COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 70051 CLEVELAND COTTON PRODUCTS : : : PLAINTIFF-APPELLANT : JOURNAL ENTRY : v. : AND : : OPINION MARK C. JAMES : : : DEFENDANT-APPELLEE : DATE OF ANNOUNCEMENT OF DECISION: OCTOBER 31, 1996 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas, Case No. CV-257417. JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-appellant: Joseph G. Ritzler, Esq. Keller and Curtin Co., L.P.A. 330 Hanna Building 1422 Euclid Avenue Cleveland, Ohio 44115 For Defendant-appellee: James E. Burns, Esq. Vincent E. Cononico, Esq. Burns & Associates 350 Park Plaza 1111 Chester Avenue Cleveland, Ohio 44114-3516 SWEENEY, JAMES D., P.J.: 1 Plaintiff-appellant Cleveland Cotton Products ("CCP") appeals from the amount of damages awarded it by the jury, contending that the damage award figure is too low, and the denial of injunctive relief in favor of CCP. For the reasons adduced below, we affirm. A review of the record indicates that CCP and defendant- appellee Mark C. James ("James"), in 1987 had entered into an employment contract prior to the commencement of James' employment as a salesman. Included in this contract, which James admitted to having fully explained to him prior to beginning his employment (R. 41) and signing on his first day of work prior to beginning his training period (R. 54-61), was a covenant not to compete in which James was precluded from soliciting CCP's customer accounts for a period of two years following the cessation of James' employment 2 with CCP. James' sales territory encompassed 15 counties in North 1 At the time of trial, CCP generated between $43,000,000 to $45,000,000 per year in sales nationally. 2 The covenant at issue, as stated at paragraph 11 of the employment contract, states in pertinent part the following: (D) Employee will not ... directly or indirectly, engage in any of the following activities: * * * (2) During the period of two (2) years following the termination of Employee's employment with Employer, Employee shall not directly or indirectly solicit, sell merchandise to, divert, entice, take away or interfere with, or attempt to solicit, sell merchandise to, divert, entice, take away or interfere with any of: - 3 - (a) Employer's customers, business, patronage, or Employer's potential customers, business or patronage, which Employee sold products to or contacted to sell Employer's products within any of the geographic sales territories to which Employee was assigned during the two (2) year period immediately prior to Employee's termination of employment with Employer; and (b) Employer's customers, business, or patronage listed as a Special Account, if any, in any of the Employee's Schedule of Sales Territory in effect during the two (2) year period immediately prior to Employee's termination of employment with Employer; and (c) Employer's customers, business, patronage, or potential customers, business or patronage with respect to which Employee had any managerial or supervisory responsibility during the two (2) year period immediately prior to Employee's termination of employment with Employer; and (d) Employer's customers, business, patronage, or potential customers, business or patronage with respect to which the Employee had any direct or indirect contact or involvement during the two (2) year period immediately prior to Employee's termination of employment with Employer, including, but not limited to those customers listed as Exception Accounts, if any, in Employee's Schedule of Sales Territory. (E) Employer's "customers, business, or patronage" is defined for purposes of this Agreement as any entity ... to which products of the Employer have been sold or made available ... * * * (G) If it shall be judicially determined that Employee has violated any of the covenants ... of sub-paragraph 11(D)(2) hereof, then the period applicable to such of said covenants shall be extended for a period - 4 - Carolina and 2 counties in Virginia, totalling approximately 300 to 350 accounts. James eventually left his employment with CCP in September of 1992, hiring on with Duratest Products for a period of several months as a salesman marketing a line of industrial lighting products. At the time of James' leaving CCP, James was earning approximately $28,000 per year (R. 242). While in the employ of Duratest Products, James took steps to start his own company, Advantage Wiping Products, which marketed a line of disposable wiping products and related items. James began his employment with Advantage Wiping Products in December of 1992, thereafter soliciting his old CCP accounts. Advantage Wiping Products marketed products which were similar, and compatible to, the products which James had previously sold for CCP. It was alleged in the complaint for injunctive relief (preliminary and permanent) and for monetary damages, which was filed on August 31, 1993, that James did solicit CCP customers within two years of his leaving CCP, in violation of his agreement not to compete. James answered that the employment agreement was void due to duress and lack of consideration. James also filed a counterclaim for monies 3 owed him by CCP in the form of earned commissions. CCP stipulated equal to the period during which said violation(s) have occurred. 3 The commission for a CCP salesman in 1992 was computed as 50% of the profits on a particular sale to class A and B customers, which represented the medium and larger customers. The remaining 50% of the profit generated by the sale went back to the company. (R. 210-211.) - 5 - to these earned commissions (R. 139) and paid James $4,350 for them subsequent to the trial. The jury trial proceeded solely on the issue of monetary damages. The plaintiff offered the testimony of James and David J. Williams (CCP's vice-president of sales). The defense presented no witnesses on its behalf. The injunctive relief sought by CCP was ordered by the court to be heard subsequent to the trial on the damages issue. 4 At the trial , James testified that his sales to former CCP accounts (R. 82, 91), of products similar to those of CCP which he knew were restricted under the employment agreement (R. 80, 97), during the two-year restrictive period of the covenant amounted to $223,566.47 (R. 107). The CCP derived accounts represent the 5 present lifeblood of James' company. James also testified in a pretrial deposition, which excerpts were used to impeach the defendant at trial, that he believed that CCP would not take legal For smaller customers, the class C customers, the salesman would receive a commission of 35% of the 50% profit, which represents approximately 17.5% of the commission from the sale, with the remaining 65% of the 50%, or 32.5% of the commission from the sale, going to the area sales manager. The rationale for this 35/65 split, which was termed the "Partnership Program" by CCP, was to encourage and allow the area manager to develop more class A and B customers, thereby discouraging the salesman from developing the lower profit margin class C customers (R. 213.) while encouraging the salesman to promote larger customers which would necessarily provide more sales volume and a better return to the salesman (R. 228). 4 Mr. James represented himself pro se at the trial. 5 Of the James' company accounts, only 2 out of 113 were not formerly CCP accounts. - 6 - action to enforce the employment contract by virtue of his living in Zebulon, North Carolina, and CCP's national headquarters being located in Highland Heights, Ohio, and because the company had not pursued litigation in the past against other salesmen who had similarly opened their own companies after leaving CCP (R. 103- 106). During the restrictive period of the covenant, which only applied to sales of similar products in the 17 counties and only to those approximately 350 accounts in those counties which James had formerly been charged with overseeing while an employee of CCP, CCP sales to the customer accounts previously serviced by employee- James plummeted to a total of $6,300 over a period of 18 months (R. 188), and 91 sales accounts were lost (R. 182-183), which were all attributed by CCP management to James' unauthorized use of CCP's confidential customer base (R. 189, 193-194). To further demonstrate the injury done to their sales base in the seventeen county area at issue, CCP had to combine those territory accounts with another sales territory's accounts so as to help James' replacement at CCP generate enough sales to justify his position. CCP management testified that CCP historically maintained annual sales growth of approximately 7% per year (R. 194), that CCP's gross profit margin from a particular sale is roughly 50% of the sales price (R. 224), that CCP's net profit from its share of a particular sale's profits (after company expenses and overhead are deducted) is approximately 7% to 8% of the sales profits free and clear (R. 210), that the average markup on an item is "anywhere - 7 - from cost plus 30 percent to cost plus, or two times the cost" (R. 215), and that the amounts lost to James directly impacted in a negative fashion CCP's future sales in the territory. Mr. Williams also testified that all sales employees of the company, which is a national company, sign the same employment contract as a condition of their employment. At the conclusion of the trial, the jury, with seven of the eight jurors assenting to the verdict, awarded CCP $3,842 in damages and awarded the defendant $4,350 on the counterclaim, on October 31, 1995. Subsequent to the discharge of the jury, CCP requested that the trial court consider the issue of injunctive relief. The trial court did not hear the injunctive relief motion at that time, instead requesting that counsel for CCP brief the issue. The parties filed briefs relative to injunctive relief and the court, on December 5, 1995, dismissed with prejudice the complaint for injunctive relief. This timely appeal followed presenting two assignments of error. I THE JURY VERDICT IN FAVOR OF PLAINTIFF CLEVELAND COTTON PRODUCTS AGAINST DEFENDANT MARK JAMES IN THE AMOUNT OF $3,842.00 WAS SO LOW THAT IT WAS AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE. In reviewing a claim that a verdict is not supported by the manifest weight of the evidence, an appellate court will review the entire record to determine whether the judgment is supported by some competent, credible evidence going to all the essential elements of the case. C.E. Morris Co. v. Foley Constr. Co. (1978), - 8 - 54 Ohio St.2d 279, 376 N.E.2d 578. However, "if the judgment is against the manifest weight of the evidence and is so grossly inadequate that it shocks the conscience and constitutes an abuse of discretion, this court cannot allow the judgment to stand." O'Neil v. State (1984), 13 Ohio App.3d 320, 321, citing Spicer v. Armco Steel Corp. (1974), 6 O.O.2d 314, 322 N.E.2d 279. We also recognize that "the purpose of a civil trial is to fully compensate the injured party for his losses." Miller v. Irvin (1988), 49 Ohio App.3d 96. In the case sub judice, appellee argues that the damage award in favor of CCP was in accord with the weight of the evidence. In support of this argument, appellee posits that the 30% average 6 markup results in a 23% gross profit margin on sales , from which CCP pays its overhead and expenses and then splits the balance 50/50 with the salesman, leaving CCP with a realized profit of 7% to 8%. Thus, appellee's formula is represented as follows: Sales x profit percentage x CCP's profit percentage = CCP's lost profit. Applying this formula of appellee, we can calculate the supposed lost profits of CCP on the basis of 7% or 8% "realized profit": 6 Appellee demonstrates this 23% figure at page 2, footnote 1 of his appellate brief, as follows: 1. This represents a gross profit of 23% on the transaction. As an example assume a product cost of $100. A 30% markup would be $30. Adding that to the cost, the sale price would become $130. The $30 "profit" on the sale would be equal to 23% of the $130 final selling price. - 9 - $223,566.47 x .023 x .07 = $3,599.42, or $223,566.47 x .023 x .08 = $4,113.62. It is not contested that the sales of similar items by James amounted to $223,566.47, or that profit ratio is 23% of a particular sale price. It is also clear that Mr. Williams testified that the average markup on a sale item was 30%, that CCP split the gross profit on a sale 50/50 with the salesman, and that CCP real profit from a sale was 7% to 8%. These figures and percentages were all mentioned during the trial and at no time did CCP present to the fact finder a formula using these figures and percentages for computing the lost profits to CCP. The trouble with appellee's formula is evident: the use of the ".023 gross profit margin" of the sale. Appellee has incorrectly converted the figure 23% to a decimal figure of .023. In reality, 23% is converted to .23 in the decimal system. The effect of this error on the computation is readily apparent, underestimating the profit margin ratio on overall sales by a factor of one hundred. Applying the correct conversion amount to the overall sales amount herein results in overall profits of $3,599.42 ($223,566.47 x .23 x .07 = $3,599.42) or $4,113.62 ($223,566.47 x .23 x .08 = $4,113.62) on James' sales to CCP accounts. Accordingly, the damages arrived at by the fact finder was in accord with the evidence, particulary where CCP provided no formula of its own to determine lost profits. The first assignment of error is overruled. II - 10 - THE TRIAL COURT COMMITTED PREJUDICIAL ERROR WHEN IT DENIED THE PLAINTIFF/APPELLANT CLEVELAND COTTON PRODUCTS MOTION FOR INJUNCTIVE RELIEF AGAINST DEFENDANT MARK JAMES. In CCP's trial brief relative to injunctive relief and in this assignment, CCP argues that because the restrictive covenant was for a two year period following the end of an employee's tenure at the company, and because James did not violate this covenant for only the first three months of the covenant period, then James should have been enjoined for a twenty-one month period following the judgment of the court from soliciting CCP accounts in the seventeen county area served by James as set forth by the terms of the restrictive covenant at sub-paragraph 11(G) of the employment agreement. Thus phrased, it appears that CCP is arguing that the trial court erred in denying permanent injunctive relief, rather than preliminary relief. By virtue of the fact that the jury returned a verdict in favor of CCP on the complaint, despite the defenses raised by James, it is necessarily inferred that the employment contract is valid. However, for purposes of determining whether injunctive relief should have issued, we must look beyond the validity of the contract and examine the restrictive covenant at issue in light of the reasonableness of the restrictive covenant. Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21, 325 N.E.2d 544. In Raimonde, the court, held that a noncompete agreement is reasonable if the restraint is no greater than is required for the protection of the employer, it does not - 11 - impose undue hardship on the employee, and is not injurious to the public. Id. at paragraph two of the syllabus. Factors to be considered in accessing (sic) reasonableness include: the absence or presence of limitations as to time and space, *** whether the employee represents the sole contact with the customer; whether the employee is possessed with confidential information or trade secrets; whether the covenant seeks to eliminate competition which would be unfair to the employer or merely seeks to eliminate ordinary competition; whether the covenant seeks to stifle the inherent skill and experience of the employee; whether the benefit to the employer is disproportional to the detriment to the employee; whether the covenant operates as a bar to the employee's sole means of support; whether the employee's talent which the employer seeks to suppress was actually developed during the period of employment; and whether the forbidden employment is merely incidental to the main employment. Id. at 25 quoting Extine v. Williamson Midwest (1964), 176 Ohio St. 403, 406, 200 N.E.2d 297. The validity of each agreement must be decided on its own facts. Id. It is the burden of the plaintiff to produce clear and convincing evidence as to each element of Raimonde and prove irreparable injury or the existence of an actual threat of such injury. Ohio Urology, Inc. v. Poll (1991), 72 Ohio App.3d 446, 454, 594 N.E.2d 1027. Cole Nat'l Corp. v. Koos (December 22, 1994), Cuyahoga App. No. 66760, unreported, 1994 Ohio App. LEXIS 5781, at 3-4. We also note that the decision to grant an injunction is left to the discretion of the trial court and such decision will not be reversed on appeal absent an abuse of that discretion. Perkins v. Village of Quaker City (1956), 165 Ohio St. 120, syllabus. - 12 - In the present case, the covenant, contrary to the testimony of Mr. Williams concerning only selling comparable merchandise to CCP customers or to potential customers (meaning, according to Mr. Williams, those customers which the employee had contacted but had not sold CCP products to), explicitly prevents the employee from selling "merchandise" to CCP customers or CCP's "potential customers." See employment agreement at paragraph 11(D)(2). The agreement does not define the terms "merchandise" or "potential customers." Applying the common usage of these terms, this restriction is unreasonable, preventing James from selling anything to anybody. Additionally, the record does not support, by clear and convincing evidence, irreparable injury to CCP since Mr. Williams testified that the North Carolina territory has been a good growth region for CCP and there is no evidence in the record to suggest that CCP's overall growth has declined by virtue of James's activities in violation of the employment agreement. Irreparable injury was also not demonstrated by the fact that CCP took steps to ameliorate the effect of James' activities by combining sales territories. Accordingly, abuse of discretion has not been demonstrated in the trial court's determination that the covenant was unreasonable. 7 Assignment overruled. 7 Appellee's argument that North Carolina law does not support the issuance of an injunction, see appellee's brief at 15-17, is inapplicable to this case because the employment contract specifically states that Ohio law shall "govern the interpretation, validity, performance and enforcement of this - 13 - Judgment affirmed. It is ordered that appellee recover of appellant his costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Court of Common Pleas to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. ANN DYKE, J., CONCURS; TERRENCE O'DONNELL, J., CONCURS IN JUDGMENT ONLY AS TO ASSIGN- MENT OF ERROR I; DISSENTS AS TO ASSIGNMENT OF ERROR II, WITHOUT OPINION. JAMES D. SWEENEY PRESIDING JUDGE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App. R. 26(A), is filed within ten (10) days Agreement." See employment agreement at paragraphs 21-22. of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the .