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Costanzo v. EMS USA, Inc.

United States District Court, N.D. West Virginia

September 21, 2017

EMS USA, INC., Defendant.



         I. Background

         This civil action was removed to this Court from the Circuit Court of Ohio County, West Virginia, on the basis of diversity jurisdiction. The case is an employment dispute arising out of a covenant not to compete that the plaintiff, Zachary Costanzo, entered into with the defendant, EMS USA, Inc., a corporation that provides energy maintenance services within the oil and gas industry. The plaintiff is a resident of Ohio County, West Virginia, and the defendant is a Texas corporation authorized to conduct business in West Virginia. On June 18, 2015, the parties executed an offer letter in Ohio County, West Virginia, by which the plaintiff became an office manager for the defendant. The covenant not to compete is contained within the defendant's Confidentiality, Non-Competition, Non-Solicitation, and Non-Disparagement Agreement (“Restrictive Covenant Agreement”) and prevents the plaintiff from working for a competing company in the territory for 12 months following his employment term with the defendant.

         The covenant not to compete states, in relevant part, as follows:

Employee agrees that during the Employment Term and for a period of twelve (12) months thereafter (the “Restrictive Covenant Term”), Employee shall not directly or indirectly, whether for Employee's account or for any other person or entity, engage in or participate in the ownership, management, operations or control of, or be employed by or connected in any manner with, any business that competes with the Company in the Territory by offering services that are the same or similar to those Employee performed on behalf of the Company during the Employment Term . . . . “Territory” shall mean the geographic area served by the Location and any other Company facility: (1) that Employee regularly works out of, supervises or manages (in whole or in part), (2) that is assigned to Employee as part of his or her designated territory, or (3) about which Employee receives confidential information. As used here, the “geographic area served” is understood to be the area within a one hundred (100) mile radius of the Location or Company facility, except where Employee can prove the market area served is smaller by clear and convincing evidence, in which case such smaller area shall apply. As used here, Location means Employee's work address. Notwithstanding the foregoing, this Section 2 shall not apply if Employee's employment is terminated by the Company without Cause.

ECF No. 1-1 at 13-14.

         The plaintiff states in his complaint that the defendant terminated his employment for cause on August 16, 2016, at which time the defendant informed him that it would enforce the covenant not to compete contained in the Restrictive Covenant Agreement against him. The plaintiff makes claims for breach of contract, tortious interference with prospective employment, and breach of West Virginia's Wage Payment and Collection Act. The plaintiff also seeks declaratory judgment regarding the enforceability of the covenant not to compete contained in the Restrictive Covenant Agreement.

         The plaintiff filed the present motion for partial judgment on the pleadings, which seeks judgment on the pleadings as to the question of whether the covenant not to compete is enforceable. The issues presented in the plaintiff's motion are fully briefed and ripe for decision. After a review of the parties' memoranda and the applicable law, this Court finds that the plaintiff's motion for partial judgment on the pleadings must be denied.

         II. Applicable Law

         A motion for judgment on the pleadings is permitted under Federal Rule of Civil Procedure 12(c). Such a motion is intended as an avenue by which parties may dispose of a case on the basis of the underlying substantive merit of the parties' claims as they are revealed in the formal pleadings “after pleadings are closed, but early enough not to delay trial.” Fed.R.Civ.P. 12(c); 5C Wright & Miller, Federal Practice and Procedure Civil 3d § 1367 (2007). When considering a motion for judgment on the pleadings pursuant to Rule 12(c), a court should apply the same standard as when considering a motion to dismiss pursuant to Rule 12(b)(6). See Burbach Broadcasting Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002).

         As with a motion to dismiss, a motion for judgment on the pleadings “tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Hence, in assessing a motion for judgment on the pleadings, a court must accept as true the factual allegations contained in the complaint. Advanced Health-Care Servs., Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990). Further, as a general matter, no information outside of the pleadings may be considered. See Fed.R.Civ.P. 12(d). However, documents “integral to and explicitly relied on in the complaint” may be considered. Phillips v. LCI Int'l, Inc., 190 F.3d 609, 618 (4th Cir. 1999).

         III. Discussion

         Covenants not to compete are generally enforceable in West Virginia, subject to a rule of reasonableness. See Reddy v. Cmty. Health Found. of Man, 298 S.E.2d 906, 910 ( W.Va. 1982) (“[A]n anticompetitive covenant will be upheld if supported by consideration, ancillary to a lawful contract, and both reasonable and consistent with the public interest.”). “A covenant is unreasonable on its face when the restriction is excessively broad with respect to time or area, or if in the circumstances the true purpose of the covenant appears to be merely to repress the employee, and him from leaving, rather than to protect the employer's business.” Id. at 915.

         If a covenant not to compete is reasonable on its face, the employer must show that it has an interest requiring protection. See id. at 916 (stating that an employer may demonstrate its interest requiring protection “by showing that [its] industry operates in which a way that [it] could be harmed by employees appropriating trade assets, and by particularizing for the court the trade assets susceptible of appropriation by the employee”). If the employer shows that ...

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