Title: Motion Control Systems Inc. v. East
Citation: N/A
Docket Number: 001940
State: Virginia
Issuer: Virginia Supreme Court
Date: June 8, 2001

Present:  All the Justices 
 
MOTION CONTROL SYSTEMS, INC. 
 
v.  Record No. 001940     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
June 8, 2001 
GREGORY C. EAST 
 
FROM THE CIRCUIT COURT OF PULASKI COUNTY 
Colin R. Gibb, Judge 
 
 
Motion Control Systems, Inc. (MCS) appeals a decision of 
the trial court holding that a covenant not to compete 
executed by its former employee, Gregory C. East, was 
overbroad and therefore unenforceable.  East assigns as cross-
error the trial court's entry of an injunction under the 
Uniform Trade Secrets Act, Code §§ 59.1-336 through -343, 
permanently enjoining him from "disclosing to anyone any 
confidential, proprietary or trade secret information of 
Motion Control."  We will affirm the trial court's 
determination that the covenant not to compete was overbroad 
and unenforceable, but because we conclude that the evidence 
is insufficient to support the imposition of the injunction, 
we will reverse that part of the trial court's judgment. 
I.  Facts 
 
MCS engages in the business of designing and 
manufacturing high performance drive systems, including 
brushless motors as well as amplifiers and electronic controls 
for the motors.  Each motor is custom made.  MCS protects its 
proprietary information regarding its products in a number of 
ways such as keeping customer lists confidential, restricting 
product application information, and removing identifying 
marks from component parts. 
 
East began working for MCS as a test technician in 1991.  
He received numerous promotions and in 1998 was the Quality 
and Reliability Engineering Manager.  In this position, he had 
access to customer lists, customer specifications, and was 
involved in new product development. He was considered an 
integral member of the MCS management team. 
 
In 1997, MCS asked its employees to sign a 
"Confidentiality and Noncompetition Agreement" (the 
Agreement).  As presented to East, Paragraph 3(b) of the 
Agreement provided: 
 
Therefore, the Employee agrees that for a 
period of two years after termination of their 
employment with the Company in any manner whether 
with or without cause, the Employee will not 
within a one hundred (100) mile radius of the 
Company's principal office in Dublin, Virginia, 
directly or indirectly, own, manage, operate, 
control, be employed by, participate in, or be 
associated in any manner with the ownership, 
management, operation or control of any business 
similar to the type of business conducted by the 
Company at the time of the termination of this 
Agreement.  The term "business similar to the 
type of business conducted by the Company" 
includes, but is not limited to any business that 
designs, manufactures, sells or distributes 
motors, motor drives or motor controls. 
 
 
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East was concerned that the final sentence of this provision 
could apply to prohibit work in areas beyond the scope of 
MCS's business.  Upon advice of counsel, East suggested the 
deletion of the phrase "but is not limited to."  MCS accepted 
East's proposed changes and added the word "currently," 
changing the final sentence of paragraph 3(b) to read: 
The term "business similar to the type of 
business conducted by the Company" currently 
includes any business that designs, 
manufactur[es], sells or distributes motors, 
motor drives or motor controls. 
 
East then signed the Agreement. 
 
East resigned from MCS in December 1998 and was hired by 
Litton Systems, Inc. (Litton) in August 1999 as a supervisor 
in Litton's slip ring manufacturing operation at its 
Blacksburg plant.  Litton makes brushless motors at its 
Blacksburg facility. 
 
The trial court found that MCS and Litton made some of 
the same products and that MCS reasonably could be concerned 
that Litton was "going to get into the production of [MCS's] 
product and put [MCS] out of business."  Nevertheless, the 
trial court concluded that the covenant not to compete was 
unenforceable because the final sentence of paragraph 3(b) 
"imposed additional restraints which are far greater than 
reasonably necessary to protect [MCS] in [its] legitimate 
business enterprise."  The trial court did, however, enjoin 
 
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East from "disclosing to anyone any confidential, proprietary 
or trade secret information of Motion Control," even though 
the trial court found that Litton had not attempted to gain 
any trade secrets and East had not "made any disclosure of any 
trade secret or any other like fact." 
II.  Covenant Not to Compete 
 
Covenants not to compete are restraints on trade and 
accordingly are not favored.  The validity of a covenant not 
to compete is determined by applying not only the general 
principles of contract construction, but also legal principles 
specifically applicable to such covenants.  The employer bears 
the burden to show that the restraint is reasonable and no 
greater than necessary to protect the employer's legitimate 
business interests.  The restraint may not be unduly harsh or 
oppressive in curtailing the employee's legitimate efforts to 
earn a livelihood and must be reasonable in light of sound 
public policy.  As a restraint of trade, the covenant must be 
strictly construed and, if ambiguous, it must be construed in 
favor of the employee.  Richardson v. Paxton Co., 203 Va. 790, 
794-95, 127 S.E.2d 113, 117 (1962).  On appeal, our 
examination of the covenant not to compete presents a question 
of law which we review de novo.  See, e.g., Musselman v. The 
Glass Works, L.L.C., 260 Va. 342, 346, 533 S.E.2d 919, 921 
(2000). 
 
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In this appeal, the two-year time period and geographic 
area covered by MCS' covenant not to compete are not at issue.  
Rather, the sole issue is whether the language of Paragraph 
3(b) is overbroad.  Relying on our cases that have approved 
language similar to that contained in Paragraph 3(b), MCS 
argues that the present restraint is no greater than necessary 
to protect its interests because the language is "narrowly 
tailored" to protect MCS from former employees disclosing its 
proprietary or confidential information to competitors.  We 
disagree. 
The covenants not to compete in the cases upon which MCS 
relies contained some, but not all, of the language used in 
Paragraph 3(b).  These covenants stated that the former 
employee could not be involved in "any business similar to the 
type of business conducted by" the employer, Roanoke Eng'g 
Sales Co. v. Rosenbaum, 223 Va. 548, 551, 290 S.E.2d 882, 883 
(1982), or that the employee would not work for a competitor 
who "renders the same or similar services as Employer," Blue 
Ridge Anesthesia & Critical Care v. Gidick, 239 Va. 369, 370, 
389 S.E.2d 467, 468 (1990), thus limiting prohibited 
employment to other business "similar" to the employer's 
business.  The prohibition in this case goes further, however.  
By defining a "similar business" as "any business that 
designs, manufactures, sells or distributes motors, motor 
 
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drives or motor controls," MCS's covenant also prohibits 
employment in any business, for example, that sells motors, 
regardless of whether the motors are the specialized types of 
brushless motors sold by MCS.  As the trial court concluded, 
under this provision, the restricted activities "could include 
a wide range of enterprises unrelated to" the business of MCS.  
Although the change in language suggested by East may have 
narrowed the range of prohibited employment, neither before 
nor after the alteration was the prohibited employment 
restricted to businesses which engage in activities similar to 
those in which MCS engaged. 
Accordingly, we conclude that the trial court did not err 
in holding that the covenant not to compete in this case 
imposed restraints that exceeded those necessary to protect 
the legitimate business interests of MCS and, therefore, was 
unenforceable. 
III.  Injunction 
The trial court, finding that East had knowledge of MCS's 
trade secrets, enjoined East from disclosing MCS's 
confidential, trade secret, or proprietary information to 
anyone, pursuant to Code § 59.1-337.  That section provides in 
pertinent part: 
 
A.  Actual or threatened misappropriation 
may be enjoined.  Upon application to the court, 
an injunction shall be terminated when the trade 
 
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secret has ceased to exist, but the injunction 
may be continued for an additional reasonable 
period of time in order to eliminate commercial 
advantage that otherwise would be derived from 
the misappropriation. 
 
By its terms, this section requires actual or threatened 
disclosure of trade secrets.  The only basis cited by the 
trial court for issuing the injunction was that East had 
knowledge of the trade secrets of MCS.  The trial court made 
no findings that East had actually disclosed or threatened to 
disclose such information.  To the contrary, the trial court 
specifically found that East had not disclosed "any trade 
secret or any other like fact."  Mere knowledge of trade 
secrets is insufficient to support an injunction under the 
terms of Code § 59.1-337. 
 
For the reasons stated, we will affirm that portion of 
the trial court's judgment holding that the covenant not to 
compete is overbroad and unenforceable and reverse that 
portion of the judgment imposing an injunction against East 
pursuant to Code § 59.1-337. 
Affirmed in part, 
reversed in part
and final judgment.
 
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