INC. : Hon. William B. Hoffman, P.J. : Hon. Sheila G. Farmer, J. Plaintiff-Appellant : Hon. Craig R. Baldwin, J. : -vs- : : ANTHONY LUTTRELL, ET AL. : Case No. 2014CA00006 : Defendants-Appellees : OPINION

CHARACTER OF PROCEEDING: Appeal from the Court of Common Pleas, Case No. 2013CV01747

JUDGMENT: Affirmed

DATE OF JUDGMENT: April 21, 2014

APPEARANCES:

For Plaintiff-Appellant For Defendants-Appellees

ROBERT E. SOLES, JR. CHRISTOPHER A. MARUCA KARA DODSON ANTHONY CELO FAITH DYLEWSKI 201 East Commerce Street KEVIN COX Suite 316 6545 Market Avenue North Youngstown, OH 44503 North Canton, OH 44721 Stark County, Case No. 2014CA00006 2

Farmer, J.

{¶1} Appellant, Lindsey Construction & Design, Inc., is a general construction

contractor company. On February 7, 2012, appellant hired appellee, Anthony Luttrell,

as a general manager. Appellee signed a noncompetition agreement, agreeing not to

compete with appellant for a two year period within one hundred miles of appellant's

principal place of business if appellant was terminated from employment.

{¶2} In March 2012, appellee, on behalf of appellant, hired Timothy Waggoner

to work as a sales agent. He signed an independent contractor agreement and an

addendum containing a noncompetition clause.

{¶3} In May 2012, appellee hired Stephen Carouthers to work as a sales agent.

He too signed an independent contractor agreement however, there is no evidence that

he ever signed an addendum containing a noncompetition clause. Mr. Carouthers left

appellant's employ three months later, in August 2012.

{¶4} In March 2013, while still working for appellant, appellee formed Avaran

Management Group, LLC, and Mr. Carouthers formed Carouthers Management &

Consulting, LLC. Both of these companies are members of the Ohio limited liability

company, Falcon General Contractors, LLC. Falcon is in the construction and

remodeling business.

{¶5} On April 2, 2013, Mr. Waggoner resigned his position with appellant and

began employment with Falcon. Appellee also resigned at about this same time.

{¶6} On June 28, 2013, appellant filed a complaint against all the

aforementioned parties. Appellant alleged breach of restrictive covenant, breach of

fiduciary duty, breach of contract, unfair competition, intentional interference with Stark County, Case No. 2014CA00006 3

prospective economic advantage, misappropriation of confidential business information,

and breach of note. Appellant sought a preliminary injunction to enjoin the parties from

continuing to engage in conduct that caused the breach. A hearing before a magistrate

was held on August 1, 2013. By decision filed August 27, 2013, the magistrate denied

the injunction. Appellant filed objections. By judgment entry filed December 13, 2013,

the trial court denied the objections and adopted the magistrate's decision.

{¶7} Appellant filed an appeal and this matter is now before this court for

consideration. Assignments of error are as follows:

I

{¶8} "IT WAS REVERSIBLE ERROR FOR THE TRIAL COURT TO FAIL TO

ENFORCE THE CLEAR TERMS OF THE NONCOMPETITION AGREEMENT TO THE

EXTENT NECESSARY TO PROTECT THE LEGITIMATE INTERESTS OF

APPELLANT."

II

{¶9} "THE TRIAL COURT ABUSED ITS DISCRETION WITH RESPECT TO

ITS FINDING THAT APPELLANT SOUGHT TO PREVENT ONLY ORDINARY

COMPETITION."

III

{¶10} "THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF WAS NOT

LIKELY TO SUCCEED ON THE MERITS, BECAUSE LUTTRELL ADMITTEDLY

BREACHED THE NONCOMPETITION AGREEMENT." Stark County, Case No. 2014CA00006 4

IV

{¶11} "THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN FINDING

THAT PLAINTIFF WILL NOT SUFFER IRREPARABLE HARM IN THE ABSENCE OF

INJUNCTIVE RELIEF."

V

{¶12} "THE TRIAL COURT APPLIED THE INCORRECT STANDARD WHEN IT

CONCLUDED THAT THIRD PARTIES WOULD BE HARMED WITHOUT BALANCING

THE HARM TO ALL PARTIES."

{¶13} Prior to discussing appellant's assignments of error, a procedural issue

must be addressed.

{¶14} First, as conceded by appellant in its brief at 4, fn.1, the trial court's

decision relative to Timothy Waggoner is moot because he no longer works for Falcon

and is no longer violating the terms of the agreement.

{¶15} Secondly, each of appellant's assignments of error argue only the

enforceability of the agreement relative to Anthony Luttrell. No citations in the brief refer

to Stephen Carouthers. Mr. Carouthers was employed by appellant for three months

and he resigned in August 2012. T. at 132. There is nothing in evidence to establish

that he ever signed an addendum containing a noncompetition clause. T. at 38-39.

There are no references or agreements relative to Mr. Carouthers included in the

assignments of error.

{¶16} Accordingly, we dismiss the appeal as it pertains to Mr. Waggoner and Mr.

Carouthers. Stark County, Case No. 2014CA00006 5

I, II, III, IV, V

{¶17} Appellant challenges the trial court's decision in denying the preliminary

injunction request against appellee Luttrell. We disagree.

{¶18} The decision to grant or deny an injunction is within the trial court's sound

discretion. In order to find an abuse of discretion, we must determine the trial court's

decision was unreasonable, arbitrary or unconscionable and not merely an error of law

or judgment. Blakemore v. Blakemore, 5 Ohio St.3d 217 (1983).

{¶19} A party requesting a preliminary injunction must show: (1) there is a

substantial likelihood that the plaintiff will prevail on the merits; (2) the plaintiff will suffer

irreparable injury if the injunction is not granted; (3) no third parties will be unjustifiably

harmed if the injunction is granted, and (4) the public interest will be served by

the injunction. Procter & Gamble Co. v. Stoneham, 140 Ohio App.3d 260 (2000).

{¶20} In the magistrate's August 27, 2013 decision, adopted by the trial court in

its judgment entry filed December 13, 2013, the trial court concluded the evidence failed

to establish any loss of jobs to Falcon, the noncompetition contract was overbroad, and

there was no proof of irreparable harm to appellant or no harm to third parties. The trial

court concluded the following:

Upon review, the Court finds that Plaintiff has not established, by

clear and convincing evidence, that there is a substantial likelihood that it

will prevail on the merits of the underlying substantive claim or that they

would suffer irreparable harm if the injunction is not granted. Additionally,

the Court finds that the issuance of the injunction will harm third parties, Stark County, Case No. 2014CA00006 6

and that the public interest would not be served by issuing the preliminary

injunction.

{¶21} The noncompetition agreement between appellant and appellee, attached

to the June 28, 2013 complaint as Exhibit B, contains the following provision in pertinent

part:

3. Non-Competition. Employee (or a member of Employee's

immediate family) shall not:

b) for a period of two (2) years after the Termination Date,

regardless of how said termination may have occurred, directly or

indirectly, own, manage, operate, control, accept employment or a

consulting position with, or otherwise advise or assist or be connected with

in any way, directly or indirectly, any individual and/or entity which

engages in or otherwise carries on any business activity which in any way

competes with the Business or which carries on activities substantially

similar to the Business anywhere within a one hundred (100) mile radius

of the principal office of the Business (the "Territory").

{¶22} In Raimonde v. Van Vlerah, 42 Ohio St.2d 21 (1975), paragraphs one and

two of the syllabus, the Supreme Court of Ohio held the following: Stark County, Case No. 2014CA00006 7

1. A covenant not to compete which imposes unreasonable

restrictions upon an employee will be enforced to the extent necessary to

protect an employer's legitimate interests. (Paragraphs two and three of

the syllabus in Extine v. Williamson Midwest, 176 Ohio St. 403, overruled.)

2. A covenant restraining an employee from competing with his

former employer upon termination of employment is reasonable if the

restraint is no greater than is required for the protection of the employer,

does not impose undue hardship on the employee, and is not injurious to

the public.

{¶23} The Raimonde court at 25 further explained the factors to be considered:

Among the factors properly to be considered are: "[t]he absence or

presence of limitations as to time and space, * * * whether the employee

represents the sole contact with the customer; whether the employee is

possessed with confidential information or trade secrets; whether the

covenant seeks to eliminate competition which would be unfair to the

employer or merely seeks to eliminate ordinary competition; whether the

covenant seeks to stifle the inherent skill and experience of the employee;

whether the benefit to the employer is disproportional to the detriment to

the employee; whether the covenant operates as a bar to the employee's

sole means of support; whether the employee's talent which the employer

seeks to suppress was actually developed during the period of Stark County, Case No. 2014CA00006 8

employment; and whether the forbidden employment is merely incidental

to the main employment." Extine, supra, at 406. See Arthur Murray

Dance Studios of Cleveland v. Witter (1952), 62 Ohio Law Abs. 17.

{¶24} Appellant is a construction company whose focus is insurance restoration

and reconstruction work involving residential and commercial properties. T. at 17.

Appellant does general contracting, roofing, siding, windows, additions, remodels, and

water restoration. Id. Appellant's office is located in Akron, Ohio and the 100 mile

radius basically covers northeastern Ohio. T. at 18. Most of appellant's customers

were one-time customers. T. at 54, 241.

{¶25} Appellee originally started working for appellant in 2010 as an

independent contractor salesperson. T. at 222. In 2012, appellee was hired as an

employee, becoming general manager and reporting directly to the owner of the

company. T. at 33. Appellee established strong business relationships with appellant's

customers, subcontractors, and suppliers. T. at 184-186. During the course of his

employment with appellant, appellee was demoted from general manager to sales

manager, but he was still regarded as the No. 2 man. T. at 225, 228.

{¶26} In 2013, while still working for appellant, appellee formed Avaran to satisfy

the IRS because he was simultaneously receiving a W-2 and a 1099 while working for

appellant. T. at 183, 223-224, 231. Appellee admitted he was the owner of Falcon. T.

at 184. Falcon is a full service general contractor company specializing in new home

construction, but also works on roofing, siding, storm damage claims, water mitigation,

kitchen remodeling, deck projects, and window renovations. T. at 176, 235-237. Stark County, Case No. 2014CA00006 9

Although appellee disagreed that his new business competed with appellant's (T. at

173), the trial court concluded that in reviewing the respective websites, the companies

engaged in substantially similar construction work. Appellee claimed he was not in the

insurance restoration business like appellant, but he did solicit storm damage work and

roofing and siding work as appellant did. T. at 174-176, 232. Appellee admitted he was

doing business within the 100 mile range (Mineral City/Tallmadge). T. at 174, 176. It

was appellee's position that the noncompetition agreement was overbroad in terms of

time and geography. Appellee also argued there was no proof of irreparable harm to

appellant and there would be harm to third parties.

{¶27} The testimony establishes only two remodel jobs by Falcon were in Stark

County, with the large amount of Falcon's work in Mahoning and Columbiana Counties.

T. at 236-237. The 100 mile geographical area extends to the northeastern Ohio region

of approximately four million people according to the U.S. Census, and is the fourteenth

largest metropolitan area in the United States.

{¶28} In its complaint filed June 28, 2013, appellant requested a preliminary

injunction for strict enforcement of the 100 mile geographic limit, although the

noncompetition agreement at ¶ 9 permitted modifications to the jurisdictional

restrictions:

9. Jurisdictional Interpretation. If any court or other tribunal having

jurisdiction to determine the validity or enforceability of Sections 2, 3 or 4

herein, determines that strictly applied, such provision(s) would be invalid

or unenforceable, the, in such event, the scope, time and, if applicable, Stark County, Case No. 2014CA00006 10

geographical provisions of said Section(s) shall be deemed modified to the

extent necessary (but only to that extent) so that the restrictions in said

Sections, as modified, will be valid and enforceable.

{¶29} We concur with the trial court's decision that the language of the

noncompetition agreement is excessive and overbroad, and given appellee's testimony,

Falcon does less than one percent of its business in appellant's major service area.

Also, no proof was presented of any direct solicitation of appellant's customers or

business leading to any possibility of a claim of irreparable harm.

{¶30} Upon review, we find the trial court correctly denied the preliminary

injunction as the noncompetition agreement was geographically overbroad, there was

no likelihood of success on the merits and of irreparable harm to appellant, and there

was the possibility of unjustifiable harm to third parties.

{¶31} Assignments of Error I, II, III, IV, and V are denied. Stark County, Case No. 2014CA00006 11

{¶32} The judgment of the Court of Common Pleas of Stark County, Ohio is

hereby affirmed.

By Farmer, J.

Hoffman, P.J. and

Baldwin, J. concur.

SGF/sg 401