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KESSLER et al. v. PURITAN CHEMICAL CO.

Supreme Court of Georgia1958-02-07No. 19929
213 Ga. 845

Summary

Holding. The court affirmed the injunction against the two former employees who signed the non-compete agreements and demonstrated a breach through solicitation and sales within the restricted territory, but reversed the injunction against the corporate defendant and the former employee's wife because they were not parties to the restrictive covenants and the petition alleged no independent basis to bind them.

Puritan Chemical Company sought to enforce non-compete agreements against two former employees and others who had begun selling competing products in the employees' designated sales territories during employment and within the two-year post-employment restriction period. The former employees had solicited customers they previously served for Puritan and the competing business had shipped goods to those customers.

The court upheld the non-compete provisions as reasonable in time and geographic scope, rejecting arguments that the language describing Puritan's business was too vague. The court found the contracts sufficiently definite because they could be applied to businesses similar to Puritan's sanitary-supply operations. However, the court found a critical defect: the petition against a corporate defendant and the wife of one former employee failed because neither was a party to the restrictive covenants, and nothing in the pleadings explained why they should be bound by restrictions on others' conduct.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Enforceability of non-compete clauses in employment contracts
  • Whether restrictive covenants are reasonable in time and territorial scope
  • Whether non-signatory parties can be enjoined under restrictive covenants
  • Whether evidence of contract violations rendered written agreements unenforceable

Procedural posture

Plaintiffs in error appealed from a trial court judgment granting a temporary injunction after overruling their demurrers to Puritan Chemical Company's petition for injunctive relief.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Duckworth, Chief Justice.

Two- of the plaintiffs in error entered into employment contracts to sell petitioner’s products and merchandise in specifically designated territories, and agreed that, during the the time of their employment and for two years after the termination thereof, they would not engage in competition in the area covered by their contracts on behalf of themselves or others. Puritan Chemical Company, the defendant in error and petitioner, sought to enjoin the defendants from conspiring with each other and others to form a competitive business and engage in the sanitary-supply business, in the territory included in the employment contracts, before their contracts had terminated and within two years after the termination of their employment with the petitioner. Demurrers to the petition were filed, heard, and overruled; and after an interlocutory hearing the defendants were temporarily enjoined as prayed. A stipulation was entered before the hearing that two of the defendants, who were the former employees that had executed the employment contracts containing the negative restrictive covenants, had solicited business within the restricted area of the contracts and had sold, and the defendant corporation had shipped goods, to customers who had previously been solicited for business by these defendants as salesmen for the petitioner. The exceptions are to the overruling of the demurrers, to certain rulings made during the hearing, and to the judgment temporarily enjoining the defendants as prayed. Held:

1. The petition alleging violations of negative restrictive covenants of employment contracts, which are reasonable as to time and area and not otherwise unreasonable, the court did not err in overruling the demurrers thereto as to the defendants who were parties to the contracts. While other businesses might fall within the broad category of the language used to describe the petitioner’s business “or any phase thereof,” it is not so indefinite and vague as to be unreasonable, such contracts being divisible as to all other businesses except those similar to the petitioner’s. See Hood v. Legg, 160 Ga. 620 (4) (128 S. E. 891); Shirk v. Loftis Brothers & Co., 148 Ga. 500 (97 S. E. 66). Compare also McCullough Brothers v. Speer, 175 Ga. 521 (165 S. E. 585); Friedman v. Friedman, 209 Ga. 653 (74 S. E. 2d 860).

2. But the petition fails to allege a cause of action against the defendant corporation and the defendant wife of one of the petitioner’s former employees, neither of whom are parties to the contracts containing the restrictive covenants. Hence, the court erred in overruling the demurrers as to them and in enjoining them as prayed, there being no reasons alleged or shown to prevent them from engaging in business in competition with the petitioner regardless of who the corporation’s stockholders are or who might be the defendant wife’s husband.

Submitted January 16, 1958

Decided February 7, 1958

Rehearing denied March 7, 1958.

Phillips & Johnson, for plaintiffs in error.

Heyman, Abram & Young, contra.

3. While plaintiffs in error sought to show by evidence that the written contracts had been on numerous occasions violated and disregarded, and as a result thereof the contracts were no longer valid and enforceable, the parties having allegedly substituted parol contracts in lieu of the written contracts, the evidence submitted was insufficient to show any departure from the restrictive covenants, although there may have been some changes in the contracts which were waived by the parties or agreed to in writing.

4. Having read with care the numerous and voluminous exceptions to rulings made by the court during the interlocutory hearing, none of which shows abuse of the court’s wide discretion in hearing evidence during such a hearing, and the evidence and stipulation being sufficient to prove the allegations of the petition as against the remaining defendants, the court did not err in enjoining the former employees as prayed.

Judgment affirmed in part and reversed in part.

All the Justices concur.