# FILED February 6, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS AT KNOXVILLE

HOMEBOUND MEDICAL CARE OF ) HAMILTON CHANCERY SOUTHEAST TENNESSEE, INC., ) C. A. NO. 03A01-9707-CH-00303 ) Plaintiff-Appellant ) ) ) ) ) ) vs. ) HON. HOWELL N. PEOPLES ) CHANCELLOR ) ) ) ) ) HOSPITAL STAFFING SERVICES OF ) AFFIRMED AND REMANDED TENNESSEE, INC., EDWARD WARREN, ) JEANINE WARREN, NANCY HYDE, ALL ) CARE PROFESSIONAL SERVICES, AND ) STELLA MESSER, ) ) Defendants-Appellees )

KYLE E. HEDRICK, Chattanooga, for Appellant.
GARYR. PATRICK, Patrick , Be ard & Richardson, P.C., Chattanooga, for appellees.2 O P I N I O N

McMurray, J.

This is an action whereby the plaintiff seeks to enforce a covenant not to compete in an employment agreement between the defendant, Warren, and the plaintiff. The d efe ndants moved for summaryjudgment. T he motion did not set out any grounds for relief but simply stated that defendants "file this motion for SummaryJudgment, pursuant to Rule 56 of the Tennessee Rules of Civil Procedure" and referred the court to grounds stated in their brief in support of the motion. The brief is not included in the record. Apparently, the parties did not make a designation of record and the Clerk of the court correctly omitted the brief pursuant to Rule 24, Tennessee Rules of Appellate Procedure.

Fromthe trial court's memorandum opinion and the appellate briefs, it appears that the motion for summary judgment was based upon the proposition that the term of the covenant not to compete had expired. The appellant's issue is framed as follows:

Whendoes Warren's covenant not to compete begin to run under the language of the parties' agreement?

Chancellor Peoples filed a well-crafted and scholarly memorandumopinion in whichhe determined that the non-competition3

clause contained inthe employment agreement between Warren and the plaintiff expired on December 31, 1991. We affirm the judgment of the trial court.

W e have studied the memorand um opi nion of the chancellor in light of the numerous exhibits and depositions filed on behalf of and in opposition to the motion for summ ary judgment. We have concluded that Chanc ello r Peoples' opinion is correct in all respects except as we hereinafter point out. We, therefore, feel i t appropriate to adopt the memorandum opinion of the chancellor as the opinion of this court with the exceptions noted.
Chancellor Peoples' opinion, stated verbatim, is as follows:

MEMORANDUM OPINION AND ORDER

This matte r is before the court upon the Defendants' motion for Summary Judgment. Having considered the matter, the Court now renders the following Memorandum Opinion and Order. I. Background Defendant, Edward C. Warren ("Warren") worked for a number of years as the Vice Presiden t a nd Administrator of the Plaintiff, Home-Bound Medical Care of Southeast Tennessee, Inc. ("the Plai ntiff"). During that time Warren entered into several employment agreements with the Plai nti ff, the last of which was1 The plaintiff also sought injunctive relief prohibiting continuing violations

o f the non-compete agreement. Additionally the plaintiff sued Jeanine Warren, Nancy Hyde, and Stella Messer, former employees of the Plaintiff and current employees of All Care, alleging that they had breached their employment agreem e n ts with the Plaintiff and had wrongfully appropriated Plaintiff's proprietary information. The claim for injunctive relief was disposed of by an Agreed Order dated April 21, 1994, which also dismissed the claim against Jeanine Warren, Nancy Hyde, and S tella Messer. 4 executed on January 1, 1988. The terms of that agreement prohibited Warren fromcompeting with the Plaintiff for three years following the date of his "separation" from employment. [Citations t o record omitted.] In March of 1992, Warren, dissatisfied with his job, left the Plaintiff to become the Executive Vice-President o f its parent company, Hea lthSphere. Warren was similarly disappointed with HealthSphere, and resigned his positionthere in 1993. As part of his search for a new job, Warren contacted Defendant All Ca re ("All Care"), a division of Hospital Staffing ("Hospital Staffing"). After meetings with several senior managers, Warren signed an employment agreement wit h Hospital Staffing and began working as the Manager of the Chattanooga All Care office in late December 19 93 or ear ly January 1994. The plaintiff subsequently filed the complaint in the instant case on January 10, 1994, alleging that Warren's employment with All Care violated the non-competition clause contained in the contract with him. The Plaintiff also sought damages from the Defendant for their allegedly inducing Warren to breach his co venant not to compete. 1 [Footnote in original]. Additionally, the p l aintiff responded to the complaint by means of an answer and the Motion for Summary Judgment at issue in this opinion, claiming that the non-5

competitionagreement had expired, and anyclaim based thereonwas unenforceable, and denying any slanderous statements were made. II. Standard of Review Entryof summary judgment is a ppropr iate when a court finds that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn.R.Civ.P. 56.03. The party seeking summary judgment bears the burdenof proving to the court that there are no disputed, material facts creating a genuine issue for trial. Byrd v. Hall , 847 S.W.2d 208, 215 (Tenn.1993). In cons iderin g a motion for summary judgment, a court should take the strongest legitimate view of the evidence in favor of the non-moving party. Id. , at 209. A court should avoid weighing evidence, however, as summary judgment is onlyappropriate when the resolution of the cas e depends solely upon t he ap plication of a legal principal and nothing is left to submit to the trier of fact. Id. , at 214. III. Law and Analysis The defendants' Motion for Summary Judgment is based uponthe terms of the employment agreement between Warren and the Plaintiff, which provides in pertinent part: 1.3 Term : The term of this Agreement is one year. The parties may renew this Employment Agreement from time to time for periods of up to one year each, but in no event is the Agr eement deemed to be automaticallyrenewable and in each case, it requires the affirmative action of employer and employee.

... 4.1 I nthe event t hat Employee becomes separated from employment of Employer for any reason, whether6 voluntaryor involuntary, the Employee shall not for a period of three (3) years from the date of his separation from such employment ...

... (a) Compete with Employer in the Chattanooga Market.

... 4.6 The expiration, termination, or cancellation of this Agreement shall in no way invalidate or affect the Employee's covenant, obligations and liabilities set forthin this paragraphNo. 4, except to the extent that it may establish a date of separation . [Emphasis ours]. 4.7 A s used herein, the word "separation" shall be broadlyconstrued and shall include, without limitation, separation due to disability or retirement. [Citations to record omitted]. This agreement was executed by bothparties and became effective January 1, 1988. Although Warren continued to work for the Plaintiff through March 1992, he never executed another employment agreement, nor was any actionrenewing or extending the January 1st, 1988 agreement taken. The terms described above are strikingly similar to those of
a n employment agreement consi dere d by the Tennessee Court of Appeals in B. & L. Corp. v. Thomas & Thorngren, Inc. , 917 S.W.2d 674 (Tenn.Ct.App. 199 5). In that case, an employee signed an employment agreement and began work with his employer on July 8, 1982. Id. , a t 677. Although the term of the agreement was only for one year and it was not renewed or extended by the parties, the employee continue d t o work for the employer until January 1994, when he accepted a position with a competing company. Id. The employer sued, claiming that the employee's new job violated a covenant in the July 8, 1982 contract which prohibited him from7

competing with the employer for three years following the "termination" of his employment. Id. "Termination" was not defined in the employment agreement. The Tennessee Court of Appeals held that the non-competition agreement had expired on July 8, 1986, three years after the end of the contract term. Id. , at 678. Thus,
even though the employee continued to work for the employer for almost twelve years, the employment agreement expired under its own terms after one year, at which time the three year term for the covenant not to compete began to run. In explaining its decision, the court stated: [F]irst, non-competition contracts are construed favorably to the employee. Also, as the drafter of the Employment Agreement [the employer] must take responsibilityfor its allegedly ambiguous provisions. [The Employer] could have clearly stated that the three year covenant n ot t o compete period began after [the employee's] departure fromthe company regardless of when h e stopped working there. However, [it] did not and [is] t h u s f aced with accepting the contract with its most evident meaning. Id. , at 678 (citations omitted). The reasoning set forth in B & L Corp. is very persuasive, and i s directly applicable to the instant case. By its own terms, the agreement between Warren and the Plaintiff only lasted for one year. It expired on December 31, 1988, even though Warren continued to work for the plaintiff until March of 1992. The noncompetition clause specifically stated that it began to run after Warren's "separation from employment." The agre e m ent further provided that "separation" from employment is to be broadly construed and a separation date may be determined by the expiration8

of the agreement. Thus, under the clear and unambiguous terms of the contract, the non-competition period began to run when the contract terminated on December 31, 1988, and expired on December 31, 1991. The non-competition agreement was not in effect at the time Warren went to work for All Care, therebyrendering any breach of it impossible as a matter of law. I n addition to its suit against Warren for breach of contract, the Plaintiff sought damages from Defendants, All Care and Hospital Staffing f or the ir alleged inducement of Warren's Breach. As stated above, the Court has found that no agreement between Warren and the Plaintiff was in effect at the time of his employment with All Care. Thus, because th ere was no contract, there could not have been any breach, and the Plaintiff's claim for inducement must fail. IV. Conclusion I n view of the foregoing, the Court is of the opinion that the non-competitionagreement between Warren and the Plaintiff expired
o n December 31, 1991, well before Warren w ent to wo rk for the Defendants All Care and Hospital Staffing. The plaintiff's claims for breach of covenant and inducement of that breach are not welltakenand must fail. Plaintiff offered no evidence to support its allegations of slander. I t is therefore ORDEREDthat the defenda nts' motion for
summ aryjudgment is GRANTED. The Plaintiff's complaint is therefore dismissed. ...9 * * * *

W e are persuaded that the result reached by Chancellor Peoples is well supported by the record and by prevailing law. We should point out, however, that paragraph 4.6, in our est imatio n, is ambiguous since there is no explanation in the contract of what the parties meant by the phrase "e xcept to the extent that it may establisha date of separation." Ambiguous provisions of a covenant no t to compete must be construed against the employer. See Allright Auto Parks v. Berry , 409 S.W.2d 361 (Tenn.1966), and the cases cited therein. The phras e is a per missive phrase and does not require any action by either party. When coupled with the phrase "the word 'separation' shall be broadly construed" the only apparent and reasonable construction is that the parties, or either of them, have the option of using the expiration, termination, or cancellationdate as the date of separation for the purposes of beginning the term of the covenant not to compete. Therefore, we
concur with the finding of the trial court had expired before Warrenaccepted other employment in competition with the plaintiff. Accordingly, we likewise find that there is no genuine issue as to anymaterial fact and that the defendants are entitled to a judgment as a matter of law.

W e should note that the appellees argue that "even if the covenant not to compete did not expire on December 31, 1991,1 0

appellant Home-Bound's main cause of action against appellees for intentional inducement to breach of contract would fail as a matter o f law." The appel lant correctly points out that this issue was not addressed by the trial court ex cept in th e context that the claimmust fail because the contra ct ha d expired. We decline to address an issue based upon anargument which must assume that our opinion on a previous issue is erroneous.
The judgment of the trial court is affirmed in all respects. Costs are assessed to the appellant and this case is rema nded to the trial court.

________________________________ Don T. McMurray, J.
CONCUR:

_______________________________ Herschel P. Franks, Judge

_______________________________ Charles D. Susano, Jr., Judge

# FILED February 6, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE

HOMEBOUND MEDICAL CARE OF ) HAMILTON CHANCERY SOUTHEAST TENNESSEE, INC., ) C. A. NO. 03A01-9707-CH-00303 ) Plaintiff-Appellant, ) ) ) ) ) vs. ) ) ) ) ) ) HOSPITAL STAFFING SERVICES OF ) TENNESSEE, INC., EDWARD WARREN, ) JEANINE WARREN, NANCY HYDE, ALL ) CARE PROFESSIONAL SERVICES, AND ) STELLA MESSER, ) ) HONORABLE HOWELL N. PEOPLES, Defendants-Appellees. ) CHANCELLOR



### CONCURRI NG OPINI ON I concur in the result reached by Chancellor Peoples and the majority opinion. I also agree with the majority’s conclusion -- which is different from that of the Chancellor’s -- that paragraph 4.6 of the employment agreement of January 1, 1988, is ambiguous. I agree with the majority opinion that the agreement can be reasonably construed as set forth at page 8 of that opinion; however, I disagree with the majority’s statement that its interpretation is “the only apparent and reasonable construction.” This is because I agree with the appellant that the subject language can be reasonably construed to mean that the1 2

“ending” of the subject employment agreement does not “affect” the covenant not to compete unless that agreement ends, for whatever reason, at the same time that the defendant, Edward C. Warren, ceases to work for the company. I believe that the simultaneous occurrence of these two events is a reasonable interpretation of what is contemplated by the language -- “except to the extent that it [the ‘expiration, termination, or cancellation of this Agreement’] may establish a date of separation.” In other words, the termination of the subject employment agreement does not affect -- does not trigger the start of the non-competition period -- unless the employee leaves the company when the period of employment set forth in the agreement ends. It seems to me that the words “may establish a date of separation” can be reasonably construed to mean “may be the actual date Warren leaves the company’s employment.”

The appellant’s construction of the subject language is also appealing because -- unlike the interpretation set forth in the majority opinion -- it avoids a construction that permits the running of the non-compete period during a time that the employeeis still working for his employer. In the typical case, a noncompete restriction is intended to start when a person first ceases to be employed. While still employed, a non-compete provision is not necessary: an at-will employee is obligated to provide faithful service or face termination; and an employee for a definite term is required to be loyal to his or her employer or face termination for cause.

However, since I believe this non-compete provision can be reasonably interpreted in two different ways -- one favorable1 3

to the employee as set forth in the majority opinion and one favorable to his former employer as set forth above -- I agree that we much adopt the one favorable to the employee in keeping with the teaching of B & L Corp. v. Thomas & Thorngren, Inc. , 917 S.W.2d 674, 678 (Tenn.App. 1995), the relevant holding of which is set forth in the majority opinion.

Accordingly, I concur in the result reached by the majority for the reasons set forth in this concurring opinion.

__________________________ Charles D. Susano, Jr., J.