Vantage Technology, LLC

FILED
October 19, 1999

Cecil Crowson, Jr.
Appellate Court Clerk
IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

VANTAGE TECHNOLOGY, LLC, ) C/A NO.
03A01-9810-CH-00333
)
Plaintiff-Appellant, )
)
)
)
)
v. ) APPEAL AS OF RIGHT FROM THE
) HAMBLEN COUNTY CHANCERY COURT
)
)
)
)
MARK CROSS, )
) HONORABLE THOMAS R. FRIERSON,

Page 1
II
Defendant-Appellee. ) CHANCELLOR

For Appellant For Appellee

J. FORD LITTLE H. SCOTT REAMS
MICHAEL J. KING Taylor, Reams,
Woolf, McClane, Bright, Tilson & Harrison
Allen & Carpenter, PLLC Morristown, Tennessee
Knoxville, Tennessee

OPINION

REVERSED IN PART
AFFIRMED IN PART
REMANDED Susano, J.

Page 2
 Vantage Technology, LLC (“Vantage”) filed this suit

against its former employee, Mark Cross (“Cross”), seeking

injunctive relief and damages for breach of a non-competition

covenant. Following a bench trial, the Chancellor found that

the covenant was unreasonable and unenforceable. Vantage

appeals, raising the following issues for our consideration:

1. Did the trial court err in finding that the
non-competition covenant was unreasonable and unenforceable?

2. Did the trial court err in denying Vantage’s motion to
amend its pleadings to conform to the evidence?

Appellee Cross raises the additional issue of whether the

trial court erred in applying Tennessee law rather than

Illinois law.

I. Facts and Procedural History

A. Vantage’s Business

Vantage’s business involves the rendering of a

service to ophthalmologists in a hospital setting. To best

understand the facts of this case, it is necessary to have an

elementary grasp of cataract surgery logistics, especially as

it relates to the relationships of the parties involved. When

an ophthalmologist determines that a patient needs surgery to

remove cataracts, the physician must then choose, from among

the hospitals at which the doctor has privileges, the facility

Page 3
at which the surgery is to be performed. Because physicians

often prefer to perform surgery with certain equipment,

supplies, and instruments, the presence or absence of these

accouterments at a particular hospital is often the

determining factor in the surgeon’s choice of location. Thus,

hospitals, in competition with one another for facility usage

fees, often seek to attract surgeons by offering the tools

that surgeons prefer. While larger hospitals are generally

able to provide these tools in-house, rural hospitals must

often obtain them from third parties. These third parties,

sometimes referred to as “mobile service providers”, transport

the necessary equipment to the hospital when a surgeon is

scheduled to perform cataract surgery. These mobile service

providers are driven by the same incentives as are the

hospitals — to provide the equipment, supplies, instruments

and services that surgeons prefer.

Vantage, as one of these mobile service providers,

employs technicians to transport the required materials to

rural hospitals and to assist the physicians during surgery.

Cross is a former Vantage technician. For the reasons

outlined above, Vantage has an interest in initiating,

developing, and sustaining relationships not only with

hospitals, but also with the physicians performing cataract

surgery at the hospitals. To initiate such relationships,

Vantage utilizes direct-mailings or face-to-face

demonstrations to sell its services to hospitals. Vantage

Page 4
delegates to the technicians the ongoing task of developing

and sustaining these relationships because a technician is the

primary liaison between Vantage and the doctors and hospitals.

In furtherance of the goal of relationship-building, Vantage

encourages its technicians to use entertainment expense

accounts to purchase meals or gifts for physicians and other

surgical staff.

Another method that Vantage employs to build and

strengthen relationships is the collection and recordation of

surgeon preferences. These “doctor diaries” are used to

record surgeons’ preferences for machine settings, supplies,

and instruments. This information is initially gathered and

logged in by a Vantage salesperson. When a technician is

assigned to a particular surgeon, the technician refers to the

diary to determine what equipment to bring and how to set up

the machine, instruments and supplies. The doctor diaries

also include personal information about the doctor such as

hobbies and interests. Part of the technician’s

responsibility is to record in the doctor diaries any change

in surgeon preferences or problems encountered during surgery.

The technicians are also required to report growth

opportunities of which they become aware during the

performance of their duties.

The primary piece of equipment that Vantage provides

to hospitals is a phacoemulsification machine. This machine

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is used to break cataracts into pieces and remove the pieces

through irrigation and aspiration. Once the cataract is

removed, the surgeon implants an artificial lens into the eye.

Surgery with the machine enables the surgeon to utilize a much

smaller incision which, in turn, allows an easier and shorter

recuperation time for the patient. Additionally, the machines

allow surgeons to perform more cataract surgeries in less time.

In addition to providing the machine, Vantage also

provides supplies, instruments, and technician services. The

technician’s pre-surgery responsibilities include

transportation of the equipment, setting up the machine’s

parameters according to the surgeon’s preferences, tuning the

hand piece, “breaking out” the supplies and instruments, and

preparing the room for surgery. During surgery, the

technician stays by the machine and changes the machine’s

modes by pressing buttons according to the surgeon’s

instructions. The surgeon, not the technician, places the

machine tip to the eye and otherwise operates the machine

during surgery through the use of foot pedals.

No medical training or education is required for

technicians, nor do technicians need to be licensed. One can

be trained to operate the machine in a single day. A trained

technician can set up the parameter preferences in

approximately 15 seconds. A physician can perform surgery

without a technician in the room. Still, a technician’s

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responsibilities require a degree of familiarity with the

machine.

From October, 1994, to August, 1996, Vantage, with

15 to 18 employees, provided mobile services to 70 to 100

hospitals in eight states, including Tennessee. Four

hospitals in Tennessee are relevant to this case: Fort

Sanders-Loudon Medical Center (“Fort Sanders-Loudon”) in

Loudon; Lakeway Regional Hospital (“Lakeway”) in Morristown;

LaFollette Medical Center (“LaFollette”) in LaFollette; and

Fort Sanders-Sevierville Medical Center (“Fort

Sanders-Sevierville”) in Sevierville.

Vantage provided mobile services to Fort

Sanders-Loudon under an exclusive contract from August 15,

1995, to August 14, 1996. After termination of the contract,

Vantage provided services at least once more on September 4,

1996. The primary ophthalmologist performing cataract surgery

at Fort Sanders-Loudon was Dr. Subba Rao Gollamudi.

Vantage provided mobile services to Lakeway under a

one-year, non-exclusive contract beginning on October 1, 1995.

Dr. Gollamudi was also the primary ophthalmologist at Lakeway.

Vantage provided mobile services to LaFollette on

one occasion in 1994. Because LaFollette was, at that time,

satisfied with its own machine and because LaFollette and

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Vantage could not come to an agreement regarding price,

LaFollette did not become a Vantage customer.

Vantage first contacted Fort Sanders-Sevierville in

April, 1998, two months prior to trial.

B. Cross’ Employment with and Departure from Vantage

Cross began employment with Vantage as a technician

in October, 1994. His qualifications for the position

included a bachelor’s of science degree in administrative

management and experience from a variety of jobs. He had no

experience, training or education directly relevant to the

operation of phacoemulsification machines.

In January, 1995, Cross signed a covenant not to

compete, which provides as follows:

[d]uring the term hereof and for a period of three years
thereafter, the Employee shall not compete, directly or
indirectly, with the Company interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise,
between the Company and any customer, client, supplier,
consultant or employees of the Company, including, without
limitation, employing or being an investor (representing more
than a 5% equity interest) in, or officer, director or
consultant to, any person or entity which employs any former
key or technical employee whose employment with the Company
was terminated after the date which is one year prior to the
date of termination of the Employee’s employment therewith.
An activity competitive with an activity engaged in by the
Company shall mean performing services (whether as an
employee, officer, consultant, director, partner or sole
proprietor) for any person or entity engaged in the business
then engaged in by the Company, within 50 miles of any Company
office or Company’s client location.

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The agreement also provides that:

[i]t is the desire and intent of the parties that the
provisions of this Section shall be enforced to the fullest
extent permissible under the laws and public policies applied
in each jurisdiction in which enforcement is sought.
Accordingly, if any particular portion of this Section shall
be adjudicated to be invalid or unenforceable, this Section
shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to
apply only with respect to the operation of this Section in
the particular jurisdiction in which such adjudication is made.

Vantage taught Cross how to perform his duties as a

phacoemulsification technician. Cross spent his first month

of employment with Vantage in 241.5 hours of training. This

training primarily consisted of observing a more senior

Vantage technician during approximately 70 cataract surgeries.

Cross also watched videos and read manuals. During the course

of his employment, Cross attended monthly meetings and also

went to one “wet lab” where he performed a cataract surgery on

a pig’s eye. Most of Cross’ training pertained to two models

of a machine manufactured by Alcon and one model manufactured

by Storz.

After Cross’ initial training, he began to provide

services to hospitals without the supervision of another

Vantage technician. Cross relied on the doctor diaries to

ascertain the preferences of the doctors with whom he worked.

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In addition to the doctor diaries, Cross received schedules

which included not only his own itinerary, but also the names

of the hospitals and doctors for whom his fellow technicians

would be working. Cross testified that, after referring to

the schedules to determine where and with whom he was to work,

he discarded the schedules without having ascertained the

identities of any other Vantage customers. Cross had limited

knowledge of Vantage’s pricing and other terms of Vantage’s

contracts with hospitals.

During his employment with Vantage, Cross serviced

49 hospitals in at least six states. Two of the hospitals

Cross serviced were Fort Sanders-Loudon and Lakeway. At

first, Vantage dispatched several different technicians to

service these two hospitals. By the summer of 1996, however,

Cross was the Vantage technician in the majority of the

surgeries performed at these two hospitals, and had developed

a strong relationship with Dr. Gollamudi.

In the summer of 1996, Vantage informed Cross that

it wanted him to service hospitals in Ohio rather Tennessee.

Cross and Dr. Gollamudi began to discuss the possibility of

Cross working as a technician for Dr. Gollamudi independent of

Vantage, using an Allergan Prestige machine which Dr.

Gollamudi preferred over the machines supplied by Vantage.

Vantage never trained Cross on an Allergan Prestige machine.

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 Around this time, Cross learned from Dr. Gollamudi

that LaFollette was experiencing problems with its

phacoemulsification machine to the point of having to postpone

and cancel surgeries. The Operating Room Director at

LaFollette testified that Cross met her on August 13, 1996, to

discuss the providing of mobile services. Cross did not

mention that he was a Vantage employee. On August 15, 1996,

Cross gave Vantage his two weeks notice. Cross faxed a price

quote to LaFollette on August 16, 1996. On August 19, 1996,

Dr. Gollamudi secured $40,000 from a bank and then loaned the

money to Cross to finance the start-up of Cross’ business,

Southern Surgical Support. Cross used most of the money to

purchase a refurbished Allergan Prestige machine which he

ordered on August 29, 1996, his last day as a Vantage

employee. Cross received the machine on September 2, 1996,

and an Allergan representative, in one day, instructed him in

its operation.

Cross rendered his first service through his new

business on September 10, 1996, at LaFollette. With the help

of Dr. Gollamudi’s influence, Cross began servicing Lakeway

sometime within the next month and Fort Sanders-Loudon in

October, 1996. In November, Dr. Gollamudi introduced Cross to

a partner who performed surgery at Fort Sanders-Sevierville.

Cross began servicing Fort Sanders-Sevierville in January,

1997.

Page 11
 Vantage filed suit on May 16, 1997, alleging that

Cross had breached a valid and enforceable covenant not to

compete. The trial court, finding the covenant unreasonable

and unenforceable, rendered judgment in favor of Cross.

Vantage then appealed.

II. Standard of Review

In this non-jury case, our review is de novo upon

the record, with a presumption of correctness as to the trial

court’s factual determinations, unless the evidence

preponderates otherwise. Rule 13(d), T.R.A.P.; Union Carbide

Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993); Wright v.

City of Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995). The

trial court’s conclusions of law, however, are accorded no

such presumption. Campbell v. Florida Steel Corp., 919 S.W.2d

26, 35 (Tenn. 1996); Presley v. Bennett, 860 S.W.2d 857, 859

(Tenn. 1993).

Our de novo review is subject to the

well-established principle that the trial court is in the best

position to assess the credibility of the witnesses;

accordingly, such determinations are entitled to great weight

on appeal. Massengale v. Massengale, 915 S.W.2d 818, 819

(Tenn.App. 1995); Bowman v. Bowman, 836 S.W.2d 563, 566

(Tenn.App. 1991).

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 III. Analysis

A. Non-Competition Covenant

Covenants not to compete, because they are in

restraint of trade, are disfavored in Tennessee. Hasty v.

Rent-A-Driver, Inc., 671 S.W.2d 471, 472 (Tenn. 1984). As

such, they are construed strictly in favor of the employee. Id

. However, when the restrictions are reasonable under the

circumstances, such covenants are enforceable. Id. The

factors that are relevant in determining whether a covenant

not to compete is reasonable include “the consideration

supporting the agreements; the threatened danger to the

employer in the absence of such an agreement; the economic

hardship imposed on the employee by such a covenant; and

whether or not such a covenant should be inimical to public

interest.” Allright Auto Parks, Inc. v. Berry, 409 S.W.2d

361, 363 (Tenn. 1966).

The first factor, consideration, is not an issue on

appeal. In balancing the other three factors, a threshold

question is whether the employer has a legitimate business

interest, i.e., one that is properly protectable by a

non-competition covenant. See Hasty, 671 S.W.2d at 473.

Several principles guide the determination of

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whether an employer has a business interest properly

protectable by a non-competition covenant. Because an

employer may not restrain ordinary competition, it must show

the existence of special facts over and above ordinary

competition. Id. These facts must be such that without the

covenant, the employee would gain an unfair advantage in

future competition with the employer. Id. Considerations in

determining whether an employee would have such an unfair

advantage include (1) whether the employer provided the

employee with specialized training; (2) whether the employee

is given access to trade or business secrets or other

confidential information; and (3) whether the employer’s

customers tend to associate the employer’s business with the

employee due to the employee’s repeated contacts with the

customers on behalf of the employer. Id. These

considerations may operate individually or in tandem to give

rise to a properly protectable business interest. See, e.g.,

AmeriGas Propane, Inc. v. Crook, 844 F.Supp. 379 (M.D. Tenn.

1993); Flying Colors of Nashville, Inc. v. Keyt, C/A No.

01A01-9103-CH-00088, 1991 WL 153198 (Tenn.App. M.S., filed

August 14, 1991).

1. Specialized Training

An employer does not have a protectable interest in

the general knowledge and skill of an employee. Hasty, 671

S.W.2d at 473. This is not only true of knowledge and skill

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brought into the employment relationship, but also true as to

that acquired during the employment relationship, even if the

employee obtained such general knowledge and skill through

expensive training. See Hasty, 671 S.W.2d at 473 (“general

knowledge and skill appertain exclusively to the employee,

even if acquired with expensive training and thus does not

constitute a protectible [sic] interest of the employer”).

In contrast, an employer may have a protectable

interest in the unique knowledge and skill that an employee

receives through special training by his employer, at least

when such training is present along with other factors tending

to show a protectable interest. Id; Selox, Inc. v. Ford, 675

S.W.2d 474, 476 (Tenn. 1984) (“A line must be drawn between

the general skills and knowledge of the trade and information

that is peculiar to the employer’s business.”) (quoting

Restatement (Second) of Contracts § 188 cmt. g (1981)). See

also Flying Colors of Nashville, 1991 WL 153198 at *5 (holding

that training in specialized techniques and processes of

paint-mixing, together with a special relationship with the

employer’s customers, gives rise to a properly protectable

interest).

Thus, whether an employer has a protectable interest

in its investment in training an employee depends on whether

the skill acquired as a result of that training is

sufficiently special as to make a competing use of it by the

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employee unfair.

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 2. Trade Secrets and Confidential Information

An employer has a legitimate business interest in

keeping its former employees from using the former employer’s

trade or business secrets or other confidential information in

competition against the former employer. Hasty, 671 S.W.2d at

473. A trade secret is defined as any secret “formula,

process, pattern, device or compilation of information that is

used in one’s business and which gives him an opportunity to

obtain an advantage over competitors who do not use it.”

Hickory Specialties, Inc. v. B & L Labs., Inc., 592 S.W.2d

583, 586 (Tenn.App. 1979) (quoting Allis-Chalmers Mfg. Co. v.

Continental Aviation & Eng’g Corp., 255 F.Supp. 645, 653 (E.D.

Mich. 1966)). The subject matter of a trade secret must be

secret and not well known or easily ascertainable. Hickory

Specialties, 592 S.W.2d at 587.

What constitutes “confidential information” is

somewhat less clear. In Heyer-Jordan & Assocs., Inc. v. Jordan

, 801 S.W.2d 814 (Tenn.App. 1990), we held that the identities

of the employer’s customers did not amount to “confidential

business information” within the meaning of the employment

agreement because such information was generally available in

the trade. We reasoned that “confidential information” is

analogous to “trade secret” and that, because customer

identities are not secret, they cannot be considered

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confidential. See also Amarr Co. v. Depew, C/A No.

03A01-9511-CH-00412, 1996 WL 600330, *4-*5 (Tenn.App. W.S.,

filed October 16, 1996) (holding that customer lists, customer

credit information, pricing information, and profit and loss

statements did not constitute confidential information because

such information is easily available from sources other than

the employer).

3. Special Customer Relationships

An employer may also have a legitimate protectable

interest in the relationships between its employees and its

customers. See Hasty, 671 S.W.2d at 473. It is often the

case that the customer associates the employer’s business with

the employee due to the employee’s repeated contacts with the

customer. The employee in essence becomes “the face” of the

employer. This relationship is based on the employer’s

goodwill. The employee’s role in this relationship is merely

that of the employer’s agent. In this role, the employee is

made privy to certain information that is personal, if not

technically confidential. Because this relationship arises

out of the employer’s goodwill, the employer has a legitimate

interest in keeping the employee from using this relationship,

or the information that flows through it, for his own benefit.

This is especially true if this special relationship exists

along with the elements of confidential information and/or

specialized training. For illustrations of this principle,

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see AmeriGas Propane, Inc. v. Crook, 844 F.Supp. 379, 386

(M.D.Tenn. 1993); Ramsey v. Mutual Supply Co., 427 S.W.2d 849,

852 (Tenn.App. 1968); Federated Mut. Implement and Hardware

Ins. Co. v. Anderson, 351 S.W.2d 411, 415 (Tenn.App. 1961);

Arkansas Dailies, Inc. v. Dan, 260 S.W.2d 200, 204-05

(Tenn.App. 1953); Powell v. McDonnell Ins., Inc., C/A No.

02A01-9608-CH-00176, 1997 WL 589232, *5 (Tenn.App. W.S., filed

September 24, 1997); Flying Colors of Nashville, Inc. v. Keyt,

C/A No. 01A01-9103-CH-00088, 1991 WL 153198, *5 (Tenn.App.

M.S., filed August 14, 1991).

4. Application

Vantage argues on appeal that it has a legitimate

business interest in all of the above categories, i.e.,

specialized training, confidential information, and special

customer relationships. The trial court concluded that Cross’

training was “not so unique or specialized as to justify a

covenant not to compete for its protection....” It also held

that Vantage had no legitimate business interest in the

customer lists, pricing levels, and doctor diaries because

such information does not constitute confidential information.

Finally, the trial court found that Vantage does not have a

protectable interest in the relationship arising out of Cross’

direct and repeated contacts with Vantage’s customers because

the hospitals are primarily concerned with quality and price

rather than developing relationships.

Page 19
 While the relevant factors mentioned above must each

be analyzed in isolation, they must also be analyzed in

tandem. When the facts of the instant case are analyzed in

the latter manner, we find and hold that Vantage has

established a legitimate business interest that can be

properly protected by a covenant not to compete.

Cross’ first month of employment was devoted to

training. His first 241.5 hours on the job were primarily

spent in observation of approximately 70 surgeries. After the

initial training period ended, he attended monthly meetings.

In addition to this training, the relationships between

Vantage and the hospitals and surgeons were initiated by

Vantage and were built on the foundation of Vantage’s

goodwill. Any contribution of Cross to the development and

sustenance of these relationships was accomplished in Cross’

role as an agent of Vantage. In performance of this role,

Cross was made privy to surgeon preferences. He had a degree

of knowledge of Vantage’s other customers and the prices it

charged for Cross’ services. Additionally, it was in this

role as Vantage technician that Cross’ relationship with Dr.

Gollamudi was initiated and developed. This relationship, as

well as the information that flowed through it, gives Cross an

unfair advantage in competition against his former employer

because it comes at the expense of his former employer. When

this special relationship is coupled with the training Cross

received from Vantage and the confidential information he

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received while in its employ, the totality of all of this

amounts to a legitimate business interest properly protectable

by a covenant not to compete. 0 To the extent the trial court

found otherwise, we find and hold that the evidence

preponderates against such a finding.

Finding that Vantage has established a protectable

interest, however, does not end our inquiry. According to the

Allright factors, the threatened danger to Vantage’s

protectable interest in the absence of a non-competition

covenant must be balanced against the economic hardship

imposed on Cross by such a covenant. The public interest must

also be considered. Allright Auto Parks, Inc. v. Berry, 409

S.W.2d 361, 363 (Tenn. 1966).

The trial court, apparently relying on its previous

findings of fact, found that “[t]he economic hardship imposed

upon Cross by such a covenant greatly outweighs the threatened

danger to Vantage in the absence of such an agreement.” For

the reasons articulated above, we disagree. If the covenant

is not enforced, Vantage stands to lose its investment in

training Cross and its investment in the development of

customer relationships as well as the effort expended in

gathering information concerning surgeon preferences. If the

covenant is enforced, Cross merely loses that which does not

Page 21
belong to him.

The relevant considerations bearing on the public

interest do not preclude enforcement of the non-competition

covenant. Any restraint on competition has the potential to

increase the cost of what are already expensive health care

services. On the other hand, not enforcing the covenant would

allow Cross to unfairly use the benefits bestowed upon him by

his employer and may result in a disincentive to Vantage to

properly train and inform its employees. Accordingly, we find

that the public interest considerations do not militate

against enforcement of the covenant. We conclude that the

threatened danger to Vantage in the absence of such

enforcement outweighs the economic hardship imposed upon Cross

by enforcement of the non-competition covenant.

To be enforceable, a covenant not to compete must

clear one final hurdle. The scope of a covenant not to

compete must be reasonable in that “the time and territorial

limits involved must be no greater than is necessary to

protect the business interests of the employer.” Allright

Auto Parks, 409 S.W.2d at 363. If the scope of the covenant

is reasonable as written, it will be enforced as written. If

the scope is unnecessarily burdensome to the employee,

however, it will be enforced only “to the extent that [it is]

reasonably necessary to protect the employer’s interest ‘

without imposing undue hardship on the employee when the

Page 22
public interest is not adversely affected.’” Central

Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28, 37 (Tenn.

1984) (quoting in part Ehlers v. Iowa Warehouse Co., 188

N.W.2d 368, 370 (Iowa 1971)). Hence, a court may modify an

unreasonable covenant so as to render it reasonable. To

protect against employers drafting overly broad language

secure in the knowledge that the sole sanction would be

modification to the maximum extent allowed, courts will hold

the entire covenant invalid if credible evidence supports a

finding that the covenant is deliberately unreasonable and

oppressive. Central Adjustment Bureau, 678 S.W.2d at 37.

With respect to territorial limitations, covenants that

embrace an area in which the employee never performed services

are unreasonable unless the employee possesses knowledge of

the employer’s trade secrets. Allright Auto Parks, 409 S.W.2d

at 364.

The covenant at issue in the instant case is rather

inartfully drawn. It essentially prohibits Cross from

competing with Vantage for three years “within 50 miles of any

Company office or Company’s client location.” Vantage’s

rationale for the 50-mile restriction is that surgeons often

serve numerous hospitals within 50 miles of each other, and,

because surgeons are so influential in the hospitals’ choice

of mobile service provider, a provider’s relationship with a

surgeon can translate into relationships with surrounding

hospitals.

Page 23
 We find the 50-mile restriction to be a reasonable

geographical scope with respect to the locations of Vantage’s

customer-hospitals in which Cross served as technician for

Vantage. Vantage’s asserted rationale, however, does not

explain the need for protection of a 50-mile area surrounding

Vantage’s offices. Nor does it explain the need for

protection in areas near hospitals in which Cross never

performed services. The evidence does not suggest that

Vantage deliberately drafted the covenant to be unreasonable

or oppressive. Accordingly, we modify the covenant to

prohibit Cross from competing with Vantage within 50 miles of

any Vantage customer location in which Cross performed

services while a Vantage technician.

There are at least two other problems with the

subject covenant. First, it does not expressly state whether “

within 50 miles” is intended to refer to a radius or driving

distance. Second, the covenant does not state whether the “

Company’s client location” refers to hospitals which were at

one time clients or which were clients at the time of Cross’

termination. Because the agreement is ambiguous, and because

we are to construe covenants not to compete favorably to the

employee, we find and hold that the area of restriction is 50

miles as determined by the shortest driving distance.

Additionally, we hold that the covenant applies only to those

hospitals in which Vantage was regularly providing services at

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the time of Cross’ termination.

With respect to the period of restriction, we hold

that three years is reasonable. See Matthews v. Barnes, 293

S.W. 993, 993, 996 (Tenn. 1927) (five-year covenant held

reasonable); Ramsey v. Mutual Supply Co., 427 S.W.2d 849,

852-53 (Tenn.App. 1968) (five-year covenant held reasonable);

Arkansas Dailies, Inc. v. Dan, 260 S.W.2d 200, 205 (Tenn.App.

1953) (three-year covenant held reasonable); Mike Glynn & Son,

Inc. v. Schang, 1990 WL 7449, *1, *4 (Tenn.App. W.S., filed

February 5, 1990) (three-year covenant held reasonable).

In sum, we hold the following: (1) that Vantage has

established that it has a legitimate, protectable interest;

(2) that the threatened danger to this interest in the absence

of a non-competition covenant outweighs the economic hardship

imposed on Cross resulting from enforcement of the covenant;

(3) that the three-year time period for which Cross is

prohibited from competing with Vantage is reasonable; and (4)

that the geographical scope of the covenant is modified so

that Cross is prohibited from competing with Vantage within 50

miles, shortest driving distance, of any hospital in which

Vantage was regularly providing services at the time of Cross’

termination, but only with respect to those hospitals in which

Cross performed services while a Vantage technician.

On remand, the trial court must determine, according

Page 25
to the parameters we have outlined above, whether and to what

extent Cross has violated his non-competition covenant. If

Cross has violated his covenant, the trial court must

determine the extent of injunctive relief and/or damages to

which Vantage is entitled.

B. Motion to Amend to Conform to the Evidence

The second issue Vantage raises on appeal is whether

the trial court erred in denying Vantage’s motion to amend its

pleadings to conform to the evidence. On May 16, 1997,

Vantage filed suit alleging breach of the covenant not to

compete. Vantage did not assert breach of duty of loyalty as

a cause of action. On June 30, 1998, the parties proceeded to

the first day of trial. Vantage examined, and Cross

cross-examined, four witnesses. The court then adjourned

until July 13, 1998. On July 7, 1998, Vantage filed a motion

to amend the pleadings to conform to the evidence seeking to

add a breach of duty of loyalty cause of action. The court

heard the motion on July 13, 1998, and denied it, finding that

the issue had not been tried by express or implied consent and

that an amendment at that time would result in prejudice to

Cross.

In determining whether to grant or deny a motion to

amend the pleadings to conform to the evidence 2, “the most

important question is whether the new issues were tried by the

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parties’ express or implied consent and whether the defendant ‘

would be prejudiced by the implied amendment, i.e., whether he

had a fair opportunity to defend and whether he could offer

any additional evidence if the case were to be retried on a

different theory.’” Zack Cheek Builders, Inc. v. McLeod, 597

S.W.2d 888, 891 (Tenn. 1980) (quoting Browning Debenture

Holders’ Comm. v. Dasa Corp., 560 F.2d 1078, 1086 (2d Cir.

1977). Presentation of evidence that is relevant to both a

pled issue and a non-pled issue does not establish trial of

the non-pled issue by implied consent. Hiller v. Hailey, 915

S.W.2d 800, 805 (Tenn.App. 1995). Whether the issue has been

tried by implied consent is a decision resting within the

sound discretion of the trial court, and, as such, it cannot

be disturbed on appeal absent an abuse of discretion. Zack

Cheek Builders, 597 S.W.2d at 891.

Here, Vantage seeks to amend the pleadings to

include a breach of duty of loyalty claim based on certain

evidence elicited on the first day of trial. Vantage asserts

that it did not learn until the first day of trial that Cross

personally solicited LaFollette two days before giving his

notice of termination to Vantage. Vantage contends that this

evidence is relevant only to a breach of duty of loyalty

claim. It also asserts that this issue was tried by implied

consent because Cross’ attorney examined two witnesses

regarding the timing of Cross’ solicitation of LaFollette for

himself. Cross responds with the argument that the facts

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surrounding the timing of his personal solicitation of clients

is relevant to the breach of the non-competition covenant,

especially as it relates to the calculation of damages should

he be found to be in violation of the covenant. Thus, Cross

argues that he did not expressly or impliedly try the breach

of duty of loyalty claim, and that the amendment after

witnesses have been dismissed would be prejudicial to his case.

On the second day of trial, after denial of the

motion to amend, counsel for Vantage questioned Cross about

when Cross established his own business. In response to an

objection based on relevancy, i.e., that the question was

outside the scope of the pleadings, counsel for Vantage stated

that “[i]f the gentleman is out competing directly with his

employer during the actual employment with the employer, that’s

certainly relevant to the facts of this case.” We agree with

Cross and Vantage’s counsel that the evidence surrounding the

timing of Cross’ solicitation of LaFollette is relevant to the

alleged violation of the non-competition covenant. Moreover,

by the time the motion was filed, four witnesses had been

examined and dismissed. Granting the motion would have

resulted in Cross not being given fair notice or an

opportunity to present evidence relevant to a cause of action

alleging breach of duty of loyalty. Accordingly, we find that

the trial court did not abuse its discretion in denying Vantage

’s motion to amend its pleadings to conform to the evidence.

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 C. Choice of Law

Cross raises as an issue on appeal whether the trial

court erred in applying Tennessee law rather than Illinois law

in determining the enforceability of the covenant not to

compete. The basis for the trial court’s decision regarding

choice of law is paragraph 2(b) of the agreement not to

compete signed by Cross. This paragraph provides as follows:

[i]t is the desire and intent of the parties that the
provisions of this Section shall be enforced to the fullest
extent permissible under the laws and public policies applied
in each jurisdiction in which enforcement is sought.
Accordingly, if any particular portion of this Section shall
be adjudicated to be invalid or unenforceable, this Section
shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to
apply only with respect to the operation of this Section in
the particular jurisdiction in which such adjudication is made.

The goal of contract interpretation is to ascertain

the intent of the parties according to the usual, natural, and

ordinary meaning of the words used by the parties. Guiliano

v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999). Any ambiguity

is to be construed against the drafter. Spiegel v. Thomas,

Mann & Smith, P.C., 811 S.W.2d 528, 531 (Tenn. 1991).

Contracts must be construed, as far as is reasonable, so as to

give effect to every term. Wilson v. Moore, 929 S.W.2d 367,

373 (Tenn.App. 1996). Interpretation of a contract, being a

matter of law, is subject to de novo review with no

presumption of correctness. Guiliano v. Cleo, 995 S.W.2d 88,

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95 (Tenn. 1999); Campbell v. Florida Steel Corp., 919 S.W.2d

26, 35 (Tenn. 1996); Presley v. Bennett, 860 S.W.2d 857, 859

(Tenn. 1993).

Tennessee follows the rule of lex loci contractus.

This rule provides that a contract is presumed to be governed

by the law of the jurisdiction in which it was executed absent

a contrary intent. Ohio Cas. Ins. Co. v. Travelers Indem. Co.,

493 S.W.2d 465, 467 (Tenn. 1973).

If the parties manifest an intent to instead apply

the laws of another jurisdiction, then that intent will be

honored provided certain requirements are met. The choice of

law provision must be executed in good faith. Goodwin Bros.

Leasing, Inc. v. H & B Inc., 597 S.W.2d 303, 306 (Tenn. 1980).

The jurisdiction whose law is chosen must bear a material

connection to the transaction. Id. The basis for the choice

of another jurisdiction’s law must be reasonable and not

merely a sham or subterfuge. Id. Finally, the parties’

choice of another jurisdiction’s law must not be “contrary to ‘

a fundamental policy’ of a state having [a] ‘materially

greater interest’ and whose law would otherwise govern.” Id,

n.2 (citing Restatement (Second) of Conflict of Laws § 187(2)

(1971)).

In a February 13, 1998, memorandum opinion relating

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to this issue, the trial court made the following findings of

fact: (1) both parties executed the agreement in good faith;

(2) Tennessee had a direct and relevant connection with the

transaction in question; (3) there was no evidence of sham or

subterfuge; and (4) there was no evidence that Illinois had a

materially greater interest. The trial court also concluded,

as a matter of law, that the provision was both a choice of

law clause and a separability clause and that the parties

intended to be governed by the laws of the State of Tennessee

in the event a party sought enforcement of the contract in

this state. Based on this conclusion and its findings of

fact, the trial court held that Tennessee law applied to the

analysis of the covenant not to compete.

Cross argues on appeal that the trial court erred in

applying Tennessee rather than Illinois law. He contends that

the provision is solely a separability provision because it

provides for modification in the event that any portion is

adjudicated invalid or unenforceable. Additionally, Cross

notes that the provision does not refer to a particular

foreign jurisdiction, but rather refers to the laws of “each

jurisdiction in which enforcement is sought.” In so doing, he

argues, the provision does not promote the goal of certainty,

predictability and uniformity because it necessarily mutates

according to the jurisdiction in which Vantage seeks to

enforce the agreement. Vantage responds that the first

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sentence of the provision is a choice of law clause and that

ignoring it would amount to a finding that it is meaningless,

a result that offends the established rule that contracts must

be construed, as far as is reasonable, so as to give effect to

every term.

We find that the trial court did not abuse its

discretion in finding that the contract was executed in good

faith, that Tennessee had a reasonable relation to the

transaction, and that there was no evidence of improper

purpose or that Illinois had a materially greater interest

than Tennessee. Moreover, we agree that the provision is both

a choice of law clause and a separability clause. To construe

the first sentence of paragraph 2(b) of the agreement as

anything other than a choice of law clause would be to ignore

the clear intent of the parties and thus render the sentence

meaningless. That the clause, in tandem with the separability

clause, might result in a different outcome depending on the

jurisdiction in which it is enforced is not an impediment to

our decision. This is so because our exercise of jurisdiction

over this matter is proper. Our decision is entitled to full

faith and credit even though it affects the rights and

obligations of the parties with respect to areas outside of

Tennessee. Hence, as between Vantage and Mark Cross, the

matter may not be re-litigated in another jurisdiction, and as

such, the choice of law provision does not offend the goal of

certainty, predictability and uniformity. We therefore hold

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that the provision is a valid choice of law provision and that

the trial court was correct in applying Tennessee, rather than

Illinois, law.

IV. Conclusion

The judgment of the trial court is reversed in part,

affirmed in part and remanded for further determinations

consistent with this opinion. Exercising our discretion, we

tax the costs on appeal half to each party.

_________________________
Charles D. Susano, Jr. J.

CONCUR:

_________________________
Houston M. Goddard, P.J.

(Not Participating)
William H. Inman, Sr.J.

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