WHEELING – A federal court has denied the plaintiff’s motion for partial judgment on the pleadings in a lawsuit against EMS USA Inc.
This civil action was removed to federal court from Ohio Circuit Court 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 EMS USA, which provides energy maintenance services within the oil and gas industry.
The plaintiff is a resident of Ohio County 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 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 and prevents the plaintiff from working for a competing company in the territory for 12 months following his employment term with the defendant.
The plaintiff claimed that the defendant terminated his employment on Aug. 16, 2016. He made claims against EMS USA for breach of contract, tortious interference with prospective employment and breach of West Virginia Wage Payment and Collection Act.
“As a preliminary matter, the plaintiff argues that the covenant not to compete is unenforceable because it is not ancillary to a lawful contract,” District Judge Frederick Stamp’s memorandum states. “Specifically, the plaintiff contends that the defendant ‘categorically denies the existence of a contract between it and Plaintiff.’”
While the plaintiff’s employment was at-will, the pleadings show that the plaintiff’s at-will employment was nonetheless subject to the terms included in the offer letter and the parties’ Restrictive Covenant Agreement.
“The plaintiff’s access to confidential information in the course of his employment by the defendant appears to provide the consideration necessary to enforce the covenant not to compete, even though the employment was at will,” Stamp wrote. “The defendant’s answer indicates that the offer letter did not prevent the application of the employment-at-will doctrine and that the defendant never denied the enforceability of all terms of the Restrictive Covenant Agreement.”
The pleadings contain no factual assertions that support the plaintiff’s contention that the covenant not to compete was not ancillary to a lawful contract.
“Given that the covenant not to compete appears to be ancillary to a lawful contract, the Court must next determine whether the covenant is reasonable on its face,” Stamp wrote. “The plaintiff has not pled sufficient facts for this Court to determine that the covenant not to compete is unreasonable on its face. Although the plaintiff asserts that the covenant is designed to intimidate him, he has not pled any facts in support that assertion.”
The court cannot determine that the covenant was designed to intimidate the plaintiff and the court also cannot determine that the covenant is unreasonable on its face by virtue of any excessively broad restriction with respect to time or area, according to the memo.
“Because the covenant not to compete appears to be ancillary to a lawful contract and reasonable on its face, the defendant must next show that it has an interest requiring protection,” Stamp wrote “This is a matter that must be developed in discovery. There are not sufficient factual allegations at this stage in the proceedings to determine whether the defendant has an interest requiring protection.”
Stamp said that if the court were to find that the defendant has an interest requiring protection, then the plaintiff would have an opportunity to rebut the resulting presumption that the covenant not to compete is enforceable.
“Any facts that might rebut a presumption of enforceability would also have to be developed in discovery,” Stamp wrote.
U.S. District Court for the Northern District of West Virginia case number: 5:16-cv-00168
