Featured Chrome Extensions:

Casey IRACs are produced by an AI that analyzes the opinion’s content to construct its analysis. While we strive for accuracy, the output may not be flawless. For a complete and precise understanding, please refer to the linked opinions above.

Keywords

contractbreach of contractdefendant
defendantinjunctionsustained

Related Cases

Lane v. Oil Delivery, Inc., 216 N.J.Super. 413, 524 A.2d 405
View Case »
Nickerson v. Stonebridge Life Ins. Co., 63 Cal.4th 363, 371 P.3d 242, 203 Cal.Rptr.3d 23, 16 Cal. Daily Op. Serv. 6028, 2016 Daily Journal D.A.R. 5547
View Case »
Pingley v. Brunson, 272 S.C. 421, 252 S.E.2d 560
View Case »
Northcom, Ltd. v. James, 694 So.2d 1329
View Case »
Frankel v. United States, 842 F.3d 1246, 2016-2 Trade Cases P 79,841
View Case »
Justia Law Link
LexisNexis Link
Westlaw Link
CourtListener Link
Oyez Link

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Stidham, 658 F.2d 1098, 1981-2 Trade Cases P 64,324

Facts

Defendants Stidham, Scarborough, and Bruner were employed by Merrill Lynch and underwent extensive training before becoming stockbrokers. Each signed contracts containing restrictive covenants regarding confidentiality and noncompetition. After resigning to join a competitor, they allegedly duplicated client records and solicited clients before informing Merrill Lynch of their departure, prompting the brokerage to file suit for breach of contract.

Defendants, it is fair to say, were successful with Merrill Lynch. Their salaries prior to their respective resignations from Merrill Lynch ranged from approximately $54,000 to $84,000 per year.

Issue

Whether the noncompetition and nondisclosure covenants in the employment contracts were enforceable under Georgia law.

The parties have cited a host of cases containing numerous versions of restrictive covenants sustained or rejected under the authority of Georgia law.

Rule

Under Georgia law, restrictive covenants must be reasonable and include an express geographic limitation to be enforceable.

Under Georgia law, restrictive covenants must be reasonable and include an express geographic limitation to be enforceable.

Analysis

The court determined that while the noncompetition covenant was reasonable in its intent to protect Merrill Lynch's investment in training its brokers, it failed to include a geographic limitation, rendering it unenforceable. Conversely, the nondisclosure covenant was upheld as it was deemed necessary to protect the confidentiality of Merrill Lynch's client information.

The covenant here at issue is reasonable. Nonetheless it fails. The Supreme Court of Georgia has injected a bright-line test into this area by requiring an express geographical description of the territory covered, without reference to the overall reasonableness of the limitation in light of the nature of the profession or trade involved.

Conclusion

The court affirmed the enforcement of the nondisclosure covenant but vacated the noncompetition covenant due to its lack of geographic specificity.

We, then, affirm that part of the district court order granting enforcement of paragraph 1 of the employment agreements between Merrill Lynch and defendants Stidham, Scarborough, and Bruner. The injunction regarding the noncompetition clause is vacated for the reasons and with the concerns set out in this opinion.

Who won?

Merrill Lynch prevailed in part, as the court upheld the nondisclosure covenant, emphasizing the importance of protecting client confidentiality and the company's investment in employee training.

Merrill Lynch prevailed in part, as the court upheld the nondisclosure covenant, emphasizing the importance of protecting client confidentiality and the company's investment in employee training.

You must be