A recent appellate decision by the Supreme Court of Virginia may appear to leave employers and their counsel widely relieved. They may rightly ask themselves: are claims to enforce noncompetition and nonsolicitation agreements effectively still subject to demurrer? In the case in question, the trial court faced a commonplace legal inquiry, namely, whether the complaint stated an actionable claim. In scrutinizing the demurrer record before it, the trial court reviewed the complaint and the written restrictive employment covenants at issue. The trial court held that, as a matter of law, the covenants were overly-broad and unenforceable, dismissing the suit with prejudice. The Supreme Court of Virginia reversed the trial court, however, noting that the employer had a right to present evidence to support the reasonableness of the provisions restraining competition.
The Supreme Court held that the trial court used the demurrer to decide the enforceability of the noncompetition and nonsolicitation provisions “on the merits.” In so holding, the Supreme Court distinguished one of its prior decisions, in which it affirmed a trial court’s sustaining of a demurrer to a noncompetition agreement. In that prior case, the Supreme Court said, the employer had failed to offer “argument or evidence to prove its legitimate business interests were served by the particular restraint at issue.” Although a hearing on a demurrer is not evidentiary in nature, the Supreme Court stated that, in its recent decision, the party seeking to enforce the restrictive covenants based its “argument” on the ground that it sought to present “evidence” to prove the reasonableness of the restraint.
At first blush, the lessons of the Supreme Court’s decision may be two-fold. First, the party seeking to enforce noncompetition and nonsolicitation provisions now may have additional support to obtain leave to amend its complaint before suffering a dismissal with prejudice. Second, “argument” that evidence later will supply the reasonableness needed to uphold the noncompetition or nonsolicitation provisions might suffice to overcome a demurrer.
What remains unspoken by this recent appellate decision, however, is whether “argument” about evidence should be accepted by trial courts to cure a substantive pleading defect. A demurrer, after all, tests whether a charging pleading states a particular claim. Given this bedrock statutory function of a demurrer, and in the absence of well-pleaded factual allegations to support the reasonableness of a restrictive covenant, it may be going too far to say that the Supreme Court of Virginia has foreclosed the demurrer from remaining a viable defensive pleading whenever the enforceability of noncompetition and nonsolicitation provisions is in dispute. The case is Assurance Data, Inc. v. Malyevac (Va. 2013).