Evo Corp. v. Poling,
2015 NCBC 80.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF FORSYTH 15 CVS 4230
EVO CORPORATION, )
)
Plaintiff, )
)
v. )
ORDER ON MOTION FOR
)
PRELIMINARY INJUNCTION
DOUGLAS A. POLING; and )
AMANDA V. TYSON, )
)
Defendants. )
)
{1} THIS MATTER is before the Court on Plaintiff’s Motion for
Preliminary Injunction (“Motion”). Based upon the Findings of Fact and
Conclusions of Law below, the Motion is GRANTED IN PART and DENIED IN
PART.
Kilpatrick Townsend & Stockton LLP by Richard Keshian and Elizabeth L.
Winters for Plaintiff.
Womble Carlyle Sandridge & Rice, LLP by Brent F. Powell and James A.
Dean for Defendant Douglas A. Poling
Fitzgerald Litigation by Andrew L. Fitzgerald for Defendant Amanda V.
Tyson.
Gale, Chief Judge.
I. FINDINGS OF FACT
{2} The Court makes the following Findings of Fact solely for purposes of
resolving the present Motion. These findings are without prejudice to inconsistent
findings in a subsequent evidentiary proceeding. The findings are based on the
verified complaint, affidavits, deposition testimony, and documents of record.
{3} Plaintiff Evo Corporation (“Evo”) instituted this action by filing a
Verified Complaint and Motion for Temporary Restraining Order and Preliminary
Injunction on July 10, 2015, against Defendant Douglas A. Poling (“Poling”) and
Defendant Amanda V. Tyson (“Tyson”). That same day, the Hon. David L. Hall
issued a temporary restraining order (“TRO”) against both Defendants and
scheduled the matter for a hearing on Evo’s motion for preliminary injunction on
July 22, 2015. On July 20, 2015, North Carolina Supreme Court Chief Justice Mark
Martin designated the matter as a complex business case, and the case was
assigned to the undersigned on July 21, 2015. On July 24, 2015, the parties
consented to the extension of the TRO until August 13, 2015, as well as to expedited
discovery. The Court heard the Motion on August 13, 2015, and at the conclusion of
the hearing, Poling agreed to extend the TRO for seven days to allow the Court to
further consider the Motion. The Court announced at the hearing that it would not
enter a preliminary injunction against Tyson and that the TRO against her would
be allowed to expire. The Motion is now ripe for determination.
{4} Evo is a North Carolina corporation, with a principal place of business
in Winston-Salem, North Carolina. It maintains other offices, including in
Chattanooga, Tennessee and Jacksonville, Florida. Evo’s services extend across a
range of specialized environmental and industrial services, which may be identified
as five separate functions. Those five functions are specified in and quoted from the
Covenant identified below.
{5} Poling is a former Evo employee. Evo hired Poling on August 13, 2012.
He became Evo’s Industrial Services Manager, with management oversight of Evo’s
industrial services operations from its facilities in North Carolina, Tennessee, and
Florida. Although Poling primarily had direct client contact only with customers
serviced from Evo’s North Carolina facility, his management oversight gave him
knowledge, or access to knowledge, regarding customers of the other facilities and
their needs. Poling was directly involved in identifying or soliciting new customers
for services to be rendered in Florida, Georgia, North Carolina, South Carolina,
Tennessee, and Virginia.
{6} Evo’s industrial services are provided onsite at the customer’s location.
{7} Poling signed an Employment and Confidentiality Agreement
(“Employment Agreement”) and a Covenant Not to Compete and Non-Solicitation
Agreement (“Covenant”) on August 13, 2012, in connection with and as a part of the
terms of his initial employment. The terms of these agreements were reaffirmed on
October 21, 2013, when Poling was promoted to the position of Industrial Services
Manager. These agreements had not been terminated and were in force when Evo
terminated Poling on March 27, 2015.
{8} Tyson is a former Evo employee. Tyson worked from Evo’s Winston-Salem facility as Poling’s administrative assistant. Evo hired Tyson on December
30, 2013. Tyson did not execute a covenant not to compete, but she did sign a
Confidentiality Acknowledgement (“Acknowledgement”) contemporaneously with
and as a part of the terms of her initial employment.
{9} The Covenant Poling signed includes several paragraphs that are
significant to the present Motion. Paragraph A.1 list the five areas of services that
Evo provides, defined as (1) industrial resources, (2) environmental resources, (3)
waste management resources, (4) transportation resources, and (5) land resources.
Poling worked only in the area of industrial resources.
{10} Paragraph A.2 of the Covenant provides that Poling will not, for a
period of twelve months from the termination of his employment, within the
“Restricted Territory,” engage in any employment activity which is the same as or
substantially similar to those employment activities in which Poling engaged while
employed with Evo:
(a) for a direct competitor of Evo whose products or services compete with
those provided by Evo; or
(b) for any customer of Evo during the two years prior to the termination of
Poling’s employment or any customer Evo was actively soliciting at the
time of the termination.
{11} As worded, the restriction on employment was limited to the period of
twelve months following Poling’s termination and only prevents employment in the
same activities Poling performed for Evo; that is, industrial services. However,
these limitations were in force throughout the entire Restricted Territory.
{12} Paragraph A.2 of the Covenant further provides that, within the
Restricted Territory and for a period of twelve months from the termination of his
employment, Poling may not solicit, for the purpose providing the same or
substantially similar product or service as Evo, any customer who was a customer
within the two years prior to the termination of Poling’s employment or who was
being actively solicited by Evo as a customer at the time of that termination.
{13} Evo advocates that the Court should read the phrase, “for the purpose
of providing the same or substantially similar product or service,” as limiting the
application of the non-solicitation covenant, as applicable to Poling, to only
industrial services.
{14} In response to the Court’s inquiry, Evo admitted that the non-solicitation Covenant is overbroad if it must be construed to extend to prohibiting
Poling from soliciting business for all five services that Evo offers.
{15} Paragraph A.2 of the Covenant also prohibits Poling from contacting
any Evo employee during the twelve months following the termination of his
employment for the purposes of soliciting or inducing them to leave Evo’s
employment. Evo has produced testimony from a number of Evo employees that
Poling solicited or induced them to leave their employment with Evo. While Poling
contests this evidence, at least in part, he further indicated that he does not oppose
the entry of a preliminary injunction enjoining any further solicitation or
inducement of Evo employees.
{16} The “Restricted Territory,” is defined by paragraph A.3 of the
Covenant, which reads:
Within a 50-mile radius of any city, town, or geographic location in
which Evo has sold its products or services within the two-year period
prior to the termination of the Employee’s employment with Evo,
within the following states:
(a) North Carolina;
(b) South Carolina
(c) Virginia;
(d) any state in the United States in which Evo sells its products or
services.
The parties agree that this geographic area is reasonable, in that this
Covenant applies only to direct competitors in the same market areas
and with respect to the same or substantially similar competing
product or service, and there is a limited number of direct competitors
who sell the same or similar products and services as those marketed
and sold by Evo.
(Verified Compl. & Mot. TRO & Prelim. Inj. Ex. B ¶ A.3.)
{17} Evo contends that the Restricted Territory for purposes of Poling’s
Covenant should be limited to the radius around customers for whom Evo provided
industrial services, and that this limitation is evident from the phrase that the
Covenant “applies only to direct competitors in the same market areas and with
respect to the same or substantially similar competing product or service.” (Verified
Compl. & Mot. TRO & Prelim. Inj. Ex. B ¶ A.3.) That is, Evo urges that the
language necessarily implies that the parties intended and agreed that the
Covenant would only apply to customers for a “substantially similar competing
product or service” for which Poling was employed by Evo.
{18} Paragraph A.5 of the Covenant acknowledges that a violation of the
Covenant would result in irreparable harm, such that Evo shall be entitled to an
injunction. Paragraph B of the Covenant states that its various provisions are
severable.
{19} Poling accepted employment with EnviroVac on April 13, 2015, to
operate a satellite facility in Greensboro, North Carolina. Evo provides industrial
services within fifty miles of Greensboro. Poling was employed for purposes of
providing industrial services of the same type as those he had provided when
employed by Evo. EnviroVac is a direct competitor of Evo’s in the area of industrial
services.
{20} At the time Poling was terminated, he maintained a close, personal
relationship with Tyson. After he was terminated, and prior to accepting
employment with EnviroVac, Poling requested that Tyson secretly obtain Evo’s
information, which Evo contends is confidential and subject to undertakings
executed by both Poling and Tyson. Tyson obtained Poling’s business-card holder in
response to his request. Poling has testified that the cards in that holder were
exclusively those that he possessed prior to beginning employment with Evo.
{21} Although Tyson agreed to and intended to obtain additional
information as Poling requested, she was unable to do so before she resigned from
Evo on March 30, 2015.
{22} Poling had one rate sheet, which Evo contends is confidential. Poling
admits that he provided the rate sheet to EnviroVac, but offered testimony denying
both that the information should be considered confidential and that he or
EnviroVac used the rate sheet. The Court has, for purposes of this Motion only,
assumed both that the information was confidential and that Poling actually used
the information on behalf of EnviroVac.
{23} After her resignation, Tyson discovered that she possessed certain
other Evo information. She testified that she has returned all such information to
Evo, and the record does not indicate that she provided this information to Poling.
At the hearing on the Motion, her counsel, in her presence, assured the Court that
she has returned all such information, she understands the nature and import of
her obligations to honor the protection of Evo’s confidential information, and she
recognizes the potential consequences of her failure to do so.
{24} Capital Power, which maintains facilities in Roxboro and Southport,
North Carolina, is or was an Evo customer that, prior to Poling’s termination,
accounted for more than fifty percent of Evo’s billings for industrial services. Poling
had direct contact with Capital Power while he was employed by Evo. Both before
and after his employment with EnviroVac, Poling directly solicited Capital Power
for the purpose of providing industrial services to Capital Power on behalf of
EnviroVac, and in direct competition with Evo.
{25} Capital Power is now an EnviroVac customer for industrial services.
There is contested evidence as to why Capital Power no longer intends to obtain
industrial services from Evo, and whether Poling’s move from Evo to EnviroVac
impacted Capital Power’s decision to switch industrial services providers.
{26} Poling has solicited other Evo customers in North Carolina for
purposes of providing of industrial services in direct competition with Evo.
{27} Shortly after his employment with Evo was terminated, Poling texted
Tyson statements evidencing his intention to harm Evo and to take its customers.
These messages demonstrate a clear potential that Poling will harm Evo if he is not
enjoined.
{28} Evo came into possession of these documents when Poling returned his
company-owned iPhone to Evo without also disabling a link between that iPhone
and his cloud account. Because the cloud account was also linked to Poling’s
personal phone, the iPhone continued to receive and display text messages sent to
and from his personal phone.
{29} Absent the entry of an injunction, it is likely that Poling intends to and
will continue employment and solicit customers in contravention of the Covenant.
{30} The geographic scope of the Restricted Territory of the Covenant is
defined by a geographic radius of fifty miles that extends not from Evo’s various
offices, but from any location where Evo provides services.
{31} Evo has not demonstrated that it has more than one customer in the
various geographic areas within the Restricted Territory, which includes a radius of
fifty miles around any customer for which Evo provided a service within two years
of the termination of Poling’s employment.
{32} Based upon these Findings of Fact, solely for purposes of the Motion,
the Court makes the following:
II. CONCLUSIONS OF LAW
{33} Restrictive covenants are not generally favored and must be strictly
construed against the employer. See Farr Assocs., Inc. v. Baskin, 138 N.C. App. 276,
279,
530 S.E.2d 878, 881 (2000) (noting that covenants not to compete are
disfavored); see also Reichhold Chems., Inc. v. Goel,
146 N.C. App. 137, 153,
555
S.E. 2d 281, 291 (2001) (noting that ambiguities in written instruments should be
construed against the drafter).
{34} To be valid, a restrictive covenant prohibiting employment or customer
solicitation must be (1) in writing, (2) made a part of the employment contract, (3)
supported by consideration, (4) reasonable both as to time and territory, and (5) not
against public policy in that they are no broader than necessary to protect the
employer’s interest. United Labs., Inc. v. Kuykendall, 322 N.C. 643, 649–50,
370
S.E. 2d 375, 380 (1988). To determine the reasonableness of the time and
geographic scope of a covenant, a court examines time and territory in combination.
See Jewel Box Stores Corp. v. Morrow,
272 N.C. 659, 665,
158 S.E.2d 840, 844
(1968) (“Although a valid covenant not to compete must be reasonable as to both
time and area, these two requirements are not independent and unrelated aspects
of the restraint. Each must be considered in determining the reasonableness of the
other.”). As a general proposition, a wider geographic scope might be permissible as
the time requirement is shortened. See
id.
{35} The Covenant was in writing, was signed by Poling as a part of his
employment contract, and was supported by consideration. See Robins v. Weill, Inc.
v. Mason, 70 N.C. App. 537, 542,
320 S.E.2d 693, 697 (1984) (noting that a covenant
not to compete entered into at the start of employment is supported by
consideration). The Covenant is then enforceable so long as it is reasonable as to
time and territory.
{36} Here, the Covenant restricts Poling from competitive employment for
twelve months. This is well within the time period that North Carolina courts have
upheld. See, e.g., Hejl v. Hood, Hargett & Assocs. Inc., 196 N.C. App. 299,
674
S.E.2d 425 (2009) (upholding three-year time restraint); Kinesis Adver. Inc. v. Hill,
187 N.C. App. 1,
652 S.E.2d 284 (2007) (upholding two-year time restraint). The
time period of the Covenant as related to the prohibition on competitive
employment is reasonable. The Covenant is drawn narrowly to limit only
employment of the type Poling performed while Evo employed him. If the
Restricted Territory is reasonable as to geographic scope, the restrictive covenant as
to employment is reasonable.
{37} As worded, the Covenant’s prohibition against customer solicitation is
for a period of three years. This period is determined by adding the one year
prohibition following the termination of Poling’s employment to the look-back period
of two years that paragraph A.2 of the Covenant uses to determine the customers
subject to the restriction. See Farr Assocs., 138 N.C. App. at 280–81, 530 S.E.2d at
881.
{38} If the Covenant were restricted to Evo customers with whom Poling
dealt directly, the three-year time period would be within the range of those time
periods approved by North Carolina cases. Cf. Manpower of Guilford Cty., Inc. v.
Hedgecock, 42 N.C. App. 515, 522,
257 S.E.2d 109, 114–15 (1979) (noting that time
limitations in non-competes should be valid if their purpose is to prevent loss of
customers, and that when the primary concern is the employee’s knowledge of
customers, the territory should be restricted to those areas in which the employee
made contacts). However, the Covenant is not so restricted. First, the Covenant is
not limited to customers with which Poling dealt directly. Second, the Covenant
extends beyond customers Evo had at the time of Poling’s termination, reaching
customers who were Evo customers within the two years prior to Poling’s
termination but were not Evo customers at the time of Poling’s termination and
reaching all potential Evo customers. Further expanding the geographic scope, the
Restricted Territory extends to a fifty-mile radius around each such customer.
{39} The Court must strictly construe the contract against its drafter, Evo.
Id. at 522,
257 S.E.2d at 115.
{40} There is, at a minimum, a substantial question of whether the
Covenant as worded is no broader than necessary to protect Evo’s legitimate
business interests. The Court concludes that Evo has not shown a probability of
success in proving that the Restricted Territory of the Covenant is reasonable both
as to time and territory. The Court further concludes that it cannot cure the
problem of the Covenant’s overbreadth by utilizing the blue-pencil doctrine. There
is no phrase that the Court can strike from the definition of the Restricted Territory
to limit its reach either to only customers consuming Evo industrial services or to
customers at the time of termination of Poling’s employment. Hartman v. W.H.
Odell & Assocs., 117 N.C. App 307, 317, 450 S.E.2d 912, 920 (1994) (blue penciling
limited to “distinctly separable” provisions of a restrictive covenant). The most
narrow construction the Court could draw using its blue-pencil authority is to limit
the Covenant to a fifty-mile radius around customers to which Evo had, within the
two years prior to Poling’s termination, sold products or services in North Carolina.
In some instances, the radius would be greater than fifty miles, because the radius
extends to any “city, town, or geographic location” in which the customer is located.
The term “geographic location” is not defined. For example, Evo indicated at the
hearing that it has a customer in Atlanta, Georgia. If the “geographic location”
were meant to be the greater Atlanta metropolitan area, the total radius would be
substantially greater than fifty miles.
{41} Even if the Covenant’s prohibitions on solicitation could be restricted
to customers seeking industrial services by employing the inference that Evo
promotes, notwithstanding the rule of construction that requires construing the
language strictly, substantial questions remain as to whether the restriction is
broader than necessary when the geographic scope is considered in conjunction with
the time period of three years.
{42} The Covenant utilizes a two-year look-back period to determine the
customers that must be used to define the geographic scope of the Covenant. That
look-back period extends the scope to a geographic radius around former Evo
customers who may no longer have been customers by the time Poling’s
employment was terminated. Manpower, 42 N.C. App. at 522, 257 S.E.2d at 114–15
(noting that a restriction as to territory is only reasonable to the extent that
restriction protects the legitimate interests of an employer in maintaining its
customers). There is no separate and distinct phrase in the definition of the
Restricted Territory that the Court could strike so as to limit the Covenant to only
current customers.
{43} Evo has not developed an evidentiary record that demonstrates a
legitimate business interest in extending the Restricted Territory to the fifty-mile
radius of the cities or towns within which its customers are located. A more typical
covenant includes a geographic radius around an employer’s business location. The
evidence indicates that some of Evo’s customers are located substantially more than
fifty miles from any Evo facility, including, for example, in Atlanta or West Virginia.
Evo argues that, in practical effect, its place of business should be considered its
customer locations because Evo provides its services at the customers’ facility. The
corollary would necessarily be that Evo has as many facilities as it has customers
and that Poling must be restricted by his Covenant within the geographic radius of
each of them.
{44} North Carolina precedent has allowed an employer to extend a non-compete to the full reach of that employer’s area of business, representing a
geographic area as large as North America and South America. Importantly,
however, the non-compete was limited to where the employee had extensive
managerial responsibility and the restriction was specific to the employer’s clients
without further geographic limitations. Okuma Am. Corp. v. Bowers, 181 N.C. App.
85, 91–92,
638 S.E.2d 617, 621–22 (2007).1 Here, the Covenant reaches beyond
customers with whom Poling dealt directly, even though he may have had some
oversight responsibility for all customers as a result of his management position.
See Hejl, 196 N.C. App. at 306–07,
674 S.E.2d at 430 (refusing to enforce a non-solicitation clause whose geographic scope extended into areas where the employee
did not have personal knowledge or involvement).
{45} The questions as to the Restricted Territory’s overbreadth are
compounded because the prohibition against customer solicitation is not limited to
customers for which Poling had direct personal involvement, and extends to
potential as well as actual customers. See id. at 307,
674 S.E.2d at 430 (“[W]here
1
Further, Okuma was decided under the inferences required for a Rule 12(b)(6) motion, and the
court in that case was unwilling to decide as a matter of law, without facts “relating to how closely
the geographic limits fit within [the employee’s] work for [the employer],” that such a large
territorial restriction was overbroad given the allegations of the employee’s significant corporate
management responsibilities. Okuma,
181 N.C. App. at 92,
638 S.E.2d at 622.
the Agreement reaches not only clients, but potential clients, and extends to areas
where Plaintiff had no connections or personal knowledge of customers, the
Agreement is unreasonable.”).
{46} The Court is aware of no North Carolina precedent that has upheld a
covenant that is both customer based and extends to a geographic radius around
customer facilities, whether based on only actual customers or both actual and
potential customers.
{47} If the Covenant against solicitation would be rendered otherwise
reasonable, the Court could use its blue-pencil authority to strike the phrase “or any
person or entity whose business Evo was actively soliciting at the time of the
termination of the Employee’s employment with Evo.”
{48} Evo has demonstrated that it may suffer irreparable harm if Poling is
not enjoined.
{49} Evo did not unreasonably delay in bringing the litigation or seeking
injunctive relief.
{50} Evo should not be barred from injunctive relief because of its
possession or use of texts Poling sent after termination of his employment. In fact,
those texts demonstrate a clear basis for enforcing the Covenant against Poling if
the Court could construe the Restricted Territory as no more broadly defined than
necessary to protect Evo’s legitimate business interests.
{51} However, based on the entire record, for purposes of the present
Motion, the Court concludes that Evo has not demonstrated a probability that it will
prove that the Restricted Territory that governs the application of the Covenant is
no broader than necessary to protect its legitimate business interest. Specifically,
Evo has not demonstrated the probability that it can prove a legitimate business
interest in restricting Poling’s employment or solicitation, even as to industrial
services only, in the geographic radius around any city, town, or geographic location
where Evo has sold services within the two years prior to the termination of Poling’s
employment. The Court is unable, based on the language as drafted, to use its blue-
penciling authority to limit the Covenant to customers with which Poling dealt with
directly or to exclude the geographic radius around such customers.
{52} Accordingly, Evo is not entitled to a preliminary injunction enjoining
Poling from violating paragraphs A.2(a), A.2(b) or A.2(c) of the Covenant.
{53} Poling agreed at oral argument that he does not contest an injunction
that enjoins him from (1) soliciting or inducing Evo employees for purposes of
terminating their employment with Evo, and (2) sharing or otherwise using
confidential information as defined by his Evo Employment Agreement.
{54} Evo has not shown that it will suffer irreparable harm if a preliminary
injunction is not entered against Tyson to enjoin any further distribution of
information governed by the Acknowledgement she signed as a part of her Evo
employment. This is particularly so because Poling has indicated that he does not
oppose the entry of a preliminary injunction enjoining him from violating his own
obligation to protect Evo’s confidential information.
{55} The TRO as against Tyson has expired. It shall be allowed to expire as
against Poling upon entry of this Order, except that the Court orders limited
preliminary injunctive relief against Poling.
{56} From the date of this Order until the conclusion of this litigation,
Poling shall:
(a) Cease any further dissemination, copying, reproduction, or other
use of confidential information taken from, or which originates from
Evo, it being understood that upon any application to enforce this
injunction, Evo shall have the burden of proving that any
information made subject to any such enforcement effort is actually
confidential; and
(b) Cease the solicitation of or attempting to induce any Evo employees
to terminate their employment with Evo.
{57} Plaintiff’s bond in the amount of $500.00 shall remain in force and is
adequate for purposes of this limited injunction.
{58} Except as otherwise provided, Plaintiff’s Motion for Preliminary
Injunction is DENIED.
IT IS SO ORDERED this 20th day of August, 2015.
/s/ James L. Gale l
James L. Gale
Chief Special Superior Court Judge
for Complex Business Cases
