David L. Bunning, United States District Judge.
Plaintiff Acuity Brands Lighting, Inc. ("Acuity Lighting"), together with its parent
Acuity Lighting is a Georgia-based corporation that manufactures lighting solutions for use in a variety of indoor and outdoor settings. (Doc. # 67 at 4). It is the sole source of revenue for its publicly-traded parent company, Acuity Brands. (Id.). Acuity Lighting generates some revenue from national accounts;
Acuity Lighting employs several Regional Sales Vice Presidents ("RSVPs"), who are responsible for cultivating relationships with these agents, recommending product pricing and setting agency sales targets in their assigned regions. (Doc. # 12). Simply put, the RSVPs drive the sale of Acuity Lighting's products. (Docs. # 120-15 and 120-16). Bickley served as the RSVP for Acuity Lighting's South Central Region (which includes Texas, Oklahoma, Arkansas, Louisiana, Mississippi and New Mexico) from April 2010 to March 2013. (Docs. # 120-15 and 168-5 at 43). Robinson served as the RSVP for Acuity Lighting's Midwest Region (composed of Kentucky, Ohio, Indiana, Michigan, Illinois, Wisconsin and the city of St. Louis, Missouri) from January 2011 to May 2013. (Docs. # 120-16 and 168-2 at 29, 53).
Each year, Acuity Brands awards shares of its stock to key Acuity Lighting employees, including RSVPs. (Doc. # 170-13 at 3). As consideration for these awards, employees must execute a Stock Notification and Award Agreement using Acuity Brand's electronic acceptance software. (Doc. # 120-2 at 5). In Fall of 2012, Acuity Brands awarded Bickley 420 restricted shares of common stock. (Docs. # 120-2 and 168-7 at 10). Robinson received 560 restricted shares of common stock around the same time.
In the early months of 2013, a national recruitment firm contacted Bickley about an employment opportunity at Big Ass Fans, a Kentucky-based company that manufactures and sells low-speed high-volume fans. (Doc. # 120-15 at 1). Bickley pursued the opportunity and received an offer of employment from Big Ass Fans. (Id.). He told Robinson, his friend and colleague, about the offer. (Doc. # 168-2 at 15). Robinson, a Kentucky native who was unhappy with his current role at Acuity Lighting, asked Bickley to recommend him for the position if he declined the offer. (Id.). Bickley promised to do so, but ultimately accepted the offer. (Id.).
Around this time, Big Ass Fans's Director of Human Resources, Scott Nielsen, asked Bickley whether Acuity Lighting had imposed any post-employment restrictive covenants on him. (Docs. # 168-8 at 16 and 168-11 at 7). Bickley admitted that he was subject to restrictive covenants. (Id.). However, he told Nielsen that the covenants, as he understood them, simply precluded him from working with certain lighting companies. (Id.). He also stated that his wife, an attorney, had examined the covenants and did not believe that his employment with Big Ass Fans would run afoul of them. Nielsen did not actually review a copy of the Stock Notification and Award Agreement at that time. (Id.).
In March 2013, Bickley voluntarily terminated his employment with Acuity Lighting. (Doc. # 120-15 at 3-4). He returned the company cell phone and laptop to the Human Resources Department. (Id.). However, he failed to return a flash drive, which contained PowerPoint presentations for Acuity Lighting clients. (Id.). According to Bickley, he did not purposefully retain the flash drive; he simply forgot to include it with the rest of the items returned. (Id.).
Bickley assumed the Vice President of Sales position at Big Ass Fans and began supervising a 150 person inside sales force. (Doc. # 120-15 at 3). He did not have any profit and loss responsibility or pricing control. (Id.). Although Big Ass Fans was exploring opportunities in the lighting industry at that time,
About a month later, Robinson contacted Bickley about employment opportunities at Big Ass Fans. (Doc. # 168-2 at 16-20). Bickley told Robinson to send him a copy of his resume and promised to forward it to the Human Resources Department. (Id.). Robinson did so, and by early April, he had an interview with Big Ass Fans. (Id. at 68-70). The day before the interview, Robinson emailed Bickley and asked him for information about his interviewers, Scott Nielsen and Big Ass Fans Manager Ed Quinn. (Id. at 17-18). Bickley sent him charts detailing Big Ass Fans's organizational structure. (Id.). The next day, Robinson interviewed with Nielsen and Quinn, then had lunch with them. (Id. at 24). The record indicates that Nielsen and Quinn invited Bickley to both of these events, but he was not able to attend. (Id. at 71). That day, Bickley texted Robinson a picture of a hat with a Big Ass Fans logo on it. (Doc. # 168-7 at 19, 68-69). The caption said "Got you a hat." (Id.). He later informed Robinson that Big Ass Fans wanted to interview him again. (Id.). Bickley coordinated the interview with Nielsen and Robinson via email. (Id.).
Before Robinson's second interview, he and Bickley exchanged text messages, expressing excitement about the prospect of working together again:
(Doc. # 168-7 at 54).
On Monday, Robinson met with Nielsen, Smith and Big Ass Fans's International Sales Manager, Paul Lauritzen. (Doc. # 168-2 at 24-25). Bickley also attended the interview. (Doc. # 168-7 at 20). He sent Robinson a text saying "Great job!" afterwards. (Id. at 54). Bickley and Robinson met for dinner with their spouses that night. (Id. at 20). The next morning, Bickley sent Robinson another text message: "Scott will be reaching out to you soon — start figuring out what makes sense $ wise to make a move, we'll go from there!" (Id.). The two men exchanged more text messages over the next few days, criticizing some of Acuity Lighting's new hires and discussing Robinson's potential departure. (Id. at 51).
Robinson received a formal employment offer from Big Ass Fans in May of 2013. (Doc. # 168-2 at 12). He accepted the offer and informed Acuity Lighting that he was voluntarily terminating his employment. (Id. at 39). Robinson had a significant amount of personal information stored on his Acuity Lighting laptop, so before returning it to the company, he saved the entire contents on an external hard drive. (Id. at 45-46). Robinson insists that he was not trying retain any sensitive information about Acuity Lighting. (Id.). One week later, Robinson started working at Big Ass Fans. (Doc. # 120-16 at 1). He was primarily responsible for building a bid-specification/new construction channel for the company. (Id.).
Shortly thereafter, Acuity Lighting's Human Resources Manager, Chad Sheffield,
Meanwhile, Sheffield also relayed his concerns to Acuity Lighting's Senior Vice President of Sales and Marketing, Geoffrey Marlow, who had already heard rumors about Big Ass Fans from several of the company's agents. (Docs. # 168-3 at 10-11, 14-15 and 168-4 at 13-14). While some of these agents simply thought that Big Ass Fans wanted to sell fans through their agency, others got the impression that Big Ass Fans was trying to establish a lighting division. (Doc. # 168-4 at 14-17). Marlow soon discovered that Robinson had approved Big Ass Fans as an Acuity Lighting distributor prior to his departure. (Id.). Big Ass Fans had also placed a large order of I-Beam LED lights, one of Acuity Lighting's most popular products, on behalf of a Canadian customer. (Id.). Moreover, Big Ass Fans was trying to negotiate a private labeling arrangement that would allow it to resell I-Beam LEDs bearing its logo. (Id.). Acuity Lighting immediately placed a hold on the order and requested a conference call with Big Ass Fans. (Id. at 17-20).
In June of 2013, Whitaker spoke with Miller and Smith. (Doc. # 168-1 at 21-22). As CEO of Big Ass Fans, Smith assured Whitaker that the company would continue selling fans, but had no plans to compete with Acuity Lighting. (Id.). He also stated that he would not allow Bickley to work on any lighting-related projects, nor would he permit Bickley or Robinson to communicate with Acuity Lighting employees about employment opportunities. (Id.). With these assurances in mind, Acuity Lighting released Big Ass Fans's order. (Doc. # 168-4 at 20-25).
This incident inspired Big Ass Fans to consider manufacturing a light themselves. (Doc. # 120-5 at 3). They came up with the Big Ass High Bay LED, which is very similar to Acuity Lighting's I-Beam in terms of form and function. (Id.). Big Ass Fans even crafted an ad, which showed the I-Beam
Around this time, Bickley contacted another Acuity Lighting employee, Jonathan Archer, about an employment opportunity at Big Ass Fans.
In August of 2013, Smith invited Bickley to participate in an interview of Acuity Lighting's Vice President of Marketing David Grimm. (Doc. # 168-8 at 6). Bickley sat in on the interview, but did not ask any questions. (Id.). That same month, Jay Dantzler, one of Acuity Lighting's Regional Sales Managers, contacted Bickley about possible employment opportunities with Big Ass Fans in the Dallas area. (Doc. # 168-6 at 14). Bickley promised to put Dantzler in touch with Jayne Jarvis, who worked in Human Resources. (Id.). Dantzler interviewed with Jarvis via phone, then sent Bickley an email thanking him for his assistance. (Id. at 37-38). Bickley responded that the interview went well and that Big Ass Fans wanted to schedule another interview in Kentucky. (Id.). Once the interview was scheduled, Bickley emailed Dantzler and told him who would be picking him up from the airport and taking him to dinner that night. (Doc. # 168-7 at 70). He also said, "Time permitting, Mike and I will take you tomorrow to lunch. I'll drop you back at the airport." (Id.).
On the day of the interview, Dantzler spoke with Bickley for about ten minutes when he arrived. (Doc. # 168-6 at 25-27). Afterwards, Robinson took him to lunch, then Bickley took him to the airport. (Id. at 27). Soon after, Dantzler asked Jarvis if she could send him contact information for his interviewers because he wanted to write them a thank you note. (Doc. # 168-7 at 72). Jarvis asked him to contact Bickley for it. (Id.). Dantzler did so, and Bickley promptly sent him the requested information. (Id.). Bickley also sent Dantzler a video clip from an episode of America's Got Talent, which featured a Big Ass Fan in the background. (Doc. # 168-6 at 29-30, 44).
In September 2013, Dantzler received and accepted an employment offer from Big Ass Fans. (Id. at 31). Bickley was copied on several emails between Dantzler and Jarvis discussing the details of the offer. (Id. at 42). He resigned from Acuity Lighting and turned in his electronic devices.
Just before Acuity Lighting filed suit, Bickley informed Archer that there was another job opening at Big Ass Fans and that Human Resources would contact him. (Doc. # 168-13 at 7). Jarvis did connect with Archer on LinkedIn. (Id. at 16). However,
As discovery proceeded in this action, Big Ass Fans continued to prepare for the launch of its High Bay LED. (Doc. # 120-5 at 3-4). Although a special sales group had handled lighting sales in the past, Big Ass Fans decided to reassign lighting to the general sales team, overseen by Bickley. (Id.; Doc. # 168-5 at 22). Accordingly, in December 2013, Bickley began attending meetings about lighting sales strategies. (Doc. # 168-5 at 22-24). Chief among Bickley's strategies was the Trial Installation Program, or "TIP," which offered existing customers a trial installation of the High Bay LED. (Id.). Bickley accompanied his team members on sales calls during this time and provided feedback about the TIP campaign to Smith. (Id. at 24-29). Bickley also sought Robinson's advice on some of these matters. (Id. at 30-31). Some of Acuity Lighting's agents, who had contracted with Big Ass Fans to sell fans, recall that Bickley and Robinson contacted them during this time and asked them if they were interested in selling the High Bay LED on commission. (Docs. # 168-21 at 4 and 168-22 at 4-8). Both agents declined these offers. (Id.). In February of 2014, Big Ass Fans finally began manufacturing its High Bay LED. (Doc. # 120-5 at 3-4).
Meanwhile, Miller asked Bickley and Robinson to give him the flash drive and external hard drive that they had retained from Acuity Lighting. (Doc. # 120-26 at 4). Both men did as instructed, and Miller gave the items to defense counsel, who arranged for a forensic computer expert to examine both storage devices, as well as the computers that both men used at Big Ass Fans. (Id.). According to Miller, the examination revealed that nothing on Robinson's external hard drive had been transferred to his work computer. (Id.). Bickley's work computer had only one Acuity Brands presentation, which he had allegedly retrieved from the investor relations link on Acuity Brands' website. (Id.).
Acuity Lighting also retained a forensic computer expert to examine the devices.
Bickley continued to supervise the general sales force at Big Ass Fans until May of 2014, when he became the Lighting Sales Manager. (Doc. # 120-15 at 3). Lighting accounted for less than 10% of the sales made by his team from February to May. (Id.). Most of these sales were made in the retrofit market, rather than the new construction market. (Id.).
More than fifteen months after the filing of this action, the parties completed their discovery efforts. (Doc. # 86). Defendants Bickley, Robinson and Big Ass Fans then filed Motions for Summary Judgment, which are fully briefed and ripe for the
Summary judgment is appropriate when there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). If there is a dispute over facts that might affect the outcome of the case under governing law, then entry of summary judgment is precluded. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party has the ultimate burden of persuading the court that there are no disputed material facts and that he is entitled to judgment as a matter of law. Id. Once a party files a properly supported motion for summary judgment by either affirmatively negating an essential element of the non-moving party's claim or establishing an affirmative defense, "the adverse party must set forth specific facts showing that there is a genuine issue for trial." Id. at 250, 106 S.Ct. 2505. "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Id. at 252, 106 S.Ct. 2505.
"It is a well-accepted principle that a federal court in a diversity case must apply the conflict of law rules of the state in which it sits." Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 361 (6th Cir.1993) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 490, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). However, courts "only need[] to go through the choice of law analysis when a conflict occurs between two states' laws." Asher v. Unarco Material Handling, Inc., 737 F.Supp.2d 662, 667 (E.D.Ky.2010).
At first blush, this case does not seem to require a choice of law analysis. After all, the Stock Award and Notification Agreement specifically states that "[t]he validity, interpretation, construction, and performance of this Agreement and Exhibit A shall be governed by the laws of the state of Georgia without giving effect to the conflicts of laws principles thereof." (Doc. # 120-2 at 7). Both parties have presumed that this provision is effective and that Georgia law applies to this litigation. (Docs. # 120-1, 121-1 and 168). However, the law does not necessarily lead to this result.
Plaintiffs filed this diversity action in the Eastern District of Kentucky, and so, the Court must apply Kentucky's conflict of law rules. Kentucky courts "are very egocentric [and] protective concerning choice of law questions." Paine v. La Quinta Motor Inns, Inc., 736 S.W.2d 355, 357 (Ky.Ct.App.1987), overruled on other grounds by Oliver v. Schultz, 885 S.W.2d 699 (Ky.1994). "[I]t is apparent that Kentucky applies its own law unless there are overwhelming interests to the contrary." Harris Corp. v. Comair, Inc., 712 F.2d 1069, 1071 (6th Cir.1983). Moreover, Kentucky courts have given little weight to contractual choice of law provisions. See Wells Fargo Fin. Leasing, Inc. v. Griffin, 970 F.Supp.2d 700, 709-10 (W.D.Ky.2013). Thus, it is possible that Kentucky law could apply to this dispute instead of Georgia law.
Because Kentucky law is much more accepting of post-employment restrictive covenants than Georgia law, the Court believes that there is indeed a conflict necessitating this choice of law analysis. Compare Hammons v. Big Sandy Claims Serv., Inc., 567 S.W.2d 313, 315 (Ky.Ct. App.1978) (approving the use of the "blue
Kentucky courts utilize different choice of law tests for contract cases and tort cases. Saleba v. Schrand, 300 S.W.3d 177, 181 (Ky.2009). In contract cases, Kentucky courts apply the "most significant contacts" test, set forth in § 188 of the Restatement (Second) of Conflict of Laws.
"[T]he place of contracting is the place where occurred the last act necessary, under the forum's rules of offer and acceptance,
Typically, "[t]he state where performance is to occur under a contract has an obvious interest in the nature of the performance and in the party who is to perform." Id. However, this factor bears relatively little weight when the place of performance is either uncertain or unknown at the time of contracting. Id. Such is the case here. Bickley and Robinson actually promised to refrain from competing with Acuity Lighting, soliciting its employees, and disclosing its trade secrets when they left its employ. (Docs. # 120-2 and 120-3). Thus, Bickley and Robinson were expected to perform wherever they next worked. Although that place turned out to be Kentucky, it could just as easily have been another state. At the time that Bickley and Robinson executed their Agreements, neither they nor Acuity Lighting had any idea where or when performance would occur.
The situs question is significant "[w]hen the contract deals with a specific physical thing, such as land or a chattel, or affords protection against a localized risk, such as the dishonesty of an employee in a fixed place of employment." Id. This case does
Finally, the significance of residence or domicile "depends largely upon the issue involved and upon the extent to which they are grouped with other contacts." Id. For example, "[t]he fact that one of the parties is domiciled or does business in a particular state assumes greater importance when combined with other contacts, such as that this state is the place of contracting or of performance or the place where the other party to the contract is domiciled or does business." Id. Here, Bickley resided in Georgia and Robinson lived in Kentucky when they executed the Agreement. (Docs. # 120-15 and 120-16). Both men now reside in Kentucky. (Id.). Acuity Lighting had, and continues to have, its principal place of business in Georgia.
After considering these five factors, the Court still lacks a clear answer to the choice of law question. The first, second and fifth factors support the application of either Kentucky or Georgia law. Although these factors slightly favor the application of Georgia law, due to the fact that Bickley lived and worked there at the time of contracting, the third factor slightly weighs in favor of Kentucky law. The fourth factor is not implicated. Thus, in deciding between Georgia and Kentucky law, the Court must carefully consider which one best serves the principles that underlie § 188.
These principles, enumerated in the Restatement (Second) of Conflict of Laws § 6(2), include: (a) the needs of the interstate and international systems; (b) the relevant policies of the forum; (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue; (d) the protection of justified expectations; (e) the basic policies underlying the particular field of law; (f) certainty, predictability and uniformity of result; and (g) ease in the determination and application of the law to be applied. Wells Fargo, 970 F.Supp.2d at 710. "When using this framework, [courts] `must balance principles, policies, factors, weights, and emphases to reach a result, the derivation of which, in all honesty, does not proceed with mathematical precision." Id. (quoting Int'l Ins. Co. v. Stonewall Ins. Co., 86 F.3d 601, 606 (6th Cir.1996)).
As the Restatement itself observes, any solution will likely require some give-and-take between states. § 6, cmt. d. "In formulating rules of choice of law, a state should have regard for the needs and policies of other states and of the community of states." Id. Even Kentucky law, with its egocentric twist on choice of law rules, acknowledges that there are situations in which its laws should not be applied. Harris, 712 F.2d at 1071.
The Court believes that this is such a situation. While Kentucky certainly has a general interest in protecting its citizens against suit, Georgia's interests are more specific. This case centers upon the enforceability of several restrictive covenants. Unlike Kentucky, Georgia has formulated
This result also protects justified expectations and promotes uniformity. In this case, the parties expected that Georgia law would apply to this dispute because the Agreement contains a choice of law provision. Although Kentucky law does not give effect to such provisions, many states do. It is easy to imagine a scenario in which a group of Acuity Lighting employees execute the same Stock Notification Award and Agreement, then seek employment elsewhere. While some of these employees may be bound by the restrictive covenants contained in the Agreement, others may not be, simply because their new state has more favorable choice of law rules. This result would not only be confusing, it would be unjust. Accordingly, the Court will apply Georgia law to the instant dispute.
"[T]he construction of a contract is a question of law for the court." Bd. of Comm'rs of Crisp Cnty. v. City Comm'rs of City of Cordele, 315 Ga.App. 696, 727 S.E.2d 524, 526-27 (2012). The first step in construing a contract is "to decide whether the language of the contract is clear and unambiguous." Id. at 527. "If so, the contract is enforced according to its plain terms, and the contract alone is looked to for meaning." Id.
Defendants argue that the restrictive covenants at issue do not apply to the activities of Bickley, Robinson and Dantzler. (Doc. # 120-1 at 15). These covenants discuss the departing employee's interactions with "the Company," but do not define that term. (Doc. # 120-2 at 8-15). However, the Agreement itself defines "the Company" as Acuity Brands, Inc. (Id. at 4). Thus, Defendants conclude that these covenants only prohibit Bickley and Robinson from soliciting employees of Acuity Brands, Inc. and competing with that entity. Because Plaintiffs allege, inter alia, that Bickley and Robinson solicited Acuity Lighting employees and competed with Acuity Lighting, Defendants conclude that the restrictive covenants are not implicated in this litigation.
Although the Agreement initially defines "the Company" as Acuity Brands, Inc., the Terms and Conditions section further states:
(Doc. # 120-2 at 5) (emphasis added). Acuity Lighting is a subsidiary of Acuity Brands, Inc. (Doc. # 10). This language clearly indicates that the restrictive covenants are also supposed to protect Acuity Brands's subsidiary, Acuity Lighting. Therefore, the Court must enforce the contract according to its plain terms and find that the restrictive covenants apply to the alleged conduct of Bickley, Robinson and Dantzler vis a vis Acuity Lighting.
Georgia law recognizes four basic types of restrictive covenants: non-competition, non-solicitation of customers, non-recruitment of employees and non-disclosure of confidential information. Albany Bone & Joint Clinic, P.C. v. Hajek, 272 Ga.App. 464, 612 S.E.2d 509, 512 (2005). "A characteristic shared by each of these provisions is a prohibition, or at the very least a limitation, placed by one party on the other party's future business activities." Id. (emphasis in original).
Georgia law subjects restrictive covenants "to three levels of judicial scrutiny: `strict scrutiny, which applies to employment contracts; middle or lesser scrutiny, which applies to professional partnership agreements; and much less scrutiny, which applies to sale of business agreements.'" Am. Control Sys., Inc. v. Boyce, 303 Ga.App. 664, 694 S.E.2d 141, 144 (2010). "Restrictive covenants that are ancillary to an employment contract are subject to strict scrutiny and will be voided by Georgia courts if they impose an unreasonable restraint on trade." Trujillo, 657 S.E.2d at 583-84; see also Albany Bone & Joint Clinic, 612 S.E.2d at 512 (explaining that such restrictive covenants "exist to protect the employer's interest in property, confidential information, customer goodwill, business relationships, and other economic advantages the employer has earned for the business over the years").
Applying strict scrutiny, a restrictive covenant in an employment contract will be considered overbroad unless: "(1) the restraint is reasonable; (2) founded upon valuable consideration; (3) is reasonably necessary to protect the party in whose favor it is imposed; and (4) does not unduly prejudice the interests of public." Dent Wizard Intl. Corp. v. Brown, 272 Ga.App. 553, 612 S.E.2d 873, 876 (2005). "Whether the restraint imposed by the employment contract is reasonable is a question of law for determination by the court, which considers the nature and extent of the trade or business, the situation of the parties, and all other circumstances." Id. If a provision is found to be overbroad, Georgia courts will not enforce it. Id.
"[I]n restrictive covenant cases strictly scrutinized as employment contracts, Georgia does not employ the `blue pencil' doctrine of severability." Advance Tech. Consultants, Inc. v. Roadtrac, LLC, 250 Ga.App. 317, 551 S.E.2d 735, 737 (2001). This doctrine permits courts to "cross[] out, as with a blue pencil, those provisions which render a covenant overbroad[,]" and therefore, unenforceable. Ga. Employment Law § 2:11 (4th ed.). Absent such a rule, Georgia courts have repeatedly held that if one covenant in an agreement is unenforceable, then all are. See, e.g., Advance Tech. Consultants, 551 S.E.2d at 737.
"The validity of a non-disclosure provision depends upon its reasonableness," which depends upon two factors: "(1) whether the employer is attempting to protect confidential information relating to the business, such as trade secrets, methods of operation, names of customers, personnel data, and so on; and (2) whether the restraint is reasonably related to the protection of the information." Holland Ins. Grp., LLC v. Senior Life Ins. Co.,
In this case, the Trade Secrets and Confidential Information clause provides as follows:
(Doc. # 120-2 at 12) (emphasis added).
According to Section 1(b), "Trade Secrets" has the meaning set forth under Georgia Law, O.C.G.A. § 10-1-760 et seq." (Id. at 9). The term "Confidential Information" includes:
(Id. at 8-9).
However, the Agreement states that the term "Confidential Information" does not include:
(Id.).
This clause does define "Trade Secrets" and "Confidential Information" separately. However, it prohibits an employee from disclosing either type of data for an unlimited period of time. As the case law states, employers are not required to put a time limit on nondisclosure of trade secrets, but they must place a time limitation on all other information that is not a trade secret. Plaintiffs failed to do that here, rendering the non-disclosure provision overly
Non-competition clauses "must be strictly limited as to time, territorial effect, capacity in which the employee is prohibited from competing, and as to overall reasonableness." Dent Wizard, 612 S.E.2d at 876 (internal quotations omitted). In scrutinizing the territorial effect limitations, Georgia courts have "`accept[ed] as prima facie valid a territory where the employee worked and the employer does business.'" Id. (quoting Hulcher Servs. v. R.J. Corman R.R. Co., 247 Ga.App. 486, 543 S.E.2d 461, 466 (2000). However, "a territory that is only where the employer does business but the employee did not work is overly broad on its face, absent strong justification for such protection, other than the desire not to compete with the former employee." Hulcher, 543 S.E.2d at 466 (invalidating a non-compete clause that restricted a former employee from working in several states, even though he worked for his former employer "only in a limited area of such states where the railroads were located"); Dent Wizard, 612 S.E.2d at 876 (striking down a non-compete clause that contained a four-county territorial restriction, when the former employee did not work in all of those counties).
The Non-Competition clause at issue in this case provides as follows:
(Id. at 12-13).
The "Territory" is generally defined as the United States. (Id. at 10). The only justification for applying the non-compete provision to such a broad area is found within the Agreement itself:
(Id.).
It is true that Acuity Lighting does business throughout the United States. However, Bickley and Robinson were each responsible for sales in a particular region, so it stands to reason that they provided most of their services in their respective regions and made most of their contacts there. The record does not indicate that Bickley or Robinson had anything more than occasional interaction with other regions. This fact, standing alone, does not automatically justify the imposition of a nationwide non-compete to protect Acuity Lighting's trade secrets, business relationships and goodwill. When scrutinized carefully, this broad statement expresses little more than Acuity Lighting's desire to avoid competition by their former employees in the Territory, which is an insufficient justification under Georgia law. See Hulcher, 543 S.E.2d at 466.
Moreover, this clause totally fails to strike the necessary balance between "the employee's right to earn a living and ability to determine with certainty the geographic area boundaries in which post-employment activities are restricted" against "the employer's interest in customer relationships that its former employee established for the employer and its right to protect itself from the risk that the former employee might use such relationships to unfairly appropriate the employers's existing customers." Id. Because the non-compete clause is overbroad and unenforceable, Defendants are entitled to summary judgment on this breach of contract claim as well.
As the Court explained above, Georgia law does not apply the "blue pencil" doctrine in restrictive covenant cases subject to strict scrutiny. Advance Tech. Consultants, 551 S.E.2d at 737. Thus, although there is nothing patently overbroad about the clauses relating to the non-solicitation of customers, employees and agents, the Court cannot enforce them because they are part of the same Agreement as the unenforceable non-disclosure and non-competition
"The elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken. Dewrell Sacks, LLP v. Chicago Title Ins. Co., 324 Ga.App. 219, 749 S.E.2d 802, 806 (2013).
The Return of Property Clause states:
(Doc. # 120-2 at 12).
Bickley and Robinson admit that they retained a flash drive and an external hard drive, respectively, with Acuity Lighting data on it. (Docs. # 120-15 and 120-16). In light of this testimony, Defendants concede that "there may be a genuine issue of material fact as to whether the inadvertent actions of [Bickley and Robinson] breached those provisions." (Doc. # 120-1 at 32). Nevertheless, Defendants argue that they are entitled to summary judgment on this claim because Plaintiffs have no proof of damages resulting from the alleged breach. (Id.). In support of this proposition, Defendants point to Bickley and Robinson's testimony that they never accessed or disclosed the data after leaving Acuity Lighting's employment. (Docs. # 120-15 and 120-16).
According to Plaintiffs, their forensic computer expert found that Bickley and Robinson accessed many of the documents on the flash drive and/or external hard drive. ((Docs. # 168-3 at 23-24 and 168-16). Although it is unclear from the record whether Bickley and Robinson accessed documents containing confidential information, many of the documents on those devices did contain confidential information. (Doc. # 170-6). Given the timing between the alleged access of these documents and the launch of the Big Ass High Bay LED, and drawing all inferences in favor of Plaintiffs, one could conclude that there is a causal connection between the alleged breach and Plaintiffs' flagging sales.
Even so, Defendants insist that there is insufficient proof of damages relating to
Defendants have raised this issue once before, in briefing their Motion to Exclude (Doc. # 107). However, Judge Wier declined to exclude these particular items of damages due to insufficient briefing on the issues. Because the briefing is similarly inadequate in Defendants' Motions for Summary Judgment, the Court finds that summary judgment is inappropriate at this juncture.
As the Court explained above, a choice of law analysis is only necessary when there is a conflict between two states' laws. Asher, 737 F.Supp.2d at 667. Although the elements of the two torts at issue here — tortious interference with contractual relations and tortious interference with business relations — are stated in different terms, they are substantively the same under Kentucky and Georgia law. Compare Snow Pallet, Inc. v. Monticello Banking Co., 367 S.W.3d 1, 5-6 (Ky.Ct.App. 2012) with Kirkland v. Tamplin, 285 Ga.App. 241, 645 S.E.2d 653, 655-56 (2007). Absent such a conflict, Kentucky law applies.
Tortious interference with a contract requires proof of the following elements: (1) the existence of a contract; (2) knowledge of the contract; (3) that defendant
Plaintiffs allege that Big Ass Fans tortiously interfered with the restrictive covenants incorporated in the Agreement. However, the Court has already found that these restrictive covenants are overly broad and unenforceable. That being the case, Plaintiffs cannot sustain their claim for tortious interference with contractual relations. See Smith v. Caterpillar, Inc., Civ. A. No. 05-436-JBC, 2007 WL 98892, at *4 (E.D.Ky. Jan. 8, 2007) (citing CMI, Inc. v. Intoximeters, Inc., 918 F.Supp. 1068, 1079 (W.D.Ky.1995)) (explaining that a plaintiff must prove the existence of a valid contract in order to recover for tortious interference). Defendants are therefore entitled to summary judgment on this claim.
Tortious interference with a prospective business advantage does not require the existence of a contract. Snow Pallet, 367 S.W.3d at 5. Rather, it requires proof of the following elements: (1) the existence of a valid business relationship or expectancy; (2) that defendant was aware of this relationship or expectancy; (3) that defendant intentionally interfered; (4) that the motive behind the interference was improper; (5) causation; and (6) special damages. Id. at 5-6.
"Special damages" are essentially "pecuniary damages." CMI, Inc., 918 F.Supp. at 1081. This element requires the plaintiff to "prove that it actually suffered damages as a result of [the defendant's] actions." Ventas, Inc. v. Health Care Prop. Investors, Inc., 635 F.Supp.2d 612, 624 (W.D.Ky. 2009) (internal quotations omitted). If the plaintiff fails to produce evidence of special damages, summary judgment is appropriate on the claim for tortious interference with business relations. Id.; see also Canning v. Poole, Civ. A. No. 10-16-JBC, 2012 WL 5198453, at *4 (E.D.Ky. Oct. 18, 2012).
According to Plaintiffs' Third Amended Complaint, the damages suffered include "the substantial cost required to identify, recruit, and train replacements for Robinson and Dantzler." (Doc. # 67 at 29). However, evidence of those damages has been excluded due to Plaintiffs' failure to comply with applicable discovery rules.
The Kentucky Uniform Trade Secrets Act provides in pertinent part:
Ky. Rev. Stat. Ann. § 365.884.
The Act defines "misappropriation" as:
Ky. Rev. Stat. Ann. 365.880(2).
This claim bears resemblance to Plaintiffs' claim for breach of the return of
Accordingly, for the reasons stated herein,
(1) Defendants Shane Bickley and Michael Robinson's Motion for Summary Judgment (Doc. # 120) is hereby
(2) Defendant Delta T Corporation's Motion for Summary Judgment (Doc. # 121) is hereby
(3) Delta T Corporation is hereby
(4) The remaining parties to this action shall file a
(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Ky. Rev. Stat. Ann. § 365.880(4).
