Julie Ray Murray had worked as an accountant for Accounting Center and Tax Services for eight years
Question:
Julie Ray Murray had worked as an accountant for Accounting Center and Tax Services for eight years when her boss, Phillip Roberts, asked her to sign a noncompete agreement. Under the agreement, Murray would be unable to work for any of her former clients for two years after leaving the Accounting Center, unless she got written permission from the firm to do so. Moreover, if she chose to work for such clients without written permission, she would be obligated to pay the Accounting Center an amount set out by the terms of the agreement. The agreement also contained an assignment clause that permitted Accounting Services to transfer the noncompete agreement, should the firm be sold. That is exactly what happened. The firm was sold to Timothy Pinkelman and Murray’s noncompete agreement was assigned to him as part of that sale. Despite this, Pinkelman tried to persuade Murray to sign a new noncompete agreement that included a change in her compensation. Under the old system, she was an hourly employee. Under the new system, she would be paid on commission. Murray refused to sign the new non-compete agreement and Pinkelman fired her. Two days later Pinkelman sent a letter to Murray reminding her of the original noncompete agreement and warning her that, should she violate the agreement, she would be subjected to a wide variety of legal consequences, none of them pleasant.
Undaunted, Murray worked for the prohibited clients and, as a preemptive strike, brought a lawsuit against the Accounting Center seeking a declaratory judgment that would strike down the noncompete agreement as unfair. The trial court agreed with Murray and the Accounting Center appealed that decision.
The Court’s Opinion Skow, Judge This is an appeal from a judgment by the Lucas County Court of Common Pleas, granting summary judgment in favor of appellee, Julie Ray Murray, and against appellants, Accounting Center & Tax Services, Inc. and TPAC, Inc. For the reasons that follow, we reverse the judgment of the trial court.
(Note: TPAC, Inc. and Accounting Center &Tax Services, Inc. are one and the same entity, TPAC, Inc. having changed its name to Accounting Center & Tax Services sometime after February 27, 2004. Thus, although the complaint in this case names both TPAC, Inc. and Accounting Center & Tax Services, Inc. as defendants, there is, in fact, just one defendant corporation.) . . .
On January 16, 2007, Murray filed a complaint in this action seeking declaratory judgment. Appellant responded with an answer and counterclaim. The parties subsequently filed cross-motions for summary judgment, and on December 12, 2007, the trial court issued an opinion and judgment entry granting Murray’s motion for summary judgment that appellant currently appeals, raising the following assignment of error: I. “The trial court erred as a matter of law when it found that the non-compete agreement entered into between the plaintiff-appellee and her former employer was not enforceable by defendant-appellant.”
An appellate court reviewing a trial court’s granting of a summary judgment does so de novo, applying the same standard used by the trial court. Grafton v. Ohio Edison Co. (1996), 77 Ohio St. 3d 102, 105, 671 N.E.
2d 241. Civ. R, 56 (C) provides:
“Summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if any, timely filed in the action, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. No evidence or stipulation may be considered except as stated in this rule. ***.”
Summary judgment is proper where (1) no genuine issue as to any material fact remains to be litigated and (2) the moving party is entitled to judgment as a matter of law, and (3) when the evidence is viewed most strongly in favor of the nonmoving party, reasonable minds can come to but one conclusion, a conclusion adverse to the nonmoving party. Ryberg v. Allstate Ins. Co. (July 12, 2001), 10th Dist. No. 00AP-1243, 2001 WL 777121, citing Tokles & Son, Inc. v. Midwestern Indemn. Co. (1992), 65 Ohio St. 3d 621, 629, 605 N.E. 2d 939.
The moving party bears the initial burden of informing the trial court of the basis for the motion and identifying those portions of the record that demonstrate the absence of a genuine issue of fact as to an essential element of one or more of the nonmoving party’s claims.
Dresher v. Burt (1996), 75 Ohio St. 3d 280, 292, 662 N.E. 2d 264. Once the burden has been satisfied, the nonmoving party has the burden as set forth at Civ. R. 56 (E), to offer specific facts showing a genuine issue for trial Id.
The instant case requires us to determine: (1)
whether the 1999 employment-and-noncompete agreement was properly assigned to appellant when it acquired Roberts’s business; and if so, (2) whether, and to what extent, the 1999 employment-and-noncompete agreement is enforceable against Murray.
Here, the assignment clause contained within the 1999 employment-and-noncompete agreement expressly provides that the agreement and its provisions are transferable upon the merger or sale of the firm. The agreement (although clearly not the product of any meaningful negotiation) was signed, and apparently assented to, by Murray. In 2004, in conjunction with Roberts’s sale of the firm to appellant, the employment-andnoncompete was properly assigned to appellant by way of the assignment-and-assumption agreement executed by Roberts and Pinkelman. Arguing that there was no valid assignment, Murray points out that she was not notified of the assignment at the time of the 2004 transfer of the business. In making this argument, Murray fails to cite (and this court’s research fails to reveal) any authority to support her position that notification to her was required for a valid assignment.
Having found that the 1999 employment-and-noncompete agreement was validly assigned, we must next determine whether, and to what extent, it may be enforced against Murray. In Ohio, reasonable noncompete agreements are enforced, and unreasonable noncompete agreements are enforced to the extent necessary to protect an employer’s legitimate interest. Procter &
Gamble Co. v. Stoneham (2000), 140 Ohio App. 3d 260, 270, 747 N.E. 2d 268. “A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.” Raimonde v. Van Vlerah (1975), 42 Ohio St. 2d 21, 71 O.O. 2d 12, 235 N.E. 2d 544, paragraph two of the syllabus. If a covenant not to compete is unreasonable, courts are empowered to modify the terms to create a reasonable covenant between the parties. Rogers v. Runfola & Assoc., Inc. (1991), 57 Ohio St. 3d 5, 8, 565 N.E. 2d 540. In so doing the courts should consider the following factors: “‘[T]he absence or presence as to time and space, * * * whether the employee represents the sole contact with the customer; whether the employee is possessed with confidential information or trade secrets; whether the covenant seeks to eliminate competition which would be unfair to the employer or merely seeks to eliminate ordinary competition; whether the covenant seeks to stifle the inherent skill and experience of the employee; whether the benefit to the employer is disproportional to the detriment to the employer; whether the covenant operates as a bar to the employee’s sole means of support; whether the employee’s talent which the employer seeks to suppress was actually developed during the period of employment; and whether the forbidden employment is merely incidental to the main employment.’ ***.” Id., quoting Raimonde, 42 Ohio St. 2d at 25, 72 O.O. 2d 12, 325 N.E.2d 544.
With these facts in mind, we conclude that the restraints and resulting hardships on Murray do, in fact, exceed that which is reasonable to protect appellant’s legitimate business interests. Temporally, Murray is prohibited from working for customers of appellant for a period of 24 months. For 16 years, Murray has supported herself, in whole or in part, by doing tax-preparation work. She has done so by working for employers, such as appellant, and by working on her own. We find that imposing a two-year time restriction is unreasonable and will create an undue hardship on her.
Our inquiry does not end here, however. We must next determine whether some restrictions prohibiting Murray from competing are necessary to protect appellant’s business interests. The record reveals that appellant and his predecessor in interest developed a clientele with which Murray had direct contact, on a regular and ongoing basis. Certainly, appellant has a legitimate commercial interest to protect. For this reason, we find appellant’s assignment of error well taken.
Balancing the restraints and projected hardships on Murray with appellant’s interests, and upon the authority of Raimonde, 42 Ohio St. 2d 21, 71, O.O. 2d 12, 325 N.E. 2d 544 and App. R. 12 (B), we modify the 24-month restriction as follows:
Sixty days from the date of this order, Murray shall be prohibited for a period of one year from servicing appellant’s clients.
For all of the foregoing reasons, the judgment of the Lucas County Court of Common Pleas is reversed. Appellee is ordered to pay the costs of this appeal pursuant to App. R. 24. Judgment for the clerk’s expense incurred in preparation of the record, fees allowed by law, and the fee for filing the appeal is awarded to Lucas County.
Questions
1. What is a summary judgment motion? What must be proven for a successful summary judgment motion? Who has the initial burden? What is that burden? What happens when the burden shifts to the other party? What is that party’s responsibility at that point? Explain everything here.
2. Who is the assignor in this assignment? Who is the assignee? Who is the obligor? Explain.
3. The court labels the transfer of Murray’s employmentand-
noncompete agreement from Roberts to Pinkelman as an assignment. Is the court correct or are is the transfer actually a novation? Explain.
4. The court concludes that Roberts had no duty to give notice of the assignment (if it was an assignment)
to Murray? Is the court correct here? Explain.
5. As we learned in Chapter 12, the law states that “a party may not delegate duties that are of a personal or professional nature.” Is that what happened in this case? Why or why not?
6. Has the assignor transferred any warranties to the assignee in this case? If not, why not? If so, what are they?
7. What are the limits that are placed on Murray in the noncompete agreement?
8. How does the court evaluate these limits? Are they fair or unfair? Do you agree or disagree with the court? Explain.
9. What consideration did Roberts transfer to Murray for her signature on the noncompete agreement? Is this consideration adequate? Explain. What consideration did Pinkelman promise to transfer to Murray for her signature on the noncompete agreement? Would that consideration have been adequate? Why or why not?
10. In general, noncompete agreements like the one in this case are not favored by the law. Why is this so?
Step by Step Answer:
Business Law With UCC Applications
ISBN: 9780073524955
13th Edition
Authors: Gordon Brown, Paul Sukys