Title: Systems and Software, Inc. v. Barnes

State: vermont

Issuer: Vermont Supreme Court

Document:

Systems and Software, Inc. v. Barnes (2004-401); 178 Vt. 389; 886 A.2d 762

2005 VT 95

[Filed 19-Aug-2005]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 2005 VT 95

                                No. 2004-401

  Systems and Software, Inc.	                 Supreme Court

                                                 On Appeal from
       v.	                                 Chittenden Superior Court

  Randy Barnes	                                 April Term, 2005

  Ben W. Joseph, J.

  Wanda Otero-Ziegler of Paul Frank + Collins P.C., Burlington, for
    Plaintiff-Appellee.

  Pietro Lynn and Matthew Siebel of Lynn, Thomas & Mihalich, P.C.,
    Burlington, for  Defendant-Appellant.

  PRESENT:  Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and 
            Allen, C.J. (Ret.), Specially Assigned

       ¶  1.    REIBER, C.J.   Defendant Randy Barnes appeals the superior
  court's order enjoining him from working for Utility Solutions, Inc. or any
  other direct competitor of his former employer, plaintiff Systems &
  Software, Inc., for a six-month period pursuant to the noncompetition
  agreement that he signed when he began working for plaintiff.  He argues
  that the trial court should not have enforced the agreement because (1)
  plaintiff did not have a legitimate protectable interest; (2) the agreement
  contains unnecessary restrictions and imposes an undue hardship on him; (3)
  in any event, he did not violate the agreement; and (4) even if he did,
  plaintiff should be estopped from enforcing it.  We affirm.
   
       ¶  2.    Plaintiff, a Vermont corporation located in Colchester,
  Vermont, is engaged in the business of designing, developing, selling, and
  servicing software that allows utility providers to organize data regarding
  customer information, billing, work management, asset management, and
  finance and accounting.  In August 2002, plaintiff hired defendant as an
  at-will employee to become a regional vice-president of sales.  At the time
  he commenced work for plaintiff, defendant signed a noncompetition
  agreement that, among other things, prohibited him-during his employment
  and for six months thereafter-from becoming associated with any business
  that competes with plaintiff.  In April 2004, defendant voluntarily left
  his position with plaintiff and started a partnership with his wife called
  Spirit Technologies Consulting Group.  Spirit Technologies' only customer
  was Utility Solutions, Inc., which, like plaintiff, services municipalities
  and utilities nationwide with respect to customer-information-systems
  software.

       ¶  3.    On April 27, 2004, plaintiff filed a complaint and a request
  for injunctive relief that sought enforcement of the parties'
  noncompetition agreement.  A hearing was held in June 2004, and on July 22,
  2004, the superior court granted plaintiff an injunction.  In its final
  judgment order dated August 6, 2004, the court enjoined defendant from
  working as a consultant or otherwise with Utility Solutions or any other
  direct competitor of plaintiff.  Defendant appeals from that judgment. 
  Pursuant to a provision of the parties' noncompetition agreement, the
  six-month non-competition period will not begin until a final
  non-appealable judgment is rendered.
   
       ¶  4.    Like many other courts, this Court has adopted a position
  with respect to enforcement of noncompetition agreements similar to that
  set forth in section 188(1) of the Restatement (Second) of Contracts
  (1981), which provides that a restrictive covenant "is unreasonably in
  restraint of trade if (a) the restraint is greater than is needed to
  protect the promisee's legitimate interest, or (b) the promisee's need is
  outweighed by the hardship to the promisor and the likely injury to the
  public."  Cf. Restatement (Third) of Employment Law § 6.05 (Preliminary
  Draft No. 2, May 17, 2004) ("A court will enforce a restrictive covenant in
  an employment agreement to the extent that enforcement is reasonably
  tailored to protect a legitimate interest of the employer.").  We have
  stated that "we will proceed with caution" when asked to enforce covenants
  against competitive employment because such restraints run counter to
  public policy favoring the right of individuals to engage in the commercial
  activity of their choice.  Roy's Orthopedic, Inc. v. Lavigne, 142 Vt. 347,
  350,