Outdoor Lighting Prospectives Franchising, Inc. v. Harders

Outdoor Lighting Prospectives Franchising, Inc. v. Harders, 2012 NCBC 26.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG 12 CVS 4430

OUTDOOR LIGHTING )
PERSPECTIVES FRANCHISING, )
INC., )
)
Plaintiff, )
)
v. )
ORDER ON MOTION FOR
)
PRELIMINARY INJUNCTION
PATRICK HARDERS, OUTDOOR )
LIGHTING PERSPECTIVES OF )
NORTHERN VIRGINIA, INC. and )
ENLIGHTENED LIGHTING, LLC, )
)
Defendants. )
)

{1} THIS MATTER, designated a complex business case by Order of Chief
Justice Sarah Parker dated March 28, 2012 and assigned to this court on March 30,
2012, is now before the court on Plaintiff Outdoor Lighting Perspectives
Franchising, Inc.’s Motion for Preliminary Injunction (“Motion”) pursuant to Rule
65 of the North Carolina Rules of Civil Procedure (“Rule(s)”). For the reasons stated
below, the Motion is GRANTED in part and DENIED in part.

Parker Poe Adams & Bernstein, LLP, by William L. Essler IV and Katie M.
Iams and Gray, Plant, Mooty, Mooty & Bennett, P.A., by Michael R. Gray,
pro hac vice, for Plaintiff Outdoor Lighting Perspectives Franchising, Inc.

Hagan Davis Mangum Barrett & Langley, PLLC, by Beth D. Langley and
Jason B. Buckland for Defendants Patrick Harders, Outdoor Lighting
Perspectives of Northern Virginia, Inc., and Enlightened Lighting, LLC.

Gale, Judge.
I. SUMMARY OF HOLDING
{2} Plaintiff Outdoor Lighting Perspectives Franchising, Inc. (“OLP”) seeks to
enforce covenants to which it contends Defendants Patrick Harders (“Harders”) and
two corporations he controls, Outdoor Lighting Perspectives of Northern Virginia,
Inc. (“OLP-NV”) and Enlightened Lighting, LLC (“Enlightened”), are bound by
reason of the October 23, 2006 agreement identified as Outdoor Lighting
Perspectives Franchise Agreement (“Agreement”). OLP seeks a preliminary
injunction pendente lite.
{3} OLP began the litigation by requesting that the court enjoin Defendants
from any involvement in an “outdoor lighting business.” At the hearing upon OLP’s
Motion, in response to the court’s expressed concern whether the Agreement
supports such a broad restriction, OLP indicated that it would be satisfied with a
restriction limited to the scope of outdoor lighting business actually performed by
Defendant Harders during the term of the Agreement. Defendants, on the other
hand, urge that the ambiguity and breadth of the Agreement’s language precludes
any injunctive relief, particularly where the Agreement seeks to reach any outdoor
lighting business in its broadest context and well beyond the contours of business
Harders conducted pursuant to the Agreement while it was in force.
{4} While OLP champions its legal interests in protecting its franchise
enterprise and invokes broad equitable principles to do so, ultimately, the court
must apply the specific language OLP has chosen for that protection. And here, the
court finds that the chosen language on the one hand is narrower than OLP’s
invitation to restrict Defendants from a wide field of outdoor lighting, and on the
other hand broader than with which the North Carolina courts have been
comfortable, at least in the employment field. Admittedly, North Carolina courts
are more lenient in enforcing restrictions contained in agreements attendant to the
sale of a business. Here, the case involves neither employment nor the sale of a
business. It arises in the context of an expired franchise agreement. A franchisor
more frequently pursues post-termination enforcement in federal court because of a
former franchisee’s abuse of federally protected trademark rights. In fact, OLP has
recently secured injunctive relief of that nature from Judge Mullen of the United
States District Court for the Western District of North Carolina. See Outdoor
Lighting Perspectives Franchising, Inc. v. Home Amenities, Inc., No. 3:11-cv-0567,
2012 U.S. Dist. LEXIS 5406 (W.D.N.C. 2012). Here, however, OLP does not
complain of trademark violations but of Defendants’ failure to abide by covenants
restricting competition as defined under the Agreement, as well as other obligations
such as the return of confidential information, including customer records.
{5} Clearly, however, the primary focus of this action is to enforce the
restriction on post-termination competition. The court’s analysis then must contend
with the precise language of the restrictive covenant, and the defined terms
embodied in the covenant. Section 14.2(b) of the Agreement contains the post-
termination non-compete provision and provides:
Upon termination or expiration . . . transfer, sale or assignment of this
Agreement by the Franchisee, neither the Franchisee, the operating
manager or the Franchisee’s owners will have any direct or indirect
interest (i.e. through a relative) as a disclosed or beneficial owner,
investor, partner, director, officer, employee, consultant,
representative or agent, for two (2) years, in any Competitive Business
within 100 miles of the Territory or any other franchisee’s Franchisor’s
or Affiliates territory.

(Compl. Ex. A (“Agrmt.”) § 14.2(b).) The Agreement includes a “Definitions” section,
but the term “Competitive Business” is not defined there. The term “Competitive
Business” is first referenced in Section 14.2(a) of the Agreement which restricts
competition by the Franchisee while the Agreement is in force. The Franchisee is
prohibited by Section 14.2(a) from activity “to be used or employed in any business
operating in competition with an outdoor lighting business or any business similar
to the Business (“Competitive Business”) as carried on from time to time . . .”
“Business” and “Outdoor Lighting Business” are defined in the Agreement’s
“Definitions” section, at least when the terms are capitalized. The Agreement
defines these capitalized terms to “mean[ ] the business operations conducted or to
be conducted by the Franchisee consisting of outdoor lighting design and automated
lighting control equipment and installation services, using the Franchisor’s System
and in association therewith the Marks.” (Agrmt. at B-2−B-4.) “Franchisor’s
System” or “System” means the standards, systems, concepts, identifications,
methods and procedures developed or used by the Franchisor . . . for the sales and
marketing of the Franchisor’s Products . . . and Services . . .” (Agrmt. at B-2−B-4.)
{6} There is tension between these definitions. The scope of “Business” or
“Outdoor Lighting Business” is defined in reference to the operations conducted by
the individual Franchisee, which may or may not be coextensive with the
Franchisor’s overall operations. The Franchisor’s overall operations, however,
define the scope of the “System,” and such operations may be broader than those
conducted by the individual Franchisee in its “Business.” “Competitive Business” is
much more broadly stated than “Business.” “Competitive Business” extends to any
business in competition with an outdoor lighting business or any business “similar
to” the defined term “Business.” “Competitive Business” then is broader than the
franchise “System,” “Products,” and “Services.”1 The post-termination restriction is
defined in reference to “Competitive Business.” The breadth of that chosen term
creates the problem Plaintiff now faces in seeking injunctive relief. Had Plaintiff
limited the covenant to the defined term “Business,” it would present much less of
an issue and would conform to Plaintiff’s request to limit the injunction to what
Defendants did pursuant to the Agreement. But, the chosen term reaches beyond
the outer limits of North Carolina court decisions upholding restrictive covenants
and, as the court concludes, falls within those cases which prohibit unreasonable
restrictions on competition. The court concludes the overbreadth cannot be cured by
“blue penciling” as the court cannot substitute “Business” for “Competitive
Business” without rewriting the Agreement.

1 “Products” and “Services” are also defined terms. “Products” is “all supplies, materials, and
equipment sold, prepared or otherwise dealt with in connection with and all services performed at or
from the home or leased Premises or in connection with the Business and associated with the
Marks.” (Agrmt. at B-4.) “Services” is “all services sold, prepared or otherwise dealt with in
connection with Business and all services performed at or from the premises or in connection with
the Business.” (Agrmt. at B-4.) The terms are defined with specific references to “Business” done by
the Franchisee as opposed to the Franchisor’s overall business to the extent it was greater.
{7} OLP itself notes problems inherent in the geographic scope of the
restrictive covenant which, as worded, extends to anywhere within 100 miles of the
Territory or any other franchisee’s Franchisor’s or Affiliates Territory. OLP has
franchises in several states, as well as territories and foreign countries. OLP
invites the court simply to strike the 100 mile territorial provision so as to restrict
the covenant to only the borders of any franchise territory. Defendants contend
that OLP has no authority to make this request. The invitation to strike the 100
mile limitation presents a more comfortable invitation for the court’s use of the blue
pencil doctrine because it is arguable a “separate and distinct” clause that can be
disregarded.
{8} The North Carolina Supreme Court has suggested that blue penciling
may be appropriate in certain instances to refuse to enforce a distinctly separable
part of the covenant. Welcome Wagon Int’l, Inc. v. Pender, 255 N.C. 244, 248, 120
S.E.2d 739, 742 (1961). But blue penciling does not allow a court to otherwise
revise or rewrite the agreement between the parties. Whittaker Gen. Med. Corp. v.
Daniel, 324 N.C. 523, 528, 379 S.E.2d 824, 828 (1989); Hartman v. W.H. Odell and
Associates, Inc., 117 N.C. App. 307, 317, 450 S.E.2d 912, 920 (1994).
{9} Again, the court notes that this particular case turns on the precise
language of this particular franchise covenant. A North Carolina appellate court
may later adopt a standard of general application to franchises that affords well-
written competition restrictions in a franchise agreement the benefit of the more
liberal standard afforded to agreements incidental to the sale of a business. See,
e.g., Jewel Box Stores Corp. v. Morrow, 272 N.C. 659, 158 S.E.2d 840 (1968).
Certainly, there are policy considerations that would militate in favor of such a
standard. But, the court here need not resolve those policy questions. Here, it is
constrained by the language OLP has chosen which pushes beyond even the borders
of a liberal standard because the covenant goes beyond business in which the
Franchisee itself was involved and transcends the business the Plaintiff can
legitimately protect.
{10} A franchise agreement is a contract. There are certain bedrock
principles that inform a court’s approach to contract enforcement.
The controlling purpose of the court in construing a contract is to
ascertain the intention of the parties as of the time the contract was
made, and to do this consideration must be given to the purpose to be
accomplished, the subject-matter of the contract, and the situation of
the parties . . . When the language of a contract is clear and
unambiguous, effect must be given to its terms, and the court, under
the guise of constructions, cannot reject what the parties inserted or
insert what the parties elected to omit. It is the province of the courts
to construe and not to make contracts for the parties.

Weyerhaeuser Co. v. Carolina Power & Light Co., 257 N.C. 717, 719, 127 S.E.2d
539, 541 (1962).
{11} However, there are other covenants beyond Section 14.2(b) which do not
present similar problems of overbreadth and to which Defendants must be bound.

II. FINDINGS OF FACT
{12} The court considered testimony by affidavit, documents attached to the
pleadings, briefs, oral argument, and other supporting materials, and after such
consideration makes the following FINDINGS OF FACT for the limited purpose of
determining the Motion.
{13} Plaintiff OLP is a North Carolina corporation with its principal place of
business in Richmond, Virginia. OLP’s predecessor in interest was based in North
Carolina until Outdoor Living Brands, Inc.’s 2008 acquisition of OLP. OLP
distributes its “Products” and “Services” through its authorized franchises. OLP
owns the federally registered name Outdoor Lighting Perspectives® and related
marks represented in Registration Nos. 3,250,972 and 3,302,023 (the “Marks”).
OLP currently has forty-two (42) franchises in the United States, Canada, Kuwait,
and the Bahamas. (Aff. of Scott Zide (“Zide Aff.”) ¶ 24.)
{14} Defendant Harders is a citizen and resident of Manassas, Virginia.
Defendant OLP-NV is a Virginia corporation owned by Harders which operated as
an authorized OLP franchise until late October 2011. Enlightened is a Virginia
limited liability company owned by Harders. Each Defendant has appeared and
consents to the court’s jurisdiction.
{15} OLP and Harders entered into the initial Agreement in 2001, which was
renewed in 2006. Among other provisions, the Agreement granted Harders an
exclusive license to use OLP’s Marks and “Business System” in the Northern
Virginia territory encompassing Arlington, Fairfax, Prince William, and Loudoun
Counties. (Compl. ¶¶ 4, 8; Aff. of Patrick Harders (“Harders Aff.”) ¶¶ 4, 5.) The
Agreement expired on October 23, 2011. Plaintiff contends that Harders
consciously allowed the Agreement to expire while Harders asserts that OLP
breached and terminated the Agreement on October 20, 2011 when an unknown
caller informed Harders’ customer Russell A. Bantham that Harders “was no longer
associated [with] OLP and that [OLP was] taking over the Northern Virginia
location.” (Harders Aff. ¶ 29; Zide Aff. ¶ 14; Affidavit of Russell A. Bantham
(“Bantham Aff.”) ¶¶ 4−7.)
{16} On October 27, 2011, OLP sent a letter to Harders confirming the
expiration of the Agreement and reminding Harders of his post-termination
obligations pursuant to Sections 14.2(b) and 17.9 of the Agreement. (Compl. Ex. B.)
The language of the restrictive covenant provided by Section 14.2(b) and related
definitions are laid out above.
{17} By Section 17.9, Harders agreed that “upon termination or expiration of
[the] Agreement,” he would:
(a) Immediately discontinue the use of all Marks . . . ;

(b) Immediately turn over to the Franchisor all materials,
including the Manual, customer lists, records, files, instructions,
brochures, advertising materials, agreements, Confidential
Information, Trade Secrets and any and all other materials provided
by the Franchisor to Franchisee . . .;

(c) . . . take such action within five (5) days to cancel or assign to
Franchisor or its designee as determined by Franchisor, all
Franchisee’s right, title and interest in and to Franchisee’s telephone
numbers . . .
(Agrmt. §§ 17.9(a)−(c).)
{18} OLP does not contend that Defendants have continued to use the Marks.
It does complain, however, that Defendants have not turned over written materials
as required by Section 17.9. Defendants have cancelled the telephone numbers
used during the franchise term, but OLP complains that those numbers have not
been assigned as the Agreement requires.
{19} OLP contends that it discovered in January 2012, through an article in
Loudoun Magazine, that Harders was directly competing with OLP in the territory
previously serviced by OLP-NV. (Compl. Ex. C.) The article identifies Harders as
the owner of Enlightened and quotes him extensively regarding his outdoor lighting
capabilities. (Compl. ¶ 17.) OLP believes that through Enlightened, Harders “is
providing the same services to the same customers with the same assets, employees
and Business Systems as when he was an OLP franchisee.” (Pl.’s Mem. of Law in
Supp. of Mot. for Prelim. Inj. (“Pl.’s Supp. Br.”) at 1.) OLP further alleges that
Harders uses his OLP-NV projects to promote Enlightened, asserting that the
Enlightened website (www.enlightenedlights.com) “displays several homes . . . that
are actually lighting projects completed while [Harders] was operating as OLP-NV.”
(Pl.’s Supp. Br. at 3.) Defendants indicate that such references have now been
removed from Enlightened’s website. (Harders Aff. ¶72.)
{20} After discovering the article, OLP’s counsel wrote Harders’ counsel
requesting his voluntary compliance with the post-expiration provisions of the
Agreement and indicating that litigation would follow his refusal to do so. (Compl.
Ex. D.) Harders refused, asserting that: (1) the post-termination non-compete
provision of the Agreement is overly broad and unenforceable as a matter of law; (2)
with the exception of certain documents retained for tax reasons, he no longer
possesses any OLP competitively sensitive or proprietary information, and (3)
neither he nor Enlightened continues to utilize the Marks in any way.
{21} On March 5, 2012, Plaintiff filed suit in Mecklenburg County Superior
Court against Harders, Enlightened, and OLP-NV for breach of the post-expiration
obligations of the Agreement, civil conspiracy, misappropriation of goodwill, and
injunctive relief pursuant to Rule 65, contending that the continued operation of
Enlightened as a direct competitor in the outdoor lighting industry has irreparably
harmed OLP and frustrated its ability to re-franchise the Northern Virginia
territory previously serviced by OLP-NV.
{22} OLP had earlier instituted litigation in the United States District Court
for the Western District of North Carolina against another franchisee and secured a
preliminary injunction enjoining that franchisee from being engaged in “the outdoor
lighting business.” Unlike Harders, that franchisee apparently continued to use the
Marks, and the federal court had jurisdiction under the trademark laws. See
Outdoor Lighting Perspectives Franchising, Inc., 2012 U.S. Dist. LEXIS 5406. The
federal court did not in its memorandum opinion address the overbreadth issue that
now precludes this court from enforcing the covenant it finds to be overbroad.
{23} OLP claims the right to eliminate geographic overbreadth by exercising
a unilateral choice to strike the language providing a buffer of “within 100 miles”
under Section 14.5 of the Agreement which provides that “the Franchisor reserves
the right to reduce the scope of [Section 14.2] without the Franchisee’s consent, at
any time or times, effective immediately upon notice to the Franchisee.” (Agrmt. §
14.5.) Defendants contend that if such language gave OLP the right to modify the
scope of the Section 14.2(b) covenant while the Agreement was in force, such right
expired upon the termination of the Agreement. The court need not resolve issues
of geographic scope in light of its decision on other grounds.

III. CONCLUSIONS OF LAW
{24} “A preliminary injunction is an extraordinary measure taken by a court
to preserve the status quo of the parties during litigation.” A.E.P. Indus., Inc. v.
McClure, 308 N.C. 393, 401, 302 S.E.2d 754 (1983). Issuance is proper only:
(1) if the plaintiff is able to show a likelihood of success on the merits
of his case and (2) if the plaintiff is likely to sustain irreparable loss
unless the injunction is issued, or if, in the opinion of the Court,
issuance is necessary for the protection of a plaintiff’s rights during the
course of the litigation.
Id. (citations omitted) (emphasis in original). The burden is on the moving party to
establish its right to a preliminary injunction, but the remedy “should not be lightly
granted.” GoRhinoGo, LLC v. Lewis, 2011 NCBC 38 ¶ 29 (N.C. Super. Ct. Sept. 29,
2011), http://www.ncbusinesscourt.net/opinions/2011_NCBC_38%20.pdf (citations
omitted); Travenol Labs., Inc. v. Turner, 30 N.C. App. 686, 692, 228 S.E.2d 478, 483
(1976).
{25} The Motion is to be determined pursuant to North Carolina law based
on the Agreement’s choice of law provision in Section 21.1.
{26} North Carolina law has developed a substantial body of case law
addressing the enforceability of restrictive covenants both incident to contracts of
employment and contracts for the sale of a business. The case law in the North
Carolina state courts addressing post-termination obligations in franchise
agreements is less defined.
{27} Under North Carolina law, covenants in restraint of trade are subject to
careful judicial scrutiny. United Labs., Inc. v. Kuykendall, 322 N.C. 643, 370 S.E.2d
375 (1988). The reasonableness of such restraints depends on the circumstances of
each case and is a question of law for the court to decide. Keith v. Day, 81 N.C.
App. 185, 193, 343 S.E.2d 562, 567 (1986) (citing Jewel Box Stores Corp., 272 N.C.
659, 158 S.E.2d 840). “A covenant which prohibits a person from engaging in a
similar business will be upheld if:” (1) it is founded on valuable consideration; (2) it
is necessary to protect the legitimate interest of the one who is to benefit from the
covenant; (3) it is reasonable with respect to time and territory; and (4) it does not
interfere with the public interest. Id. (citations omitted). By statute, the covenant
must be in writing and signed by the one who agrees not to compete. N.C. GEN.
STAT. § 75-4 (2012).
{28} Covenants in employment agreements which restrain competition are
not viewed favorably under modern law. Farr Assocs., Inc. v. Baskin, 138 N.C. App.
276, 282, 530 S.E.2d 878, 881 (2000). Any ambiguity in a covenant against
competition is to be construed against the drafter. Reichhold Chems., Inc. v. Goel,
146 N.C. App. 137, 153, 155, 555 S.E.2d 281, 291 (2001). A restrictive covenant “is
unreasonable and void if it is greater than is required for the protection of the
promisee or it imposes an undue hardship upon the person who is restricted.”
Masterclean of N.C., Inc. v. Guy, 82 N.C. App. 45, 50, 345 S.E.2d 692, 695 (1986)
(citations omitted).
{29} However, North Carolina courts will enforce well-written restrictions on
competition. “While the law frowns upon unreasonable restrictions, it favors the
enforcement of contracts intended to protect legitimate interests. It is as much a
matter of public concern to see that valid covenants are observed as it is to frustrate
oppressive ones.” Kuykendall, 322 N.C. at 649; 370 S.E.2d at 380 (internal
quotations, brackets, and citations omitted).
{30} North Carolina courts recognize the distinction between covenants not
to compete ancillary to the sale of a business and covenants not to compete ancillary
to employment contracts, with the latter deserving closer judicial scrutiny. See
Seaboard Indus., Inc. v. Blair, 10 N.C. App. 323, 178 S.E.2d 781 (1971); Jewel Box
Stores Corp., 272 N.C. 659, 158 S.E.2d 840.
{31} The North Carolina Supreme Court articulated the principal
justification for the heightened scrutiny applicable to restrictive covenants ancillary
to employment contracts as follows:
[a] workman “who has nothing but his labor to sell and is in urgent
need of selling that” may readily accede to an unreasonable restriction
at the time of his employment without taking proper thought of the
morrow, but a professional man who is the product of a modern
university or college education is supposed to have in his training an
asset which should enable him adequately to guard his own interest,
especially when dealing with an associate on equal terms.

Beam v. Rutledge, 217 N.C. 670, 673−74, 9 S.E. 2d 476, 478 (1940).
{32} The North Carolina Court of Appeals explained that the policy factors
play differently in the sale of a business as follows:
[a]mong reasons often given for the greater acceptability of “sale of
business covenants” are that covenants not to compete enable the
seller of a business to sell his goodwill and thereby receive a higher
price; and they also furnish a material inducement to the purchaser
who purchases a business with the hope of retaining its customers.

Seaboard Indus., Inc. 10 N.C. App. at 333, 178 S.E.2d at 787.
{33} A franchise agreement is generally entered into for purposes of enabling
the franchisee to create a valued business by utilizing the franchisor’s system and
marks, with the successful franchisee creating goodwill for both the franchisor and
franchisee. As such, a franchise agreement shares some of the same characteristics
as a sale of a business. And, at least theoretically, the franchisee has more leverage
and freedom of contract than might an employee in those situations typical of the
employment contracts on which case precedent was created. But, even a more
lenient standard attendant to the sale of a business does not authorize a court to
enforce covenants more broadly than they were written and agreed to by the
signatories.2
{34} The language of the restrictive covenant at issue here would clearly be
problematic in an employment agreement, for North Carolina courts do not look
favorably upon restrictions against “direct[ ] or indirect[ ]” competition in
employment contracts. See VisionAIR v. James, 167 N.C. App. 504, 508, 606 S.E.2d
359, 362 (2004) (affirming trial court’s ruling that plaintiff-employer could not show
a likelihood of success on the merits of a preliminary injunction when the non-
compete provision stated the employee could not “own, manage, be employed or
otherwise participate in, directly or indirectly, any business similar to the
Employer’s”). However, similar phrases have been enforced in an agreement
ancillary to the sale of a business. See Bicycle Transit Auth., Inc. v. Bell, 314 N.C.
219, 226, 333 S.E.2d 299, 303−04 (1985) (overturning summary judgment in favor of
defendant-purchaser of business and upholding as valid covenant not to “directly or

2 Through its papers and during oral argument, Plaintiff repeatedly encouraged the court to adopt

and apply franchise standards developed by the federal courts. While it is true that some federal
courts apply a quasi-intermediate level of scrutiny to franchise agreements, reported North Carolina
appellate court decisions fail to make such a distinction. Furthermore, the unreported federal
authority cited by Plaintiff fails to articulate a bright-line test to determine the enforceability of
restrictive covenants incident to franchise agreements. See Lockhart v. Home-Grown Indus. of Ga.,
Inc., No. 3:07-CV-297, 2007 U.S. Dist. LEXIS 67256 (W.D.N.C. 2007); Meineke Car Care Centers,
Inc. v. Bica, No. 3:11-cv-369-FDW-DCK, 2011 U.S. Dist. LEXIS 118171 (W.D.N.C. 2011).
indirectly be employed by, be associated with, be under contract with, own, manage,
operate, join, control or participate in the ownership, management, operation, or
control of, or be connected in any manner with, any business which is a competitor
. . .”) (emphasis added). Here, the court determines that the use of the terms “direct
or indirect interest (i.e., through a relative)” do not alone invalidate the covenant.
{35} The problem here arises because of the definition of “Competitive
Business” in Section 14.2(a). The definition is by no means a model of clarity. The
language, however, closely attempts to restrict Defendants from any “outdoor
lighting business or any business similar to the Business . . .” If the word
“business” were capitalized, the Agreement’s own definition would restrict the scope
to the activities actually conducted by Defendants pursuant to the Agreement. The
language so limited would be consistent with OLP’s indication at oral argument
that an injunction of that scope would adequately protect its interests. However,
the language further restricts Defendants from any outdoor lighting business and
any business which competes with a business “similar to” the Franchisee’s business.
This expansive language extends well beyond activities that Defendants performed
pursuant to the Agreement. It likewise extends beyond the business OLP itself
conducts. The language thus extends beyond OLP’s legitimate business interests.
{36} Even though contained in a franchise agreement, the breadth of the
chosen language conflicts with cases which refuse, at least in the employment
context, to enforce restrictive covenants which purport to limit the promisor’s ability
to perform work in an unrelated capacity for a business in the same field. See
Henley Paper Co. v. McAllister, 253 N.C. 529, 534−35, 117 S.E.2d 431, 434 (1960)
(non-compete which purported to “exclude[ ] defendant from too much territory and
from too many activities” found overly broad and unenforceable), VisionAIR, 167
N.C. at 508−09, 606 S.E.2d at 362−63 (non-compete ancillary to employment
agreement found overly broad and unenforceable where the defendant would “be
prevented from doing even wholly unrelated work at any firm similar to [plaintiff]”);
Hartman, 117 N.C. App. at 317, 450 S.E.2d at 920 (non-compete ancillary to
employment agreement found overly broad and unenforceable “in that, rather than
attempting to prevent plaintiff from competing for business, it required plaintiff to
have no association whatsoever with any business that provides [similar] services. .
. . Such a covenant would appear to prevent plaintiff from working as a custodian
for any ‘entity’” performing such services).
{37} This is not, however, an employment case. Cases might allow OLP to
restrict Defendants from doing business after the franchise ends from business that
they did while an OLP franchisee. Try as it might, the court cannot interpret the
definition of a “Competitive Buisness” to be restricted to the business done by
Defendants pursuant to the Agreement. The court should not and will not enforce
the covenant to foreclose Harders or his corporations from the entire field of outdoor
lighting or any business that competes with an outdoor lighting business or a
“similar” business. That is the only choice the definition of “Competitive Business”
gives the court. The court would have preferred to limit the definition to “Business”
done by the franchisee. It would have enforced that covenant. But simply striking
the term “Competitive” from the definition so as to substitute the defined term
“Business” would require the court to rewrite the Agreement that the Parties
entered into.3
{38} OLP has not shown a probability of success in enforcing the covenant in
Section 14.2(b). The Motion to enjoin Defendants from violating that provision is
DENIED.

3 The court need not address further complications in terms of whether the Agreement extends

beyond a time the courts would find reasonable. While the competition restriction at first appears to
be for two (2) years, the language of Section 14.3 makes the time period much less clear. That
section provides that, “if any person restricted by this Section 14 refuses to voluntarily comply with
the foregoing obligations, the two (2) year period will commence with the entry of any order of court
or arbitrator enforcing this Section 14.” (Agrmt. § 14.3.) Defendants contend that the time cannot be
determined under this language, but that in any event, the restriction is well beyond two (2) years
and further beyond the bounds of what the North Carolina courts have been willing to enforce.
North Carolina courts generally analyze the time and territory restrictions in tandem. See Farr
Assocs., Inc., 138 N.C. App. at 280, 530 S.E.2d at 881. When the restraint on competition results
from the sale of a business, North Carolina courts have upheld restrictive covenants containing
limitations of ten (10), fifteen (15), and twenty (20) years, as well as for the life of one of the parties.
Jewel Box Stores Corp., 272 N.C. at 663, 158 S.E.2d at 843 (citations omitted).
{39} OLP is, however, entitled to enjoin violations of other provisions of the
Agreement. To prevail on a claim for breach of contract under North Carolina law,
a plaintiff must establish the existence of a valid contract and a breach of the
contractual terms. Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000).
{40} Harders does not challenge the validity of the Agreement or the post-
termination undertakings outlined in Section 17.9, but takes exception to the class
of materials asserted by OLP to be proprietary and competitively sensitive. More
specifically, by affidavit, Harders asserts:
(a) “The information that OLP claims is ‘proprietary’ and
‘competitively-sensitive’ information . . . is publicly available and readily
known to competitors of OLP.” (Harders Aff. ¶ 30.)
(b) “OLP’s purported ‘training’ and/or ‘Business System’ regarding the
installation of low-voltage outdoor lighting is the same information that is
taught by fixture manufacturers, lighting distributors, . . . as well as
landscape design courses in schools, trade-shows, hardware and home
improvement stores, and on television and the internet.” (Harders Aff. ¶ 31.)
(c) “The ‘training’ provided by the OLP manual was very basic
information that . . . is taught free to customers at Lowe’s, Home Depot and
other home improvement stores throughout the country.” (Harders Aff. ¶ 32.)
(d) “The purported proprietary and confidential training regarding the
various installation techniques is not taught by OLP or its employees . . .
[but] by one of its suppliers, B&B. The training provided to OLP franchisees
by B&B is the same training that B&B puts on for free for competitors of
OLP . . .” (Harders Aff. ¶ 34.)
{41} During oral argument, Harders stated that he “threw away” most of the
competitively sensitive and proprietary information distributed to him by OLP and
that he cancelled the OLP-NV telephone number after the Agreement expired.
{42} Section 17.9 of the Agreement gives OLP the option of having the
franchisee cancel phone numbers or have them assigned to OLP.
{43} By Harders’ own admission, he is in breach of Section 17.9 of the
Agreement because he: (1) retained certain OLP proprietary and competitively
sensitive information which he deems essential to this litigation and for income tax
purposes; (2) retained certain installation files in an effort to provide maintenance
to customers serviced by OLP-NV during the term of the Agreement; and (3) failed
to assign OLP-NV’s telephone number within five (5) days of the Agreement’s
expiration in accordance with Section 17.9(c).
{44} OLP has demonstrated a likelihood of success on the merits of its claim
for breach of the post-expiration undertakings in Section 17.9 of the Agreement.
{45} OLP has demonstrated sufficient irreparable injury to justify injunctive
relief. A party may show that it will suffer “irreparable injury” for which it has no
adequate remedy at law where damages are difficult and cannot be ascertained
with certainty. See e.g., A.E.P., 308 N.C. 393, 406−07, 302 S.E.2d 754, 762 (“[O]ne
of the factors used in determining the adequacy of a remedy at law for money
damages is the difficulty and uncertainty in determining the amount of damages to
be awarded for defendant’s breach”).
{46} OLP has been harmed. Harders has retained and made use of
confidential OLP information including customer and installation files and has used
worked performed by OLP-NV to market Enlightened and compete for business in
the Northern Virginia territory.
{47} If the court does not enjoin Harders’ continued breach of the post-
expiration undertakings in Section 17.9 of the Agreement, OLP will suffer
irreparable harm to its goodwill and franchise system.
{58} It is difficult, if not impossible, to assign a dollar figure to the damages
OLP may suffer in this case. The court cannot quantify the economic loss attendant
to OLP’s loss of goodwill, customer relationships, and franchise System as a result
of Harders’ improper use and retention of the competitively sensitive and
proprietary information.
{49} Section 17.18 of the Agreement acknowledges the availability of
injunctive relief to prevent irreparable harm stating “[n]othing herein shall prevent
the Franchisor or the Franchisee from seeking injunctive relief to prevent
irreparable harm, in addition to all other remedies.“ Similar language has been
recognized as evidence of the inadequacy of monetary damages. A.E.P., 308 N. C. at
406, 302 S.E.2d at 762; see Amdar, Inc. v. Satterwhite, 37 N.C. App. 410, 246 S.E.2d
165, disc. rev. den. 295 N.C. 645 (1978).
{50} Harders, Enlightened, and OLP-NV will suffer materially less damage
or injury than OLP if Harders is not enjoined from the continued breach of the post-
expiration undertakings in Section 17.9.
{51} Harders contends that he has merely retained certain unidentified
documents “solely for the purposes of this lawsuit” and “for income tax purposes.”
(Harders Aff. ¶ 61.) The court concludes that OLP’s interest in preserving the
integrity of its competitively sensitive and proprietary information outweighs any
harm that might be suffered by Harders, Enlightened, or OLP-NV.
{52} Rule 65(c) requires that the grant of a preliminary injunction shall be
conditioned upon the giving of security by the moving party in a sum determined by
the court to be proper for the payment of costs and damages that may be suffered by
a party ultimately determined to have been wrongfully enjoined or restrained.
{53} In its discretion, the court concludes that to protect the interests of those
impacted by this injunction, security in the amount of $5,000 is reasonable and
appropriate as a condition of granting a preliminary injunction in this matter.
NOW THEREFORE, based upon the foregoing FINDINGS of FACT and
CONCLUSIONS of LAW, it is hereby ORDERED that:
{1} The Motion by Plaintiff seeking a preliminary injunction is GRANTED, in
part, based on the terms and conditions of this Order.
{2} This Order is intended only to preserve the status quo between OLP and
the Defendants during the pendency of this litigation.
{3} Conditioned upon compliance by OLP with the requirement in Paragraph
53 above, Defendants shall:
(a) immediately discontinue the use, if any, of all signs, structures,
forms of advertising, telephone listings, facsimile numbers, e-mail addresses,
the Manual, and all materials, Products and Services of any kind which are
identified or associated with the System; and return all of these materials
and Products to OLP;
(b) within ten (10) business days turn over to OLP all materials,
including the Manual, customer lists, records, files, instructions, brochures,
advertising materials, agreements, Confidential Information, Trade Secrets
and any and all other materials provided by OLP to Harders and/or OLP-NV
or created by a third party for Harders or OLP-NV relating to the operation
of OLP-NV. Under no circumstances shall Harders, OLP-NV, or Enlightened
retain any printed or electronic copies of the Manual, Confidential
Information, or Trade Secrets or portions thereof; and
(c) within ten (10) days take all necessary action to assign to OLP or
its designee as determined by OLP, all of the Defendants’ right, title, and
interest in and to the telephone numbers previously used in the operation of
OLP-NV.
{4} Notwithstanding the requirements of Paragraph 3 above, and upon five
(5) business days written notice, OLP shall provide Harders access to any and all
financial records necessary for the sole and exclusive purpose of facilitating the
accurate reporting of Harders’ income or other business taxes.
{5} The security required by Paragraph 55 shall be in the form of a surety
bond or other undertaking satisfactory to the Clerk of Superior Court of
Mecklenburg County, for the payment of such costs and damages as may be
incurred or suffered by any party who is found to have been wrongfully enjoined by
this Order.
{6} Except as GRANTED by the terms of this Order, the Motion is DENIED.

IT IS SO ORDERED, this 14th day of May, 2012.