Court Opinion

ID: 7819873
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:50:12.095799+00
Date Added: 2024-06-11T16:30:42.661942
License: Public Domain

John A. Fogleman, Justice, dissenting. As I read the majority opinion, the court has held that a covenant not to compete within a radius of 75 miles of the City of El Dorado for a period of five years, contained in a contract of employment of an insurance salesman, which is terminable at will, is unreasonable and therefore void and unenforceable as a matter of law. Since I am unable to join the majority in this gigantic leap from the previous position that the reasonableness or unreasonableness of such a covenant is a question of fact, I dissent. It appears that the majority is satisfied to take this step, abruptly, and without any supporting authority or reasoning. Actually, the only case on the subject cited in the majority opinion is cited to support the statement that the courts have always examined the facts and circumstances of the particular case in determining the validity of a contract not to compete. But the majority does not follow Miller v. Fairfield Bay, 247 Ark. 565, 446 S.W. 2d 660, after citing it, unless it intends to say that the trial court’s considering the pleadings, the briefs filed there, and oral arguments is some kind of substitute for an evidentiary hearing. In Miller, we said: We have pointed out that each case involving a restraint to compete must be determined by the facts of the particular case, and we have, accordingly, never laid down any rule governing provisions as to area or length of time. *** ***** We conclude that, under the facts of this case, the contract, because of the length of the restriction not to compete, and the right of the employer to terminate employment, is against public policy, and void. In between the two quotes the court does considerable weighing of the impact of evidence in the case. This court has consistently followed the general rule that negative employment covenants are not illegal per se but that whether a restraint provision is valid depends upon its reasonableness, which is a matter to be determined under the particular circumstances. See McLeod v. Meyer, 237 Ark. 173, 372 S.W. 2d 220; Bailey v. King, 240 Ark. 245, 398 S.W. 2d 906; McCumber v. Federated Implement & Hdw. Insurance Co., 230 Ark. 13, 320 S.W. 2d 637. In Bailey, we said: *** As we have pointed out, each case must stand upon its own facts. Here, there is no evidence that this was not a bona fide agreement. There is no evidence of trickery or chicane/y. In McCumber, we said: After a careful review of the legal and factual issues, we reach the conclusion that no injunction should have been issued under the state of facts here presented. Significantly, in Hultsman v. Carroll, 177 Ark. 432, 6 S.W. 2d 551, we reversed a judgment sustaining a demurrer to such a complaint on a similar type of contract. The demurrer had raised the question whether the contract was void and unenforceable as a restraint of trade and contrary to public policy. We have not been alone in that position, as demonstrated by the textwriter in 54 Am. Jur. 2d under the subject of Monopolies, Restraints of Trade, and Unfair Trade Practices. At p. 982, §543, he said: As a general rule, an employment contract provision barring the employee from competing with the employer after termination of the employment is enforceable if reasonable and supported by a valuable consideration. There is no inflexible formula for deciding the ubiquitous question of reasonableness. Precedents are of little value, because the question of reasonableness must be decided on an ad hoc basis. The question whether the agreement will be enforced is to be determined in view of the circumstances of the case, but a stricter test of reasonableness is applied in employment-covenant cases than in sale-covenant cases. There are certain elements which should always be considered in ascertaining the reasonableness of such agreements in employment cases, among which are the consideration supporting agreements, the threatened danger In the employer in the absence of such an agreement, the economic hardship imposed on the employee by such a covenant, and whether or not such a covenant would be inimical to the public interest. If, considered with reference to the situation or objects of the parties or other circumstances under or with reference to which they were made, and in the light of all the surrounding circumstances, the restraint appears to have been for a just and honest purpose, or the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them, and not specially injurious to the public, the restraint will be upheld. An employee’s anti-competitive covenant is unenforceable if its true purpose is to repress the employee and prevent him from leaving, rather than to protect the employer’s business. and then, at p. 983, §544: An employee’s postemployment anticompetitive covenant is unreasonable and therefore unenforceable ichere it is broader than necessary to protect the employer’s business. ... further, at p. 984, §546: A postemployment anticompetitive covenant is justified where part of the employee’s services consist in creating the good will of customers and clients ivho are likely to follow him ivhen he leaves. The territorial scope of an anticompetitive covenant is reasonable if the area of restraint is no broader than the territory in ivhich the employee contacted the employer’s customers. Conversely, that no customers have been pirated is a factor tending to render the covenant unenforceable. and, at p. 985, §548: That an employee has no special skill tends to show the unreasonableness of his postemployment anticompetitive covenant. *** and finally, at p. 985, §549: *** But the employee's hardship is a factor in determining the reasonableness of his anticompetitive covenant, and in iveighing hardship the court will consider general business conditions, possible deprivation of support of the employee and his family, and the necessity of the employee’s changing his occupation or his residence. (Emphasis mine in each quotation.) What answers are given to the pertinent factual questions posed as italicized above in appellee’s feeble, although effective, attempt to show that there were no genuine issues as to material facts? The majority has simply brushed this requirement aside without explanation, doubtless because there is none. I would reverse the summary judgment and direct the court to proceed further in order that the facts and circumstances of the parties and their contract could be developed. I am authorized to state that Mr. Justice George Rose Smith joins in this opinion.