Emp't Staffing Grp., Inc. v. Little
Emp't Staffing Grp., Inc. v. Little
Opinion
*267 Monica Little ("Defendant") appeals the trial court's order granting Employment Staffing Group's ("Plaintiff's") motion for a preliminary injunction, contending that the consideration given for the covenant not to compete within the parties' employment agreement was illusory and inadequate. After careful review, we hold that a monetary payment to Defendant in exchange for her signing the Employment Agreement rendered the covenant binding and enforceable, and therefore affirm the decision below. In the context of a non-compete covenant, the parol evidence rule does not prohibit the trial court from considering parol evidence of consideration when the written contract is silent as to this necessary and essential term.
Factual and Procedural Background
On 13 June 2014, Defendant, who had been working for Plaintiff since September 2001, signed an Employment Agreement containing a covenant titled "Limitation on Competition" (the "non-compete covenant"). The non-compete covenant prohibited Defendant from performing for any competing business within a 50-mile radius of Plaintiff's base locations for a period of one year following Defendant's termination any "Protected Duties," defined as those duties Defendant performed for Plaintiff in the two years before her termination. The non-compete covenant also contained a "Limitation on Solicitation" provision, which prohibited Defendant from soliciting Plaintiff's customers for a period *311 of two years following her termination. 1 Although the non-compete *268 covenant does not contain any discussion of consideration, it is undisputed that Plaintiff's human resources director told Defendant that she would be paid $100 for executing the Employment Agreement and that, on 17 June 2014, $100 was directly deposited by Plaintiff into Defendant's bank account.
On 17 November 2014, Plaintiff filed suit against Defendant, claiming breach of the Employment Agreement, conversion, tortious interference with contractual relations, misappropriation of trade secrets, and unfair and deceptive trade practices. The complaint sought compensatory, punitive, and treble damages as well as injunctive relief. On 25 November 2014, Plaintiff moved for a preliminary injunction. According to the allegations in Plaintiff's Motion for a Preliminary Injunction, Defendant had left Plaintiff's employ and shortly thereafter begun soliciting Plaintiff's customers to her new employer, Atlantic Staffing Consultants. Plaintiff's Motion came on for hearing on 5 December 2014. 2 After hearing arguments, Judge Bridges concluded that "there is a reasonable likelihood that [Plaintiff] will prevail on its claims" and entered an order prohibiting Defendant from:
2. Soliciting or having any further business contact, directly or indirectly, with Ultra-Mek, Inc., any other ESG customer, and any employees of any such company....
*269 3. Competing or attempting to compete with ESG in the staffing service industry on her own behalf or on behalf of any other employment staffing firm, directly or indirectly, by performing any duties that she performed within the 730 days immediately preceding her termination from ESG on July 21, 2014....
Defendant timely appeals.
Appealability
"A preliminary injunction is interlocutory in nature, which means that an order issuing a preliminary injunction cannot be appealed prior to [a] final judgment absent a showing that the appellant has been deprived of a substantial right which will be lost should the order escape appellate review before final judgment."
*312
Copypro, Inc. v. Musgrove,
--- N.C.App. ----, ----,
where time is of the essence, the appellate process is not the procedural mechanism best suited for resolving the dispute. The parties would be better advised to seek a final determination on the merits at the earliest possible time. Nevertheless, because this case presents an important question affecting the respective rights of employers and employees who choose to execute agreements involving covenants not to compete, we have determined to address the issues.
A.E.P. Indus., Inc. v. McClure,
Standard of Review
The standard of review from a preliminary injunction is essentially de novo. Thus, on appeal from an order of a superior court granting or denying a preliminary injunction, an appellate court is not bound by the findings, but may review and weigh the evidence and find facts for itself. Nevertheless, a trial court's ruling on a motion for a preliminary injunction is presumed to be correct, and the party challenging the ruling bears the burden of showing it was erroneous.
*270 Horner Int'l Co., --- N.C.App. at ----, 754 S.E.2d at 855 (internal citations and quotation marks omitted).
As a general rule, a preliminary injunction is an extraordinary measure taken by a court to preserve the status quo of the parties during litigation. It will be issued only (1) if a plaintiff is able to show likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain irreparable loss unless the injunction is issued, or if, in the opinion of the Court, issuance is necessary for the protection of a plaintiff's rights during the course of litigation.
A.E.P.,
Analysis
Defendant contends that Plaintiff is not likely to succeed on the merits because the non-compete covenant was unenforceable due to lack of consideration. Specifically, Defendant alleges that the $100 Plaintiff paid her was illusory because it was not mentioned in the non-compete covenant or anywhere else in the Employment Agreement. Furthermore, Defendant, distinguishing
Hejl v. Hood, Hargett & Associates, Inc.,
A covenant not to compete is valid if the covenant is: "(1) in writing, (2) entered into at the time and as a part of the contract of employment, (3) based on valuable considerations, (4) reasonable both as to time and territory embraced in the restrictions, (5) fair to the parties, and (6) not against public policy."
Hejl,
I. Illusory Consideration
The Employment Agreement specified in writing all essential terms of the non-compete covenant except consideration. However, contemporaneous with the execution of the written contract, the parties entered into a separate oral agreement as to the amount of consideration *271 Plaintiff would pay Defendant for signing the non-compete agreement. Defendant relies on the Employment *313 Agreement's merger clause that "[t]his [Employment] [A]greement embodies the entire agreement of the parties relating to the subject matter in this Agreement" to support her claim that the trial court is prohibited from considering any separate oral agreement as to consideration to determine whether the non-compete agreement is enforceable. Thus, the issue is whether the trial court could consider evidence of the parties' outside negotiations as to consideration even though the Employment Agreement contained a merger clause.
As our Court has noted, "merger clauses were designed to effectuate the policies of the Parol Evidence Rule; i.e., barring the admission of prior and contemporaneous negotiations on terms inconsistent with the terms of the writing. North Carolina recognizes the validity of merger clauses and has consistently upheld them."
Zinn v. Walker,
[t]his rule applies where the writing totally integrates all the terms of a contract or supersedes all other agreements relating to the transaction. The rule is otherwise where it is shown that the writing is not a full integration of the terms of the contract. The terms not included in the writing may then be shown by parol.
Craig v. Kessing,
*272
This Court has previously addressed limitations of the parol evidence rule in the employment contract context. In
Hall v. Hotel L'Europe, Inc.,
Similarly, in
Beal v. K.H. Stephenson Supply Co., Inc.,
Here, since the Employment Agreement is silent as to consideration, an element necessary to form a binding non-compete agreement is absent-but that element is not precluded by any provision in the written agreement. Furthermore, both parties admitted that Plaintiff offered Defendant $100 to sign the non-compete covenant, and it is undisputed that Plaintiff actually paid Defendant $100. Consequently, as in Hall and Beal, the written non-compete covenant is not fully integrated, and the merger clause and parol evidence rule do not prohibit the trial court from considering the evidence showing the missing essential term of consideration-that Plaintiff paid Defendant $100 for signing the Employment Agreement. This Court has reached a similar conclusion in a case in which there was no signature on the signature line of the written non-compete agreement. See New Hanover Rent-A-Car, Inc.
*273
v. Martinez,
II. Inadequate Consideration
Next, Defendant argues that the non-compete covenant was not supported by adequate consideration. This argument is refuted by well-established case law.
Defendant, citing
Hejl,
Conclusion
For the reasons stated above and based on our review of the record and the applicable law, we affirm the preliminary injunction order.
AFFIRMED.
Judges CALABRIA and STROUD concur.
The Employment Agreement also contained a provision prohibiting Defendant from disclosing confidential information and trade secrets, and the trial court's order granting Plaintiff's preliminary injunction enforced this provision in addition to the non-compete covenant. However, Defendant's argument on appeal focuses solely on the non-compete covenant and whether it was supported by valuable consideration, a separate analysis from that involved in determining the likelihood of success on a misappropriation of trade secrets claim.
Compare
Barr-Mullin, Inc. v. Browning,
In its injunction order, the trial court noted that previously, on 26 November 2014, it had entered an injunction prohibiting Defendant from soliciting Plaintiff's customers and competing with Plaintiff. However, despite receiving notice of the preliminary injunction hearing, Defendant had failed to appear. Based on his "concern about entering a preliminary injunction that would operate during the pendency of this matter without providing [Defendant] with an opportunity to request an additional hearing [,]" Judge Bridges allowed Defendant to request that the November injunction be dissolved for good cause, which she did, and treated the 5 December 2014 hearing on Defendant's Motion for Relief as a hearing on Plaintiff's Motion for a Preliminary Injunction, giving Defendant the opportunity to argue that Plaintiff was not likely to succeed on its asserted claims.
We note that our Supreme Court's decision appears to conflict with this Court's decision in
R.B. Cronland Bldg. Supplies, Inc. v. Sneed,
Reference
- Full Case Name
- EMPLOYMENT STAFFING GROUP, INC., Plaintiff, v. Monica LITTLE A/K/A Monica Phillips Thomas, Defendant.
- Cited By
- 9 cases
- Status
- Published