Business Communications, Inc., v. Albert Banks
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2009-CA-00407-COA
BUSINESS COMMUNICATIONS, INC.
APPELLANT
v.
ALBERT BANKS
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEYS FOR APPELLANT:
ATTORNEYS FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
APPELLEE
03/02/2009
HON. WILLIAM E. CHAPMAN III
MADISON COUNTY CIRCUIT COURT
STEPHEN J. CARMODY
JOHN CURTIS HALL II
SILAS W. MCCHAREN
BRANDI S. SHAFER
CIVIL - CONTRACT
ENTERED A JUDGMENT
NOTWITHSTANDING THE VERDICT IN
FAVOR OF ALBERT BANKS
AFFIRMED IN PART AND REVERSED
AND REMANDED IN PART: 02/22/2011
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
GRIFFIS, J., FOR THE COURT:
¶1.
This appeal arises from the circuit court’s grant of a judgment notwithstanding the
verdict, under Mississippi Rule of Civil Procedure 50(b), which is commonly referred to as
a “JNOV.”
The appellant, Business Communications, Inc. (“BCI”), brought several
employment related claims against its former employee, Albert Banks, the appellee. After
a trial, the jury awarded BCI $1,000 in damages for Banks’s breach of a “Business Protection
Agreement” (“BPA”) due to Banks’s subsequent employment with a competitor-company,
GKR Systems, Inc. d/b/a Venture Technologies (“Venture”). The jury also awarded BCI
$9,000 in damages for Banks’s breach of the cost-reimbursement provision of the BCI
employee handbook (“RCA”). The circuit court then granted Banks’s motion for a JNOV
and entered a final judgment in favor of Banks. It is from this judgment that BCI now
appeals.
FACTS
¶2.
BCI is a technological solutions company.
Its business includes the design,
implementation, and maintenance of the following: (1) internet protocol telephony and
traditional phone systems, (2) network security, (3) wireless communications, (4) structured
cabling systems, (5) data storage, (6) internet services, (7) software services, and (8)
hardware maintenance.
¶3.
On March 2, 2001, BCI extended a written offer of employment to Banks for a
position as “Lead Consulting Engineer.” Banks accepted the offer and began working for
BCI on March 19, 2001.
¶4.
Banks brought with him approximately twelve years of computer-technology
experience: four to six years of graduate and undergraduate education in computer science
and internet technology and six years of work experience in the information-systems field.
Banks also had received a number of technology certifications. Of particular interest to BCI,
Banks had obtained a certificates for Cisco Certified Internetwork Expert (“CCIE”) and
Microsoft Certified System Engineer (“MCSE”).
¶5.
BCI’s employment offer was contingent upon Banks’s signing the BPA. It included
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a non-competition provision, which provides:
For a period of one (1) year after termination of Employee’s employment with
the Company, whether voluntarily or involuntarily terminated by either party
with or without cause or notice, the Employee hereby agrees not to render
services, directly or indirectly, whether as principal or agent, officer, director,
employee, advisor, consultant, shareholder, or otherwise, alone or in
association with any other person or entity, to or for any Competitor of the
Company within a 150 mile radius of (a) the location of any office of the
Company and (b) from any place where the business of the Company is being
conducted, whether or not the Company established an office in such location.
¶6.
Banks signed the BPA on March 8, 2001. Banks was also provided a copy of BCI’s
employee handbook. He signed an acknowledgment of receipt. The employee handbook
expressly disclaimed any employment contract, with the following language:
I acknowledge and agree that nothing in this Employee Handbook is intended
to create or constitute an employment agreement with any employee. As an
employee covered by this Employee Handbook, I acknowledge and agree that
my employment is for no definite period of time and may be terminated, with
or without cause, at any time in accordance with the Employee Handbook, at
my option or at the option of BCI.
¶7.
In addition, on March 8, 2001, Banks executed a separate stand-alone agreement
entitled “Reimbursement of Costs” (“2001 RCA”), which provides:
I understand that during the course of my employment, [BCI] may necessarily
incur certain fees and expenses related to my employment. Therefore, I
hereby agree that should I terminate my employment with [BCI] within
one year of my date of hire, I will be responsible for reimbursing to [BCI]
all expenses which may have been incurred by the Company with regard
to my relocation, training, and/or certification of any kind. I understand
and agree that a sum equal to this amount will become immediately due and
payable, with or without notice, and without demand therefore, on the date of
my separation from employment, and I agree to immediately reimburse to
[BCI] this amount.
¶8.
In his first year of employment, Banks was promoted to “Vice-President of Emerging
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Technologies.” During his employment with BCI, Banks was primarily responsible for the
installation and support of the local and wide-area network Cisco equipment sold to BCI’s
customers. Banks also often assisted BCI’s sales personnel with prospective customers to
help explain the technology and how it might be implemented to best meet the customer’s
needs. As a salaried employee, Banks did not receive a commission for any of the goods and
services BCI sold. Except for a brief period when Banks voluntarily took a cut in pay,
Banks’s salary remained the same throughout his employment with BCI.
¶9.
In January 2005, Banks placed his resume on the employment web site
“Monster.com.” As a result, in November 2005, Venture made contact with Banks about
potential employment. In response, Banks told Venture’s representative that he had signed
a non-compete agreement with BCI and that he could not work for Venture because the
company was a competitor of BCI.
¶10.
On March 31, 2005, BCI issued a new employee handbook and distributed it to its
employees via e-mail. The new employment handbook contained, on page thirty-five, a new
RCA (“2005 RCA”). Banks did not sign an acknowledgment of receipt of the 2005
handbook or the 2005 RCA. The 2005 RCA, essentially, was identical in form to the 2001
RCA, in that it contained a space for the employee’s signature, the employee’s printed name,
the date, and a witness’s signature. It provided different terms than the 2001 RCA, stating:
I understand that during the course of my employment, [BCI] may necessarily
incur certain fees and expenses related to my employment. Therefore, I
hereby agree that should I terminate my employment with [BCI], I will be
responsible for reimbursing [BCI] all expenses which may have been
incurred by [BCI] with regard to my relocation, training, and/or
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certification of any kind within the previous twelve months. In addition,
I agree to returned [sic] or reimburse [BCI] for any outstanding advances, per
diems, travel, tools or equipment that have been issued to me. I understand
and agree that a sum equal to this amount will become immediately due and
payable, with or without notice, and without demand therefore, on the date of
my separation from employment, and I agree to immediately reimburse to
[BCI] this amount.
(Emphasis added).
¶11.
In January 2006, a representative of Venture again contacted Banks. Venture formally
extended Banks an offer of employment on February 7, 2006. Banks accepted. He formally
tendered his resignation to BCI on February 15, 2006.
¶12.
The same day, Tony Bailey, BCI’s owner, called Banks into his office and asked
Banks where he was going. Banks declined to tell him. Bailey reminded Banks that he had
signed a BPA, and he said to Banks, “Do you understand that if you go to work for a
competitor, I will come after you to the nth degree?”
¶13.
Banks left BCI on February 28, 2006. Shortly thereafter, BCI learned that Banks had
gone to work for Venture.
¶14.
In March 2006, BCI filed a lawsuit in the Madison County Chancery Court against
Banks and Venture. The complaint alleged two causes of action against Banks: (1) breach
of the BPA, and (2) misappropriation of trade secrets and confidential/proprietary
information in violation of the BPA and Mississippi law. The complaint alleged three causes
of action against Venture: (1) tortious interference with contract, (2) intentional interference
with business relations and prospective business advantage, and (3) misappropriation of trade
secrets and confidential/proprietary information in violation of the BPA and Mississippi law.
5
Banks and Venture timely answered the complaint and denied all claims.
¶15.
Along with the complaint, BCI filed a motion for temporary injunction and a
restraining order. BCI sought to restrain or enjoin Banks from working at Venture. Banks
and Venture responded, and Venture offered the following two documentary exhibits:
(1) an agreement entered into between Banks and Venture (on February 13,
2006) wherein Banks’s employment with Venture would be restricted so as to
prevent Banks from unfairly competing with BCI by using his knowledge of
BCI confidential information or trade secrets, if any, and that would prevent
Banks from soliciting/servicing former BCI customers; and
(2) an affidavit from Venture’s President, Gerard Gilbert, swearing under oath
that Venture and Banks had both adhered to their agreements to prevent any
unfair competition by Banks against BCI.
¶16.
The chancery court transferred the case to the Madison County Circuit Court. In
August 2006, the circuit court entered an agreed order on BCI’s motion for injunctive relief.
The order permitted Banks to continue his employment at Venture, and it enjoined Banks
from disclosing any of BCI’s confidential information and soliciting or servicing any of
BCI’s customers. The parties were required to pay their own costs and attorney’s fees
incurred with the temporary restraining order and preliminary injunction.
¶17.
In March 2007, following discovery, BCI filed an amended complaint. The amended
complaint eliminated all claims against Banks and Venture except for BCI’s claims against
Banks for breach of contract and BCI’s claim against Venture for tortious interference with
a contract. In December 2007, the circuit court granted partial summary judgment and
dismissed with prejudice BCI’s claim against Venture for tortious interference with a
contract.
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¶18.
In October 2008, a jury trial was held on BCI’s breach of contract claims against
Banks. In addition to other evidence, BCI presented evidence of Venture’s agreement to
reimburse Banks up to $10,000 to defend against any legal action BCI undertook to enforce
the terms of the BPA. The jury’s verdict found that Banks had breached both the BPA and
the 2005 RCA. The jury awarded BCI $1,000 as damages for Banks’s breach of the BPA
and $9,000 as damages for his breach of the 2005 RCA.
¶19.
Banks then timely filed a motion for a JNOV or, in the alternative, a new trial or a
remittitur of the damages awarded. BCI responded to the motion and filed a motion for an
award of attorney’s fees and costs in the amount of $63,597.
¶20.
The circuit court granted Banks’s motion for a JNOV. In its order, the circuit court
found:
As to the breach of the BPA, the Court finds as a matter of law that the
evidence presented by BCI at trial was insufficient to satisfy its burden to
prove all of the essential elements of its case. Covenants not to compete only
protect against “unfair” competition by a former employee. Being disfavored
by law, these agreements are never enforced to prevent fair competition in the
marketplace. BCI’s proof failed to show that it was subject to unfair
competition as a result of the Banks’[s] employment by Venture Technologies.
The Court notes that BCI and Venture Technologies were competitors before
Banks started work for Venture and remained competitors after Banks was
working there. The evidence failed to show that there was any change in
competition between these two companies as a result of Banks’[s]
employment. Because BCI’s proof, as a matter of law, failed to show that it
suffered any unfair competition, the jury’s verdict cannot stand and must be
set aside.
....
Regarding [the] breach of the 2005 RCA, the Court finds that BCI’s proof was
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legally insufficient to show that there ever existed a legally valid and binding
contract. First, the 2005 RCA was never signed by Banks or witnessed by
anyone. It was contained in a revised Employee Handbook that Banks never
saw or acknowledged receiving.
Second, the course of dealings between the parties showed that Banks had
earlier signed a stand-alone RCA in March of 2001 which was duly witnessed
by his supervisor. The unsigned 2005 RCA was materially different from the
signed March 2001 RCA regarding the period of time Banks would be
required to reimburse BCI for certain items of expense. There was no proof
of a “meeting of the minds” regarding this purported material change.
Finally, the March 2, 2001[,] offer letter signed by Banks and later
incorporated into his employment agreement, expressly stated that “[n]either
the Employee Handbook nor any explanation of BCI’s policies and guidelines
you may receive will constitute an express or implied contract for any purpose
or otherwise affect your status as an employee at-will.”
Accordingly, the Court finds that there was never a valid, legally enforceable
RCA between the parties and [that] the jury’s verdict cannot stand.
¶21.
On appeal, BCI asks this Court to reverse the trial court’s grant of the JNOV and
render a decision that reinstates the jury’s verdict. BCI also asks that the Court to remand
this case to the circuit court for consideration of its motion for award of attorney’s fees and
costs.
STANDARD OF REVIEW
¶22.
A motion for a JNOV made under the procedural vehicle of Mississippi Rule of Civil
Procedure 50(b) requires a trial court to test the legal sufficiency of the evidence supporting
the verdict, not the weight of the evidence. Tharp v. Bunge Corp., 641 So. 2d 20, 23 (Miss.
1994).
¶23.
On appeal, this Court review is de novo. White v. Stewman, 932 So. 2d 27, 32 (¶10)
8
(Miss. 2006). Indeed, for our consideration, this Court must apply the “same criteria” that
the trial court would consider:
This Court will consider the evidence in the light most favorable to the
appellee nonmovant, giving that party the benefit of all favorable inference[s]
that may be reasonably drawn from the evidence. If the facts so considered
point so overwhelmingly in favor of the appellant movant that reasonable men
could not have arrived at a contrary verdict, we are required to reverse and
render. On the other hand if there is substantial evidence in support of the
verdict, that is, evidence of such quality and weight that reasonable and fair
minded jurors in the exercise of impartial judgment might have reached
different conclusions, affirmance is required. The above standards of review,
however, are predicated on the fact that the trial judge applied the correct law.
Id.
ANALYSIS
A.
¶24.
Claim for Breach of Business Protection Agreement
BCI claims that the circuit court erred when it granted Banks’s motion for a JNOV
and entered a judgment as a matter of law in favor of Banks on the breach-of-contract claim
for damages based on the BPA.
¶25.
This issue actually contains two parts. First, BCI argues that Mississippi law does not
require a finding of “unfair competition” to enforce a non-competition agreement. Second,
if a finding of “unfair competition” is the proper legal element, then it was not presented
before the jury was instructed, was not contained in the jury instructions, and was not part
of the jury’s deliberation and decision.
¶26.
Our review will focus on whether “the trial judge applied the correct law.” Id. In the
order granting the motion for a JNOV, the circuit court ruled:
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As to breach of the BPA, the Court finds as a matter of law that the evidence
presented by BCI at trial was insufficient to satisfy its burden to prove all of
the essential elements of its case. Covenants not to compete only protect
against “unfair” competition by a former employee. Being disfavored by
law, these agreements are never enforced to prevent fair competition in the
marketplace. BCI’s proof failed to show that it was subjected to unfair
competition as a result of Banks’[s] employment by Venture Technologies.
The Court notes that BCI and Venture Technologies were competitors before
Banks started work for Venture and remained competitors after Banks was
working there. The evidence failed to show that there was any change in
competition between these two companies as a result of Banks’[s]
employment. Because BCI’s proof, as a matter of law, failed to show that it
suffered any unfair competition, the jury’s verdict cannot stand and must be
set aside.
(Emphasis added).
¶27.
We find that the circuit court erred when it found that to establish a breach of the non-
competition agreement BCI had to prove some “unfair” competition resulted from Banks’s
employment with a competitor. No such term existed in the BPA between Banks and BCI.
There was no such evidentiary requirement in the BPA, and no such requirement exists under
Mississippi law. There was simply no authority for the circuit court to have compared the
competition between BCI (Banks’s former employer) and Venture (Banks’s current
employer) to conclude whether the covenant not to compete in the BPA should be enforced.
Thus, we find the circuit court erred as a matter of law.
¶28.
The circuit court determined that the outcome of the case was controlled by this legal
proposition – “Covenants not to compete only protect against ‘unfair’ competition by a
former employee.” This proposition it takes existing legal authority out of context. We do,
however, recognize that the supreme court has used the words “unfair competition” in an
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earlier opinion. In Donahoe v. Tatum, 242 Miss. 253, 261, 134 So. 2d 442, 445 (1961), the
supreme court held:
“It is the law’s function to maintain a reasonable balance in this area. This
‘requires us to recognize that there is such a thing as unfair competition by an
ex-employee as well as by unreasonable oppression by an employer.’” The
circumstances of each case will be carefully scrutinized to determine whether
it falls within or without the boundary of enforceability.
(Citation omitted).
¶29.
The Donahoe court upheld the enforcement of a covenant not to compete. Id. The
facts of Donahoe are strikingly similar to the case before this Court. However, Donahoe
does not stand for the legal proposition that “[c]ovenants not to compete only protect against
‘unfair’ competition by a former employee.” Instead, Donahoe supports the jury’s verdict
in favor of BCI.
¶30.
In Donahoe, Rudy Tatum owned and managed an employment agency. Id. at 257,
134 So. 2d at 443. Barbara Donahoe had worked at the agency, and she agreed to and signed
a covenant not to compete. She left the agency and went to work for a competitor. Id.
Tatum brought an action to prevent Donahoe’s violation of the covenant not to compete. Id.
at 255, 134 So. 2d at 442. In the covenant, Donahoe agreed to the following:
never to be employed by, or to install for myself, or to be employed by another
company for the purpose of operating an employment agency within the
boundary of Hinds County, Mississippi, for a period of five years following
my separation from [Tatum’s company]. I further agree and contract never to
divulge any information contained in the office files of [Tatum’s company] to
anyone for any reason.
Id. at 256-57, 134 So. 2d at 442-43. The chancery court granted the injunction against
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Donahoe. Id. at 256, 134 So. 2d at 442-43.
¶31.
At trial, Tatum established that “[a]ll of the information available to the owners of the
business was available to her.” Id. at 257, 134 So. 2d at 443. Donahoe “received job orders
from employers, different types of confidential information, and screened applicants to fit
the orders.” Tatum testified that “the purpose of the contract was to protect his agency in its
business, because it was a personal and confidential type of operation, with trade secrets and
confidential relations with large employers and applicants for jobs.” Id. After Donahoe left
her employment with Tatum’s company, she went to work for a competitor employment
service. Tatum testified that “Donahoe in her new job is calling former clients of his agency
[and] that she is an excellent employment counselor, [who] knows his agency’s business,
trade secrets, and confidential information.” Id. at 258, 134 So. 2d at 443.
¶32.
Donahoe testified that she knew she had signed the contract, but she thought “its terms
were unreasonable.” Id. Donahoe “denied that she had been soliciting business away from
Tatum, although she admitted her new employer had widely mailed a printed announcement
of her association with him. She said she has not divulged any confidential information
learned at [Tatum’s company and] that she does not know anything which would enable her
to harm [the] appellee.” Id. at 258, 134 So. 2d at 443-44.
¶33.
The chancellor concluded that the contract was “not unreasonable.” In fact, the
chancellor enjoined Donahoe “from employment with an agency in Hinds County until the
expiration of five years from the date of the contract.” Id. at 259, 134 So. 2d at 444. The
Mississippi Supreme Court held:
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We do not think [Donahoe’s] contract imposes an unreasonable restraint of
trade so as to render it unenforceable. A bargain by an employee not to
compete with the employer after the employment has terminated falls within
this permissible category, provided the agreement is within such territory and
during such time as may be reasonably necessary for the protection of the
employer, without imposing undue hardship of the employee, and provided
there is a reasonable basis for the covenant. The validity of such an
agreement is dependent upon such considerations as the nature and character
of the employment, the size and conditions of the locality to which the
prohibition extends, and the duration of the prohibition. In short, the evidence
must show the reasonableness of the restriction with respect to the nature of
the employment, the duration of the period of restraint, and the scope and
extent of the restriction, territorially.
Id. (emphasis added). The supreme court upheld the chancellor’s decision and ruled:
Donahoe's employment with [Tatum’s company] was of such character as to
inform her of its business methods, confidential information, and trade secrets.
These facts, if brought to the knowledge of a competitor, would prejudice the
interests of the employer. She acquired confidential knowledge and
acquaintance with the employer's clientele. These factors indicate the
reasonableness of the agreement from the point of view of the employer.
With reference to the employee, she is a well-educated person and understood
the contract which she was signing. The chancellor correctly found that
[Donahoe] is trained in other areas of work, and has sufficient talent and
experience to earn a living in other pursuits during the period of the covenant.
He was justified, therefore, in holding that there would be no such undue
hardship upon [Donahoe] as would invalidate her contract. Nor does the
evidence indicate that the agreement tends to promote a monopoly. [Tatum’s
company] has seven competitors in Hinds County. Competition among
employment agencies appears to be vigorous.
Id. at 259-60, 134 So. 2d at 444 (emphasis added).
¶34.
After the supreme court upheld the enforcement of the covenant, the court discussed
several earlier cases (one from 1859) where similar covenants were interpreted. Then, the
supreme court included the following language:
13
It is the law’s function to maintain a reasonable balance in this area. This
“requires us to recognize that there is such a thing as unfair competition by
an ex-employee as well as by unreasonable oppression by an employer.” The
circumstances of each case will be carefully scrutinized to determine whether
it falls within or without the boundary of enforceability. 6 Corbin, Contracts
(1951), Sec. 1394; 5 Williston, Contracts (Rev. Ed. 1937), Secs. 1659, 1660;
Anno., 41 A.L.R.2d 15 (1955).
The evidence here shows that [Donahoe] contracted to forbear from
competition in Hinds County for five years. [Tatum’s company] made
available to her, and she possesses, confidential information, and the business
methods and trade secrets of this employment agency. [Tatum’s company] has
suffered, and may suffer in the future, substantial harm if [Donahoe] is
permitted to violate the contract. Nor does it place an undue burden upon
[Donahoe]. . . . The facts of each case will be carefully examined as to the
reasonableness of such restrictive covenants. The evidence here supports the
decree enforcing [Donahoe]’s contract.
Donahoe, 242 Miss. at 261, 134 So. 2d at 445 (emphasis added).
¶35.
The supreme court’s decision in Donahoe simply cannot be read to require a former
employer to prove “unfair competition” to prevail on a claim to enforce a covenant not to
compete. Instead, this language reads that the court should look at the restrictions contained
in the covenant to determine whether such restrictions need to be reduced.
¶36.
Mississippi courts have held that an employer has an interest in the protection of its
customer base, its goodwill, and its ability to succeed in a competitive marketplace.
Empiregas, Inc. of Kosciusko v. Bain, 599 So. 2d 971, 976 (Miss. 1992). “The primary right
of the employer is that of ‘protecting the business from loss of customers by the activities of
the former employees who have peculiar knowledge of and relationships with the employer’s
customers.’” Herring Gas Co. v. Magee, 813 F. Supp. 1239, 1245 (S.D. Miss. 1993)
(quoting Redd Pest Control Co., Inc. v. Heatherly, 248 Miss. 34, 43, 157 So. 2d 133, 136
14
(1963)). Covenants not to compete are valid and enforceable if they protect an employer’s
investment in the training and education of an employee. Redd Pest Control Co., Inc. v.
Foster, 761 So. 2d 967, 973 (¶22) (Miss. Ct. App. 2000); Taylor v. Cordis Corp., 634 F.
Supp. 1242, 1247-49 (S.D. Miss. 1986); Texas Rd. Boring Co. of La.-Miss. v. Parker, 194
So. 2d 885, 889 (Miss. 1967); and Heatherly, 248 Miss. at 43, 157 So. 2d at 136.
¶37.
In Foster, Redd Pest Control filed claims against two former employees based on the
breach of covenants not to compete. Foster, 761 So. 2d at 969. The chancery court ruled for
the employee, and Redd Pest Control appealed. In a unanimous opinion written by Judge
Lee, this Court held that the chancellor erred in failing to enforce the covenant not to
compete in part because the covenant protected “the money and time involved in training
employees.” Id. at 973.
¶38.
In Taylor, a pacemaker manufacturer had extensively trained the defendant former
employee to sell pacemakers to physicians. Taylor, 634 F. Supp. at 1243. The former
employee brought a declaratory-judgment action requesting that the court rule that his
contract of employment was void and unenforceable. The employer counterclaimed for a
preliminary injunction to enforce the covenant not to compete. The district judge interpreted
Mississippi law and held that the former employee was not entitled to rescission of the
contract. Id. at 1247. The court also found that the employer was entitled to preliminary
injunction to enforce the covenant. Id. at 1252. The court concluded:
This court is of the opinion that Cordis sustained its burden of demonstrating
the economic justification for its agreement with Taylor. In the pacemaker
sales industry the customers, in most cases the physicians, rely primarily on
15
the salesperson and have little or no contact with the company prior to
purchasing a pacemaker. Throughout the period during which Taylor was in
training, and later when he was establishing his and Cordis’[s] credibility with
the physicians, Cordis paid all his salary and expenses. Under similar
circumstances, the Mississippi Supreme Court has stated that it is proper for
the court to take into consideration the fact that [the employer] spent large
sums of money over a period of time to establish the business and acquire the
customers. Redd Pest Control Co. v. Heatherly, 248 Miss. 34, 157 So. 2d 133,
136 (1963). See also Texas Rd. Boring Co. of Louisiana-Mississippi v. Parker,
194 So. 2d 885, 889 (Miss. 1967).
Id. at 1248.
¶39.
These cases make it clear that, under Mississippi law, covenants not to compete are
valid and enforceable. Such covenants may be used to protect confidential information, trade
secrets, proprietary information, customer lists, vendor relationships, business practices, and
the employer’s investment in training and education of an employee. The employee may not
simply take such information to a competitor. Mississippi courts have enforced covenants
not to compete when former employees who, like Banks, have peculiar knowledge of and
relationships with the employer’s customers and vendors. See Herring Gas, 813 F. Supp. at
1245.
¶40.
The enforceability of a non-compete agreement “is largely predicated upon the
reasonableness and specificity of its terms, primarily the duration of the restriction and its
geographic scope.” Empiregas, 599 So. 2d at 975. A court must also examine the covenant's
effect on “the rights of the employer, the rights of the employee, and the rights of the public,”
and balance these respective interests. Texas Rd. Boring, 194 So. 2d at 888.
¶41.
Here, the circuit judge focused on the competition between the two employers, BCI
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and Venture. The balancing test is actually between the employer (BCI), the employee
(Banks), and the public. What BCI sought to protect was Banks’s giving of information to
Venture that could be used to improve Venture’s competitive advantage. Banks had access
to BCI’s confidential information and proprietary business methods. Banks acknowledged
the importance of this when he signed the BPA, which states:
Employee recognizes that the Company engages in the business of network
communication systems integration and consulting, and that such business
requires confidentiality in connection with many of its methods and operating
procedures, including without limitation names and addresses of the
Company’s customer, sources of buying, training methods, and techniques of
organization. During the course of his/her employment, Employee may
become knowledgeable of the Company’s confidential information. In
addition, Employee may develop on behalf of the Company a personal
acquaintance with the Company’s present customers, suppliers, and/or other
business-related contact which acquaintance may constitute the Company’s
only contact with such individuals or entities. As a result, Employee will
occupy a position of trust and confidence with the respect to the Company’s
affairs and products.
The territorial scope and period of restriction in the BPA was reasonable. The BPA
prohibited Banks from competition only in the areas where BCI has an office. Banks
admitted at trial that he could work in other cities where BCI had no offices. The one-year
term of the BPA was reasonable.1
1
See, e.g., Texas Rd. Boring Co., 194 So. 2d at 886 (two-year duration); Heatherly,
248 Miss. at 38, 157 So. 2d at 133 (two-year duration); Bagwell v. H.B. Wellborn & Co., 247
Miss. 564, 566-67,156 So. 2d 739, 739-40 (1963) (two-year duration); Frierson v. Sheppard
Bldg. Supply Co., Inc., 247 Miss. 157, 161, 154 So. 2d 151, 152 (1963) (two-year duration);
Donahoe, 242 Miss. at 255, 134 So. 2d at 442-43 (five-year duration); Wilson v. Gamble,
180 Miss. 499, 177 So. 363, 365 (1937) (five-year duration); Foster, 761 So. 2d at 969 (twoyear duration); Taylor, 634 F. Supp. at 1244 (one-year duration).
17
¶42.
The second part of our review concerns the jury instructions. Indeed, there appears
to be a startling contrast in the law that was used in the jury instructions and that which was
used in the order granting a JNOV. The circuit judge considered, in a post-trial motion, a
legal element that was not presented before the jury was instructed, was not contained in the
jury instructions, and was not part of the jury’s deliberation and decision. Indeed, we find
it error that the circuit judge added a legal element of proof post-trial.
¶43.
The jury instructions that were given by the trial court on the issue of the breach of
the non-competition agreement read as follows:
Jury Instruction No. 12
The Court instructs the jury that the Business Protection Agreement 1)
prohibited Al Banks from rendering service to any competitor of Business
Communications, Inc. located within a 150 mile radius of the location of any
Business Communications, Inc. office for a period of one (1) year after
termination of his employment with Business Communications, Inc., that
served to protect a legitimate business interest as defined; 2) prohibited Al
Banks from retaining written material, information, records, and documents or
copies of same made by him or coming into his possession concerning the
business or affairs of Business Communications, Inc.; and 3) required Al
Banks to promptly return to Business Communications, Inc. all written
material, information, records, and documents made by him or coming into his
possession concerning the business or affairs of Business Communications,
Inc., including without limitation Confidential Information, and any other
property in his possession owned or leased by the Business Communications,
Inc. If you find that Al Banks violated one or more of the above conditions of
the Business Protection Agreement with Business Communications, Inc., you
may find that he was in breach of his agreement with Business
Communications, Inc.
Jury Instruction No. 13
“Legitimate” business interests are protection from loss of customers and
goodwill, disclosure of confidential and proprietary business information and
18
mis-appropriation of “trade secrets” and training costs.
Jury Instruction No. 14
The Court instructs the jury that in determining the validity and enforceability
of the covenant not to compete provision in the Business Protection Agreement
between Business Communications, Inc., and Albert Banks, you consider the
following factors: 1) [t]he rights of Business Communications, Inc., in
protecting its legitimate business interests including but not limited to its
confidential and proprietary information and the investment in training its
employees; 2) [t]he rights of Albert Banks to not be subjected to undue
hardship; and 3) [t]he rights of the public to avoid the creation of a deficiency
of service in the information technology industry, or that any one information
technology company in the state has created or is in danger of creating a
monopoly though its use of them.
Based on the verdict, the jury followed the instructions and found a breach of the BPA
There was sufficient evidence offered to establish that Banks breached the BPA.
¶44.
The parties are to submit jury instructions on “substantive law of the case” to the
court.
M.R.C.P. 51(b). In his exceptional treatise, Professor Jeffery Jackson states the
reason for and requirements of jury instructions as follows:
Jury instructions are intended to advise the jury of applicable law and to
instruct the jury to make the factual findings necessary to reach a verdict in a
civil case. . . . Tactically, counsel’s role in instruction practice is clear. First,
one should offer and obtain instructions correctly stating all areas of the law
necessary for the client to prevail on the merits. Conversely, one should object
to and obtain exclusion of any instruction offered that misstates the law, or
that, through its content, phrasing or order, will mislead the jury in its
deliberation.
J. Jackson, Mississippi Civil Procedure §14:1 (2009).
¶45.
The circuit judge’s order granting the JNOV was not consistent with the substantive
law contained in the jury instructions. If indeed BCI was required to prove that “covenants
19
not to compete only protect against ‘unfair’ competition by a former employee,” then it
would be the jury’s province to determine whether the competition was “fair” or “unfair.”
This would have been a factual determination. No such instructions were offered by Banks
or included by the circuit court. The jury was not instructed as to this element. The “main
‘purpose of jury instructions is to tell the jury what facts they have to find and who has the
burden of proving or disproving those facts.’” Neal v. State, 15 So. 3d 388, 397 (¶14) (Miss.
2009) (quoting Harris v. State, 861 So. 2d 1003, 1016 (Miss. 2003)).
¶46.
Therefore, this Court finds that the terms of the BPA are reasonable and enforceable.
Banks breached the terms of his employment contract by disclosing confidential information
to third parties including Venture. The nondisclosure provisions of the BPA state:
3. Covenant Not to Disclose.
(a) For the purpose of this Agreement, “Confidential Information” means
information and trade secrets disclosed to Employee or known by Employee
as a consequence of, or through, Employee’s employment with the Company,
including information conceived, originated, discovered, or developed in
whole or part by Employee, not generally known in the relevant trade or
industry, about the Company’s business, but not limited to information relating
to business methods or practices, training and training programs, and the
documentation thereof. . . .
(b) The Employee acknowledges that all Confidential Information is and shall
at all times remain the property of the Company. . . .
¶47.
The evidence established that Banks, while working at BCI and in the process of
seeking other employment, shared his BPA with BellSouth and Venture, two of BCI’s
biggest competitors. Banks breached a material term in his employment agreement by
disclosing the BPA, which was BCI’s confidential information. Banks negotiated an
20
agreement for Venture to employ Banks and defend and indemnify him up to $10,000 if BCI
attempted to enforce the terms of the BPA.
¶48.
The BPA required Banks to return BCI’s property at the end of an his employment,
stating:
4. Business Material and Property Disclosures.
All written material, information, records, and documents made by Employee
or coming into Employee’s possession concerning the business or affairs of the
Company, including without limitation Confidential Information, shall be the
sole property of the Company, and, upon termination of Employee’s
employment with the Company, whether voluntary or involuntary terminated
by either party with or without cause or notice, Employee shall promptly
deliver the same to the Company and shall retain no copies. This includes,
without limitations, customer and supplier information and lists. Employees
shall also promptly return to the Company all other property in Employee’s
possession owned or leased by the Company upon termination of employment.
The evidence revealed that Banks took BCI’s property with him when he left. Banks took
BCI’s books, a listing of overdue work orders, several Cisco documents, a BCI employee
handbook, a backup computer file containing BCI information, and BCI files stored on his
personal computer.
Banks testified that he retained these documents inadvertently.
Inadvertent or intentional, Banks’s retention of BCI’s confidential property was a breach of
the BPA.
¶49.
Based on the appropriate standard of review, we conclude that the circuit court
committed reversible error when it granted the JNOV. As to this issue, we reverse the order
granting the JNOV, reinstate the jury’s verdict, and remand this case to the trial court to
consider BCI’s motion for attorney’s fees.
21
B.
¶50.
Claim for Breach of 2005 Reimbursement of Costs Agreement
BCI’s second issue claims that the trial court erred when it granted Banks’ motion for
a JNOV and entered a judgment as a matter of law in favor of Banks on the breach-ofcontract claim for damages based on the unsigned 2005 RCA, which is contained in BCI’s
employee handbook. Said differently, the circuit court erred when it held that there was no
meeting of the minds between Banks and BCI with regard to the RCA. BCI claims that the
evidence established that Banks’s duties to comply with the provisions of his employee
handbook arose as part of his obligations under his employment contract with BCI. Banks
counters that he did not sign the RCA, nor did he sign the handbook in general, so he should
not be bound by its terms.
¶51.
The circuit court granted Banks’s motion for a JNOV. In its order, the circuit court
found:
Regarding [the] breach of the 2005 RCA, the Court finds that BCI’s proof was
legally insufficient to show that there ever existed a legally valid and binding
contract. First, the 2005 RCA was never signed by Banks or witnessed by
anyone. It was contained in a revised Employee Handbook that Banks never
saw or acknowledged receiving.
Second, the course of dealings between the parties showed that Banks had
earlier signed a stand-alone RCA in March of 2001 which was duly witnessed
by his supervisor. The unsigned 2005 RCA was materially different from the
signed March 2001 RCA regarding the period of time Banks would be
required to reimburse BCI for certain items of expense. There was no proof
of a “meeting of the minds” regarding this purported material change.
Finally, the March 2, 2001[,] offer letter signed by Banks and later
incorporated into his employment agreement, expressly stated that “[n]either
the Employee Handbook nor any explanation of BCI’s policies and guidelines
you may receive will constitute an express or implied contract for any purpose
22
or otherwise affect your status as an employee at-will.”
Accordingly, the Court finds that there was never a valid, legally enforceable
RCA between the parties and [that] the jury’s verdict cannot stand.
¶52.
To support its argument, BCI cites Perry v. Sears, Roebuck & Co., 508 So. 2d 1086,
1088 (Miss. 1987), where the supreme court held that a personnel manual “can create
contractual obligations, even in the absence of a written agreement.” Further, in Perry v.
Sears, Roebuck & Company, 508 So. 2d 1086, 1088 (Miss. 1987) (citing Robinson v. Board
of Trustees of East Central Junior College, 477 So. 2d 1352, 1353 (Miss. 1985)), the
supreme court held that “a written contract can be modified by a policy handbook which then
becomes part of the contract, but only where the contract expressly provides that it will be
performed in accordance with the policies, rules and regulations of the employer.”
¶53.
Here, there was no dispute that Banks did not sign the employee handbook or the
RCA. He did, however, execute a written employment contract. BCI contends that the
contract gave rise to several duties, including those contained in the employee handbook.
The evidence to support this came from Banks and Derrick Lindsay, BCI’s former vice
president. BCI introduced an offer letter from BCI that was extended to Banks which
explicitly stated: “This letter . . . is an offer of employment on the forgoing basic terms. Upon
joining BCI, you may receive an employee handbook and a more detailed, formal
explanation of BCI’s policies and guidelines.” In Bobbitt v. Orchard, Ltd., 603 So. 2d 356
(Miss. 1992), the Mississippi Supreme Court held that because an employment manual was
given to all employees, it became a part of the employment agreement. While the handbook
23
did not create a right to employment, it did create an obligation on the part of the employer
to follow its provisions in reprimanding, suspending, or discharging an employee for
infractions specifically covered therein. BCI contends that the RCA gave rise to obligations
on the part of both Banks and BCI. We find that the employee handbook did indeed give rise
to duties and obligations on the part of both parties. The question, therefore, is whether there
was sufficient evidence to support the jury’s verdict that found Banks was obligated to
reimburse BCI $9,000 in damages for breach of the RCA.
¶54.
Our analysis requires that we review both provisions. First, the 2001 RCA, which was
signed by Banks, provides:
I understand that during the course of my employment, [BCI] may necessarily
incur certain fees and expenses related to my employment. Therefore, I
hereby agree that should I terminate my employment with [BCI] within
one year of my date of hire, I will be responsible for reimbursing to [BCI]
all expenses which may have been incurred by the Company with regard
to my relocation, training, and/or certification of any kind. I understand
and agree that a sum equal to this amount will become immediately due and
payable, with or without notice, and without demand therefore, on the date of
my separation from employment, and I agree to immediately reimburse to
[BCI] this amount.
(Emphasis added).
¶55.
Next, the 2005 RCA provides:
I understand that during the course of my employment, [BCI] may necessarily
incur certain fees and expenses related to my employment. Therefore, I
hereby agree that should I terminate my employment with [BCI], I will be
responsible for reimbursing [BCI] all expenses which may have been
incurred by [BCI] with regard to my relocation, training, and/or
certification of any kind within the previous twelve months. In addition,
I agree to returned [sic] or reimburse [BCI] for any outstanding advances, per
diems, travel, tools or equipment that have been issued to me. I understand
24
and agree that a sum equal to this amount will become immediately due and
payable, with or without notice, and without demand therefore, on the date of
my separation from employment, and I agree to immediately reimburse to
[BCI] this amount.
(Emphasis added).
¶56.
Here, it is the 2005 RCA that BCI seeks to enforce. The form of both RCAs was
identical. They both contained a space for the employee’s signature, the employee’s printed
name, the date, and a witness’s signature. The terms were slightly different. The term was
changed, from “within one year of my date of hire” (2001 RCA) to “within the previous
twelve months” (2005 RCA). In addition, the 2005 RCA added the sentence, “In addition,
I agree to returned [sic] or reimburse [BCI] for any outstanding advances, per diems, travel,
tools or equipment that have been issued to me.”
¶57.
We find that the circuit court was correct to grant a JNOV as to the jury’s verdict that
awarded BCI $9,000 in damages for Banks’s breach of the cost-reimbursement provision
(2005 RCA) of the BCI employee handbook. Having carefully reviewed the BCI employee
handbook included in the exhibit and the record excerpts, we note that the provision for
reimbursement of costs clearly anticipated that the employee would sign, date, and have a
witness sign the 2005 RCA before it would be enforceable. We might, however, be
convinced by BCI’s argument that the provision could be enforced as part of the duties and
obligations of the employment manual but for the fact that the form itself specifically called
for and, thus, required its execution by the employee. Without the execution of the
agreement by the employee, we do not find that it can be enforced. We cannot conceive why
25
the form in the handbook would require a signature if such was not expected and necessary
to advise the employee of his/her obligation to the company. The execution would represent
the “meeting of the minds” of the parties to now place a possibly significant financial
obligation on the employee.
¶58.
Further, we recognize that contracts must be interpreted by their terms. The 2005
RCA seems to require the payment of “all expenses which may have been incurred by [BCI]
with regard to my relocation, training, and/or certification of any kind . . . .” The record does
not establish that Banks knew, or should have known, what BCI actually meant by training
expenses. Banks testified that when he signed the 2001 RCA, he assumed that training
expenses meant out-of-pocket expenses for “off-site training.” But according to Tom Hinds,
President of BCI’s Internet Technology Group, such expenses were not taken into account.
The training expenses that BCI asked for reimbursement of were the “hourly rate costs,”
with/or without “overhead,” that BCI incurred while Banks was “not billing.”
Hinds’s
testimony, exhibit P-12, and the record indicate that here the term “training expenses” is an
ambiguous term. Our courts are not bound to adopt a construction not compelled by an
instrument in which one would have to believe that no person in his or her right mind would
have agreed to. See, e.g., Frazier v. N.E. Miss. Shopping Ctr. Inc., 458 So. 2d 1051, 1054
(Miss. 1984).
¶59.
BCI admitted an exhibit entitled “Banks[’s] Training Cost,” identified as exhibit P-12.
According to the exhibit, Banks accumulated 108.25 hours of training-time from March 1,
2005, to January 13, 2006. According to Hinds, the training, which could consume up to
26
twenty-five percent of an engineer’s work-time each week, was necessary for Banks and
BCI’s other engineers to “stay abreast of the latest technology.” Some of the training
activities listed on exhibit P-12, include: “reading,” “studying,” “MCSE review,” “SUN
testing,” “Cisco meeting,” “Engineer meeting,” “Monthly meeting,” “Staff meeting,” “Cisco
product Review,” “SUN account problems,” “Monthly Meeting,” and “Securing lab
equipment.” Hinds testified that BCI entrusts its engineers with the responsibility of entering
their own respective hours and identifying the training purpose.
¶60.
Exhibit P-12 also contained two separate dollar totals, $10,763.30 and $7,174.81.
According to Hinds, the first amount was calculated by multiplying $99.43 times 108.25, and
the second amount was calculated by multiplying $66.28 times 108.25. Hinds said that
$99.43 was Banks’s “hourly rate cost,” when taking into consideration “overhead.” The
other dollar figure, $66.28, was Banks’s “hourly rate cost” without “overhead.”
¶61.
During direct examination, Hinds attempted to explain how BCI had determined each
“hourly rate cost,” stating:
A. This page shows what [Banks’s] annual salary is, and then it breaks down
to a monthly rate, which is $7,083.33. And what we’re trying to get to is an
hourly cost, what [Banks] cost us when he was our employee to have in the
office. We use an 11 percent tax burden as an estimate, maybe a little bit
higher or a little bit lower for certain employees, but we use an 11 percent tax
burden. And at the time [Banks] was here, we paid for a portion of the
employee’s medical benefit, 80 percent of the employee’s medical benefit. So
we have that on here as well . . . . We take 20,080 [sic] hours a year that an
employee is scheduled that are regular hours to work and divide that by 12, so
you’ll come up with 173 point something, something in hours per month. So
if you add those monthly numbers together, divide it out, you’ll come up with
a raw hourly rate that [Banks] would have on that. It is not burdened with any
overhead or administration or cost of buildings or anything else.
27
Q. As far as overhead is concerned, explain what you mean.
A. There are other people other than [Banks] that are supervisors and
managers that were above [Banks]. There are others: [c]ustomer service,
accounting, receiving, [and] purchasing people. There are other people that
are required to run the business, including buildings and vehicles and gas and
utilities and everything else that make up what we call the overhead
calculation. So that’s what the overhead is, it’s those things not directly
[Banks’s] hourly rate.
....
Q. Tell the jury why you think BCI is entitled to the total training personnel
cost of either $10,763.30 with overhead or the [sic] without overhead number
of $7,174.81. Let’s talk about with the overhead first, okay?
A. We spend a lot of time in [sic] buying the systems and the lab gear and the
books and everything else for our people to study. We invest in the time for
them to do it as well. We can’t retrain somebody every six months. If
somebody were to leave and go where ever they go, we’ve got to retrain
another individual. So we’ve got to be able to recoup that. That’s why we
want to recover that. We spend a lot of time and effort making the lab gear
available, making the books available, and [making] the time available to our
employees to do that studying. So we want to make sure that we get the full
value for it and keep us on a competitive edge.
Q. As far as lab work in [sic] concerned, tell us what those costs are?
A. There’s a lot of money in equipment and gear. We actually buy kind of the
latest and greatest technology. One of our partnerships with Cisco requires us
to buy about $100,000 worth of gear a year. That’s the latest technology.
What we do is we put that in the lab environment and allow our engineers to
play with it and configure it and make it work essentially the way that it would
in a typical customer environment. You don’t want them experimenting on
your site and on your job when they are doing it. You want them to learn it
and know it and understand it and have felt it and touched it before they got to
your site.
¶62. Hinds’s cross-examination provided more clarity as to what each “hourly rate cost”
represents, as the following colloquy reveals:
28
Q. Mr. Hinds, your background is in accounting, . . . is that correct?
A. Yes.
Q. I may ask you a few questions and if they sound naive or even stupid,
please indulge me, okay?
A. Certainly.
Q. These expenses that are reflected on this most recent exhibit, those are all
for what we would call in-house events, right?
A. They [sic] would be training that was done on [sic] our facility or at [the]
library or one of our partner sites, correct.
Q. Right. And there was no payment to any outside or third party vendor,
correct?
A. No.
Q. So you remember yesterday we looked at some documents that had
reimbursement of costs, remember that?
A. Yes, I do.
Q. I believe the last number on there was some $900.00 that was a cost that
had been incurred by BCI for [Banks] to get some training?
A. That’s correct.
Q. Now, what you’re talking about here, though, is something entirely
different. I just want to be sure I’m clear on it. Correct?
A. It is. It’s something different.
Q. And in effect you want - - BCI wants to recover this money even though
its got the benefit already of [Banks’s] work there as an employee, correct?
A. Yes, it’s correct, but also we’re not going back and retraining somebody
else at that time to learn those same skill sets again.
29
Q. Right. You would have to do that whether [Banks] went to work for
Venture or . . . anywhere, correct?
A. That’s correct.
Q. And you would have to do that if [Banks] died?
A. That’s correct.
Q. The expenses that you have outlined here on this exhibit, they only include
his time and some allocation of his overhead, correct?
A. The time on the third sheet, it’s his time period. On the first of the second
sheet it includes a raw cost for him and then an overhead calculation as well.
Q. And those are costs that you incur in the ordinary course of your business
...?
A. They are.
Q. And they are not in the nature of any kind of costs for which you have an
outlay that you would not otherwise have to employ [Banks]?
A. There’s a cost to the business that we would have whether he was training
or not. But in those 100 hours that he was training, he was not billing. So
that’s the difference. We’re not billing when he is in training.
Q. But he was entitled to be paid in salary whether he was . . . billing or not,
wasn’t he?
A. That’s correct, but the value for engineers for us is to have them out billing
as much as possible.
....
Q. So you’re telling this Court and jury that you are seeking this
reimbursement for [Banks] irrespective of what his post-employment conduct
is?
A. Correct.
30
....
Q. And it is not connected with the [BPA]?
A. I don’t know that I would draw the two together related to that.
¶63.
Therefore, we find that there was not sufficient evidence to support the jury’s verdict
that found Banks was obligated to reimburse BCI $9,000 in damages for breach of the RCA.
Accordingly, we affirm the circuit court’s grant of a JNOV as to this issue.
¶64. THE JUDGMENT OF THE CIRCUIT COURT OF MADISON COUNTY IS
AFFIRMED IN PART AND REVERSED AND REMANDED IN PART FOR
FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF
THIS APPEAL ARE ASSESSED EQUALLY BETWEEN THE PARTIES.
LEE, P.J., BARNES, ISHEE, ROBERTS AND CARLTON, JJ., CONCUR.
MYERS, P.J., CONCURS IN PART AND DISSENTS IN PART WITH SEPARATE
WRITTEN OPINION JOINED BY IRVING, J. KING, C.J., AND MAXWELL, J.,
NOT PARTICIPATING.
MYERS, P.J., CONCURRING IN PART AND DISSENTING IN PART:
¶65.
While I concur with the result reached by the majority on issue two, I must dissent
from the majority’s decision to reverse the circuit court’s judgment on issue one.
¶66.
The jury awarded BCI $1,000 in compensatory damages for breach of the BPA
without any proof that BCI suffered any cognizable harm from Banks’s employment with
Venture or from Banks’s retention of certain property items, all of which were returned to
BCI,2 or from Banks’s disclosure of so-called confidential information–i.e., the BPA, itself,
2
None of the property items were presented at trial. According to the record, BCI’s
attorney was still in possession of some of the items at the time of trial.
31
and the industry-standard, boilerplate language contained therein.3
¶67.
In its pleadings, BCI claimed that Banks’s breach of the BPA caused it to suffer loss
of business and loss of goodwill. BCI suffered neither, as Thomas Hinds, BCI’s President,
and Tony Bailey, BCI’s owner, illustrated for the record at trial.
Hinds:
Q. Can you tell this jury one single unfair competition advantage that
[Venture] has gotten as a result of [Banks] going to work there?
A. I don’t know of any.
....
Q. You didn’t know in March of 2006 [when this lawsuit was filed], did you?
A. No, I didn’t.
Q. And you don’t know today, do you?
A. Correct.
Q. BCI’s interest in protecting itself from unfair competition has not been
harmed by [Banks’s] employment at [Venture], has it?
A. I can’t say that it has.
....
Q. Now, other than simply not wanting [Banks] to go work for Venture, which
he could quit . . . and go somewhere, what is it about the fact that he went to
work for Venture that has caused you [BCI] any monetary damage?
3
“[M]atters of general knowledge within the industry are not classified as trade
secrets or confidential information entitled to protection.” 54A Am. Jur. 2d Monopolies and
Restraints of Trade § 913 (2009).
32
A. I don’t know of any.
....
Q. It’s been two-and-a-half years now. If you don’t know today, how are you
going to know[?]
A. I’ve told you the same answer, I don’t know.
....
Q. BCI is not a manufacturer of anything, are they?
A. No, we’re not.
Q. BCI doesn’t hold any patents or has [sic] any trade secrets . . . .?
A. No, we don’t.
Q. So you’re basically selling Cisco products and installing them and
servicing them?
A. That’s correct.
Q. Now, you admit that BCI has not lost any customers, correct?
A. Not to my knowledge.
....
Q. I’m not trying to imply that that’s a bad thing, but because of what you do,
BCI is not the kind of company that would have trade secrets.
A. That’s correct.
Q. In fact, probably [ninety percent] or more of the information related to the
sales, servicing, installation and so on of Cisco products is available to any
Cisco seller, right, distributor?
A. Correct.
33
....
Q. Now, you mentioned something about the silver certification through
Cisco, but BCI never lost the benefit of that, did it?
A. We did not.
Q. In fact . . . I believe that BCI has gone from silver to gold since [Banks]
left?
A. That’s correct.
Q. So [Banks’s] leaving certainly didn’t hurt you in that regard, did it?
A. No. We had to spend a lot of time and resources getting other people
trained to take his spot.
Q. That’s right. And you would have had to incur those time and expenses
whether he left to go work for Venture or if he’d left to go farm, correct?
A. Correct.
Q. So how is it that his leaving has caused you to incur that[?]
A. Because he went to go work for a competitor, we look at it - - we ended up
incurring things that normally we wouldn’t have incurred.
Q. Like what?
A. We had a very short period of time to get people trained and attaining that
certification which is normally a much longer period of time than six months.
Q. But my question is why his quitting and going to work for Venture, how
that caused you to incur those expenses and how that would have been any
different had he just quit and retired?
A. If he [had] quit and retired, it wouldn’t have been any different.
Q. So . . . if he went to go farm with a cousin in the Delta, you would have
incurred the very identical expenses that you’re asking this jury to reimburse
you for?
34
A. That’s correct.
....
Q. You have mentioned some documents and so on that [Banks] took with
him and that we’ve returned to you. Do you know the specifics of those
documents?
A. I know there - - some printed documents that I’ve seen are vendor lists,
customer work orders - - I’m trying to recall what the other ones were.
....
Q. My question to you, though, is his taking those documents, which we don’t
know what they are because we don’t have them, that has not harmed BCI in
any way, has it?
A. We don’t know that it has.
....
Q. That hasn’t harmed BCI, has it?
A. Not that we know of.
Bailey:
Q. Do you have any evidence whatsoever that any action taken by [Banks]
caused you to lose any customers?
....
A. No.
Q. Do you have any evidence . . . that [Banks] has disclosed any of your
business practices information that you would consider confidential to anyone?
A. Absolutely. He showed our [BPA] all over the world.
Q. You know, that’s interesting that you say that because BCI allowed him to
35
take that agreement. Your talking about the BPA, right?
A. Sure, to our biggest competitor.
Q. BCI allowed him to take that agreement to have his father-in-law look at
it?
A. Sure, an attorney, but not to our biggest competitor. Two of them actually,
Bell South [sic] and Venture.
....
Q. The truth is there isn’t any proof that you have that you have been harmed
as a result of [Banks’s] actions?
....
A. The only evidence is we [have] spent a lot of time and money trying to
defend [sic] something, and I go back to the point that I know he took some
things, and we have been harmed from dealing with this in time, money, and
effort. So, yes, we have been harmed, but maybe not in the way that [you’re]
talking about.
Q. Monetary damages.
A. Yeah.
....
Q. I believe you testified to the fact that the business has grown maybe [thirty]
percent a year?
A. Yes.
Q. That’s been since [Banks] left, correct?
A. Correct.
Q. So Banks’s leaving and going to work for Venture did not cause your
business to not to [sic] continue to develop?
36
A. No, it did not.
¶68.
Non-competition covenants are not favored in the law, as they are considered
restrictive contracts that restrain trade and individual freedom. Frierson v. Sheppard
Building Supply, Co., 247 Miss. 157, 172, 154 So. 2d 151, 156 (1963); Thames v. Davis &
Goulet Ins., Inc., 420 So. 2d 1041, 1043 (Miss. 1982). The Mississippi Supreme Court has
also recognized that there is a “valid and accepted distinction between covenants not to
compete in an employer-employee setting, and those dealing with the sale of a business[.]”
Cooper v. Gidden, 515 So. 2d 900, 905 (Miss. 1987) (citation omitted); see also Herring Gas
Co. v. Whiddon, 616 So. 2d 892, 897 (Miss. 1993) (noting the same distinction). “[A]
purchaser is entitled to protect himself against competition on the part of the vendor, while
the employer is not entitled to protection against mere competition on the part of a servant.”
Id. (quoting 46 A.L.R.2d, p. 144 (1956)) (emphasis added). Further, a non-competition
agreement is likely to affect an employee’s means of procuring a livelihood for the employee
and his or her family more so than that of a seller who usually receives adequate
consideration from the sale of his or her business. Id.4
4
In the landmark case of Arthur Murray Dance Studios of Cleveland v. Witter, 105
N.E.2d 685, 704 (Ohio Law Abs. 1952), which was also recognized by our supreme court
in Thames, 420 So. 2d at 1043, for its comprehensive discussion of this area of the law,
Judge Hoover explained:
The average, individual employee has little but his labor to sell or to use to
make a living. He is often in urgent need of selling it and in no position to
object to boiler plate [sic] restrictive covenants placed before him to sign. To
him, the right to work and support his family is the most important right he
possesses. His individual bargaining power is seldom equal to that of his
37
¶69.
Our courts, however, will enforce such agreements if there is shown to be a reasonable
basis for the covenant, necessary for the protection of the employer, and which does not
impose undue hardship on the employee or the public. Donahoe v. Tatum, 242 Miss. 253,
259, 134 So. 2d 442, 444 (1961) (citation omitted). The determination of reasonableness
depends upon the competing needs of the parties as well as the needs of the public. These
needs are: (1) the employer’s need to protect legitimate business interests (Redd Pest Control
v. Heatherly, 248 Miss. 34, 44, 157 So. 2d 133, 136 (1963)); (2) the employee’s need to
make a living (Empiregas, Inc. of Kosciusko v. Bain, 599 So. 2d 971, 976 (Miss. 1992)); and
(3) the public’s need to secure the employee’s presence in the labor pool and guard against
monopolies (Wilson v. Gamble, 180 Miss. 499, 510-11, 177 So. 363, 365 (1937)).
¶70.
The employer bears the burden of proving the reasonableness of the agreement and
must “demonstrate to the trial court the economic justification, the reasonableness, of the
restraint which is sought to be imposed.” Empiregas, 599 So. 2d at 976 (quoting Thames,
employer. Moreover, an employee ordinarily is not on the same plane with
the seller of an established business. He is more apt than the seller to be
coerced into an oppressive agreement. Under pressure of need and with little
opportunity for choice, he is more likely than the seller to make a rash,
improvident promise that, for the sake of present gain, may tend to impair his
power to earn a living, impoverish him, render him a public charge or deprive
the community of his skill and training. The seller has the proceeds of sale on
which to live during his period of readjustment. A seller is usually paid an
increased price for agreeing to a period of abstention. The abstention is a part
of the thing sold and is often absolutely necessary in order to secure to the
buyer the things he has bought. Usually the employee gets no increased
compensation for agreeing to the abstention; it is usually based on no other
consideration than the employment itself.
38
420 So. 2d at 1043).
“The facts of each case will be carefully examined as to the
reasonableness of such [agreements].” Donahoe, 242 Miss. at 261, 134 So. 2d at 445.
¶71.
The general recognition among authorities is that an employer is not entitled to
protection against ordinary competition from a departing employee. 54A Am. Jur. 2d
Monopolies and Restraints of Trade § 905 (2009).5 In Donahoe, the supreme court implicitly
acknowledged as much when it spoke of “unfair competition” on the part of ex-employees
and instructed that the validity of the agreement is dependant, in part, upon the nature and
character of the employment. See Donahoe, 242 Miss. at 259-61, 134 So. 2d at 444-45.
¶72.
Donahoe is distinguishable from the instant case in that the question there was
whether the chancellor erred by enjoining an employee from working for a competitor of the
5
Arkansas: Statco Wireless, LLC v. SW. Bell Wireless, 95 S.W.3d 13, 21 (Ark. Ct.
App. 2003) (“[T]he law will not enforce a [non-competition] contract that merely prohibits
ordinary competition.”). Kansas: Allen, Gibbs & Houlik, L.C. v. Ristow, 94 P.3d 724, 726
(Kan. Ct. App. 2004) (“If the sole purpose is to avoid ordinary competition, [a noncompetition agreement] is unreasonable and unenforceable.”). Massachusetts: Marine
Contractors Co., Inc. v. Hurley, 310 N.E.2d 915, 920 (Mass. 1974) (“Protection of the
employer from ordinary competition . . . is not a legitimate interest.”). Missiouri:
Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610 (Mo. 2006) (Noncompete agreements “are not enforceable to protect an employer from mere competition by
a former employee.”). Ohio: Westco Group, Inc. v. City Mattress, 1985 WL 144712, at *3
(Ohio Ct. App. 1991) (“The purpose in allowing non-competition agreements is to foster
commercial ethics and to protect the employer’s legitimate interests by preventing unfair
competition–not ordinary competition.”). Oklahoma: Cardiovascular Surgical Specialists,
Corp. v. Mammana, 61 P.3d 210, 213 (Okla. 2002) (“only ‘unfair competition’ on the part
of a former employee is the legitimate focus of a covenant not to compete”). Tennessee:
Fadalla v. Life Auto. Prods., 2007 WL 2746940, at *3 (W.D. Tenn. 2007) (“An employer
. . . cannot by contract restrain ordinary competition.”). Wisconsin: Wausau Med. Ctr.,
S.C. v. Asplund, 514 N.W.2d 34, 39 (Wis. Ct. App. 1994) (“An employer is not entitled to
be protected against legitimate and ordinary competition of the type a stranger could give.”).
39
former employer for the period of time stated in the employee’s contract. Id. at 256, 134 So.
2d at 442-43. The supreme court agreed with the chancellor’s finding that based on the
nature and character of Barbara Donahoe’s employment with Rudy Tatum’s company,
Donahoe’s continued employment with Tatum’s competitor would prejudice Tatum’s
business interests. Id. at 259, 134 So. 2d at 444. Although the supreme court did not
expressly say so, one can readily infer that the supreme court meant “unfair competition” by
its use of the word prejudice. Otherwise, it would have been pointless for the supreme court
to make mention of the fact that Donahoe knew of Tatum’s “business methods, confidential
information, and trade secrets,” and then reason that, if such information were “brought to
the knowledge” of Tatum’s competitor, it “would prejudice the interests of [Tatum].” Id.
¶73.
Based on my interpretation of the controlling case law in this state, if the purpose of
a non-competition agreement ancillary to an employment contract is to prevent ordinary
competition, the covenant is unreasonable and unenforceable. See Cooper, 515 So. 2d at
905; see also Thames, 420 So. 2d at 1043 (holding that an employer was not entitled to
injunctive relief where the employer merely offered the contract and proof as to its violations,
but it did not offer proof as to the reasonableness and necessity of the contractual
prohibition). And if my interpretation is accurate, then I think it would be counterintuitive
to not require an employer to demonstrate “unfair competition” on the part of an ex-employee
when seeking compensatory damages for an ex-employee’s alleged breach of a non-
40
competition agreement.6
¶74.
In interpreting Thames, the federal district court in Taylor v. Cordis Corp., 634
F.Supp. 1242, 1247-48 (S.D. Miss. 1986), said:
The Mississippi Supreme Court has held that certain non-competition
agreements are valid and enforceable. See, e.g., Donahoe[,] . . . 242 Miss. 253,
134 So. 2d 442 . . . . The court has recognized, however, that such an
agreement “restricts the exercise of a gainful occupation [and] is a restraint of
trade.” Accordingly, the Mississippi courts require more than[:]
the fact that an employer has a written agreement that the
employee will not, on leaving his employment, compete with his
employer, that the employee breaks that agreement, that the
employee quits his employer, that the employee starts working
for a rival, and that the rival thereby becomes a more efficient
competitor
to enforce a non-competition agreement. Thames[,] . . . 420 So. 2d [at 1043].
The court carefully scrutinizes the particular circumstances of each case to
maintain a reasonable balance between “unfair competition by an ex-employee
[and] unreasonable oppression by an employer.” Donahoe[,] . . . 242 Miss.
253, 134 So. 2d [at] 445[.]
The district court enforced the non-competition provision at issue in the case based on a
finding that the employer “sustained its burden of demonstrating the economic justification
for its agreement with [the former employee].” Id. at 1248. The district court held:
The court has attempted to reform and limit the non-competition agreement to
reflect a truer balance between [Daniel] Taylor’s interest in professional
credibility and Cordis’[s] interest in maintaining the legitimate goodwill
6
Contrary to BCI’s argument on appeal, Banks did indeed try to submit a jury
instruction, which would have instructed that non-competition agreements are unenforceable
if they seek merely to avoid fair competition in the marketplace. But BCI objected to it on
the ground that no evidence was presented that BCI has a “monopoly.” Accordingly, the
circuit court disallowed the instruction.
41
developed in [sic] its behalf and at its expense. It appears, however, that
Taylor is in a position to lure former Cordis customers to Cardio-Life products,
and in fact has done so since leaving Cordis. Under these circumstances, and
based upon the evidence adduced at trial, the court is of the opinion that
issuance of a preliminary injunction is necessary to protect Cordis.
Id. at 1252.
¶75.
Here, unlike the plaintiff in Donahoe (or the plaintiff(s) in each of the cases cited by
the majority), BCI agreed to injunctive relief that allowed Banks to continue to work for
Venture. BCI then sought damages for the “loss of business and loss of goodwill” it alleged
resulted from Banks’s breach of the BPA.
At trial, BCI admitted that no “unfair
competition” resulted from Banks’s employment with Venture. BCI also made no effort to
demonstrate how Banks’s retention of BCI’s property items and/or Banks’s disclosure of the
BPA to BCI’s competitors harmed BCI’s business interests. BCI did not even demonstrate
how it was harmed so-called monetarily.
¶76.
Nevertheless, BCI now claims on appeal that it had a “protectable interest” in the
training and education it provided to Banks. While I agree with the majority that our courts
have before taken such factors into consideration when assessing the reasonableness and
necessity of non-competition agreements, I know of no Mississippi decision that has held a
non-competition agreement valid and enforceable based solely on an employer’s investment
in the training and education of an employee.
¶77.
The United States Court of Appeals, First Circuit, addressed a similar argument put
forth in the case of Wilson v. Clarke, 470 F.2d 1218 (1st Cir. 1972). There the court said:
In cases of agreements forbidding an employee to engage in the same
42
business or line of activity as the employer, attention is often given to whether
the agreement is reasonably limited as to area and duration. But such
considerations are merely aspects of the rule . . . that the agreement must be no
wider than is necessary to afford reasonable protection to the employer. A
further, and here more relevant, aspect of the rule is that an employer may not
enforce limitations on an ex-employee’s engaging in activities which do no
damage to the employer.
....
Perhaps because it recognizes the absence of damage based on unfair
competition, [the former employer] stresses its damages allegedly suffered by
losing a valuable employee whom it had trained. (This damage would, of
course, be the same had [Alan] Clarke left to go work for a non-client instead
of for a client or prospective client. It would likewise be the same whether he
found employment as a psychologist or in some other capacity.)
An employer’s right, however, to place future burdens on an employee
merely to forestall or offset the loss of his services is clearly limited:
An employer cannot by contract prevent his employee from
using the skill and intelligence acquired or increased and
improved through experience or through instruction received in
the course of the employment. The employee may achieve
superiority in his particular department by every lawful means
at hand, and then, upon the rightful termination of his contract
for service, use that superiority for the benefit of rivals in trade
of his former employer. As was said in Herbert Moris, Limited,
v. Saxelby, 1916 1 A.C. 688, at 714: “A man’s aptitudes, his
skill, his dexterity, his manual or mental ability . . . ought not to
be relinquished by the servant; they are not his master’s
property; they are his own property; they are himself.”
Id. at 1221-23 (citation omitted).
¶78.
In National Training Fund v. Maddux, 751 F. Supp. 120 (S.D. Tex. 1990), the district
court upheld an apprenticeship agreement, somewhat similar to the 2001 RCA that Banks
expressly agreed to at the beginning of his employment with BCI. But in so doing, the
43
United States District Court, S.D. Texas stated the following:
As society has become more mobile and the workplace more technical,
workers may agree that they will reimburse the company or union for valuable
training, but only up to the line of recompense. Contractual punishment is
stilled barred.
Doubtless an employer who has provided specialized training to an
employee–as by a course of studies or the like–might reasonably contract with
the employee for reimbursement if the employee should quit before the
employer achieves any benefit. However, the employer may not require its
ex-employee to make payment to it unrelated to the employer’s damage,
simply as a penalty to discourage or punish a job change.
Id. at 121 (quoting Wilson, 470 F.2d at 1223).
¶79.
As Banks points out on appeal, in each case cited by BCI on this point, there was
additional evidence presented in support of the employer’s economic justification for the
covenant. In Redd Pest Control Co., Inc. v. Foster, 761 So. 2d 967, 973 (¶23) (Miss. Ct.
App. 2000), the former employer provided testimony that it had lost over one hundred
customers and submitted evidence of a projected two-year loss of profits of $50,400, as a
result of that loss of business. In Taylor, as mentioned, there was evidence that the exemployee could (and did) lure clients away from his former employer. Taylor, 634 F. Supp.
at 1252. In Texas Rd. Boring Co. of Louisiana-Mississippi v. Parker, 194 So. 2d 885, 889
(Miss. 1967), “the defendant copied a part of complainant’s machinery, hired his former
employer’s personnel, and contacted the same customers he had met and become acquainted
with while in the employ of the complainant in order to promote his own business . . . .” In
Heatherly, evidence was presented that the ex-employee had solicited his former employer’s
customers, which resulted in the former employer losing many of its customers to the ex-
44
employee’s new employer. Heatherly, 248 Miss. at 41, 157 So. 2d at 135.
¶80.
Here, the evidence showed that Banks is not in the customer-procuring business.
While he worked closely with some of BCI’s customers, he did so as a problem solver, and
he usually was shadowed by one of BCI’s sales representatives. When Banks went to work
for Venture, not one of BCI’s customers followed. Nor was it shown that Banks attempted
to lure one of BCI’s customers over to Venure, or one of BCI’s remaining engineers.
¶81.
The evidence also showed that BCI and Venture (and Bellsouth for that matter) are
downstream suppliers of Cisco products. Cisco requires its suppliers to remain up-to-date
on its latest technology. The training that BCI’s engineers receive is the same training the
engineers of its competitors receive. Thus, the training Banks received while employed at
BCI was not unique.
¶82.
Banks claims on appeal that because BCI knew that it could not demonstrate that he
harmed any “protectable interest” under the BPA, BCI asserted, for the first time at trial, a
separate breach-of-contract claim. Unquestionably, most of the trial concerned the 2005
RCA, an unsigned reimbursement agreement printed on page thirty-five of BCI’s 2005
employee handbook, which has a “perpetual” element to it that, seems to me, runs–at the very
least–counter to Mississippi’s employment-at-will doctrine.7
8
That said, what I find well
7
As Banks points out in his brief, unlike ordinary reimbursement agreements, which
are limited in duration, the terms of the 2005 RCA put an at-will employee in the “perpetual”
position of either having to (1) pay to leave or (2) stay employed with BCI.
8
Based on my calculations of the numbers provided in Hinds’s testimony, Banks
potentially could have been looking at reimbursement costs of $51,703.60. This is based on
45
based about Banks’s argument in relation to this issue, is that Hinds admitted that the
expenses BCI sought to recoup as damages for Banks’s breach of the 2005 RCA were not
connected to the BPA. The following testimony, which is mentioned in the majority’s
discussion of the 2005 RCA in issue two, provides:
Q. So you’re telling this Court and jury that you are seeking this
reimbursement for [Banks] irrespective of what his post-employment conduct
is?
A. Correct.
....
Q. And it is not connected with the [BPA]?
A. I don’t know that I would draw the two together related to that.
¶83.
The trial court reached the right result in this case. Not only is the record without
proof to support the jury’s award of $1,000 in compensatory damages awarded to BCI, it
plainly reveals that BCI failed to demonstrate the reasonableness of the BPA. Accordingly,
I would affirm the circuit court’s decision to grant a JNOV in favor of Banks on BCI’s
breach-of-contract claim for damages regarding the BPA.
IRVING, J., JOINS THIS OPINION.
Hinds’s testimony that BCI’s engineers may spend up to twenty-five percent of their worktime each week (10 hours per week) in training. This comes to 520 hours per year. Multiply
that times the so-called “hourly rate costs” with “overhead” ($99.43) that BCI claimed was
lost at the expense Banks’s training sessions in the months prior to Banks’s departure.
46
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