Lampman v. Dewolff Boberg & Associates, Inc. , 319 F. App'x 293 ( 2009 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-2072
DEAN LAMPMAN,
Plaintiff - Appellant,
v.
DEWOLFF BOBERG & ASSOCIATES, INCORPORATED; MIKE OWENS; LEON
ZEBROSKI,
Defendants - Appellees.
Appeal from the United States District Court for the District of
South Carolina, at Charleston. David C. Norton, District Judge.
(2:06-cv-00062-DCN)
Argued: January 28, 2009 Decided: March 23, 2009
Before TRAXLER, DUNCAN, and AGEE, Circuit Judges.
Affirmed in part, reversed in part, and remanded by unpublished
opinion. Judge Agee wrote the opinion, in which Judge Traxler
and Judge Duncan joined.
ARGUED: George J. Kefalos, GEORGE J. KEFALOS, P.A., Charleston,
South Carolina; William C. Cleveland, III, BUIST, MOORE, SMYTHE,
MCGEE, P.A., Charleston, South Carolina, for Appellant. Thomas
Peter Gies, CROWELL & MORING, L.L.P., Washington, D.C., for
Appellees. ON BRIEF: Jennifer G. Knight, CROWELL & MORING,
L.L.P., Washington, D.C., for Appellees.
Unpublished opinions are not binding precedent in this circuit.
AGEE, Circuit Judge:
I.
Dean Lampman appeals from the award of summary judgment to
DeWolff, Boberg & Associates, Inc. (“DBA”), Michael Owens, and
Leon Zebroski (collectively “the Defendants”) as to all of
Lampman’s claims against them and awarding the Defendants
summary judgment on a counter-claim against Lampman. In the
underlying action, Lampman challenged the enforceability of a
non-competition clause contained in a revised employment and
shareholders’ agreement Lampman signed with DBA. He also
contended the Defendants made negligent misrepresentations that
induced him to sign the agreement. The Defendants’ counter-
claim asserted Lampman breached his contract with DBA by
accepting employment that violated the terms of the non-
competition clause. For the reasons that follow, we affirm the
district court’s judgment in part, reverse in part, and remand.
II.
DBA, a South Carolina corporation, is a management
consulting firm, which conducted business in the period relevant
to this appeal in thirty-two states, as well as Europe, Mexico,
Canada, Colombia, and Panama. The corporation represents that
it occupies a special niche within its market because it both
analyzes and implements management operating systems. Zebroski
2
is DBA’s President and CEO, and Owens is its Executive Vice
President.
Lampman began working for DBA in 1994 as a systems analyst,
and was subsequently promoted to other positions. During the
course of this employment, Lampman received fifty shares of DBA
stock. Lampman’s ownership of the stock was initially governed
by a stock redemption agreement that permitted DBA employee
shareholders who left the corporation to work for a DBA
competitor as long as they did not acquire an equity interest in
the competitor. The stock redemption agreement also provided
that DBA would annually redeem in equal amounts over five years
a former employee shareholder’s outstanding stock. Although the
stock redemption price was nominal, the former employee
shareholder would continue to receive dividends on his remaining
stock during the five-year period. 1
In April 2004, DBA decided to implement a new, more
restrictive, shareholders’ agreement (the “Shareholders’
Agreement”) in order to respond to certain concerns regarding
the protection of DBA’s operations and, specifically, its
1
It appears that DBA was, at least for the time periods
relevant to this appeal, a subchapter S corporation for income
tax purposes. A substantial portion of each shareholder’s
income who worked for DBA was derived from distributions of the
corporation’s income as dividends. Thus, the right to continue
receiving dividends on a departed shareholder’s unredeemed stock
was a valuable asset to that shareholder under both the “old”
and “new” stock redemption agreements.
3
business methodologies and strategies. Draft versions of a new
agreement were circulated and discussed with the shareholders,
including Lampman, during meetings that occurred in April and
July 2004. In addition to restrictions on the transfer and
redemption of DBA stock, the Shareholders’ Agreement also
contained specific provisions imposing shareholder covenants on
the confidentiality of intellectual capital, noncompetition, and
non-solicitation. In July 2004, the shareholders met to discuss
the final version of the proposed Shareholders’ Agreement.
During the meeting, Owens and Zebroski indicated that the
Shareholders’ Agreement was in the “best interests” of DBA and
its shareholders. Lampman joined other shareholders in signing
the Shareholders’ Agreement at that time. In consideration for
entering into the non-competition provision, DBA promised to pay
$5,000 to shareholders, like Lampman, with fewer than one
hundred shares.
The Shareholders’ Agreement became effective August 9,
2004. It continued the prior provision for redemption of a
departing shareholder’s stock in equal parts over five years,
following the termination of a shareholder’s employment with
DBA, but now provided DBA the immediate right to redeem all of a
shareholder’s stock if the shareholder violated any portion of
the non-competition clause or the provisions for confidentiality
or non-solicitation. Such a redemption could significantly
4
impact a former shareholder because he would lose all future
dividends.
In early August 2004, Lampman and Owens worked together on
an assignment. Lampman avers that Owens cautioned him that he
(Lampman) was “in Leon’s cross hairs.” Lampman stated he asked
Owens if he should look for another job, and Owens responded
that Lampman “should keep [his] head down and just keep doing a
good job on analysis.” 2 (Ex. J.A. 236-37.)
On August 23, 2004, Zebroski and Owens held a regularly-
scheduled meeting with DBA’s senior chiefs. Because the account
upon which Lampman had been working unexpectedly terminated, one
issue on the agenda was Lampman’s reassignment to a new project.
All the senior chiefs expressed their dissatisfaction with
Lampman’s performance and their unwillingness to work with him
on future projects. Zebroski, the individual required to make
the final determination as to Lampman’s employment, had not
previously considered firing Lampman. However, he decided
during the course of the meeting that Lampman’s employment
2
Owens avers this conversation did not occur. The district
court proceeded on the assumption that Owens made these
statements, properly considering whether summary judgment was
appropriate when the evidence was viewed in the light most
favorable to Lampman.
5
should be terminated immediately. 3 Lampman was informed of this
decision the same day.
Lampman began working for a DBA competitor, Synergetics
Installations Worldwide, Inc., (“Synergetics”) in October 2004.
In April 2005, Lampman received dividends on his DBA stock in
the amount of $31,969. A few months later, after learning of
Lampman’s employment with Synergetics, DBA redeemed all of
Lampman’s remaining DBA stock, claiming it was entitled to do so
under the Shareholders’ Agreement because Lampman breached the
noncompetition clause. This redemption terminated the payment
of any further dividends to Lampman.
In February 2006, Lampman filed a complaint in the United
States District Court for the District of South Carolina
asserting several causes of action against the Defendants based
on the above-stated events. Essentially, Lampman contended that
the Defendants made negligent misrepresentations that induced
him to execute the Shareholder’s Agreement and that DBA breached
the agreement. The Defendants answered and filed a counter-
claim for breach of contract based on Lampman’s post-DBA
employment with Synergetics. DBA asserted this conduct violated
3
There is no evidence in the record contradicting
Zebroski’s testimony that he had not made any determination as
to Lampman’s employment status prior to the August 23, 2004
meeting. Owens also states that he was unaware of any
information suggesting that Lampman’s termination was “imminent
at any time prior to” August 23, 2004. (Ex. J.A. 228, 256-62.)
6
the non-competition clause in the Shareholders’ Agreement and
entitled the corporation to repayment of the post-termination
dividends paid to Lampman.
Lampman moved for partial summary judgment to declare the
non-competition clause impermissibly overbroad and therefore
void and unenforceable. The Defendants moved for summary
judgment on all of Lampman’s claims, as well as its
counterclaim. After a hearing, the district court denied
Lampman’s motion for partial summary judgment and granted the
Defendants’ motions for summary judgment.
By order dated January 19, 2007, the district court held
that statements at the shareholders’ meeting that signing the
Shareholders’ Agreement was in the shareholders’ “best
interests” were expressions of opinion and therefore did not
constitute “representations” that could support Lampman’s claims
for negligent misrepresentation. The district court further
found no evidence that would support “an inference that [DBA]
had already decided to terminate” Lampman’s employment before
the August 23 meeting. Lastly, the court held Owens’ statement
to Lampman was only a “subjective assessment of [Lampman’s] work
performance,” and was not a factual representation showing that
Lampman was going to be terminated. (J.A. 176-79.)
The district court also held that the non-competition
provision was enforceable under South Carolina law. The
7
district court found that DBA presented uncontradicted evidence
that it “occupies a unique, narrow niche of the type of business
it engages in—and that it has a very limited set of direct
competitors. . . . i.e., consulting firms that analyze and
implement specific cost savings for businesses.” (J.A. 173.)
Therefore, the court concluded the non-competition clause was an
appropriate means of protecting DBA’s proprietary information
and a satisfactory alternative limitation to a strictly
geographic limitation on competition.
Pursuant to Federal Rule of Civil Procedure 59(e), Lampman
moved to alter or amend the district court’s judgment. He
contended the district court failed to properly interpret the
non-competition provision, erred in finding DBA occupied a
narrow niche of the type of business in which it engages and has
a limited set of direct competitors, and did not consider
whether DBA’s failure to disclose that Lampman was a “candidate
for termination” prior to “consummation” of the Shareholders’
Agreement represented a factual issue not susceptible to
resolution by summary judgment.
By order dated September 26, 2007, the district court
denied Lampman’s Rule 59(e) motion. The court reiterated that
the non-competition clause was enforceable under South Carolina
law because it “only prohibited [Lampman] from working for a
direct competitor in positions similar to the ones he held at
8
DBA,” (J.A. 233), and where he was “most likely to use and share
trade secrets and the proprietary information he used while
employed by DBA.” (J.A. 233.)
The district court then held that “[t]o the extent
[Lampman’s] negligent misrepresentation claim relies on an
alleged affirmative misrepresentation, that allegation was
disposed of in the prior order . . . .” (J.A. 234.) To the
extent Lampman claimed that DBA wrongfully withheld information,
the district court concluded Lampman’s claim still failed. It
noted Lampman “could not have justifiably relied on such an
omission” because he was aware of poor performance reviews, he
was an at-will employee, and there was no evidence that DBA
planned to terminate Lampman’s employment prior to the decision
made on August 23, 2004.
Lampman noted a timely appeal, and we have jurisdiction
pursuant to 28 U.S.C. § 1291 (West 2005).
III.
We review de novo a district court’s award of summary
judgment, viewing the facts in the light most favorable to the
non-moving party. 4 Lee v. York County Sch. Div., 484 F.3d 687,
693 (4th Cir. 2007). An award of summary judgment is
4
In this diversity of jurisdiction case, we apply the
substantive law of South Carolina.
9
appropriate only “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c); see also
Lee, 484 F.3d at 693.
We review for abuse of discretion the denial of a Rule
59(e) motion to alter or amend judgment. See Pac. Ins. Co. v.
Am. Nat’l Fire Ins. Co., 148 F.3d 396, 402 (4th Cir. 1998).
Although Rule 59(e) does not itself provide a standard
under which a district court may grant a motion to
alter or amend a judgment, we have previously
recognized that there are three grounds for amending
an earlier judgment: (1) to accommodate an intervening
change in controlling law; (2) to account for new
evidence not available at trial; or (3) to correct a
clear error of law or prevent manifest injustice.
Id. at 403.
IV.
Lampman raises two main issues on appeal. First, he
asserts the district court erred in awarding the Defendants
summary judgment and subsequently denying his Rule 59(e) motion
as to his negligent misrepresentation claims because there was a
triable issue of fact as to whether Lampman justifiably relied
on Owens’ “negative response to the question of whether Lampman
should look for another job” and whether DBA improperly failed
10
to tell Lampman that he was a “candidate for termination.”
Second, Lampman contends the district court erred in holding the
non-competition clause was enforceable under South Carolina law.
He maintains the provision is void as a matter of law because it
lacks a geographic limitation and is “broader than necessary to
protect DBA’s legitimate interests.” 5 For the reasons set forth
below, we affirm the district court’s judgment as to the first
issue, but reverse as to the second issue.
A. Negligent Misrepresentation
Lampman appeals the district court’s determination that he
could not assert a claim of negligent misrepresentation based on
(1) Owens’ statement that Lampman should keep on doing good work
and to keep his head down; and (2) DBA’s failure to inform
Lampman that he was a “candidate for termination.” 6
5
Lampman also asserts a third issue regarding his claim
that the non-competition clause is unenforceable: that DBA
breached the contract by failing to make the $5,000 payment as
consideration for execution of that provision. The district
court denied Lampman’s claim on this issue. Because we find the
non-competition clause is void as a matter of law, we need not
address this argument.
6
Although Lampman argued to the district court that Owens’
and Zebroski’s statements at the shareholders’ meeting in July
2004 also formed the basis for a negligent misrepresentation
claim, he does not make that argument on appeal. Accordingly,
he has abandoned that argument and we do not review the district
court’s conclusion that those statements constituted non-
actionable opinion. See Fed. R. App. P. 28(a)(9)(A); 11126
Balt. Boulevard, Inc. v. Prince George's County, 58 F.3d 988,
(Continued)
11
To state a claim for negligent misrepresentation under
South Carolina law, a plaintiff must allege (1) a false
representation made by the defendant to the plaintiff, (2) the
defendant’s pecuniary interest in the statement, (3) breach of a
duty of care owed by the defendant to the plaintiff, (4)
justifiable reliance by the plaintiff on the representation, and
(5) loss suffered as a result of such justifiable reliance. See
Redwend Ltd. P’ship v. Edwards, 581 S.E.2d 496, 504 (S.C. Ct.
App. 2003).
As the district court observed, to be actionable a
representation must be a statement of fact rather than a
statement of opinion. See Gilbert v. Mid-South Machinery Co.,
227 S.E.2d 189, 193 (S.C. 1976). “[W]hat was susceptible of
exact knowledge when the statement was made is usually
considered to be a matter of fact.” Id. at 193 (citation
omitted). Moreover, “the representation must relate to a
present or pre-existing fact and be false when made. The
representation cannot ordinarily be based on unfulfilled
promises or statements as to future events.” Koontz v. Thomas,
511 S.E.2d 407, 413 (S.C. Ct. App. 1999) (internal quotation
marks and citation omitted).
993 n.7 (4th Cir. 1995) (en banc) (involving predecessor to
Federal Rule of Appellate Procedure 28(a)(9)(A)).
12
We find no error in the district court’s conclusion that
Owens’ statement to Lampman that he should “keep his head down
and just keep doing a good job” spoke to “Owens’s subjective
assessment of [Lampman’s] work performance” and was therefore an
expression of opinion. The statement provided Owens’ viewpoint
as to how Lampman could act in the future and was not
“susceptible to exact knowledge.” Furthermore, the record
contains no evidence that at the time he spoke, Owens personally
believed Lampman should be fired or that DBA was considering
terminating Lampman’s employment. Owens’ statement therefore
cannot be considered a “false representation” of any fact and
cannot form the basis for a claim of negligent
misrepresentation. It is thus unnecessary to consider whether
Lampman justifiably relied on Owens’ statement.
Lampman’s contention that DBA’s failure to inform him he
was a “candidate for termination” constitutes negligent
misrepresentation by omission also lacks merit. Under South
Carolina law, the “[s]uppression of a material fact which one is
duty bound to disclose is equivalent to a false
[]representation.” Landvest Assocs. v. Owens, 274 S.E.2d 433,
434 (S.C. 1981). The record does not support such a claim in
this case. First, Lampman was aware that his supervisors were
dissatisfied with his performance because he had received
negative performance reviews. Second, Lampman was an at-will
13
employee, a status not altered by the Shareholders’ Agreement,
therefore his employment could be terminated at any time.
Furthermore, the Shareholders’ Agreement specifically stated a
shareholder’s employment could be terminated at any time. 7 For
these reasons, Lampman knew before signing the Shareholders’
Agreement that DBA could terminate his employment without
providing any notice, and he even knew that DBA may have a
reason for doing so.
Finally, the record does not support an inference that the
Defendants were considering whether to terminate Lampman’s
employment prior to the August 23, 2004 meeting. To the
contrary, the evidence unequivocally shows that Zebroski first
considered terminating Lampman’s employment during the August 23
meeting upon learning that all of the senior chiefs were
dissatisfied with Lampman’s poor performance and did not want to
work with him. Simply put, there is no evidence that the
Defendants considered Lampman to be a “candidate for
termination” prior to making the decision to terminate him, and
consequently could not have had a duty to disclose that
information to Lampman.
7
Section 19 of the Shareholders’ Agreement states: “Nothing
in this Agreement shall confer any right to any Shareholder to
continue in the service as an employee of the Corporation or
shall interfere in any way with the right of the Corporation to
terminate the employment of any Shareholder at any time, with or
without Cause.” (Ex. J.A. 28.)
14
For all of these reasons, the district court did not err in
awarding DBA summary judgment on Lampman’s claim of negligent
misrepresentation, and it did not abuse its discretion in
denying Lampman’s subsequent Rule 59(e) motion related to its
disposition of those claims.
B. Non-Competition Clause
Lampman next contends the district court erred in holding
that the non-competition clause in the Shareholders’ Agreement
was enforceable under South Carolina law. Specifically, Lampman
asserts the clause is unenforceable because it does not contain
a geographic limitation or a suitable substitute limitation, and
is broader than necessary to protect DBA’s legitimate interests.
We review de novo the district court’s interpretation of the
non-competition clause. See Seabulk Offshore, Ltd. v. Am. Home
Assurance Co., 377 F.3d 408, 418 (4th Cir. 2004) (stating the
district court’s interpretation of a written contract is a
question of law that is reviewed de novo).
To be enforceable under South Carolina law, a non-
competition clause must be: (1) necessary for the protection of
the legitimate interest of the employer; (2) reasonably limited
in its operation with respect to time and place; (3) not unduly
harsh and oppressive in curtailing the legitimate efforts of the
employee to earn a living; (4) reasonable from the standpoint of
15
sound public opinion; and (5) supported by a valuable
consideration. Stringer v. Herron, 424 S.E.2d 547, 548 (S.C.
Ct. App. 1992). Non-competition agreements are disfavored under
South Carolina law and are “critically examined and construed
against the employer.” Poole v. Incentives Unlimited, Inc., 548
S.E.2d 207, 209 (S.C. 2001); Cafe Assocs. v. Gerngross, 406
S.E.2d 162, 164 (S.C. 1991). Furthermore, South Carolina courts
will not modify or “blue pencil” a non-competition clause so as
to restate its terms in a way to make the agreement enforceable.
If any provision fails to satisfy the standard set forth above,
then the entire non-competition clause is void as a matter of
law, although the clause may be severable from unrelated parts
of a broader contract. See Somerset v. Reyner, 104 S.E.2d 344,
347-48 (S.C. 1958).
With these principles in mind, we review the non-
competition clause in the Shareholders’ Agreement, which
provides in relevant part that:
Each Shareholder agrees that he or she will not,
directly or indirectly, engage in Competition with
[DBA], without the express written consent of [DBA]’s
Chief Executive Officer . . . for a period of three
(3) years following the termination of his or her
employment . . . for any reason . . . . For purposes
of this Agreement, “Competition” shall mean, with
respect to a given Shareholder, any of the following:
. . . .
(d) Serving in any capacity, job or function
(including as a proprietor, partner, owner, manager,
16
director, employee, consultant, contractor or agent)
for any Person that analyzes, designs, modifies and
implements management systems to improve productivity,
quality, service and capacity levels that generates
quantifiable financial savings, and where such
services are competitive with or similar to those that
such Shareholder rendered during his or her employment
with [DBA]. [DBA]’s known competitors include the
entities identified on Exhibit D[8] attached hereto,
which may be amended from time to time.
(Ex. J.A. 20) (emphasis added).
In reaching its conclusion that the non-competition clause
was enforceable, the district court found that the clause only
prohibited Lampman from working for “one of DBA’s ‘direct
competitors’ (i.e., consulting firms that analyze and implement
specific cost savings for business), but [permitted Lampman] to
work for any other ‘indirect competitor’ of DBA here in South
Carolina and anywhere else in the world.” (J.A. 173.) The
district court’s finding that the non-competition clause only
prohibited “direct competition” with “direct competitors” was
central to its ultimate determination that the non-competition
clause was enforceable. 9 The district court specifically stated
8
Exhibit D lists eight “known competitors,” and includes
Synergetics, for whom Lampman began working after DBA terminated
his employment. (Ex. J.A. 296.)
9
The district court repeatedly referred to “the shareholder
agreement’s prohibition on working for DBA’s ‘direct
competitors,’” (J.A. 173), “the non-compete provision only
included competitors who participated in the same narrow subset
of the business consulting world (i.e., those businesses that
would benefit the most from discovering DBA’s confidential
information),” (J.A. 230), “[t]he non-compete provision mirrored
(Continued)
17
that “[t]he prohibition on working for DBA’s eight direct
competitors . . . was narrow enough to serve as a valid
substitute for a geographic limitation.” (J.A. 173.) We
disagree.
The district court’s construction of the non-competition
clause conflicts with its plain language. The clause
specifically prevents a shareholder from “directly or
indirectly[] engag[ing] in Competition with” DBA. Nothing in
the non-competition clause limits its scope to the eight “direct
competitors,” including Synergetics, identified in the
Shareholders’ Agreement. Moreover, the clause’s definition of
“competition” has a much broader scope than the narrow
restrictions envisioned by the district court.
Our review of the plain language of the non-competition
clause compels us to conclude that it is void under South
Carolina law and therefore unenforceable. The provision is not
reasonably limited to protect DBA’s legitimate interests and it
DBA’s niche by prohibiting shareholders from working for any
company that analyzed and implemented cost-savings programs,”
(J.A. 231), “the non-compete provision did not prohibit
[Lampman] from working for companies that were not DBA’s
competitors,” (J.A. 231), “DBA has a limited number of ‘direct
competitors’ and the non-compete was drafted to encompass only
those competitors,” (J.A. 233), “[t]he non-compete only
prohibited [Lampman] from working for a direct competitor in
positions similar to the ones he held at DBA [and] was limited
to ‘direct competitors.’” (J.A. 233.)
18
lacks a reasonable geographic limitation or a valid substitute
for a territorial restriction. Two examples highlight the non-
competition clause’s impermissible overbreadth.
First, the non-competition clause would prohibit Lampman
from working for many entities that do not compete in the
marketplace with DBA, even accepting the “market” as defined by
DBA. Under the plain language of the clause, Lampman would be
prohibited from working for “any Person” “in any capacity, job
or function (including as a proprietor, partner, owner, manager,
director, employee, consultant, contractor or agent)” where his
duties were “competitive with or similar to those [he] rendered
during his” employment with DBA. 10 (Ex. J.A. 20) (emphasis
added). Ford Motor Company, for example, “analyzes, designs,
modifies and implements management systems to improve
productivity, quality, service and capacity levels that
generates quantifiable financial savings” for the corporation’s
internal use and not in competition with DBA. (Cf. Ex. J.A.
20.) But it is exactly this type of service that the non-
competition clause defines as “competition” and which Lampman
would offer to Ford as an employee. If Lampman were Ford’s
10
The Shareholders’ Agreement defines “Person” as “an
individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a joint venture,
an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.” (Ex. J.A.
14.)
19
employee, and provided those services for Ford’s internal use,
the non-competition clause’s definition of “competition” set
forth in Section 6.2(d) of the Shareholders’ Agreement would
place him in breach of that covenant. Lampman would be “serving
in any capacity” (as an employee) of Ford (a “Person”), which
“analyzes, designs, modifies and implements management systems
to improve productivity, quality, service and capacity levels
that generates quantifiable financial savings” and “such
services” of Lampman would be “similar to those . . . rendered
during his . . . employment with” DBA. (Cf. Ex. J.A. 20.) Even
though Ford could not be deemed a direct or indirect competitor
of DBA, Lampman’s employment would nonetheless violate the plain
terms of the non-competition clause. The clause is therefore
broader than necessary to achieve the protection of DBA’s
legitimate interests.
Second, the non-competition clause would prohibit Lampman
from providing “competitive . . . or similar” services anywhere
in the world, even in places where DBA concedes it conducts no
business and would not be deprived of a client if Lampman
serviced a customer in that location. During the hearing on the
motion for summary judgment, the court conducted the following
colloquy with counsel for DBA:
The Court: So, Mr. Lampman could have gone to Africa
to Zimbabwe and worked for Synergetics?
20
Mr. Gies: No, he could not have. It’s definitely a
global restriction.
The Court: Even though y’all aren’t working in
Zimbabwe?
Mr. Gies: Yes.
(J.A. 138.) The plain language of the non-competition provision
shows DBA’s construction is correct. In the example, Lampman
would be providing services “competitive with or similar to
those . . . rendered during his . . . employment” to a Person –
his customer – even if that customer were not a client of DBA’s.
The non-competition clause thus would prohibit Lampman from
working for a “competitor” in Zimbabwe, even though DBA does not
provide services in that country and has no legitimate interest
in prohibiting Lampman from working there. “To be considered
reasonable, a territorial restriction must not cover an area any
broader than is necessary to protect the employer’s legitimate
interest.” Stringer, 424 S.E.2d at 548; Standard Register Co.
v. Kerrigan, 119 S.E.2d 533, 539 (S.C. 1961). Because the non-
competition clause lacks any geographic limitation or a valid
substitute for such a restriction, prohibits Lampman’s
employment with entities which do not compete with DBA, and
because DBA lacks a legitimate interest in prohibiting
competition in portions of the world in which it does not
21
operate, the clause is void as a matter of law and therefore
unenforceable. 11
The district court thus erred in granting DBA summary
judgment as to Lampman’s claims because the void non-competition
clause cannot act as a bar to his claims. Similarly, the
district court erred in granting summary judgment as to DBA’s
counter-claim because it is dependent on the enforceability of
the non-competition clause.
V.
For all the foregoing reasons, we affirm the district
court’s award of summary judgment to DBA on Lampman’s claim of
11
We note that in its consideration of the non-competition
clause, the district court relied on its view that enforcement
of the non-competition clause was necessary to DBA’s ability to
protect “the trade secrets and proprietary information it has
developed.” (See, e.g., J.A. 232-33.) However, even though the
Shareholders’ Agreement contains specific confidentiality and
non-solicitation provisions, DBA has never asserted Lampman
breached those covenants. The district court’s findings as to
the non-competition clause’s validity were also in error to the
extent that its determination was based on a non-existent breach
of covenants not before the court in this case. Moreover, where
a non-competition clause is designed to protect an employer’s
trade secrets and business methods, its terms must still be
reasonable. See Oxman v. Sherman, 122 S.E.2d 559, 561-62 (S.C.
1961). DBA’s interest in protecting its “trade secrets and
proprietary information” does not remove from it the
responsibility of crafting a non-competition clause that is no
broader than necessary to protect those interests and that only
places reasonable limits on its territorial scope. As the
nondisclosure and confidentiality provisions of the
Shareholders’ Agreement are not before us in this appeal, we
express no opinion as to those provisions.
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negligent misrepresentation. We reverse the district court’s
award of summary judgment to DBA on Lampman’s breach of contract
and conversion claims. And we also reverse the award of summary
judgment to DBA on its breach of contract counter-claim.
Lastly, we remand this case for further proceedings consistent
with this opinion.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
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