American Rentals, LLC v Pomponio

[*1] American Rentals, LLC v Pomponio 2008 NY Slip Op 50336(U) [18 Misc 3d 1137(A)] Decided on February 25, 2008 Supreme Court, Monroe County Fisher, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 25, 2008
Supreme Court, Monroe County

American Rentals, LLC, and Volvo Construction Equipment Rents, Inc., Plaintiff,

against

Richard Pomponio and Skyworks Equipment Leasing, LLC, Defendants.



2007/16751

Kenneth R. Fisher, J.

Plaintiffs move for a preliminary injunction (1) enjoining Pomponio from using proprietary and confidential information of plaintiffs, (2) enjoining him from selling, contacting, or communicating with any customers to which he was assigned while employed by American Rentals with respect to any products or services in competition with plaintiffs, and (3) enjoining him from involvement in the management of any business venture in competition with, or similar to, American Rentals. See Order to Show Cause. It appears that Pomponio is a member of American Rentals, LLC, a franchisee of Volvo Construction Equipment Rents, Inc., by virtue of a series of agreements executed two years after be first became employed by American Rentals in 2003. American Rentals offered Pomponio a membership interest in the LLC in exchange for his execution of an In-Term Covenant Not to Compete, a Post-Term Covenant Not to Compete, and a Confidentiality Agreement. When these agreements were executed, the LLC's operating agreement was amended to reflect the addition of Pomponio as a member.[FN1]

There was a standard confidentiality agreement. The covenants not to compete provided that Pomponio would not, during [*2]the term of his employment with the LLC and within 2 years of termination of employment:

(a)Divert or attempt to divert any present or prospective business or customer of any Volvo Construction Equipment Rents, Inc. Franchisee to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with Volvo Construction Equipment Rents, Inc.'s Proprietary Marks and its Franchise System;

(b)Employ or seek to employ any person who is at the time employed by Volvo Construction Equipment Rents, Inc. or by any other Volvo Construction Rents, Inc. Franchise, or otherwise directly or indirectly induce such person to leave his or her employment; or

(c)Except for ownership of a less than five percent (5%) beneficial interest in the outstanding equity securities of any publicly held corporation, I shall not own, maintain, operate, engage in, be employed by, provide assistance to or have any interest in (as owner or otherwise) any rental equipment company or facility which offers compact equipment which is located within: (i) the city or county in which Franchisee operates; (ii) the state in which Franchisee operates; or (iii) the United States.

Terry Affidavit(Exhibits B and C).

Section 3.10 of the American Rentals, LLC Operating Agreement also contains non-competition restrictions for the members of the company:

Any member of the Company, either individually or with others, shall have the right to participate in other business ventures of any kind, provided that without written consent of fifty-five percent in Interest of the Members, no Member may be involved in the management of any business venture that competes with the Company or is otherwise substantially similar to the Franchised Business.

(emphasis supplied). Under the operating agreement (First Amendment to Operating Agreement), Pomponio's status as a member conferred "no power to participate in the management of the company," and expressly precluded him from any status as agent of the LLC. ¶3.11.

Pomponio acknowledges that, in 2007, he differed with the management on the issue of acquiring the Simmons Company, a [*3]direct competitor of American Rentals, and on other matters. Pomponio's bosses demoted him in May 2007, and rebuffed his efforts to have them buy out his interest, until on August 20, 2007, they told Pomponio that they would buy him out at his initial investment figure of $25,000. When Pomponio told them that they would be hearing from his attorney, his bosses terminated him and ceased all payments to him. Thereafter, Pomponio began employment in Buffalo with Skyworks Equipment Leasing, LLC on October 22, 2007, as a "sales manager." Skyworks is located in Buffalo, New York although it operates in the Buffalo, Rochester, and Syracuse areas, and also in Western Pennsylvania and Eastern Ohio.

Defendants contend that the above quoted restrictive covenants are unenforceable under North Carolina law, the governing law under the non-competition and confidentiality agreements in question (the LLC operating agreement is governed by New York law). Plaintiffs, on the other hand, contend that North Carolina courts assess the reasonableness of restrictive covenants in the franchise context under the standards applicable to a sale of business, not the standards applicable to restrictive covenants in an employment agreement. But the only case cited in support of that proposition is an unpublished federal decision, Baskin-Robbins, Inc. v. Golde, 2000 WL 35536665, 200 U.S. Dist. LEXIS 22861 (E.D. N.C. May 25, 2000), an eight year old case never cited by any court and which itself acknowledged that the rule therein applied had never been so applied by a North Carolina court. Moreover, plaintiffs do not seek enforcement of the restrictive covenants contained in the franchise agreement between Volvo Construction and American Rentals. That agreement has not been provided to the court, and references to its terms in the papers are vague and uncertain. Instead, plaintiffs seek enforcement of restrictive covenants, allegedly required by the Volvo Construction franchise agreement, contained in what are essentially employment agreements of the franchisee, American Rentals. This is unaffected by the fact that Pomponio had an equity interest in the franchisee by virtue of his investment, some two years before the covenants were executed, of $25,000, an interest which, under the terms of the operating agreement, appears to have him trapped because of his inability to obtain dissolution under LLCL §702, see Widewaters Herkimer Co., LLC v. Aiello, 28 AD3d 1107 (4th Dept. 2006); Matter of Horning, 12 Misc 3d 402 (Sup. Ct. Monroe Co. 2006), and the refusal of the other LLC members to buy him out. Accordingly, I believe that North Carolina courts would assess the reasonableness of the restrictive covenants in this case under the standards applicable in the employer-employee context, and further believe that Pomponio's trapped status as a member of American Rentals, LLC would not provide a supportable predicate [*4]for plaintiff's breach of fiduciary duty claim outside of the continuing employment context. Cf., Kinesis Advertising, Inc. v. Hill, ___ N.C. App. ___, 652 S.E.2d 284, 295 (2007)("in North Carolina, an individual may owe a fiduciary duty to the corporation if he is considered to be a de facto officer or director, with authority for tasks such as signing tax returns, offering major input as to the company's formation and operation, or managing the company"); Tzolis v. Wolff, - NY3d , 2008 WL 382345 (Feb. 14, 2008)(drawing an analogy between corporate directors or managers, i.e., "those in control of a corporation," and LLC fiduciaries); Alpert v. 28 Williams St. Corp., 63 NY2d 557, 568 (1984)(corporate fiduciary status arises from "the power to manage the affairs of a corporation"); Nathanson v. Nathanson, 20 AD3d 403 (2nd Dept. 2005)(citing LLCL §409(a)); Lerner v. Westreich, 12 Misc 3d 1164(A) (Sup Ct. NY Co. 2006)(same under Delaware law).

Turning first to the motion to enjoin Pomponio's use or dissemination of plaintiff's confidential information, plaintiffs only speculate that he has any, and they fail to point to any specific use or disclosure thereof on the part of Pomponio in his new employment. Under North Carolina law, "[t]o state a claim for breach of the Non-Disclosure Agreement, as in any other contract case - the complaint must allege . . . the facts constituting the breach[.]'" Visionair, Inc. v. James, 167 N.C. App. 504, 510, 606 S.E.2d 359, 363 (2004)(emphasis in original)(quoting RKG, Inc. v. U.S. Fid. & Guaranty Co., 292 N.C. 668, 675, 235 S.E.2d 234, 238 (1977)). Plaintiffs have as in Visionair, "however, neither alleged facts supporting the alleged breach, nor specified confidential information . . . [Pomponio] shared with . . . [Skyworks] or any other party." Visionair, 167 N.C. App. at 510, 606 S.E.2d at 363 (adding that "conclusory statements are insufficient" and that a "likelihood of success on the merits of breach of confidentiality contract not shown where plaintiff described confidential information and alleged breach only in general terms"). Accordingly, the motion for a preliminary injunction directed to Pomponio's alleged use of confidential information is denied.

The second restraint demanded in the Order to Show Cause is an injunction prohibiting Pomponio from contacting or soliciting any accounts or customers "to which he had been assigned or otherwise dealt with during his employment with American Rentals, LLC, with respect to any products or services that are competitive with the products or services provided by American Rentals or Volvo Construction Equipment Rentals, Inc." Although this restriction appears unremarkable in the abstract under North Carolina law, North Carolina courts having upheld covenants not to compete that last for two years and use customer-based restrictions instead of territorial restrictions, Triangle [*5]Leasing Co. v. McMahon, 327 N.C. 224, 393 S.E.2d 854 (1990), whether to grant the motion depends upon the likelihood of success of plaintiffs' claim that the underlying restrictive covenant providing a predicate for the injunction, is enforceable under North Carolina's blue-pencil rule.

Pomponio contends first that the temporal duration of the covenants not to compete necessarily is indefinite by reason of his trapped status as an American Rentals member. See Post-Term Covenant ("for two years after the end or termination for any reason of my employment or other relationship with franchisee")(emphasis supplied). For the reasons stated below, it is unnecessary to reach this separate argument. For purposes of this motion, it is assumed that the two year restriction contained in the restrictive covenants themselves is applicable.

Pomponio also contends that the geographic restriction as interpreted by plaintiffs, is overbroad. The first clause of the covenant states that Pomponio may not "divert or attempt to divert any present or prospective business or customer of any Volvo Construction . . . Franchisee to any competitor, . . . , or do or perform, . . . any other act injurious or prejudicial to the goodwill associated with Volvo Construction . . . Propriety Marks and its Franchise System." In other words, while the covenant is client-based, it is not limited in geographic scope to the territory of Pomponio's employer, American Rentals, but extends throughout the entirety of the Volvo Construction franchise system. The Terry affidavit alleges that Volvo Construction "has a nationwide system of independently owned and operated franchised rental businesses. ¶6. The client-based restrictive covenant, therefore, extends well beyond the specific territory served by American Rentals (again, the franchise agreement between Volvo and American is not provided and the affidavits do not provide a clear indication of American Rentals' territory under those agreements except to establish that they do not extend nationwide or statewide), or served by Pomponio himself.

This client-based restriction, therefore, cannot be the basis for injunctive relief. Under North Carolina law, client-based restrictions that contain no geographic terms may be enforced under certain circumstances not present here. The lead case is Professional Liability Consultants v. Todd, 345 N.C. 176, 478 S.E.2d 201 (1996), rev'ing on dissenting opn. below, 122 N.C. App. 212, 218-21 468 S.E.2d 578, 582-84 (1996)(Smith, J., dissenting). That case, like this one, involved a client-based covenant which did not address its territorial scope. The court held that, without proof of "the number or location of its customer base," the court was "le[ft] . . . with no basis upon which to assess the reasonableness of the territory covered by the covenant." Id. If the covenant was directed to American [*6]Rentals' customer base, the proof on this motion would be insufficient. For the reasons stated below in connection with the separate covenant not to become employed by a competitor, the failure of plaintiffs to prove, establish, or even to allege with particularity, American Rentals' customer base is fatal to plaintiff's request for a client-based injunction.

More fundamentally, however, the restrictive covenant is by its very terms not limited to the American Rentals customer base, but is instead applicable throughout what is alleged to be Volvo Construction's entire nationwide franchise system. Under North Carolina law, plaintiffs' "use of . . . [Volvo Construction's] client base as a substitute for a physical limitation works to achieve an unreasonableness effect in its own way." Farr Associates, Inc. v. Baskin, 138 N.C. App. 276, 281-83, 530 S.E.2d 878, 882-83 (2000). Referring to the six-part test for determining the reasonableness of a restrictive covenant containing an express geographic scope as "applicable to assess the client-based-restriction,"[FN2] the court in Farr Associates found a similar business-wide client-based covenant "extreme, considering that . . . [the former employee] only worked with a relatively small number of . . . [the business]'s clients." Id. 138 N.C. App. at 282, 530 S.E.2d at 882. The court held further that, "where the primary concern is the employee's knowledge of the customers, . . . a client based limitation cannot extend beyond contracts made during the period of the employee's employment." Id. 138 N.C. App. at 282, 530 N.E.2d at 883. Ultimately, the court upheld dismissal of the non-compete claim and trial court's denial of a preliminary injunction on the independent ground "that the scope of the client-based territorial restriction . . . [wa]s unreasonable, thereby rendering the non-compete agreement unenforceable." Id. 138 N.C. App. at 283, 530 S.E.2d at 883 (also holding as an "addition[al]" ground for affirmance the unreasonable 5-year limitation). See also, Manpower of Guilford County, Inc., v. Hedgecock, 42 N.C. App. 515, 257 S.E.2d 109 (1979)(rejecting one-year non-competition agreement; length of restriction was reasonable but restrictions included geographic areas where plaintiff's [*7]business did not extend).

Different considerations might apply to the case of a mere 6-month restriction directed to a senior executive having intimate knowledge of a Western Hemisphere wide business in a case involving the executive accepting with a competitor a virtually identical position as head of customer service, Okuma America Corp. v. Bowers, 181 N.C. App. 85, 90-92, 638 S.E.2d 617, 621-22 (2007), but plaintiffs do not present a similar scenario involving Pomponio. Nor is this a case involving a covenant such as was upheld in Wade S. Dunbar Ins. Agency v. Barber, 147 N.C. App. 463, 556 S.E.2d 331 (2001), which prohibited the employee "for two years, from soliciting any customers having an active account with plaintiff at the time of his termination or prospective customer whom defendant himself had solicited within the six months immediately preceding his termination." Id. 147 N.C. App. at 469, 556 S.E.2d at 335. In that case, the plaintiff insurance agency was a local Moore County concern, and the defendant employee took on a new position with a similar insurance agency in the same county where he actively solicited his former employer's biggest customer. Id. 147 N.C. App. at 465-66, 556 S.E.2d at 333. See also, Precision Walls, Inc. v. Servie, 152 N.C. App. 630, 568 S.E.2d 267 (2002)(upholding time and territory restriction covering two states, although defendant only worked in one, because he took an "identical position" in a competing firm and "was aware of information affecting [plaintiff's] business in both North Carolina and South Carolina, such as pricing arrangements with suppliers, labor costs, and profit margins"). Under the six factor test quoted above in the margin, the calculus in this case must be as in Farr Associates, Inc. v. Baskin, supra, not as in Wade S. Dunbar Ins. Agency v. Barber, supra, or in Precision Walls, Inc. v. Servie, supra. The cases of Harwell Enterprises, Inc. v. Heim, 276 N.C. 475, 173 S.E.2d 316 (1970)(enforcing a two-year restrictive covenant prohibiting employee from competing anywhere in the United States where former employer specifically alleged that its business activities extended throughout the United States and former employee was engaged in active solicitation of former employer's customers), and Market America, Inc. v. Christman-Orth, 135 N.C.App. 143, 520 S.E.2d 570 (1999)(approving six-month non-competition agreement containing no link to actual customer base and no territorial restriction, where court assumed covenant was intended to reach the entire U.S.), are also fully distinguishable.[FN3] [*8]

It is true that the client-based preliminary injunction requested by plaintiff is limited to customers served by American Rentals, and Pomponio in particular. But whether to grant the motion depends not upon "the necessity for the injunction," but rather on plaintiffs' likelihood of success on its discrete claim that the client-based restrictive covenant contained in the parties' agreements is enforceable. Triangle Leasing Co., Inc. v. McMahon, 327 N.C. 224, 227-28, 393 S.E.2d 854, 857 (1990)("Where a preliminary injunction is sought to enforce a noncompetition clause in an employment contract, this Court has held that the employment agreement itself must be valid and enforceable in order for the employer to be able to show the requisite likelihood of success on the merits."); Milner Airco, Inc. of Charlotte, NC v. Morris, 111 N.C. App. 866, 869, 433 S.E.2d 811, 813 (1993)("the threshold question we decide is whether plaintiff has shown a likelihood that the covenant will be upheld"). Inasmuch as they are not enforceable, and the court cannot under North Carolina law blue-pencil clause (a) in a manner which might make it reasonable (see, discussion below on blue penciling), this aspect of plaintiff's motion for a preliminary injunction is denied. See also, Professional Liability Consultants, Inc. v. Todd, 122 N.C. App. at 221, 468 S.E.2d at 583-84 (Smith, J., dissenting)(refusing to blue pencil the inferred territorial provisions of a business-wide customer-based restrictive covenant not having an express geographic restriction), rev'd on dissenting opn below, 345 N.C. 176, 478 S.E.2d 201 (1996).

Plaintiffs also contend that their effort to restrain Pomponio from soliciting, contracting, or selling to the customers to which he was assigned or otherwise dealt with while at American Rentals is supported by Pomponio's alleged breach of a separate clause in the restrictive covenants barring employment with a competitor. Specifically, this clause of the covenant prohibits employment with "any rental equipment company or facility which offers compact equipment . . . located within: (i) the city or county in which . . . [American Rentals] operates; (ii) the state in which . . . [American Rentals] operates; or (iii) the United States." In plaintiff's moving papers, they invite the court to rewrite the covenant as follows: "The territory that plaintiffs seek to enforce the non-compete is the business area of American Rentals, i.e., the Western New York area." Plaintiff's Memorandum of Law, at 3. The affidavits submitted with plaintiff's motion and the order to show cause giving notice of the motion are not so limited, however. In [*9]reply, plaintiffs respond to the overbreath contention by referring to that portion of the covenants which provides "that if a court of competent jurisdiction finally determines this covenant to be invalid, illegal, or unenforceable, the covenant shall be deemed restricted in application to the extent required to render it valid under applicable law." Plaintiff's Reply Memorandum, at 2.

In this, plaintiffs must confront contrary North Carolina case law:

The court is without power to vary or reform the contract by reducing either the territory or the time covered by the restrictions. However, where, as here, the parties have made divisions of the territory, a court of equity will take notice of the divisions the parties themselves have made, and enforce the restrictions in the territorial divisions deemed reasonable and refuse to enforce them in the divisions deemed unreasonable.

Welcome Wagon International, Inc. v. Pender, 255 N.C. 244, 120 S.E.2d 739 (1961). Plaintiff's response to this is that clause (c) of the covenants provides the requisite "divisions of territory" under the blue-pencil rule of Welcome Wagon, and that ¶(c)(i)("the city or county in which franchisee operates") is sufficiently and "distinctly severable" under Welcome Wagon to permit enforcement thereof in Monroe and Ontario Counties. Plaintiffs' Reply Memorandum, at 2-3. There are several difficulties with this approach, not the least of which is plaintiff's effort to limit the reach of the preliminary injunction sought only in memoranda of law, and not in any affidavits which might properly be a part of the record. A more fundamental defect in plaintiffs' request of the court to blue pencil is the failure on their part to establish what American Rental's territory is. The Volvo-American franchise agreement, which presumably would contain a definition of American Rentals' territory, is not provided to the court or described in sufficient detail. Nor do plaintiffs' affidavits detail the actual operating area of American Rentals during the relevant time period of Pomponio's employment. The complaint alleges that American Rentals is located on Jefferson Road in Monroe County and that it operates "in Monroe and other surrounding counties." The American Rentals operating agreement refers to a "Rochester, New York Metropolitan Statistical Area" and additional areas "described in the Development Agreement." But the former is otherwise undefined, and the Development Agreement is not a part of the record. Plaintiffs' Reply Memorandum refers to Pomponio's affidavit (which refers to the territory as the Rochester Metropolitan Area including four other counties), but nothing in plaintiffs' papers adopts or agrees with Pomponio's assertion. Plaintiffs say only that an injunction directed to Monroe and [*10]Ontario counties ought to be accepted by defendants as "eminently reasonable." Reply Memorandum, at 2-3.

The case of Southeastern Outdoor Products, Inc. v. Lawson, 172 N.C. App. 592, 616 S.E.2d 693, 2005 WL 1950247 (2005) is instructive. In that case, the defendant asserted that the "trial court erred by granting a preliminary injunction on the basis of a blue penciled' covenant not to compete, which encompassed a territory smaller than the covenant." Id. The court began by observing that the "central purpose of a covenant not to compete is the protection of an employer's customer relationships." Id. The court continued: "Therefore, to prove that a covenant's territorial restriction is reasonable, an employer must . . . show where its customers are located and that the geographic scope of the covenant is necessary to maintain those customer relationships.'" Id. (quoting Hartman v. Odell & Assoc., Inc., 117 N.C. App. 307, 312, 450 S.E.2d 912, 917 (1994)). To the same effect is Kinesis Advertising, Inc. v. Hill, __ N.C. __, 652 S.E.2d 284, 294 (2007)(quoting Hartman). Necessarily, this showing consists of proof of " the area assigned to the employee'" while employed by plaintiffs, and " the area where the employee actually worked or was subject to work.'" Kinesis, 652 S.E.2d at 294 (quoting Hartman, 117 N.C. App. at 312, 450 S.E.2d at 917).[FN4]

In Lawson, the restrictive covenant prohibited competitive activity "within the geographical boundaries of North and South Carolina," Lawson, supra, whereas the trial court ordered a preliminary injunction restraining competitive activity "encompassing all North Carolina counties east of Interstate 77 [*11]from Virginia to South Carolina to the Atlantic Ocean . . . [and] all counties in . . . South Carolina East of Interstate I-77 to the Atlantic Ocean that border the State of North Carolina.'" Id. The proof on the motion showed the precise area in both states that the former employer served. In reversing, the appeals court referred to the blue pencil rule of Welcome Wagon:

"If the territory is too broad, the entire covenant fails since equity will neither enforce nor reform an overreaching and unreasonable covenant.'" Id. (quoting Hartman, 117 N.C. App. at 312, 450 S.E.2d at 917 (quoting Basby v. Banks, 90 N.C. App. 458, 460, 368 S.E.2d 885, 886 (1988)). The court then quoted the following instructive passage from Hartman:

North Carolina's blue pencil' rule severely limits, what the court may do to alter the covenant. A court at most may choose not to enforce a distinctly separable part of a covenant in order to render the provision reasonable. It may not otherwise revise or rewrite the covenant.

Lawson, supra (emphasis supplied)(quoting Hartman, 117 N.C. App. at 317, 450 S.E.2d at 920). Ultimately, in reversing, the court explained that, "instead of denying the preliminary injunction because the covenant not to compete was overly broad, the trial court rewrote' the covenant and granted a preliminary injunction based on this blue-penciled' version." Lawson, supra. Accord, Masterclean of North Carolina, Inc. v. Guy, 82 N.C. App. 45, 51, 345 S.E.2d 692, 696 (1986)("while the court may separate distinct enumerated clauses of the geographical restriction drafted by the parties, the court "was without the power to [with respect to one enumerated clause] vary or reform the contract by reducing territory"). On this authority, the court would be powerless to enforce the territorial division, "United States," or "the state in which franchisee operates," by blue penciling in the words "Western New York," as one of plaintiffs' submissions urge.

Separately enforcing that portion of paragraph (c)(i) of the covenant ("city or county in which franchisee operates") might be permissible under Welcome Wagon and its progeny as outlined above, but only if plaintiffs established what cities and counties were served by American Rentals and only if plaintiffs' motion was so limited in territorial reach. Okuma America Corp. v. Bowers, 181 N.C. App. 85, 89, 638 S.E.2d 617, 620 (2007)(to show reasonableness of a territorial restriction, " an employer must first show where its customers are located'")(quoting Hartman, supra). As set forth above, plaintiffs have offered scant proof of American Rentals' territory on this motion. They have not by affidavit adopted Pomponio's speculations in that regard (he was, after all, demoted to a mere salesman only months prior, and in the context of what he describes as a substantial business upheaval engineered by the Terry's). At bottom, [*12]however, plaintiffs have asked in the Order to Show Cause for a client-based restraint not limited by territory without proving who those customers are. They have asked in other papers supporting the motion a restraint of competition throughout "Western New York" not evidently based on Pomponio's or American Rentals' actual clients or customers. And in a reply memorandum, plaintiffs request a restraint of competition limited to Monroe and Ontario Counties, again evidently not limited to Pomponio's or American Rentals' actual clients or customers.

Such requests would involve a substantial rewrite of the clause in the restrictive covenant which prohibits Pomponio from employment in "any rental company or facility which offers compact equipment which is located within: (i) the city or county in which franchisee operates," on the basis of wholly speculative proof of American Rentals' area of operation (offered by Pomponio, not plaintiffs) and, critically, on no proof that Pomponio's current employer "is located within" such area of operation. The covenant, with respect to the competitor - Skyworks, does not employ the phrase, "area served by" the entity defendant. Plaintiffs concede that Skyworks is located in Buffalo and that its principal place of business is Erie County. Accordingly, the motion for a preliminary injunction predicated on plaintiffs' causes of action grounded on Pomponio's alleged breach of paragraph (c)(i) of the restrictive covenants is denied.

The remaining aspect of preliminary relief requested in the Order to Show Cause is a restraining order which would effectively prevent Pomponio from assuming the status of "manager" in his new employment. The restrictive covenant addressing this situation, however, is contained in the LLC operating agreement, §3.10, which prohibits a "member" of the LLC from becoming "involved in the management of any business venture that competes with the company or is otherwise substantially similar to the franchised business." Pomponio states without contradiction that he now is a mere sales manager for Skyworks in a sprawling "large-scale aerial" construction rental business which is also a "dealer" for aerial lines of equipment. On the other hand, he also maintains that American Rentals largely specializes in small or medium sized construction equipment and has an extensive inventory of tools, a point confirmed by Mr. Terry in his own affidavit (at ¶6). Nevertheless, Pomponio acknowledges that American Rentals and Skyworks compete on some minor levels, thus triggering the application of §3.10 of the operating agreement because he remains trapped as a member.

Plaintiffs do not, however, establish in support of their motion a likelihood of success on their claim that Pomponio is currently involved in the "management" of Skyworks. Management of a business implies a role in the conduct of the business well [*13]divorced from the activities of a sales manager. Indeed, the term "manager" has specific meaning both under LLCL §§408-416, and under Article 4 of the American Rentals operating agreement. Plaintiffs do not provide a copy of the Skyworks operating agreement in support of their motion, and otherwise do not in affidavits address the management structure of Skyworks Equipment Leasing, LLC. Furthermore, the complaint fails to allege a violation of §3.10 of the American Rentals operating agreement, and does not otherwise allege that Pomponio is involved in the management of Skyworks. Accordingly, the motion for a preliminary injunction restraining Pomponio from assuming the status of "manager" of Skyworks is denied.

SO ORDERED.

______________________

Kenneth R. Fisher

Justice Supreme Court

DATED:February 25, 2008

Rochester, New York Footnotes

Footnote 1: For the reasons stated below, it is unnecessary to discuss the consideration issue raised by defendant, which in any event is laden with fact specific determinations which could not be made on this meager record. Wade S. Dunbar Ins. Agency v. Barber, 147 N.C. App. 463, 468, 556 S.E.2d 331, 335 (2001).

Footnote 2: "The six factors are: (1) the area or scope of the restriction; (2) the area assigned to the employee; (3) the area where the employee actually worked; (4) the area in which the employer operated; (5) the nature of the business involved; and (6) the nature of the employee's duty and his knowledge of the employer's business operation." Farr Associates, Inc. v. Baskin, 138 N.C. App. at 281, 530 S.E.2d at 882 (citing Hartman v. W.H. Odell & Associates, Inc., 117 N.C. App. 307, 312, 450 S.E.2d 912, 917 (1994)).

Footnote 3: "In evaluating the reasonableness of [a] time and territory restriction, [North Carolina courts] consider each element in tandem and not independently." Wade S. Dunbar Ins. Agency, Inc. v. Barber, 147 N.C. App. 463, 469, 556 S.E.2d 331, 335 (2001) (citing Hartman v. W.H. Odell and Assoc., Inc., 117 N.C. App. 307, 311-12, 450 S.E.2d 912, 916 (1994)).

Footnote 4: In Static Control Components, Inc. V. Darkpoint Imaging, Inc., 240 F. Supp. 2d 465, 473 (M.D. N.C. 2002) the court provided a helpful summary of what plaintiffs' proof should have consisted of:

To demonstrate the reasonableness of a geographic restriction, employers should provide evidence of the customer and vendor contacts throughout the geographic area. Hartman, 117 N.C. App. at 312-13, 450 S.E.2d at 917. To be valid, the employer should provide a breakdown of revenues from different states and name specific customers. Id. An employer who simply states that there are customers in different areas only propounds, "at best, an 'indefinite generality.' " Id. at 313, 450 S.E.2d at 917. Instead, to demonstrate the geographic reasonableness of a non-competition agreement, the employer should offer specific evidence that it has more than one or two customers in a particular state or country. Id. at 314, 450 S.E.2d at 918 (stating that two or three customers in a state does not warrant a state-wide geographical restriction).