Court Opinion

ID: 6927846
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:36:23.979173+00
Date Added: 2024-06-11T09:10:49.274292
License: Public Domain

MURNAGHAN, Circuit Judge,
concurring in part and dissenting in part:
While I fully concur with the majority opinion insofar as it disallows recovery on a copyright or trade secrets basis, I reluctantly come to another conclusion with respect to whether CTI, as employer, could enforce as reasonable and not unduly harsh or oppressive the Hawkes covenant not to compete. The covenant not to compete held valid by the majority is operable “within the United States.” The district court found that a reasonable covenant would restrict competition only in “Virginia, Nebraska and perhaps one other state.” The majority has enhanced CTI’s claim to proof of reasonableness by naming 31 states in which CTI has licenses, clients, or potential clients, but that still leaves 19 others, every one of which, it seems to me, is “within the United States.” While the majority characterizes CTI’s business as “national,” it has provided no justification for calling it all inclusive.
The question of validity or not of the non-compete undertaking is one to be decided by the law of the Commonwealth of Virginia. The decision announced by the majority, that a company with business in only 31 states may enforce a non-compete clause in all 50, is a mathematically dubious one on a Virginia point of law. However, the same decision, if announced by the Virginia Supreme Court, would carry more authority than any decision on the point announced by the Fourth Circuit. See Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967) (applying the rule of Erie R. Co. v. Tompkins1 in a nondiversity case when underlying substantive rule is based on state law because “the State’s highest court is the best authority on its own law.”). I feel and have suggested that the question should be certified to the Supreme Court of Virginia. Unfortunately, my colleagues on the panel feel otherwise. Hence, I must make as *742educated a guess as possible as to what the Virginia law is.2
A restraint on an employee is unreasonable if it is greater than is necessary to protect the employer in its legitimate business interest and unreasonable from the employee’s standpoint as unduly harsh in curtailing his legitimate efforts to earn his livelihood. Richardson v. Paxton Co., 203 Va. 790, 795, 127 S.E.2d 113, 117 (1962). “Whatever [the employer’s] subjective intent, we must give effect to the language of the agreement, strictly construed.” Linville v. Servisoft of Virginia, Inc., 211 Va. 53, 55, 174 S.E.2d 785, 787 (1970).
Because restraints of trade are disfavored in Virginia, we must give effect to the language of the agreement, strictly construed. See Linville v. Servisoft of Virginia, Inc., 211 Va. 53, 55, 174 S.E.2d 785 (1970); Richardson v. Paxton Co., 203 Va. 790, 127 S.E.2d 113 (1962). We construe the agreement, reading it literally and construing it favorably to the employee, as an attempt to impose a post-employment restraint upon Gress [employee] without geographic or other limitation. We must therefore decline Alston’s [employer’s] invitation to read into the agreement limitations which simply are not there.
Alston Studios, Inc. v. Lloyd V. Gress & Associates, 492 F.2d 279, 285 (4th Cir.1974). “Conceivably the non-competition clause could be interpreted more narrowly, but Virginia law requires that it be strictly construed against the employer....” Grant v. Carotek, Inc., 737 F.2d 410, 412 (4th Cir.1984).
The Supreme Court of Virginia has never approved a non-compete clause that restricts employment “within the United States.” To the contrary, Virginia courts have repeatedly held that non-compete clauses should be limited to a geographical area no greater than is necessary to protect the employer’s legitimate business interests. Where Virginia courts have enforced non-compete contracts, the contracts have restricted competition only within “quite narrow and well defined geographic limitations.” Alston Studios, 492 F.2d at 283 n. 5. See, e.g., Blue Ridge Anesthesia & Critical Care, Inc. v. Gidick, 239 Va. 369, 371, 389 S.E.2d 467, 469 (1990) (covenant that prohibited employment only in territories serviced by the former employee, not in the company’s entire market area, enforced); Roanoke Eng’g Sales Co., Inc. v. Rosenbaum, 223 Va. 548, 552, 290 S.E.2d 882, 884 (1982) (three year restriction that broadly limited an employee’s right to be employed by any similar business enforced; court specifically noted that the restriction was reasonable because it was geographically co-terminous with the territory in which the employer did business, which involved only two states); Meissel v. Finley, 198 Va. 577, 581, 95 S.E.2d 186, 190 (1956) (covenant with restrictions that applied only within a radius of 50 miles of Norfolk enforced); Worrie v. Boze, 191 Va. 916, 922-26, 62 S.E.2d 876, 879-81 (1951) (covenant that restricted competition within 25 miles of dance studio enforced); Stoneman v. Wilson, 169 Va. 239, 245, 192 S.E. 816, 818 (1938) (agreement of employee not to go into the hardware business for five years within a limited geographical radius enforced); Power Distribution, Inc. v. Emergency Power Eng’g, 569 F.Supp. 54 (E.D.Va.1983) (non-compete contract that restrained former employee from employment with anyone in competition with employer found too broad because area in which plaintiff competed was not fixed and thus the limitation could extend “to every location where plaintiff might potentially compete, which included at least the entire United States”).
Perhaps the Virginia Supreme Court would agree that the noncompete clause ap*743plicable to the employee, Hawkes, was reasonable, but in doing so it would have severely to limit, curtail or even contradict what it has said before. I do not accept that we are free to treat a controlling state rule of law applied by the highest court in the Commonwealth of Virginia so cavalierly.
Accordingly, I would hold the non-compete clause overbroad and hence invalid. I would uphold the district court throughout. So to that extent I dissent.

. 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

. In that I have the assistance of the district judge, who has had intimate relationship with Virginia law. "As we have noted in the past 'in determining state law in diversity cases where there is no clear precedent,' we accord 'substantial deference to the opinion of a federal district judge because of his familiarity with the state law which must be applied.' ” National Bank of Washington v. Pearson, 863 F.2d 322, 327 (4th Cir.1988) (quoting Caspary v. Louisiana Land & Exploration Co., 707 F.2d 785, 788 n. 5 (4th Cir.1983)). My panel colleagues hail from South Carolina and West Virginia and I from Maryland. The district judge, acting in the Eastern District of Virginia, refused to enforce the covenant because it was geographically overbroad and unreasonably curtailed the employee's legitimate efforts to earn a living.