U3S Corp. of America v. Parker

414 S.E.2d 513, 202 Ga. App. 374, 1991 Ga. App. LEXIS 1763

• Court: Court of Appeals of Georgia
• Decided: December 5, 1991
• Docket: A91A0805
• Status: Published

Opinions

Pope, Judge.

U3S Corporation of America d/b/a Must Software International (“Must”) purchased a computer software product line known as Nomad from D&B Computing Services, Inc. (“D&B”). Subsequently, Must hired former D&B employees Doris Bihm and Joe Oliver to serve as professional services consultants to its customers, but did not hire former D&B employee Larry Parker. Parker established Diversified Business Systems, Inc. (“Diversified”) and Bihm and Oliver, while still employed by Must, each invested $10,000 to become shareholders of Diversified. First Bihm and then Oliver left Must to work for Diversified. Diversified provides professional consulting services to clients which use Nomad software. Must claims that by engaging in these services, Bihm and Oliver have breached the terms of their employment contract with Must and Parker has breached the terms of his employment contract with D&B which, Must claims, it is entitled to enforce.

Must filed suit against Diversified and the three individuals seeking certain injunctive relief and damages for breach of the terms and conditions of employment contracts, tortious interference with contractual relationships, conspiracy to commit tortious interference with contractual relationships, breach of the duty of loyalty and good faith and, against Parker and Diversified, aiding and abetting Bihm and Oliver to breach their duty of loyalty and good faith. The defendants counterclaimed for damages for abusive litigation. The trial court granted defendants’ motion for summary judgment on those three counts of the complaint alleging breach of terms and conditions of employment contracts and the two counts alleging conspiracy to commit tortious interference with contractual relationships. The trial court denied Must’s motion for partial summary judgment on the counterclaim. Must appeals these rulings. The trial court also granted defendants’ motion for summary judgment on the two counts of the complaint in which Must sought injunctive relief, but Must does not appeal these rulings.

1. Preliminarily, we note that all parties to this appeal have relied heavily in their briefs on hearsay evidence. In arriving at the disposition of this appeal we have not considered inadmissible hearsay evidence but have relied, primarily, upon the terms of the various written contracts which were properly before the trial court on the motions for summary judgment.

2. Must first argues the trial court erred in granting summary judgment to defendants on those counts of the complaint alleging breach of the terms and conditions of each individual’s employment contract (Counts I, II and V).

(a) In regard to defendant Parker, Must claims Parker’s activities with Diversified constitute a breach of the terms and conditions of his previous employment with D&B. The threshold issue is whether Must is entitled to enforce D&B’s rights under Parker’s employment contract.

Must purchased the rights to the Nomad software line pursuant to an asset purchase agreement. The assignment to Must of rights under the terms and conditions of D&B’s employment contracts was made by a separate document to the asset purchase agreement. D&B’s employment agreement rights were assigned to Must only “to the extent that such employment agreements relate to the System and the NOMAD2 Business (as defined in the Asset Purchase Agreement ...)... .” This proviso merely served to exclude from the assignment the right to enforce those employment agreement rights which are unrelated to that part of the business which was sold to Must. The purchase agreement documents clearly show, however, that Must was assigned the right to enforce any violation of an employment agreement that related in any way to that part of the business sold to Must. Since D&B no longer holds any interest in the System and Nomad2 business, to construe the agreement otherwise, as set forth in the dissenting opinion, would lead to the absurd result of leaving no party with the authority to protect the System and Nomad2 business from nondisclosure and non-solicitation violations.

Schedule A of the asset purchase agreement describes the assets assigned under “The System” as “[a]ll of the assets, properties, rights, businesses, operations and goodwill of Seller related to the System. . . .” (Emphasis supplied.) Pursuant to the terms of the asset purchase agreement, the obligations assumed by the purchaser include: “Customer Contracts. All obligations of Seller under any license, agreement, contract . . . including Consulting or Professional Services Agreements. ...” Thus, contrary to the conclusion of the dissenting opinion, the asset purchase agreement assigned to Must far more that just the product development or marketing aspect of D&B’s business. It is obvious from the asset purchase agreement that D&B assigned to Must all interest in that part of its business known as the System, including professional services to customers. Thus, the assignment of rights under the terms and conditions of employment agreements included D&B’s employment contracts with professional service employees whose work related to the System, such as defendant Parker. To the extent that the terms and conditions of Parker’s employment contract are enforceable, Must was assigned the right to enforce them.

The pertinent part of the terms and conditions of Parker’s employment contract states: “Employee will regard and preserve as confidential all information pertaining to the Company’s business that may be obtained by him from any source as a result of his employment hereunder and he will not, without written authority from the Company, disclose to any persons, or use for his own benefit, during his employment or for a period of two (2) years thereafter, any such information relating to methods, processes, apparatus, programs or other materials conceived, designed, created or heretofore or hereafter used or developed by the Company or any of its customers, customers’ lists, pricing and pricing methods, agents, suppliers or contractors, all such information being considered to relate to trade secrets and to be confidential information of the Company; he will not solicit or in any manner encourage employees of the Company to leave the employ of the Company. . . . This agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, beneficiaries, successors and assigns.”

The trial court denied Parker’s motion for summary judgment on those two counts of the complaint alleging tortious interference with Must’s contractual relationships with Bihm and Oliver, expressly finding that issues of fact remain concerning Parker’s liability for hiring Bihm and Oliver away from Must. One of the issues we must consider, then, is whether the alleged interference with the employment contracts of Bihm and Oliver is also a breach of the non-solicitation covenant of Parker’s employment contract, as set forth above.

Parker argues the non-solicitation covenant is unenforceable because it is vague and ambiguous and not limited in time. We do not believe that the phrase “or in any manner encourage employees of the Company to leave” is so vague or ambiguous as to be unenforceable. For example, in Lane Co. v. Taylor, 174 Ga. App. 356, 360 (2b) (330 SE2d 112) (1985), this court held enforceable a non-solicitation clause which included the phrase “or directly or indirectly cause any . . . employee to leave his employment in order to work for another.” Id. We also reject Parker’s argument that the two-year limitation contained in the nondisclosure clause of his employment contract does not apply to the non-solicitation clause. Although the non-solicitation clause is set apart from the nondisclosure clause by a semi-colon, the time limitation is contained in the same sentence as the non-solicitation clause and, pursuant to the rules of construction, the time limitation applies to each restriction in the sentence, even those appearing after the semi-colon. See OCGA § 13-2-2 (6); Bridges v. Home Guano Co., 33 Ga. App. 305 (125 SE 872) (1924). Thus, the trial court erred in granting summary judgment to defendant Parker on Counts I and II of the complaint alleging breach of the non-solicitation clause of his employment contract.

The trial court also granted summary judgment to Parker on Count V of the complaint alleging breach of the nondisclosure clause of his employment contract. Parker argues the nondisclosure clause is overly broad and therefore unenforceable. In particular, Parker argues that the record shows Must’s customer lists are a matter of public record and since the disclosure of customer lists is one of the items of information he was prohibited from disclosing, then pursuant to the holding in Nasco, Inc. v. Gimbert, 239 Ga. 675 (238 SE2d 368) (1977), the nondisclosure clause is therefore unenforceable. In Nasco, the nondisclosure clause applied to “ ‘any information concerning any matters affecting or relating to the business of employer’ including but not limited to [certain specific information].” Id. at 676 (3). The Supreme Court noted that “[t]here is a great deal of public information concerning many matters which would affect or relate to the business of the employer; e.g., interest rates or minimum wage legislation.” Id. Consequently, the court held the nondisclosure provision was overly broad and unenforceable. In this case, however, while the nondisclosure provision includes at least one item of information, which is available to the public, the duty not to disclose is limited to “information . . . that may be obtained by him from any source as a result of his employment. . . .” Thus, the nondisclosure clause does not prohibit the disclosure of information obtained through public knowledge and is not overly broad.

Despite the public policy disfavoring agreements in restraint of trade, “ ‘ [i]f, considered with reference to the situation, business, and objects of the parties, and in light of all the surrounding circumstances . . . the restraint contracted for appears to have been for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them, and not specially injurious to the public, the restraint will be held valid.’ [Cits.]” Durham v. Stand-By Labor of Ga., 230 Ga. 558, 561-562 (2) (198 SE2d 145) (1973). Here, the nondisclosure clause is reasonably related to protecting the interests of the owner of a computer software system against competitive use by a former employee of that special knowledge he would have naturally obtained as a result of his employment. “[I]t is clear that the items listed are confidential business information which are protectable as such, and that this provision does not prohibit the [defendant’s] using the skills and dexterity which he has acquired [during his employment with plaintiff’s predecessor in interest] with any new employer. . . .” Nunn v. Orkin Exterminating Co., 256 Ga. 558, 559 (2) (350 SE2d 425) (1986). Consequently, we hold the trial court erred in granting summary judgment to Parker on Must’s claim that Parker breached the nondisclosure clause of his employment contract.

(b) In regard to defendants Bihm and Oliver, Must claims their activities with Diversified constitute a breach of the terms and conditions of employment contained in the identical written contracts they both signed when they accepted employment employment with Must. The contracts contained a clause prohibiting the employee from disclosing confidential information to third parties without the employer’s written consent. The nondisclosure clause contained no time limitation and is therefore unenforceable. See Howard Schultz & Assoc. v. Broniec, 239 Ga. 181 (4) (236 SE2d 265) (1977); Thomas v. Best Mfg. Corp., 234 Ga. 787 (1) (218 SE2d 68) (1975). Thus, the trial court did not err in granting summary judgment to defendants Bihm and Oliver on the claim in Count V of the complaint that their activities violated the nondisclosure clause of their employment contracts.

The non-solicitation covenant in the two employment contracts, however, was limited to two years. It cannot be said that such a period is excessive, considering the nature of the business activity involved. See Lane Co. v. Taylor, supra at (2). The covenant provided that the employee would not, for two years after termination, “solicit or otherwise encourage others to leave” their employment with Must. (Emphasis supplied.) For the reasons set forth in Division 2a, we reject defendants’ argument that the phrase “or otherwise encourage others to leave” is so vague as to make the covenant unenforceable. The reasonably limited non-solicitation covenant was separate from the unenforceable nondisclosure covenant and may be separately enforced. See Kem Mfg. Corp. v. Sant, 182 Ga. App. 135 (3) (355 SE2d 437) (1987); Lane Co. v. Taylor, supra.

Plaintiff claims Bihm violated the non-solicitation clause of her employment contract by encouraging Oliver to leave his job with Must and join her and Parker at Diversified. The trial court denied defendant Bihm’s motion for summary judgment on the count of the complaint alleging she joined with Parker and Diversified to interfere tortiously with Must’s contractual relationship with Oliver, expressly finding that issues of fact remain concerning Bihm’s liability for hiring Oliver away from Must. By the same token, issues of fact remain concerning whether Bihm’s alleged interference with Must’s contractual relationship with Oliver is also a breach of the non-solicitation covenant of her employment contract. Consequently, the trial court erred in granting summary to defendant Bihm on Must’s claim in Count II of the complaint for breach of the non-solicitation clause of her employment contract.

3. Must next argues the trial court erred in granting summary judgment to defendants on those counts of the complaint which allege defendants Parker and Diversified conspired to interfere tortiously with Bihm’s employment contract and that Parker, Bihm and Diversified conspired to interfere with Oliver’s employment contract (Counts VII and IX). According to Must, these rulings are inconsistent with the trial court’s denial of summary judgment on Count VIII of the complaint alleging Parker and Diversified are jointly liable for tortious interference with Must’s contractual relationship with Bihm and the denial of summary judgment on that count of the complaint alleging Parker, Bihm and Diversified are jointly liable for tortious interference with Must’s contractual relationship with Oliver.

“ ‘A civil conspiracy has been defined as a combination between two or more persons to do some unlawful act which is a tort or else to do some lawful act by methods which constitute a tort. The averment of a conspiracy in the declaration does not ordinarily change the nature of the action nor add to its legal force or effect. The gist of the action is not the conspiracy alleged, but the tort committed against the plaintiff and the damage thereby done wrongfully.’ (Citations and punctuation omitted.) Sofate of America v. Brown, 171 Ga. App. 39, 40 (318 SE2d 771) (1984).” Kem Mfg. Corp. v. Sant, supra at 143 (7c). The trial court properly granted summary judgment on the conspiracy counts of Must’s complaint because these counts are merely restatements of the claims set forth in the joint tortfeasor counts described above.

4. Finally, Must asserts the trial court erred in denying its motion for summary judgment on defendants’ counterclaim for damages for abusive litigation. The trial court granted summary judgment to defendants on seven of the eleven counts of the complaint but expressly found that four of the counts raised issues to be tried. As set forth in this opinion, the trial court erred in granting summary judgment to defendants on three of those five counts which were addressed in this appeal. Only the grant of summary judgment on those two counts which sought injunctive relief was unchallenged by Must on appeal. Consequently, issues remain to be tried in seven of the eleven counts set forth in the complaint (Count I, alleging Parker is liable for breach of contract for soliciting and encouraging Bihm to leave Must; Count II, alleging Parker and Bihm are liable for breach of contract for soliciting and encouraging Oliver to leave Must; Count V, alleging Parker is liable for breach of the nondisclosure clause of his employment contract, although summary judgment was properly granted to Bihm and Oliver on this count; Count VI, alleging Parker and Diversified are jointly liable for tortious interference with Bihm’s employment contract; Count VIII, alleging Parker, Bihm and Diversified are jointly liable for tortious interference with Oliver’s employment contract; Count X, alleging Bihm and Oliver breached their fiduciary duty to plaintiff; and Count XI, alleging Parker and Diversified aided and abetted the other two defendants’ breach of fiduciary duty). In the opinion of this court, the allegations of the complaint, even the two counts seeking injunctive relief, “can in no sense be categorized as being completely devoid of any justifiable issue of law or fact.” Guernsey Petroleum Corp. v. Data Gen. Corp., 183 Ga. App. 790, 796 (4) (359 SE2d 920) (1987). “Because the area of non-compete clauses is one in which similar clauses beget dissimilar results and each case must be considered on its own particular facts,” this court held, even in a case in which the non-compete clause on which the suit was based was unenforceable, that summary judgment was properly granted to plaintiff on defendant’s claim for abusive litigation. Colquitt v. Network Rental, 195 Ga. App. 244, 246 (2a) (393 SE2d 28) (1990). We hold that no issue exists concerning whether plaintiff’s complaint was “substantially frivolous, substantially groundless, or substantially vexatious.” Yost v. Torok, 256 Ga. 92, 96 (344 SE2d 414) (1986). Thus, the trial court erred in denying Must’s motion for summary judgment on defendants’ counterclaim for abusive litigation.

Judgment affirmed in part and reversed in part.

Sognier, C. J., Cooper, Andrews, JJ., and Judge Arnold Shulman concur. Beasley, J., concurs in judgment only. McMurray, P. J., Birdsong, P. J., and Carley, P. J., concur in part and dissent in part.