THIS OPINION HAS NO
PRECEDENTIAL VALUE. IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY
PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.
THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Professional
Wiring Installers, Inc., Randy Cochran and Denise Cochran, Respondents,
v.
Thomas Sims,
III, and Communication Components, Inc., Defendants,
of whom Thomas
Sims, III is the Appellant.
Appeal From Richland County
Joseph M. Strickland, Master In Equity
Unpublished Opinion No. 2008-UP-173
Submitted March 3, 2008 Filed March 12,
2008
REVERSED and REMANDED
Tucker S. Player, Esquire; Debra C. Galloway, of Columbia, for
Appellant.
S. Jahue Moore, of W. Columbia, for Respondents.
PER CURIAM:
Thomas Sims, III alleges the Master in Equity committed error in granting the Respondents
(PWI) a preliminary injunction, which enjoined him from violating the terms of
a non-compete agreement between him and PWI and in failing to require PWI to
post a bond pursuant to Rule 65, SCRCP. We reverse and remand.[1]
FACTS
PWI is in
the communications business, and Sims worked for them. In July of 2005, PWI
presented a non-compete agreement to Sims, which Sims signed. The agreement
provided: While I am employed by the Company, and for 3 years
afterward, I
will not compete with the business of the Company . . ., within a radius of 600
miles from the present location of the Company. Sims continued to work for
PWI until March 10, 2006. After his employment with PWI ended, he began
working for Computer Components, Inc. (CCI), one of PWIs largest customers.
Sims performed similar services for CCI as those he previously provided CCI
while employed by PWI. As a result of Sims activities, PWI allegedly no longer
received business from CCI.
On
August 7, 2006, PWI and its owners, Randy and Denise Cochran, filed suit against
Sims and CCI seeking monetary damages and both preliminary and permanent
injunctive relief to enforce the terms of the agreement not to compete. By
order signed December 11, 2006, the Master granted a preliminary injunction
against Sims, enjoining him from violating the employee non-compete agreement
to the extent that he shall not solicit or attempt to solicit any business or
trade from [PWIs] customers or clients until further Order of this Court. The
Master also refused to set a bond as required by Rule 65(c), SCRCP. This
appeal follows.
STANDARD OF
REVIEW
The granting of temporary injunctive relief is within
the sound discretion of the trial court and will
not be overturned absent an abuse of that discretion. City of Columbia v. Pic-A-Flick Video, Inc., 340 S.C. 278, 282, 531 S.E.2d 518, 520-21 (2000).
An abuse of discretion occurs when a trial courts decision is unsupported by
the evidence or controlled by an error of law. County of Richland v. Simpkins, 348 S.C. 664, 668, 560 S.E.2d 902, 904 (Ct. App. 2002).
LAW/ANALYSIS
The
Supreme Court of South Carolina recently addressed injunctive relief:
The power of
the court to grant an injunction is in equity. The court will reserve its
equitable powers for situations when there is no adequate remedy at law. The
party seeking an injunction has the burden of demonstrating facts and
circumstances warranting an injunction. The remedy of an injunction is a
drastic one and ought to be applied with caution. In deciding whether to grant
an injunction, the court must balance the benefit of an injunction to the
plaintiff against the inconvenience and damage to the defendant, and grant an
injunction which seems most consistent with justice and equity under the
circumstances of the case.
For a preliminary injunction to be granted, the plaintiff must establish
that (1) it would suffer irreparable harm if the injunction is not granted; (2)
the party seeking injunction will likely succeed in the litigation; and (3)
there is an inadequate remedy at law.
Strategic Resources Co. v. BCS Life Ins. Co., 367 S.C. 540, 544, 627
S.E.2d 687, 689 (2006) (internal citations omitted). This court has also
addressed injunctive relief, noting:
[i]t is well settled that, in determining whether a
temporary injunction should issue, the merits of the case are not to be
considered, except in so far as they may enable the court to determine whether
a prima facie showing has been made. When a prima facie showing has been made
entitling plaintiff to injunctive relief, a temporary injunction will be
granted without regard to the ultimate termination of the case on the merits.
MailSource, LLC v. M.A. Bailey & Assocs., 356 S.C. 363, 368, 588
S.E.2d 635, 638 (Ct. App. 2003) (internal citations omitted).
We are aware that in determining whether a temporary
injunction should be granted, the merits of the case should not be considered beyond
determining whether a prima facie showing has been made. However, as noted by
the Supreme Court in
Strategic Resources, the party seeking injunctive
relief must establish it will likely succeed on the merits. Accordingly, we
review whether PWI has made a prima facie showing of the likelihood of succeeding
on the merits. Following our review, we have concluded that PWI failed to make
this showing.
This
Court addressed the enforceability of covenants not to compete in Faces
Boutique, Ltd. v. Gibbs, where we stated:
Covenants
not to compete contained in employment contracts are generally disfavored and
will be strictly construed against the employer. A restriction against competition must be narrowly drawn to
protect the legitimate interests of the employer. A covenant not to compete
will be upheld only if it is:
(1) necessary for the protection of the legitimate
interest of the employer;
(2)
reasonably limited in its operation with respect to time and place;
(3) not
unduly harsh and oppressive in curtailing the legitimate efforts of the
employee to earn a livelihood;
(4)
reasonable from the standpoint of sound public policy; and
(5)
supported by valuable consideration.
Moreover, each case concerned
with the enforceability of covenants not to compete contained in employment contracts
must be decided on its own facts. If a covenant not to compete is defective in
one of the above referenced areas, the covenant is totally defective and cannot
be saved.
318 S.C. 39, 41-42, 455 S.E.2d 707, 708-09 (Ct.
App. 1995) (internal citations omitted).
In
the case sub judice, we are troubled by the broad geographical scope and effective
time period of the non-compete agreement. The terms of the agreement restrict
Sims business activities within a 600 mile radius of Lexington, South Carolina, for three years following the completion of his employment with PWI. The
agreement, if enforceable, would bar Sims business activities in thirteen
states fully and in parts of nine other states. While the agreement bars Sims
activities in at least part of twenty-two states, PWI only conducted business
in five states. For these reasons, we are doubtful of the enforceability of
this agreement. See Poole v. Incentives Unlimited, Inc., 345 S.C. 378, 548 S.E.2d 207 (2001) (holding that a covenant not to compete is
enforceable if it is not detrimental to the public interest, is reasonably limited as to time and territory, and is supported by valuable
consideration).
To be entitled to injunctive relief, PWI must establish it would
suffer irreparable harm without such relief. We find no such showing. Generally,
pure economic loss is not sufficient to satisfy the requirement of showing an
irreparable harm where an adequate remedy is available at law. See MailSource, LLC,
356 S.C. at 370, 588 S.E.2d at 639 (stating the general rule is that an
injunction should be granted only where some irreparable injury is threatened
for which there is no adequate remedy at law). However, this Court has recognized an irreparable harm
where economic loss threatens the plaintiffs business as a whole. See Peek v. Spartanburg Regional Healthcare System, 367 S.C. 450, 455-56, 626 S.E.2d 34,
37 (Ct. App. 2005) (holding the complete loss of a professional practice
can be an irreparable harm).
PWI
failed to allege any irreparable harm arising from Sims business activities. Randy Cochran, one of PWIs owners and its president, testified PWI
no longer conducted business with CCI, one of its largest customers, as a
result of Sims activities. Cochran alleged the lost business represented
approximately thirty percent of PWIs overall business. However, PWI failed to
allege or present any evidence that Sims activities could cause the complete
loss of business for PWI.
The
only allegation of irreparable harm in this case is contained in the
non-compete agreement itself. The agreement states:
3.
Injunctive Relief. I acknowledge and
agree that in the event of a violation or threatened violation of any
provisions of this agreement, the Company will sustain irreparable harm and
will have the full right to seek injunctive relief, in addition to any other
legal remedy available, without the requirement of posting bond.
We are not satisfied that language
in the challenged agreement alone constitutes a sufficient showing of
irreparable harm, particularly when considering the overly broad scope of the
agreement. See Faces Boutique, Ltd. 318 S.C. at 42, 455 S.E.2d
at 709 (holding: If a covenant not to compete is defective in one . . . area[],
the covenant is totally defective and cannot be saved.). Accordingly, we find
the Master erred in finding PWI had satisfied the requirement of showing
irreparable harm, and therefore, the preliminary injunction should not have
been granted.
Sims also claims the Master committed error in failing to require
PWI to pay a bond pursuant to Rule 65(c), SCRCP. We agree.
Rule 65(c), SCRCP, provides:
no restraining order or temporary
injunction shall issue except upon the giving of security by the applicant, in
such sum as the court deems proper, for the payment of such costs and damages
as may be incurred or suffered by any party who is found to have been
wrongfully enjoined or restrained.
PWI argues the deems proper
language of Rule 65, SCRCP, provides the Master with discretion to set no bond
at all. PWI also argues the language of the non-compete argument, which states
PWI has a right to seek injunctive relief without the requirement of posting
bond, justifies the Masters refusal to set bond. We are not persuaded by
either argument.
In Atwood Agency
v. Black, 374 SC 68, 646 S.E.2d 882, (2007), the Supreme Court of
South Carolina recently addressed the issue of the discretion provided to trial
courts by Rule 65, SCRCP. Atwood Agency is a vacation rental business on Edisto Island, South Carolina. Elaine Shaw was employed by Atwood Agency for fifteen
years. When Shaws employment with Atwood Agency ended, she went to work for
another vacation rental business, Edisto Sales and Rental Realty, Inc. Atwood Agency
filed suit against Shaw and her new employer. The circuit court granted Atwood
Agency a temporary injunction, restraining Shaw and her employer from
contacting or contracting with Atwoods clients. The court set bond in the
amount of $250.
Shaw
and her employer challenged the underlying temporary injunction and argued the
amount of bond was inadequate. The Supreme Court reversed and remanded, explaining:
[t]he circuit courts order requiring only a nominal security bond does not
satisfy Rule 65(c) because it erroneously assumes the injunction is proper
instead of providing an amount sufficient to protect appellants in the event
the injunction is ultimately deemed improper. 374 SC 68, 78, 646 S.E.2d 882,
884. The Supreme Court ruled Shaw and her employer had been improperly
enjoined and remanded the matter back to the circuit court to award the
appropriate amount of costs and damages incurred as a result of the temporary
injunction. Id.
We find that if
setting nominal bond is not within the discretion of the trial court, setting
no bond is likewise beyond the trial courts discretion. Furthermore, to allow
the language of the non-compete argument to control whether a bond is required
would impose the same flawed reasoning upon Sims as that rejected in Atwood:
to erroneously assume[] the injunction is proper instead of providing an
amount sufficient to protect appellants in the event the injunction is
ultimately deemed improper. Id.
CONCLUSION
For the reasons
stated above, we reverse the Masters grant of a preliminary injunction and
remand the matter back to the Master for further proceedings to determine if
Sims has incurred any cost or suffered any damages as a result of the improper
injunction and to award appropriate relief. Accordingly, the order of the
Master is
REVERSED and
REMANDED.
ANDERSON, SHORT,
and THOMAS JJ., concur.
[1] We decide this case without oral argument pursuant to
Rule 215, SCACR.