Court Opinion

ID: 8296036
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:03:37.683562+00
Date Added: 2024-06-11T16:44:03.590705
License: Public Domain

GEATHERS, J.,
concurring in a separate opinion:
I concur with the majority’s dismissal of Total Quality Logistics, LLC’s (TQL’s) cross-appeal and with its decision to reverse the circuit court’s grant of partial summary judgment to TQL. However, I write separately because I believe this court must first apply Ohio law in determining the enforceability of the non-compete agreement before considering whether it violates South Carolina public policy. Through the mechanism of first applying the law of the state governing the agreement, this court could potentially modify a provision that, if left unmodified, would violate South Carolina public policy. Furthermore, if we fail to follow the foregoing approach, the choice of law provision agreed to by the parties in the non-compete agreement would be rendered meaningless.
Fay signed an Employee Non-Compete, Confidentiality and Non-Solicitation Agreement, which stated it was to be “interpreted and enforced under the laws of the State of Ohio.” Paragraph nine of the agreement prohibited Fay from owning *635or working for a Competing Business—an entity providing motor transport or logistics services anywhere in the continental United States—for a period of one year after the termination or cessation of his employment with TQL. The agreement also contained a broad definition of Confidential Information and stated all information Fay received or had access to during his employment at TQL was “presumed to be Confidential Information.” Pursuant to section four of the agreement, Fay was prohibited from disclosing or using any of TQL’s Confidential Information during the course of his employment at TQL “and at all times thereafter.” Section six of the agreement prohibited Fay from working “in a position similar to [his] position at TQL” because such employment “would necessarily and inevitably result in [Fay] revealing, basing judgments and decisions upon, or otherwise using TQL’s Confidential Information to unfairly compete with TQL.”
I agree with the majority that the nondisclosure portion of the agreement should be treated as a non-compete agreement. I also agree with the majority’s conclusion that the nondisclosure agreement is overly broad because it prohibits Fay from ever working “in a position similar” to his position at TQL. However, to reach this conclusion, I believe this court must first determine whether the agreement can be modified under Ohio law in light of the agreement’s choice of law provision before considering whether the agreement violates South Carolina public policy. See Team IA, Inc. v. Lucas, 395 S.C. 237, 248, 717 S.E.2d 103, 108 (Ct. App. 2011) (“Choice of law clauses are generally honored in South Carolina.”).
I acknowledge South Carolina does not follow the “blue pencil” rule and does not permit courts to rewrite or modify parties’ agreements, while Ohio, as discussed below, permits courts to make reasonable modifications. See Poynter Invs., Inc. v. Century Builders of Piedmont, Inc., 387 S.C. 583, 588, 694 S.E.2d 15, 18 (2010) (“[I]n South Carolina, the restrictions in a non-compete clause cannot be rewritten by a court or limited by the parties’ agreement, but must stand or fall on their own terms.”). Although our supreme court has explicitly prohibited some modifications, see Stonhard, Inc. v. Carolina Flooring Specialists, Inc., 366 S.C. 156, 160, 621 S.E.2d 352, 354 (2005) (holding it would violate public policy to allow a court to insert an entirely new geographical term when none *636existed), I believe modifying an agreement pursuant to the law of the state governing the agreement would not automatically violate South Carolina public policy. See Team IA, Inc., 395 S.C. at 249, 717 S.E.2d at 109 (“[A] choice-of-law clause in a contract will not be enforced if application of foreign law results in a violation of South Carolina public policy.” (quoting Nucor Corp. v. Bell, 482 F.Supp.2d 714, 728 (D.S.C. 2007))); see also 16 Am. Jur. 2d Conflict of Laws § 74 (2009) (“Enforcement of a contract or a contract provision [that] is valid by the law governing the contract will not be denied on the ground of public policy unless a ‘strong case’ for such action is presented; mere dissimilarity of law is not sufficient for application of the public policy doctrine.” (footnote omitted)). Thus, I believe Ohio law should be applied in this case.
“Terms in a non-compete agreement may be construed according to the law of another state.” Stonhard, Inc., 366 S.C. at 159, 621 S.E.2d at 353. “But if the resulting agreement is invalid as a matter of law or contrary to public policy in South Carolina, our courts will not enforce the agreement.” Id. (emphasis added).
In Stonhard, our supreme court considered whether a non-compete agreement that did not contain a geographical limitation could be blue penciled according to New Jersey law and then enforced in South Carolina. Id. Before considering South Carolina public policy, our supreme court first attempted to modify the agreement pursuant to New Jersey law based on the agreement’s choice of law provision. Id. at 159-60, 621 S.E.2d at 353-54. Our supreme court found that under New Jersey law, a court may blue pencil a non-compete agreement to make the terms reasonable and noted that if the agreement contained an overly broad geographical limitation, “a court may decrease the limitation to make it reasonable, while at the same time continuing to enforce other terms in the agreement.” Id. at 159-60, 621 S.E.2d at 353. Our supreme court further noted the non-compete agreement it was reviewing did not contain a geographical limitation, and our supreme court was “unable to find a single case from New Jersey in which a court ha[d] added a geographical term when one was previously omitted.” Id. at 160, 621 S.E.2d at 354. Thus, it determined the agreement could not be blue penciled “to add an entirely new term to which neither of the parties agreed.” Id. Only after determining New Jersey law would not permit the *637addition of a geographical term when the parties had not included one did our supreme court consider whether the non-compete agreement violated South Carolina public policy. Id. It stated, “Because we find no term that may suffice as a substitute for a geographical restriction so as to render the covenant reasonable, we hold that the covenant is unenforceable as against public policy.” Id.
In Ohio, “a covenant not to compete [that] imposes unreasonable restrictions upon an employee will be enforced to the extent necessary to protect the employer’s legitimate interests.” Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 325 N.E.2d 544, 547 (1975). “A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if it is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.” Id. “Courts are empowered to modify or amend employment agreements to achieve such results.” Id. Ohio’s “reasonableness” test “permits courts to fashion a contract reasonable between the parties, in accord with their intention at the time of contracting, and enables them to evaluate all the factors comprising ‘reasonableness’ in the context of employee covenants.” Id. at 546-47.
However, “[t]he use of permissive language in the Rai-monde decision implies that modification is within the discretion of the trial court.” Prof'l Investigations & Consulting Agency, Inc. v. Kingsland, 69 Ohio App.3d 753, 591 N.E.2d 1265, 1270 (1990). In Kingsland, the Court of Appeals of Ohio considered a non-compete agreement that contained no temporal or geographic limitations. Id. at 1269-70. The Kingsland court found the lack of temporal and geographic limitations gave “the covenant a greater restraint than necessary to protect [the employer] and impose[d] an undue hardship on” the employee. Id. at 1269. The Court of Appeals of Ohio found that although Ohio courts have “the authority to refashion an unduly restrictive non-competition clause to make it reasonable,” a court may decline to modify the restriction if it “could not easily modify existing provisions but might be required to rewrite the entire covenant.” Id. at 1269-70; see also LCP Holding Co. v. Taylor, 158 Ohio App.3d 546, 817 N.E.2d 439, 446-47 (2004) (finding the modifications requested by the employer “would entail substantial changes to the agreement” *638and, thus, the trial court did not abuse its discretion in declining to modify the restrictive covenants).
In South Carolina, “public policy demands [non-eompete agreements’] scope be subject to judicial review for reasonableness,” which includes evaluating “whether the restriction is reasonable in that it is no greater than necessary to protect the employer’s legitimate interests, and it is not unduly harsh in that it curtails the employee’s ability to earn a living.” Milliken & Co. v. Morin, 399 S.C. 23, 33, 731 S.E.2d 288, 293 (2012). “The reason that contracts against competition are held to be unenforceable unless they meet certain criteria[ ] is that they constitute a restraint upon trade[,] which is against public policy.” Standard Register Co. v. Kerrigan, 238 S.C. 54, 71, 119 S.E.2d 533, 542 (1961).
Applying the Stonhard approach to the instant matter, I believe the agreement, which prohibits Fay from working in a similar position to the one he held at TQL without a time limitation, would not pass Ohio’s “reasonableness” test because it imposes an undue hardship on Fay and creates “a greater restraint than necessary to protect” TQL. See Kingsland, 591 N.E.2d at 1269. Although this court could modify the agreement pursuant to Ohio law, I believe we should decline to do so because the agreement could not easily be modified and this court would be required to rewrite paragraphs four and six, as well as potentially narrow the scope of the Confidential Information definition. I believe it would be difficult for this court to modify these provisions in a way that would ensure we are honoring the intent of the parties. See Raimonde, 325 N.E.2d at 547 (permitting courts to fashion reasonable contracts “between the parties, in accord with their intention at the time of contracting” (emphasis added)).3 I believe this court would also be prevented from severing certain portions of the agreement pursuant to the severability clause because of the interrelated nature of the paragraphs. Because' the agreement cannot easily be modified, I believe the agreement is unreasonable and unenforceable under Ohio law. Further*639more, I believe the unmodified agreement is unreasonable according to South Carolina public policy because it imposes greater restrictions than necessary to protect TQL’s legitimate interests and curtails Fay’s ability to earn a living. See Standard Register Co., 238 S.C. at 71, 119 S.E.2d at 542 (“The reason that contracts against competition are held to be unenforceable unless they meet certain criteria[ ] is that they constitute a restraint upon trade[,] which is against public policy.”). Therefore, I would reverse the circuit court’s grant of partial summary judgment to TQL.

. The Stonhard court’s rationale for determining that adding an entirely new term would violate public policy was that adding a new term would “bind [the] parties to a term that [did] not reflect the parties’ original intention.” 366 S.C. at 160, 621 S.E.2d at 354; see Poynter Invs., Inc., 387 S.C. at 587-88, 694 S.E.2d at 17 (”[T]his [c]ourt has held that it would violate public policy to allow a court to insert a *639geographical limitation [when] none existed.”). Similarly, Ohio courts are only permitted to make modifications that are “in accord with [the parties’] intention at the time of contracting.” See Raimonde, 325 N.E.2d at 547.