Neitzey v. Allen (Cir. Ct. Mont. Cnty)

Filed: August 31, 2017

Opinion by: Judge Michael D. Mason

Holding:  A covenant not to solicit clients that is overbroad on its face will be interpreted based on the wording of the agreement and is not partially enforceable if the employer voluntarily commits to limit its right of enforcement to only those remedies necessary to protect the employer’s legitimate business where such partial enforcement is not achievable based on the wording of the agreement. 

Facts:  A former employee sued his former employer to have certain restrictive covenants stricken from his employment agreement as overbroad.  At issue was a non-solicitation provisions that restricted the former employee from soliciting and accepting business from any customer of the former employer.  The term “customer” was not defined in the employment agreement and was not limited to customers of the former employer during the former employee’s employment by the former employer.  The former employer offered to restrict the meaning of “customer” to those with whom the former employee had personal contact while employed by the former employer. 

Analysis:  The court held that the former employer’s offer to limit enforcement of the non-solicitation provision could not save the provision from being declared unenforceable.  After a lengthy discussion of Holloway v. Faw, Casson & Co., 78 Md. App. 205 (1989) (“Holloway”), Holloway v. Faw, Casson & Co., 319 Md. 324 (1990), and Fowler v. Printers II, Inc., 89 Md. App. 448 (1991), the court agreed with the Court of Appeals in Holloway, that the enforceability of the non-solicitation provision at issue turned on its internal severability.  The non-solicitation provision at issue was not internally severable because, without some measure of damages on a client-by-client basis similar to the liquidated damages clause in Holloway*, there was no way to establish separate damages for clients with whom the former employee had personal contact and the other clients of the former employer.  Therefore, the non-solicitation provision could not be enforced even if the court limited enforcement in the manner proposed by the former employer.

* In Holloway, the non-solicitation provision was accompanied by a liquidated damages provision equal to 100% of the prior year’s fee for any clients solicited in violation of the non-solicitation provision.

Full text of opinion available here.