Palmer & Cay of Georgia, Inc. v. Lockton Companies, Inc.

629 S.E.2d 800, 280 Ga. 479, 2006 Fulton County D. Rep. 1408, 24 I.E.R. Cas. (BNA) 932, 2006 Ga. LEXIS 259
CourtSupreme Court of Georgia
DecidedMay 8, 2006
DocketS05G1629
StatusPublished
Cited by15 cases

This text of 629 S.E.2d 800 (Palmer & Cay of Georgia, Inc. v. Lockton Companies, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Palmer & Cay of Georgia, Inc. v. Lockton Companies, Inc., 629 S.E.2d 800, 280 Ga. 479, 2006 Fulton County D. Rep. 1408, 24 I.E.R. Cas. (BNA) 932, 2006 Ga. LEXIS 259 (Ga. 2006).

Opinions

CARLEY, Justice.

As employees of Palmer & Cay of Georgia, Inc. (P&C), Douglas Hutcherson, John Varner, and Philip Holley (Employees) signed a covenant which provided that, for a two-year period after leaving their employment, they would

not, in any way, directly or indirectly, except as an employee of the Company, solicit, divert, or take away, or attempt to solicit, divert or take away, the insurance or employee benefit plan business of any of the customers of the Company which were served by the Employee during the term of his employment with the Company, or any prospective customers of the Company which the Employee solicited for the Company within one year prior to his termination of employment, for the purpose of selling to or serving for any such customer or prospective customer any insurance or employee benefit product or service which was provided or offered by the Company during his employment....

[480]*480After voluntarily leaving their employment with P&C and accepting positions with a competitor, Lockton Companies, Inc. (Lockton), the Employees and Lockton (Appellees) filed a declaratory judgment action to determine the enforceability of the nonsolicitation covenant. The trial court found that the covenant was not enforceable. On appeal, the Court of Appeals affirmed that holding, concluding that the covenant is unenforceable because it “provides no time restriction [on the Employees’ provision of services to P&C’s customers] Palmer & Cay of Ga. v. Lockton Cos., 273 Ga. App. 511, 513 (615 SE2d 752) (2005).

We granted certiorari to determine whether the Court of Appeals correctly held that the covenant was unenforceable due to the lack of any restriction placed on the period of time during which the Employees had served P&C’s customers.

1. The covenant does not broadly prohibit the solicitation of all of P&C’s customers. Its scope is narrowly limited to only those customers of P&C who were served by the Employees during their respective terms of employment. Previously, this Court has upheld such covenants prohibiting the post-termination solicitation of a former employer’s customers for a reasonable period, without regard to when the former employee may have had contact with those customers. See Wiley v. Royal Cup, 258 Ga. 357 (370 SE2d 744) (1988); Marcoin, Inc. v. Waldron, 244 Ga. 169 (259 SE2d 433) (1979). As exemplified by those cases, the critical factor is whether the former employee ever served the customer, not the length of time since he or she may have done so. “ ‘[A] court will enforce an agreement prohibiting an employee from pirating his former employer’s customers served by the employee during the employment, at the employer’s direct or indirect expense. . . .’ [Cit.]” Wiley v. Royal Cup, supra at 359 (1).

[T]he employer has a protectible interest in the customer relationships its former employee established and/or nurtured while employed by the employer ([cit.]), and is entitled to protect itself from the risk that a former employee might appropriate customers by taking unfair advantage of the contacts developed while working for the employer. [Cits.]

W.R. Grace & Co. v. Mouyal, 262 Ga. 464, 466 (2) (422 SE2d 529) (1992). The employer’s recognized interest in protecting its customers is not diminished by the length of time since the employee may have ceased to serve the customer, but depends instead on the fact that the customer relationship was either established or nurtured by the employee. This is true because the risk that a former employee [481]*481may take unfair advantage of personal contacts developed in establishing or nurturing the customer relationship still exists even after such direct and immediate contacts have ended.

Thus, P&C “had a legitimate business interest to protect in preventing [Employees] from leaving and encouraging clients to leave with [them].” Marcoin, Inc. v. Waldron, supra at 171 (2). Consistent with our prior cases, P&C sought to protect that interest by limiting, for a two-year post-termination period, the solicitation by the Employees of only those customers of P&C whom they served during the term of their employment.

2. In support of its holding that the covenant is nevertheless unenforceable, the Court of Appeals concluded that any decision which predates W.R. Grace & Co., supra, is unpersuasive authority. There, this Court was called upon to answer a certified question from the Eleventh Circuit as to whether a covenant which prohibited an employee from soliciting clients of his former employer whom he actually contacted during his tenure was enforceable in Georgia notwithstanding the absence of an express geographical limitation. W.R. Grace & Co. v. Mouyal, supra at 464-465. Thus, “[t]he focus of [that] case [was] the absence of an express geographic description of the territorial restriction contained in the no-solicitation clause of the employment contract.” W.R. Grace & Co. v. Mouyal, supra at 465 (2). Accordingly, the Court of Appeals misinterpreted W.R. Grace & Co. as authority for the entirely distinct proposition that a nonsolicitation covenant must provide an express limit on the time within which the employee actually provided services to the former employer’s customers. Geographic and temporal limitations are not equivalents. Indeed, to the extent that W.R. Grace & Co. may be applicable here, it cited with approval prior cases which had recognized the existence of an employer’s protectible interest in those customers who were served by a former employee and the concomitant right to protect against the risk that unfair advantage might be taken of those contacts. W.R. Grace & Co. v. Mouyal, supra at 466 (2).

Appellees correctly point out that the covenant in W.R. Grace & Co. was limited in its scope to those customers with whom the employee had contact in the two-year period prior to termination of his employment. That the covenant in that case may have contained such a limitation, as a matter of fact, does not, however, support the conclusion that, as a matter of law, every covenant must likewise contain a temporal limitation. To the contrary, by its express terms, W.R. Grace & Co., supra at 465, fn. 1, notes that its holding addresses the enforceability of a restrictive covenant which is as broad as that set forth in the certified question, rather than one which was as limited as that provided in the actual employment contract.

[482]*482Where the parameters of the restrictive covenant are as narrow as those set forth in the certified question, i.e., where the former employee is prohibited from post-employment solicitation of employer customers which the employee contacted during his tenure with the employer, there is no need for a territorial restriction expressed in geographic terms.

W.R. Grace & Co. v. Mouyal, supra at 467-468 (2). Thus, W.R. Grace & Co. is not a departure from any of our prior cases which recognize that, when dealing with a covenant that prohibits the solicitation of customers whom the employee served, the entire length of service of the employee establishes the permissible temporal boundary.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cmgrp, Inc. v. Maggie Gallant
806 S.E.2d 16 (Court of Appeals of Georgia, 2017)
VULCAN STEEL STRUCTURES, INC. Et Al. v. McCARTY Et Al.
764 S.E.2d 458 (Court of Appeals of Georgia, 2014)
Murphree v. Yancey Bros. Co.
716 S.E.2d 824 (Court of Appeals of Georgia, 2011)
Exceptional Marketing Group, Inc. v. Jones
749 F. Supp. 2d 1352 (N.D. Georgia, 2010)
Mohr v. Bank of New York Mellon Corp.
393 F. App'x 639 (Eleventh Circuit, 2010)
H&R BLOCK EASTERN ENTERPRISES, INC. v. Morris
606 F.3d 1285 (Eleventh Circuit, 2010)
Coleman v. Retina Consultants, P.C.
687 S.E.2d 457 (Supreme Court of Georgia, 2009)
Wachovia Insurance Services, Inc. v. Fallon
682 S.E.2d 657 (Court of Appeals of Georgia, 2009)
Global Link Logistics, Inc. v. Briles
674 S.E.2d 52 (Court of Appeals of Georgia, 2009)
Godley Park Homeowners Ass'n v. Bowen
649 S.E.2d 308 (Court of Appeals of Georgia, 2007)
Palmer & Cay of Georgia, Inc. v. Lockton Companies, Inc.
643 S.E.2d 746 (Court of Appeals of Georgia, 2007)
Variable Annuity Life Insurance v. Joiner
454 F. Supp. 2d 1297 (S.D. Georgia, 2006)
Palmer & Cay of Georgia, Inc. v. Lockton Companies, Inc.
629 S.E.2d 800 (Supreme Court of Georgia, 2006)

Cite This Page — Counsel Stack

Bluebook (online)
629 S.E.2d 800, 280 Ga. 479, 2006 Fulton County D. Rep. 1408, 24 I.E.R. Cas. (BNA) 932, 2006 Ga. LEXIS 259, Counsel Stack Legal Research, https://law.counselstack.com/opinion/palmer-cay-of-georgia-inc-v-lockton-companies-inc-ga-2006.