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.

GARY R. 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

summary judgment. T he motion did not set out any grounds for

relief but simply stated that defendants "file this motion for

Summary Judgment, 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.

From the 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:

When does Warren's covenant not to compete begin to

run under the language of the parties' agreement?

Chancellor Peoples filed a well-crafted and scholarly

memorandum opinion in which he determined that the non-competition
3

clause contained in the 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 was
1

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 from competing 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 position there 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

competition agreement had expired, and any claim based thereon was

unenforceable, and denying any slanderous statements were made.

II. Standard of Review

Entry of 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

burden of 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

only appropriate 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 upon the

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

automatically renewable and in each case, it

requires the affirmative action of employer and

employee.

...

4.1 I n the event t hat Employee becomes separated from

employment of Employer for any reason, whether
6

voluntary or 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 forth in this paragraph No. 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

broadly construed and shall include, without

limitation, separation due to disability or

retirement.

[Citations to record omitted]. This agreement was executed by

both parties 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 action renewing

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 from
7

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

responsibility for 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 from the 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 expiration
8

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, thereby rendering 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-competition agreement 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 welltaken and must fail. Plaintiff offered no evidence to support its

allegations of slander.

I t is therefore ORDERED that the defenda nts' motion for

summ ary judgment 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

establish a 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

cancellation date 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

Warren accepted other employment in competition with the plaintiff.

Accordingly, we likewise find that there is no genuine issue as to

any material 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

claim must fail because the contra ct ha d expired. We decline to

address an issue based upon an argument 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

CONCURRING OPINION

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 the
1 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 employee

is 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 favorable
1 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.