Competition Corner
COMPETITION CORNER, by Charles M. Dalziel, Jr.
Most all of us know that Georgia largely abandoned its common law relating to restrictive covenants via a Constitutional Amendment that made OCGA 13-8-50 constitutional as of May 11, 2011. Contracts before that date have the old common law and concepts of public policy applied to them(hostile to covenants). Contracts entered into after May 11, 2011 have the new statute applied to them, with safe harbors for contract provisions enumerated. We who handle a lot of these cases know there haven’t been many reported decisions under the new statute. Here are three:
1. Carpetcare Multiservices, LLC v. Carle, 347 Ga. App. 497, 819 S.E.2d 894 (October 3, 2018). Pro Se litigant Carle gets judgment on the pleadings in his favor affirmed. His non-compete has no geographic limitation at all. 13-8-53(a), says the two judge majority (Rickman and McFadden, Ray dissenting), creates a safe harbor for a covenant, yes—but the drafter has to put the boat in the slip. Where no geographic limitation at all is provided, the covenant is declared void by OCGA 13-8-53(d)—any restrictive covenant not in compliance with the safe harbor is declared unenforceable and void. This ruling is based on the plain meaning of the statute. In dissent, Judge Ray says the statute doesn’t require a geographic limitation, but only that it be reasonable if there is one. He finds tying the geographically unlimited covenant to former customers makes it reasonable. Carle suggests defense counsel has a great line of defense if she can find a way the covenant does not comply with the safe harbor. Then, counsel can argue 53(d) declares it void.
2. Cady Studios, LLC v. Clift, USDC NDGa, Civil Action No. 1:18-cv-4670 ( November 13,2018, Mark Cohen, J.) Confidentiality Agreement with no time limit is unenforceable(just like under the old law) BECAUSE the statute’s safe harbor requires that the confidentiality agreement limit its application by time, i.e., it must only restrict “for so long as the information remains confidential or trade secret.” 13-8-53(e).
DEFENSE LAWYERS NEED TO CREATE OVER TIME A LIST OF DEFECTS IN COVENANTS WHICH PUT THEM IN “ENEMY HARBOR”—Not safe harbor—and then use the 53(d) declaration that non-compliant covenants are void. Over time a body of law similar to that pre amendment will arise.
3. Kennedy v. Shave Barber Company, LLC, December 20, 2018, Georgia Court of Appeals, 2018 WL 6694822—Is a master barber a key employee who can have an enforceable non-compete? Yes, when she posted her work schedule and a link to her employer’s website (for making appointments on her social media accounts and posted pictures of herself working, and talked in the posts about the Shave. She had name recognition and her own customer base, so she was hooked.
Call Chuck at 404 735 0438 for immediate help with your next restrictive covenant injunction case.