In a horse of a different color, the Georgia Court of Appeals recently issued an opinion in Falcon Ridge, Inc. v. Leon regarding enforcement of certain restrictive covenants in favor of an elite competitive hunter jumper horse training and boarding stable and against an independent contractor who provided equestrian riding and training services at the facility.
After accepting a position at Falcon Ridge and forming relationships with its customers and the horses, the trainer left the stable to work out of two other stables located nearby despite having signed a noncompete prohibiting him from doing so. He also solicited clients to move their horses and train with him at the new barns to fund his independent venture.
The stable filed suit, initially seeking only an injunction to enforce the restrictive covenants. But the request for injunctive relief became moot when the restrictive covenants expired. In other words, the horse was already out of the barn. However, the stable filed an amended complaint seeking damages which was at issue on appeal.
At summary judgment, the trial court wasn’t horsing around and granted a judgment to the trainer on the customer non-solicitation covenant. The court held that the non-solicit was unenforceable due to the fact that it applied to all of the stables’ customers (not just those with whom he had material contact) and lacked a geographic restriction.
While it appeared the plaintiff had lost its stride and was saddled with a tough case, the court of appeals reversed, holding that the trial court put the cart before the horse because a Code of Georgia (OCGA) statute provides that “no express reference to geographic area or the types of products or services considered to be competitive shall be required” in order for a customer non-solicitation covenant to be enforceable; and “[a]ny reference to a prohibition against ‘soliciting or attempting to solicit business from customers’ or similar language shall be adequate for such purpose and narrowly construed to apply only to: Such of the employer’s customers, including actively sought prospective customers, with whom the employee had material contact…” As such, the defendant was knocked off his high horse because the trial court erred in failing to construe the non-solicit to only apply to the customers with whom he had contact.
Uninterested in reining it in, the court of appeals went further. It also held that the trial court was unbridled and erred in concluding that the noncompete was overbroad because it effectively prohibited the trainer from working for a competitor in any capacity. While the agreement prohibited the trainer from “engaging in business with, owning an interest in, or acting as an officer in any competitor,” the court found it sufficiently provided a good faith estimate of the scope of prohibited activities. As such, the trial court was obligated under the statute to construe the covenant to cover only so much of such estimate “as relates to the activities actually conducted [and] the products or services actually offered” within a reasonable period of time prior to termination.
Thank you to my partners, Ken Winkler, Neal Weinrich, Lea Dearing, and Daniel Park whose hilarious emails about this case inspired this blog post. And, while I don’t normally dedicate blog posts, I dedicate this one to my favorite equestrian—my daughter Elizabeth.
Benjamin Fink is known for his work in noncompete, trade secret and competition-related disputes. A shareholder at Berman Fink Van Horn, Ben concentrates his practice in business and employment litigation.
