Court Opinion

ID: 9465968
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:01:46.654122+00
Date Added: 2024-06-11T17:39:28.552851
License: Public Domain

WINTER, Circuit Judge,
dissenting:
The majority reverses the preliminary injunction granted by the district court (1) for failure properly to apply Blackwelder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189 (4 Cir. 1977), and (2) because PSC is not in competition with Maryland Undercoating in the Portsmouth area and the district court’s finding to the contrary is clearly erroneous and contrary to law. My view is that Blackwelder was correctly applied, that PSC is in competition with Maryland Undercoating in the Portsmouth area, and that therefore the district court should be affirmed. I respectfully dissent.
I.
The district court, as its oral opinion amply demonstrates, was fully aware of Black-welder, as well as the reiteration of its principles in Fort Sumter Tours v. Andrus, 564 F.2d 1119 (4 Cir. 1977), including Black-welder’s emphasis on the balance-of-hardship test. In applying that test, the district court concluded, correctly in my view, that the significant issue was which of the parties would probably succeed on the merits. Payne voluntarily entered into the restrictive covenant which on its face discloses no apparent illegality; he voluntarily, and indeed surreptitiously, negotiated new. employment with PSC; he voluntarily accepted new employment with PSC. Of course if the restrictive covenant is enforced against him, he will suffer injury in that his employment with PSC will be interrupted. But, unless the covenant is inapplicable, the consequence will be the result of his own acts. “It would seem elementary that a party may not claim equity in his own defaults.” Long v. Robinson, 432 F.2d 977, 981 (4 Cir. 1970). More importantly, if, when the case is fully tried, it is found that Payne was improperly temporarily enjoined, Payne will not suffer irreparable injury. The bond of Maryland Undercoating which the district court required as a condition precedent to issuance of interim relief will be available to compensate Payne for losses improperly imposed. The district court fixed the bond in an amount to cover Payne’s anticipated compensation from PSC, without reduction by interim earnings from other sources, for the period that the district court estimated would be required to achieve a final judgment.
By contrast, if an interim injunction were denied, Maryland Undercoating would suffer irreparable injury. Payne had access to and knowledge of its engineering and technical data, pricing and cost information, personnel matters, and customer relations. Payne was in a position to pass much of this information to PSC and indeed it appears that this process has begun since PSC hired between 12 and 14 of Maryland Undercoating’s 27 employees within a few weeks after Payne’s employment began.
Thus, I think that, under the balance-of-hardship test, the equities lie with Maryland Undercoating and indicate that interim injunctive relief should be granted, if it is assumed that the restrictive covenant is valid and enforceable. This is why I agree with the district court that the major factor to be considered in determining whether interim injunctive relief should be granted is the probability of how the merits will be finally decided, and I turn to it.
II.
Payne stipulated the facial legality of the restrictive covenant and correctly so. *486Whether tested by Maryland or Virginia law, it is reasonable in scope and reasonably limited in duration. See e. g. Ruhl v. F. A. Bartlett Tree Expert Co., 245 Md. 118, 225 A.2d 288 (1967); Meissel v. Finley, 198 Va. 577, 95 S.E.2d 186 (1956). Where applicable, it is therefore legally enforceable.
Payne seeks to avoid its application on the ground that PSC and Maryland Undercoating are not in competition. Whether they are or not is a mixed question of fact and of law. As to the factual aspects of the question, I do not think that the district court’s findings are clearly erroneous, and I think that its legal conclusions were correct.
As a factual matter, the majority determines that PSC and Maryland Undercoating are not in competition on the basis of PSC’s own representations that it has no intention to expand its services at Portsmouth to automobiles other than Ford Fiestas. The objective evidence, however, provides reason to doubt these representations. In employing Payne, PSC described itself as in “an expansionary phase requiring the addition of management personnel” and added that “pending our future expansion activities, we would be overstaffed.” A current customer of Maryland Undercoating has approached Payne to inquire about the availability of PSC’s services. Although PSC has not yet seen fit to offer its services at Portsmouth to manufacturers other than Ford, this attitude may well change when PSC acquires the additional land that it has sought in Portsmouth. Certainly it offers no explanation of its need for this additional land. It is true that PSC is a wholly-owned subsidiary of Ford, but this subsidiary status did not prevent PSC from servicing Peugeot automobiles in Newark. Even if PSC’s Portsmouth facility limited itself to Ford products, it may well decide to service domestically produced Ford trucks, an account which for the moment is still held by Maryland Undercoating. The evidence thus supports the district court’s finding that PSC is a competitor of Maryland Undercoating in Portsmouth.
Even if there is some ambiguity about the desire of PSC to expand its operations, to acquire new customers, and thus to compete with Maryland Undercoating with respect to Maryland Undercoating’s present customers, there is no such doubt with respect to Maryland Undercoating’s competing with PSC. When PSC obtained the Ford Fiesta account at Portsmouth, Maryland Undercoating lost it. Maryland Undercoating is ready, willing and able to resume servicing Fiestas if it could obtain the business. Ford switched its business in Portsmouth to PSC for economic reasons, and presumably it would switch its business back to Maryland Undercoating if that switch were in its economic interest. The majority’s conclusion that PSC and Maryland Undercoating are not competitors must certainly come as a surprise to the managers of Maryland Undercoating, who will nevertheless continue their efforts to regain the lost Fiesta business. Unfortunately for Maryland Undercoating, however, it is not likely to be able to underbid PSC, so long as PSC enjoys the services of Payne, who is privy to Maryland Undercoating’s pricing and cost data. This is, of course, the very evil that Payne’s restrictive covenant with Maryland Undercoating was designed to prevent.
As a legal matter, I believe that the majority has interpreted the term “competition” in an unjustifiably narrow manner. The majority appears to hold that two companies providing the same services in the same geographic area are not in competition simply because they do not share the same customers. This holding is surely contrary to the definition of competition in First National Bank v. City of Hartford, 273 U.S. 548, 559, 47 S.Ct. 462, 71 L.Ed. 767 (1927), which the majority quotes and endorses. See also Schill v. Remington Putnam Book Co., 179 Md. 83, 17 A.2d 175 (1941). In many service markets, every customer may decide to give all of his business to a single supplier, but this does not mean that the suppliers are not competitors. If this were an antitrust case involving an agreement between PSC and Maryland Undercoating to fix the prices for services *487offered to their respective customers, I am confident that the majority would consider the agreement to be an unlawful restriction of competition. Similarly, if a merger between PSC and Maryland Undercoating were proposed, I have no doubt that the two companies would be considered to be part of the same relevant market for purposes of assessing the anticompetitive effect of the merger. I fail to see why the majority refuses to apply these same concepts of competition in a case involving a covenant in an employment contract. The record is devoid of any evidence that Maryland Undercoating and Payne intended that the word “competition” be used in a sense other than its ordinary one.
The only authority that suggests a contrary conclusion is E. L. Conwell & Co. v. Gutberlet, 298 P.Supp. 623 (D.Md.1969), aff'd per curiam, 429 F.2d 527 (4 Cir. 1970). There, the district court, in an alternative ground of decision, held that when a certain Gutberlet went to work for a customer of his employer, he did not violate a restrictive covenant because the employer and customer were not in competition, the customer merely doing its own work. But in Conwell the customer employed Gutberlet directly and not through a separate corporation. By contrast, Ford, instead of servicing its own import vehicles, has chosen to do so through PSC, whose separate corporate presence must be respected. See Food Fair Stores, Inc. v. Blumberg, 234 Md. 521, 200 A.2d 166 (1964); Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 336, 45 S.Ct. 250, 69 L.Ed. 634 (1925). More importantly, our per curiam opinion in Conwell affirmed on other grounds and did not mention the no-competition holding of the district court.
I would not follow the alternative holding of the district court in Conwell but would rather follow the ordinary concept of “competition.” Since PSC and Maryland Undercoating are competitors, Payne breached the restrictive covenant in his employment contract with Maryland Undercoating. I would therefore affirm the district court’s issuance of the preliminary injunction against Payne.