Rogers v. Runfola & Associates, Inc.
57 Ohio St.3d 5 (1991)
Rule of Law:
A covenant not to compete that imposes unreasonable restrictions on an employee will not be invalidated entirely; rather, a court will modify the covenant and enforce it to the extent necessary to protect an employer's legitimate business interests.
Facts:
- Appellees Patricia A. Rogers and Robert L. Marrone were employed as court reporters by appellant Thomas J. Runfola, who operated a court reporting business as a sole proprietorship.
- Rogers, initially an employee-at-will, signed an employment contract on June 1, 1975, containing a covenant not to compete in exchange for Runfola's promise to only discharge her for specified causes.
- Marrone also signed an employment contract containing a similar covenant not to compete.
- The covenants prohibited Rogers and Marrone from engaging in court reporting in Franklin County for two years post-employment and from soliciting any of Runfola's clients for a lifetime.
- In 1977, Runfola incorporated his business, assigning all assets and liabilities, including the employment contracts, to the new corporation of which he was the sole director and stockholder.
- Rogers was aware of the incorporation, and it did not alter her duties or the daily operations of the business.
- Marrone later tendered his resignation, which Runfola accepted, ending his employment.
Procedural Posture:
- Thomas J. Runfola (appellant) initiated a lawsuit against Patricia A. Rogers and Robert L. Marrone (appellees) in an Ohio trial court to enforce the covenants not to compete.
- Following a judgment by the trial court, the case was appealed to the intermediate court of appeals.
- The court of appeals found the employment contracts to be valid and assignable.
- The parties then sought review from the Supreme Court of Ohio, with Runfola appealing and Rogers and Marrone cross-appealing.
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Issue:
Does Ohio law permit a court to modify an otherwise valid but unreasonable covenant not to compete to make it enforceable to the extent necessary to protect the employer's legitimate interests?
Opinions:
Majority - Douglas, J.
Yes. A court may modify and enforce an unreasonable covenant not to compete to the extent necessary to protect the employer's legitimate interests. Citing its precedent in Raimonde v. Van Vlerah, the court affirmed that a covenant is reasonable if the restraint is no greater than required for the employer's protection, does not impose undue hardship on the employee, and is not injurious to the public. Here, the court found the original two-year, county-wide ban combined with a lifetime ban on soliciting clients was an unreasonable hardship on Rogers and Marrone, for whom court reporting was their sole profession. However, the court also found that Runfola had a legitimate interest to protect, given his investment in their training and the client relationships they developed under his business's name. Balancing these interests, the court modified the covenant to a one-year prohibition on engaging in court reporting within the Columbus city limits and a one-year prohibition on soliciting Runfola's clients, with the injunction period to begin from the date of the court's order.
Concurring-in-part-and-dissenting-in-part - H. Brown, J.
Yes. While the majority's legal analysis is correct, its application is flawed. The judge concurred with the legal principle of modifying unreasonable covenants and with the one-year restriction on soliciting clients. However, the judge dissented from the one-year injunction preventing Rogers and Marrone from practicing their trade in Columbus. He argued this modified restriction still imposed an undue hardship because the vast majority of legal business in the county is within Columbus, effectively forcing the employees to relocate or change professions. The judge contended that monetary damages for any unfair competition would be sufficient to make the employer whole without destroying the employees' new, functioning business.
Analysis:
This case solidifies the 'rule of reasonableness' in Ohio for non-compete agreements, confirming that courts should reform, rather than void, overbroad covenants. It establishes that courts will actively balance the interests of the employer and employee to 'blue pencil' a contract, creating new, enforceable terms. This approach gives employers confidence that even an imperfectly drafted covenant can be salvaged, while putting employees on notice that they cannot simply ignore an unreasonable covenant as it may be judicially modified and enforced against them in a more limited form.
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