Holland, an insurance agent, entered into a contract with Senior Life in 2002 under which he was authorized to solicit applications for insurance as an independent agent. Holland was paid commissions based on premiums received by Senior Life for the policies he sold.
Senior Life terminated the contract in 2011 and notified Holland that it was suspending the payment of commissions, pending an investigation of whether Holland had violated restrictive covenants in the contract.
Holland sued, seeking injunctive relief and a declaratory judgment that the restrictive covenants were overbroad and unenforceable. Holland filed a motion for judgment on the pleadings, which was denied.
Senior Life filed a counterclaim, seeking a preliminary injunction for the return of confidential documents, including applications for insurance and information about prospective customers, and to prevent Holland and his sub-agents from using that information after the termination of his contract.
The trial court granted the injunction in an order consisting of a single sentence, and Holland appealed.
Section 5.5 of the Holland's contract, entitled "Confidentiality," defined "Confidential Proprietary Information" to include "certain lists of or data relating to our Customers and Prospective Customers," and provided that Senior Life "take[s] all reasonable steps necessary to ensure that each and every component of the Confidential and Proprietary Information constitutes a 'Trade Secret.'"
Holland contended that the "Confidentiality" provision was void because it did not contain a time limit, and that the information sought to be protected did not constitute a "Trade Secret."
It was undisputed that Section 5.5 did not contain a time limit. But the court of appeals had held in earlier cases that "[a] nondisclosure clause with no time limit is unenforceable as to information that is not a trade secret." See, e.g., Allen v. Hub Cap Heaven, Inc., 225 Ga. App. 533, 539, 484 S.E.2d 259 (1997) (emphasis added). "[T]hus," the court said, "whether or not Section 5.5 is overly broad and unenforceable hinges upon whether the 'Confidential and Proprietary Information' it prohibits disclosing constitutes a trade secret."
O.C.G.A. § 10-1-761(4) defines a "Trade Secret" to include "a list of potential customers or suppliers which is not commonly known by or available to the public." Because "customers are not trade secrets," confidentiality is enforced "only where the customer list is not generally known or ascertainable from other sources and was the subject of reasonable efforts to maintain its secrecy." Crews v. Roger Wahl CPA, P.C., 238 Ga. App. 892, 898 n.4, 520 S.E.2d 727 (1999).
The court of appeals held that additional facts, beyond those disclosed by the pleadings, were needed to determine whether Senior Life's customer lists constituted "a legitimate trade secret or merely confidential information relating to its business." Therefore, the trial court properly denied Holland's motion for judgment on the pleadings as to the enforceability of Section 5.5 of his contract.
Section 5.7 of the contract, entitled "Damages," required, "with respect to any Customer of ours who completely severs his/her relationship with us in favor of you," that Holland would pay Senior Life "an amount equal to 100% of the commissions you earned … from us with respect to the Severing Customer during the twenty-four (24) month period immediately preceding the termination of this Agreement." This provision was applicable to customers who terminated their policies "without any direct or indirect solicitation by you."
The court of appeals held that because Section 5.7 "penalizes Holland from accepting the unsolicited business from Senior Life's former clients, regardless of who initialed the contact, it is unreasonable and unenforceable." Because the contract included a severability clause, however, the void restrictive covenant in Section 5.7 did not invalidate the entire contract.
Finally, the court of appeals affirmed the trial court's order requiring Holland to return confidential documents, including insurance applications and "leads" to potential customers provided by Senior Life. The court held that the potential of irreparable injury was demonstrated by Senior Life's allegations that Holland and his sub-agents had "falsified insurance applications in order to hide the replacement of Senior Life policies, engaged in the illegal process of 'switching' and 'cross-selling,' and lied to current policy holders by informing them that Senior Life was going out of business."