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Thompson Industrial Services, LLC v. Haggenmaker

United States District Court, W.D. North Carolina, Charlotte Division

July 20, 2018

THOMPSON INDUSTRIAL SERVICES, LLC, Plaintiff,
v.
ANDY HAGGENMAKER, Defendant.

          ORDER

          MAX O. COGBURN UNITED STATES DISTRICT JUDGE.

         THIS MATTER is before the court on plaintiff's Motion for Preliminary Injunction (#5). Having considered plaintiff's motion and reviewed the pleadings, the court enters the following Order.

         I. Background

         Defendant is a former employee of plaintiff, a limited liability company that provides industrial cleaning and maintenance services across the southeastern United States. Defendant was originally hired as a site Superintendent in 2010 and was employed until March 11, 2018 in a variety of positions. Plaintiff promoted defendant to the position of Site Manager on August 25, 2015; in exchange for this promotion, defendant signed an Employment Agreement (“the Agreement”) which included a covenant not to compete and an employee non-solicitation provision. In January 2018, defendant was again promoted to General Manager, where he performed similar duties as before but also solicited work from plaintiff's clients and served as a client contact for multiple clients of plaintiff.

         On February 28, 2018, defendant gave notice of intent to leave plaintiff; his last day with plaintiff was March 11, 2018. Within two weeks of leaving employment with plaintiff, defendant began working for Hill Services, Inc. (“Hill”) in a similar capacity. On May 11, 2018, after learning of defendant's new employment, plaintiff sent defendant and Hill a cease-and-desist letter to remind defendant of his non-compete and non-solicitation requirements. However, plaintiff did not believe that defendant's actions changed as a result of the letter and filed the instant lawsuit on June 11, 2018.

         In their Motion for Preliminary Injunction (#5), plaintiff seeks a preliminary injunction enjoining defendant from (1) using, disclosing, disseminating or transmitting for any purpose, including the solicitation of plaintiff's customers, plaintiff's proprietary and confidential information; (2) any activity in violation of Sections 5, 6, and 7 of the Agreement, including soliciting, accepting business from and interfering with plaintiff's customers for a period of twelve months; and (3) otherwise violating the Agreement. Defendant filed a Response (#12) to plaintiff's motion and both sides presented arguments in a hearing on July 19, 2018. The court will now determine whether a preliminary injunction is necessary.

         II. Legal Standard

         Whether to grant injunctive relief is within the sound discretion of the district court. See Hughes Network Sys. V. InterDigital Commc'ns Corp., 17 F.3d 691, 693 (4th Cir. 1994). However, granting a preliminary injunction “requires that a district court, acting on an incomplete record, order a party to act, or refrain from acting, in a certain way. The danger of a mistake in this setting is substantial.” Scotts Co. v. United Indus. Corp., 315 F.3d 264, 284 (4th Cir. 2002) (citations and internal quotations omitted). Consequently, a preliminary injunction is “an extraordinary remedy . . . which is to be applied ‘only in [the] limited circumstances' which clearly demand it.” Direx Israel, Ltd. V. Breakthrough Med. Corp., 952 F.2d 802, 811 (4th Cir. 1992) (quoting Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 800 (3rd Cir. 1989)). The injunction must “be tailored to restrain no more than what is reasonably required to accomplish its ends.” Consolidation Coal Co. v. Disabled Miners of S. W.Va., 442 F.2d 1261, 1267 (4th Cir. 1971).

         To secure a preliminary injunction, a party must establish (1) that it is likely to succeed on the merits; (2) that it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in its favor; and (4) that an injunction is in the public interest. See Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008). While a balancing test was previously used, today every preliminary injunction factor must be “satisfied as articulated” and courts “must separately consider each Winter factor.” Pashby v. Delia, 709 F.3d 307, 320 (4th Cir. 2013) (citing The Real Truth About Obama, Inc. v. FEC, 575 F.3d 342, 347 (4th Cir. 2009)).

         III. Discussion

         a. Likelihood of success on the merits

         In determining whether the Agreement and its restrictive covenants are valid, a restrictive covenant between an employer and an employee is valid and enforceable under North Carolina law if it is: “(1) in writing; (2) reasonable as to terms, time, and territory (3) made part of the employment contract; (4) based on valuable consideration; and (5) not against public policy.” Triangle Leasing Co., Inc. v. McMahon, 327 N.C. 224, 228 (1990); United Labs., Inc. v. Kuykendall, 322 N.C. 643, 649-50 (1988). A restrictive covenant must also “be no wider in scope than is necessary” to protect the legitimate business interests of the employer. Med. Staffing Network, Inc. v. Ridgway, 194 N.C.App. 649, 656 (2009).

         Here, it is uncontested that the Agreement was in writing and the non-compete and non-solicitation provisions were made part of the Agreement. Plaintiff has also shown that valuable consideration was involved, as in exchange for the Agreement, defendant received a promotion, a raise in excess of $20, 000, and became eligible for a new bonus structure. Such consideration is sufficient. See Clyde Rudd & Assoc, Inc. v. Taylor, 29 N.C.App. 679 (1976) (holding that consideration was present when a non-compete agreement was entered into in exchange for advancement of employment and change in compensation). The Agreement also explicitly contains an explanation that its provisions are necessary to protect plaintiff's legitimate business interests, confidential information, and other assets, and notes that defendant's duties would involve serving as a client liaison and contact and otherwise involved important customer relationships. “[P]rotection of customer relations and goodwill against misappropriation is well recognized as a legitimate protectable interest of the employer.” Kuykendall, 322 N.C. at 651; see also A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 408 (1983). As such, the court does not believe the Agreement's restrictive covenants are against public policy.

         The court has also considered whether the non-compete and non-solicitation provisions are reasonable as to terms, time, and territory. North Carolina courts consider “the time and geographic limitations of a covenant not to compete . . . in tandem.” Okuma Am. Corp. v. Bowers, 181 N.C.App. 85, 89 (2007) (citation omitted). Here, defendant is restricted for one year from engaging in industrial cleaning services work for customers he worked for in areas where he was previously assigned to work for plaintiff in the last twelve months of his employment. North Carolina courts have recognized much longer and far-reaching covenants than this, and the court finds the Agreement's restrictive covenants to be reasonable. See Hartman v. W.H. Odell & Assoc.,117 N.C.App. 307, 315 (1994) (noting that our Supreme Court has recognized that, under certain circumstances, a five-year covenant may be ...


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