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A decade ago the Georgian legislature enacted a new restrictive federal law, OCGA § 13-8-51 et al. (the “Georgia RCA”). Among other things, the Georgian RCA allowed the courts in Georgia to flag or amend a contract that is otherwise void and unenforceable, as long as the amendment does not make the contract more restrictive in relation to the employee than it was originally by the parties designed. “OCGA § 13-8-53 (d).
There was initially some confusion about the extent to which the Georgia RCA used the word “change”. Did “modify” mean that a court could only remove offensive language? Or did this mean that a court could actually reform or rewrite a contract to make it enforceable? In late 2016, the Northern District of Georgia addressed this issue directly in LifeBrite Labs., LLC v Cooksey, No. 1: 15-CV-4309-TWT, 2016 WL 7840217 (ND Ga. December 9, 2016).
In LifeBrite, Ms. Cooksey sought a declaratory judgment that a non-compete clause was unenforceable because there was no geographic restriction that had to be enforceable. In making its decision, the Northern District of Georgia relied on the landmark decision of the Georgia Supreme Court, Hamrick v. Kelley, 260 Ga. 307, 392 SE2d 518 (1990): “[t]he marks ‘blue pencil’ but it doesn’t write. It can narrow down an area, making it reasonable, but it cannot rewrite a treaty that is void due to vagueness by specifying a new, clearly delineated area. “
LifeBrite was largely based on Hamrick and concluded that “[t]although courts may impose unreasonable restrictions, and can restrict territorial names that are too broadCourts may not be able to fully reform and rewrite treaties by providing new and substantive terms from the whole subject. As such, the court ruled that the non-compete clause in question was “void and unenforceable” as the court could not rewrite the contract to supply the missing geographic area. That would be beyond his “blue pencil” powers.
Recently, the Georgia Business Court faced a similar issue in Cameron Martin v Hauser, Inc., Case No. 20-GSBC-0008 – this time regarding the enforceability of an unsolicited customer (“Non-Solicit”) . The non-solicit is as follows:
The employee hereby agrees that the employee will not make any direct or indirect advertising for customers after the employee’s employment relationship with the company has ended and for a period of three (3) years thereafter, regardless of whether this is from the employee or another party was initiated or customers of the company who were customers or customers of the company at the time the employee’s employment relationship with the company was terminated or at any time during the 18 months prior to that customer or customer of the company [sic] to change or relocate his insurance or other business to another company or agency during the aforementioned period of three (3) years.
Mr. Martin filed a declaratory complaint requesting, among other things, a declaration that the above non-solicitousness was unenforceable because: (1) it lasted longer than two years and; (2) its scope was too broad.
In his March 5, 2021 ruling, Judge Davis concluded that Hauser, Inc. Not presented sufficient evidence to warrant three years of reluctance, noting that the Georgian RCA provides: “[A] The court assumes that a time limit of a maximum of two years and within the period is appropriate It is assumed that a time limit of more than two years is unreasonablemeasured on the date of the termination of the business relationship. “OCGA § 13-8-57 (b) (emphasis added.)
The court also ruled that the scope of the non-solicit was widespread and violated OCGA § 13-8-53 (b) because it prevented Mr. Martin from soliciting a company that had been a Hauser customer for 18 years, Inc. was months prior to his departure and not just the customers of Hauser, Inc. at the time of Mr. Martin’s departure.
Notwithstanding these findings, however, Judge Davis refused to strike the entire non-solicit, as requested by Mr. Martin’s attorney. Instead, Judge Davis relied heavily on LifeBrite, arguing that the Georgia RCA allowed him to “blue pen” the language of the non-solicitous to make it enforceable.
To make it enforceable under Georgian law, Judge Davis did two things. First, he reduced the three-year reticence to just one year. Second, he separated the words “or at any time in the 18 months prior” from the non-solicitation and made them applicable to “any customer or customer of the Company who was or was a customer of the Company at the time of termination of the employment relationship with the Company Company goods … ”
Judge Davis considered these revisions to be “honor[] both the intention of the parties to “as much as possible” by maintaining a limited restriction on the plaintiff’s ability to solicit clients or customers of the Company after termination of employment, and to provide only as much relief to the defendant as after the judgment The Court of Justice is reasonably required to protect the company’s interest in such relationships. See OCGA, § 13-8-54 (b). “
This stake appears to be the first instance of a Georgia court using the Georgia RCA to modify an unsolicited overseas customer by shortening their length of time. It could be argued that the court “rewrote” the non-solicit by adding the one-year term (rather than simply removing the three-year term abroad). However, it seems more accurate to conclude that the decision was in line with LifeBrite in that a term (duration) was simply shortened rather than entirely rewritten. Just as LifeBrite narrowed too wide a geographic area, Georgia now has a precedent for narrowing too wide a duration.
Ultimately, the Martin v Hauser ruling should be good news for Georgian employers who want to enforce restrictive agreements that are too long in duration. There is now a precedent where a court can only reduce a term abroad to what it deems enforceable and not violate the Georgia RCA’s “Blue Pencil” rule.
The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.
