Court Opinion

ID: 9855252
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:21:41.18737+00
Date Added: 2024-06-11T09:25:22.495540
License: Public Domain

*218Judge Smith
dissenting.
As the majority correctly states, a trial court may issue a preliminary injunction when the plaintiffs evidence demonstrates: (1) a likelihood of success on the merits; and (2) irreparable loss if the injunction is not granted. Milner Airco, Inc. v. Morris, 111 N.C. App. 866, 868, 433 S.E.2d 811, 813 (1993). Because I find this Court’s analysis in Hartman v. Odell and Assoc., Inc., 117 N.C. App. 307, 311-18, 450 S.E.2d 912, 916-20 (1994), disc. review denied, 339 N.C. 612, 454 S.E.2d 251 (1995), controlling, I do not believe plaintiff has shown a likelihood of success on the merits.
According to the Hartman Court, viable covenants not to compete must meet five requirements. A covenant must be:
“(1) in writing; (2) reasonable as to time and territory, (3) made a part of the employment contract; (4) based on valuable consideration; and (5) designed to protect a legitimate business interest of the employer (citations omitted).”
Hartman, 117 N.C. App. at 311, 450 S.E.2d at 916 (emphasis added) (quoting Young v. Mastrom, Inc., 99 N.C. App. 120, 122-23, 392 S.E.2d 446, 448, disc. review denied, 327 N.C. 488, 397 S.E.2d 239 (1990)). Under Hartman's analysis, it is inescapable that the instant covenant overreaches, as it is unreasonable as to time and territory. See Hartman, 117 N.C. App. at 311-15, 450 S.E.2d at 917-20. The covenant’s time and territory terms are so broad that it cannot claim to serve any legitimate business interest. Accordingly, the covenant should not be “blue penciled” (saved) by this Court. Id.

Time and Territory

The majority states that “the covenant places no geographic restrictions on where defendants may conduct their business. The only restriction is that defendants may not, for a period of five years after terminating Todd’s employment. . . solicit business from plaintiff’s clients . . . .” Under Hartman, this restriction formulation is insufficient. The Hartman Court held that
to prove that a geographic restriction in a covenant not to compete is reasonable, an employer must first show where its customers are located and that the geographic scope of the covenant is necessary to maintain those customer relationships.
Hartman, 117 N.C. App. at 312, 450 S.E.2d at 917 (emphasis added).
*219Plaintiff’s brief describes “[t]he geographic restriction [of the covenant as consisting of its customers] during the prior 3 years from Todd’s resignation.” Neither this description, nor the majority’s analysis that “no geographic restrictions” exist in the covenant, demonstrate the numerical or geographic scope of its customer base. Hartman, 117 N.C. App. at 312, 450 S.E.2d at 917. Plaintiff’s assertion that the covenant’s geographic scope equals its customer base is no more than a tautology. Id. At no point in the record has plaintiff shown the number or location of its customer base.
The covenant prohibits “contact... to solicit insurance business from any individual, corporation or organization which is then or during the preceding three years was such a customer . ...” It is plaintiff’s burden to demonstrate the geographic scope of its customer base. Plaintiff has failed to do so, leaving the Court with no basis upon which to assess the reasonableness of the territory covered by the covenant.
Hartman dictates that time and territory provisions in an anti-competition covenant are to be read in tandem. Each requirement must be considered conjunctively with the other in order to determine the reasonableness of the covenant. Hartman, 117 N.C. App. at 311-12, 450 S.E.2d at 918. I agree with the majority that the covenant contains no particularized geographic restriction. It follows that I cannot adjudge the reasonableness of a nonexistent geographic description, or assess the same in tandem with a time provision.
Our Supreme Court has held that “only ‘extreme conditions’ will support a five-year covenant... .’’Hartman, 117 N.C. App. at 315, 450 S.E.2d at 917 (quoting Engineering Associates, Inc. v. Pankow, 268 N.C. 137, 139, 150 S.E.2d 56, 58 (1966). On an operative level, the instant covenant is in essence an eight-year restriction. This restriction is for five years, plus any customer of plaintiff’s during the three years prior to defendant’s separation date.
The three-year provision impacts retrospectively for three years, transforming what purports to be a five-year covenant into an eight-year restriction. For instance, if a customer has ended its relationship with plaintiff 2 years and 364 days prior to defendant’s separation date, the customer may not be contacted for five years thereafter. Plaintiff has provided the Court with no compelling reason to uphold such an expansive time restriction, and I find this covenant to be “patently unreasonable.” Hartman, 117 N.C. App. at 315, 450 S.E.2d at 918.

*220
Legitimate Business Interest

A covenant must be no wider in scope than is necessary to protect the business of the employer. Manpower of Guilford Co. v. Hedgecock, 42 N.C. App. 515, 521, 257 S.E.2d 109, 114 (1979). If the covenant at issue is too broad to be reasonable, it will not be enforced. Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 528, 379 S.E.2d 824, 828, reh’g denied, 325 N.C. 231, 381 S.E.2d 792 (1989). As this dissenter has previously noted, neither the time nor territory provisions of the instant covenant are reasonable. Under this covenant, defendant would be prohibited from transacting business in the year 1998 with clients (how many we cannot determine) that plaintiff lost in 1990.
This “ ‘approach to drafting [the covenant] produces oppressive results and [the covenant is thus] invalid.’ ” Hartman, 117 N.C. App. at 316, 450 S.E.2d at 919 (quoting Electrical South, Inc. v. Lewis, 96 N.C. App. 160, 168, 385 S.E.2d 352, 357 (1989), disc. review denied, 326 N.C. 595, 393 S.E.2d 876 (1990)).
The instant covenant prohibits defendants from “directly or indirectly . . . contacting] or in any way attempting] to solicit insurance business from any individual, corporation or organization which is ... [or was] a customer or client of the Company . . . .” Defendant Homer Todd, in his affidavit, states unequivocally:.“All such policies that I have written have resulted from those clients contacting me and asking that I provide insurance for them. At no time did I first solicit or contact any of those clients after I left PLC [plaintiffs firm] in 1993.” (Emphasis added.)
The covenant explicitly prohibits defendants from affirmative contact; it does not speak to the issue of former or current customers of PLC (plaintiff) contacting defendants for the purpose of conducting business. Defendant Todd’s denial of any affirmative contact stands uncontested, as the portion of plaintiff Stuart C. Thomas’s (Thomas is an officer and director of PLC) affidavit dealing with defendants’ alleged solicitations is not based on the personal knowledge of the affiant. It is the long-standing rule of this Court that affidavits must be made on the affiant’s personal knowledge. Singleton v. Stewart, 280 N.C. 460, 467, 186 S.E.2d 400, 405 (1972). Thus, any portion of plaintiff Thomas’s affidavit not based on personal knowledge “could not have been properly considered by the trial judge” in granting the preliminary injunction. Id.
*221Paragraph nine of the Thomas affidavit (2 March 1995) states: “Either I or my staff has confirmed with each of these former clients [listed in paragraph eight] that Mr. Todd has solicited and written their insurance business since his termination with the Plaintiff.” Since this allegation forms the central premise of plaintiff’s case, and we cannot discern whether or not it is based on the affiant’s personal knowledge, we are bound by Singleton not to consider this information.

Application of the Blue Penciling Doctrine

“When the language of a covenant not to compete is overly broad, North Carolina’s ‘blue pencil’ rule severely limits what the court may do to alter the covenant.” Hartman, 117 N.C. App. at 317, 450 S.E.2d at 920. If part of an unreasonable covenant may be severed so as to save the contract and render the provision reasonable, this Court may elect to do so. Id. In this case, severing the overly broad time and territory provisions would eliminate clauses inherently necessary to a covenant not to compete. Id. at 311, 450 S.E.2d at 916.
This Court may not resurrect, in whole cloth, a covenant not to compete by erasing and replacing offending, but key, portions of a contract. Id. at 311, 317, 450 S.E.2d at 916, 920. Yet this is exactly the necessity raised by the instant facts. As plaintiff’s covenant fails the Hartman analysis, it logically follows they will not succeed at trial. Thus, the covenant not to compete is void, and the trial court should be reversed. Therefore, I respectfully dissent.