Sanford v. RDA Consultants, Ltd.

535 S.E.2d 321, 244 Ga. App. 308, 2000 Fulton County D. Rep. 2655, 2000 Ga. App. LEXIS 697
CourtCourt of Appeals of Georgia
DecidedJune 1, 2000
DocketA00A0025
StatusPublished
Cited by14 cases

This text of 535 S.E.2d 321 (Sanford v. RDA Consultants, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sanford v. RDA Consultants, Ltd., 535 S.E.2d 321, 244 Ga. App. 308, 2000 Fulton County D. Rep. 2655, 2000 Ga. App. LEXIS 697 (Ga. Ct. App. 2000).

Opinion

Ellington, Judge.

Robert M. Sanford appeals from a Cobb County Superior Court order granting an injunction against him in favor of his former employer, RDA Consultants, Ltd. The trial court issued the injunction following its determination that Sanford had violated a restrictive covenant in his employment contract with RDA. After reviewing the record on appeal, this Court finds that portions of both the covenant- and the injunction are unenforceable under Georgia law, and we reverse those portions of the trial court’s order.

RDA is a software development consulting services company that conducts business in five states, including Georgia, and the District of Columbia. RDA opened its Atlanta office in March 1998 and hired Sanford in May 1998. On May 27, 1998, Sanford signed an employment contract that contained the following provision:

As part of this agreement to accept employment, you agree that full rights to any and all work performed and products developed by you for fee or compensation during your tenure with the firm belong to RDA. Further, any information pertaining to clients such as their plans, products, and financial information should be considered proprietary information and should not be disclosed to any persons not employed by RDA. Employment is at will and in the case of employment *309 termination, for any reason, at the decision of either party, you agree for a period of one year from the date of termination not to accept employment with or provide services, competitive to RDA’s own, to any current RDA customers or customers RDA has worked with during the two years prior to employment termination and not to attempt to employ or assist any other person in employing or soliciting for employment any employee employed by RDA.

During his employment with RDA, Sanford used RDA’s software product, ROOP, 1 and was given videos, written documents, and other supporting materials about the product. Sanford’s supervisor testified that RDA spent between $500,000 and $1,000,000 over approximately four years while developing ROOP.

On December 14, 1998, Sanford sent his supervisor a letter of resignation by electronic mail. Within weeks, Sanford started his own company and was consulting with one of RDA’s customers, UPS. Sanford also contacted RDA employees about leaving the company.

RDA notified Sanford that his actions were in violation of his employment agreement. When Sanford refused to discontinue his activities, RDA filed suit to enforce the agreement through an injunction and for breach of contract. RDA also moved for a temporary restraining order against Sanford.

On April 1, 1999, the trial court conducted a hearing and, after considering additional evidence submitted by the parties, issued its order on May 26, 1999. The trial court made the following factual findings and legal conclusions: (1) the restrictive covenant in Sanford’s employment contract was reasonable, even absent a territorial restriction, citing W. R. Grace & Co. v. Mouyal, 262 Ga. 464 (422 SE2d 529) (1992); (2) Sanford performed work for an RDA customer and directly competed with an RDA bid for work with another existing RDA customer; (3) Sanford talked with RDA employees about resigning and working with him in the future; and (4) ROOP was proprietary information belonging to RDA, and Sanford violated the restrictive covenant by using ROOP after his resignation from RDA.

Based upon such findings, the trial court issued an injunction, “in accordance with the restrictive covenant,” prohibiting Sanford from the following for a period of one year from the date of his employment termination with RDA:

(1) performing services, submitting proposals to, and servicing the following customers of [RDA] with whom [Sanford] *310 rendered services to in the Atlanta office, to wit: UPS, HBOC, RMC, Cox Interactive Media, AT&T, and Mercedes Benz Credit Corporation; (2) soliciting or attempting to employ any of [RDA’s] present employees; (3) using or disclosing any of [RDA’s] proprietary materials, including, but not limited to, ROOP; and (4) using improper means to interfere with business opportunities for Plaintiff.

Sanford appeals from the trial court’s order granting this injunction. Held:

1. In his first enumeration, Sanford claims that the trial court erred as a matter of law in restraining him from performing services, submitting proposals to, and servicing RDA’s customers. We agree, because the noncompetition covenant as written was unenforceable under Georgia law.

Because covenants against competition in employment agreements are in partial restraint of trade, they are upheld only when strictly limited, both in time and geographical effect, and when the restrictions are otherwise reasonable, considering the business interests of the employer needing protection and the effect of the restrictions on the employee.

(Citation omitted.) Wolff v. Protege Systems, 234 Ga. App. 251, 252 (1) (a) (506 SE2d 429) (1998). Georgia’s courts use a three-element test of duration, territorial coverage, and scope of activity as a “helpful tool” in examining the reasonableness of a restrictive covenant in an employment contract, based upon the particular factual setting to which it is applied. W. R. Grace & Co. v. Mouyal, supra at 465 (1). Applying this test to the noncompetition clause before us, we find that the lack of limitations on territorial coverage and scope of activity makes the provision unreasonably overbroad and, therefore, unenforceable as a matter of law.

The evidence presented at the hearing showed that, at the time Sanford resigned, RDA had approximately forty-five customers in five states and the District of Columbia. The plain language of the agreement prohibited Sanford from working for any of its current customers for one year, as well as any customer served by RDA during the two years prior to Sanford’s resignation. Even though RDA has repeatedly asserted otherwise, this provision prohibited Sanford from seeking employment with these customers regardless of whether he served the customer during his employment with RDA. “[A] prohibition against doing business with any of an employer’s customers, whether or not a relationship existed between the customer and the former employee, is overbroad.” (Emphasis in origi *311 nal.) W. R. Grace & Co. v. Mouyal, supra at 467 (2), n. 2. See also American Software v. Moore, 264 Ga. 480, 483 (1) (448 SE2d 206) (1994).

Further, at the time he signed the agreement, Sanford could not determine with any certainty the extent of the noncompetition provision. See Fuller v. Kolb, 238 Ga. 602, 603-604 (234 SE2d 517) (1977) (the problem with this type of covenant is the lack of notice to the former employee regarding whether he will be in violation of the covenant by accepting certain employment opportunities). Since any territorial limitations on his future employment opportunities could not be determined until Sanford resigned from RDA, the provision is invalid. Ceramic &c. Corp. v. Hizer,

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Bluebook (online)
535 S.E.2d 321, 244 Ga. App. 308, 2000 Fulton County D. Rep. 2655, 2000 Ga. App. LEXIS 697, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sanford-v-rda-consultants-ltd-gactapp-2000.