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NVR, Inc. v. Nelson

United States District Court, E.D. Virginia, Alexandria Division

February 14, 2017

NVR, Inc., Plaintiff,
David Nelson, Defendant.


          Lium O'Grady, United States District Judge

         This matter comes before the Court on Plaintiff NVR Inc.'s Motion for a Temporary Restraining Order. Dkt. No. 19.[1] Plaintiff asks this Court to enjoin Defendant David Nelson from working for Siminini Homes, Inc., a Charlotte-based home developer and construction company; or for any other company covered by a non-compete clause in Defendant's contract with Plaintiff. For the reasons discussed below, the Court orders that Motion is DENIED.

         I. Background

         Plaintiff NVR, Inc. ("NVR") is a Virginia corporation in the business of selling and constructing homes. It operates under a variety of trade names including Ryan Homes and does business in 28 metropolitan areas in fourteen states including Charlotte, North Carolina. Plaintiff divided the Charlotte region into three Divisions covering the city and surrounding counties. Defendant David Nelson is a former employee of Ryan Homes who worked for Plaintiff as the Division Manager in the North Division of Charlotte from approximately January 1, 2014 until his termination on or about August 30, 2016. As the Division Manager, Defendant was responsible for, among other things, sales functions, profits and losses, ongoing homebuilding efforts, and strategic-decisions about the policies and guidelines for Plaintiffs operations in the area. On or about August 24, 2016, Plaintiff informed Nelson that his employment with the Company was terminated due to performance deficiencies. On October 31, 2016, Defendant joined Simonini Homes, Inc. ("Simonini"). Simonini is also engaged in the homebuilding industry in the Charlotte area.[2]

         During Defendant's tenure at NVR, he signed various compensation agreements: a stock option agreement on February 7, 2014; two more on May 27, 2014 (the "Equity Agreements"); and a Homebuilding Profit Center Manager EBIT Incentive Program Description and Participation Agreement (the "EBIT Agreement") (collectively "the Agreements"). The most recent EBIT Agreement was Dated: May 6, 2016 but Plaintiff avers that Defendant received payments through the EBIT program in March of 2015 and 2016 presumably through earlier, unsubmitted, versions of the EBIT Agreement. The Agreements contain an identical noncompete provision which provides in relevant part that:

During your Service and for a period of twelve (12) months after your service ends.. .you shall not anywhere in the Restricted Area (as defined below):... (b) render services to.. .any person or entity that competes with the Company or an Affiliate in the residential homebuilding, mortgage financing, or settlement services business where such services are competitive with any of the services you provided to the Company or to an Affiliate during the twenty-four (24) months prior to termination of your Service.

Dkt. No. 21, Exh. A at 6. The Agreements define the "Restricted Area" as:

"those counties and other units of local government in which the Company engaged in residential homebuilding business activities, mortgage financing business activities, or settlement services business activities, as applicable (x) over which you had any management responsibility at any time during the twenty-four months prior to termination of your Service or (y) from which you received, as part of your work duties, Confidential Information regarding such business activity, at any time during the twenty-four months prior to termination of your Service.


         Plaintiff filed a Complaint on October 20, 2016 alleging that Defendant misappropnated and converted Plaintiffs trade secrets and other information, and thereby breached his contract when he left Plaintiffs employment. Dkt. No. 1. The next day Plaintiff filed a motion for a preliminary injunction and temporary restraining order to prevent Defendant's use of the allegedly misappropriated information. Dkt. No. 4. The parties reached an agreement on how Defendant would handle the relevant information in his possession and the Court dismissed the motion pursuant to the parties' stipulation. Dkt. No. 16. On December 21, 2016, Plaintiff filed an amended complaint alleging that Defendant breached the non-compete provision in the Agreements by joining Simonini. Dkt. No. 18. Plaintiff contemporaneously filed a second motion for a temporary restraining order to enjoin Defendant's employment with Simonini. Dkt. No. 19. After conferring with the Plaintiff, the Court converted the motion to one for a preliminary injunction and scheduled it for a hearing. The parties fully briefed the matter and the Court heard arguments on January 5, 2017.

         II. Legal Standard

         In order to succeed on a request for preliminary injunction, the movant "must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest." Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008); see also Centro Tepeyac v. Montgomery Cnty., 722 F.3d 184, 188 (4th Cir. 2013). A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter, 555 U.S. at 22. "The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held." United States v. South Carolina, 720 F.3d 518, 524 (4th Cir. 2013) (quoting Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)) (internal quotation marks omitted).

         III. Discussion

         A. Likelihood of Success on the Merits

         Plaintiff must first establish that it is likely to succeed on the merits of its breach of contract claim against Defendant. The elements of a breach of contract action under Virginia law are: "(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Filak v. George, 267 Va. 612, 619 (2004).

         Plaintiff contends that Defendant breached the non-compete provisions in the Agreements. Defendant argues that the Agreements are invalid for lack of consideration so the non-compete provision is not binding. In the alternative, Defendant alleges that the non-compete provision in the Agreements is not reasonable. The Court considers these issues in turn.

         I. Consideration for the Agreements

         "Virginia contract law requires the standard elements of offer, acceptance, and consideration for the formation of a valid contract." Hill v. Alstom Power, Inc., No. 3:13-CV-00496-JAG, 2013 WL 6408416, at *2 (E.D. Va. Dec. 6, 2013). Consideration exists where an employer makes a unilateral offer to an employee and the conditions of that unilateral offer are performed. Jensen v. Int'l Bus. Machs. Corp., 454 F.3d 382, 387 (4th Cir. 2006) (citing Nicely v. Bank of Va. Trust Co., 277 S.E.2d 209, 212 (Va. 1981)). Sufficient consideration does not exist when an employee is terminated before his rights under the unilateral contract vest. Chapman v. Asbury Auto. Grp., Inc., No. 3:15CV679, 2016 WL 4706931, at *4 (E.D. Va. Sept. 7, 2016).

         Defendant argues that the Agreements were not supported by consideration because he signed the Agreements after he began his employment and did not immediately receive any benefits or promise of continued employment. Rather the Agreements only offered future benefits which did not vest. Accordingly, Defendant believes the Agreements lacked consideration. Plaintiff counters that Defendant did receive the benefit of the ...

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