Northern District of Georgia Judge Remands Declaratory Judgment Action

Posted by Neal F. Weinrich on

This blog has previously discussed decisions explaining the analysis to be undertaken when a defendant removes an action in which the plaintiff seeks a declaratory judgment that his or her restrictive covenants are unenforceable to federal court, and the plaintiff then files a motion to remand the action to state court on the grounds that the amount-in-controversy requirement is not met.  See Eleventh Circuit Opinion in Non-Compete Case Addresses Amount-in-Controversy Requirement and Mandatory Arbitration Provisions, posted on April 25, 2011.  A recent opinion from the Northern District of Georgia sheds additional light on this analysis.  See Wilson v. Benyon Sports Surfaces, Inc., Civil Action No. 1:11-CV-2002 RWS, 2011 WL 6014666 (N.D. Ga Dec. 1, 2011).

In Wilson, the plaintiff filed an action in a Georgia superior court seeking a declaration that the restrictive covenants he signed with his former employer, Benyon Sports Surfaces, Inc. (“BSS”), are invalid.  He also sought an injunction to stop BSS from seeking to enforce the covenants.  BSS removed the lawsuit to federal court.  Mr. Wilson then filed a motion to remand, challenging BSS’ blanket assertion in its removal papers that the amount-in-controversy exceeded $75,000.00.

BSS then amended its Notice of Removal to address the alleged deficiencies.  Mr. Wilson, however, made renewed challenges to the Amended Notice of Removal.

In considering Mr. Wilson’s motion to remand, Judge Story noted the Eleventh Circuit’s statements that “[w]hen a plaintiff seeks injunction or declaratory relief, the amount in controversy is the monetary value of the object of the litigation from the plaintiff’s prospective … [i]n other words, the value of the requested injunctive relief is the monetary value of the benefit that would flow to the plaintiff if the injunction were granted.”  Judge Story further observed that “’[i]n the restrictive covenant context, ‘the value of the injunctive relief requested would have to be measured by comparing what the plaintiffs could earn while complying with the restrictive covenants to what they could earn without having to comply.”  Finally, Judge Story noted that he could only look to the evidence submitted to support removal and could not speculate to make up for any failings in the removal notice.

Judge Story then applied these principles to the evidence submitted by BSS to support its contention that the amount-in-controversy was met.  The evidence showed BSS had paid Mr. Wilson approximately $225,000.00 in compensation in both 2009 and 2010.  BSS had also learned that a competitor had announced internally that Mr. Wilson had accepted a position as the competitor’s President and CEO.  BSS’ Chief Operating Officer testified that in that position Mr. Wilson would make in excess of $75,000.00 per year.

Mr. Wilson submitted a declaration averring that he was not employed with the competitor or any other employer, and he had no current intention of becoming employed with the competitor.  Mr. Wilson also testified that he does not have any measureable or reliable estimate of what his earning potential or ability will be.

Considering this evidence, Judge Story found that the value of the Mr. Wilson’s claims was too speculative to satisfy the amount-in-controversy requirement.  Judge Story found that, standing alone, Mr. Wilson’s prior salary was not probative, on what more Mr. Wilson could make if the restrictive covenants were declared invalid.  Judge Story therefore found that the evidence regarding Mr. Wilson’s prior salary did nothing to inform the Court of the value that Mr. Wilson would receive if the covenants were invalidated.  Resolving the uncertainties in the evidence in favor of remand, Judge Story granted Mr. Wilson’s motion to remand.

Wilson thus warrants careful consideration when a defendant is considering removing a declaratory judgment action to federal court, as well as when a plaintiff is analyzing whether to file a motion to remand an action which has been removed.