Roanoke Engineering Sales Co. v. Rosenbaum
223 Va. 548, 1982 Va. LEXIS 237, 290 S.E.2d 882 (1982)
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Rule of Law:
A court of equity may grant prospective injunctive relief to enforce a valid non-competition covenant for a period of time beginning after its decree, even if the original contractual period has expired due to the length of the litigation process.
Facts:
- Four brothers, including Curtis Rosenbaum, were officers, directors, and managers in their family's building supply business, Roanoke Engineering Sales Company, Inc. (RESCO).
- In 1970, each brother signed an employment contract containing a non-competition clause, prohibiting them from competing with RESCO for three years post-termination within the territories RESCO covered.
- As Treasurer, Senior Vice President, and a director, Curtis Rosenbaum had access to confidential financial records, customer lists, and pricing policies for all four of RESCO's branches across Virginia and North Carolina.
- In April 1978, following a policy disagreement, RESCO discharged Curtis Rosenbaum from his corporate offices.
- Curtis Rosenbaum then resigned his employment with RESCO.
- The following month, May 1978, Curtis Rosenbaum became the manager of Mahone, Inc., a direct competitor of RESCO in the Roanoke area.
- On July 1, 1978, Curtis Rosenbaum purchased Mahone, Inc., renamed it Rosenbaum of Roanoke, Inc., and continued to directly compete with RESCO.
Procedural Posture:
- Roanoke Engineering Sales Company, Inc. (RESCO) filed a bill of complaint in the circuit court (trial court) seeking an injunction to enforce the non-competition covenant against Curtis Rosenbaum.
- After a trial, the chancellor ruled that the covenant was unreasonable and unenforceable.
- RESCO, as appellant, appealed the trial court's decision to the Supreme Court of Virginia, with Curtis Rosenbaum as the appellee.
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Issue:
Does a court have the equitable power to enjoin an employee from competing for a period of time beginning after the date of the court's decree, when the original contractual non-competition period has expired due to the length of the litigation process?
Opinions:
Majority - Russell, J.
Yes. A court of equity has the flexibility to grant prospective injunctive relief to enforce a valid non-competition covenant, even if the original contractual period has expired during litigation, to prevent a party from benefiting from their breach and the delays of the judicial system. The court first determined that the non-competition covenant was reasonable and enforceable under the three-part test from Richardson v. Paxton Company. Because Curtis Rosenbaum had access to confidential information regarding all of RESCO's branches, a restriction covering the entire territory in which RESCO operated was no greater than necessary to protect RESCO's legitimate business interests. The court then addressed the remedy, distinguishing this case from Hallmark v. Jones. To hold the issue moot due to the expiration of the three-year term during the appeal would reward the breach of contract and encourage dilatory litigation tactics. The historic strength of equity is its flexibility to mold decrees to the exigencies of a case to accomplish justice. Therefore, the court can enforce the covenant for a period starting from the date of its final decree, subtracting time to account for the plaintiff's own delay in filing suit.
Dissenting - Carrico, C.J.
No. The court should not make a new and different contract for the parties. The precedent set in Hallmark v. Jones, which held a similar issue moot, should be given full stare decisis effect. While the delay caused by a congested court docket is unfortunate, it does not grant the court the authority to rewrite the parties' agreement to specify a new non-competition period that they did not agree to.
Analysis:
This decision significantly strengthens the enforcement of non-competition agreements in Virginia by providing a remedy against defendants who might otherwise benefit from protracted litigation. It establishes that a defendant cannot simply 'run out the clock' on a covenant's term while the case is pending. By allowing for prospective injunctive relief, the court prevents the judicial process itself from rendering a plaintiff's contractual rights meaningless. This ruling gives employers more confidence that valid covenants will be enforced, regardless of systemic court delays, thereby deterring breaches and encouraging compliance.
