## Facts

- Morgan Stanley employed Spencer Frisby and Patrick Lovell as brokers in its north Atlanta office selling financial products to customers.
- Each broker signed an employment agreement containing a one-year non-solicitation covenant covering clients within a 100-mile radius whom they “serviced or learned about” during employment.
- On August 3, 2001, both brokers resigned to join a competing firm, PaineWebber.
- Their resignation letters instructed Morgan Stanley to provide their new PaineWebber contact information to customers with whom they had worked.
- Morgan Stanley alleged that after the resignations customer phone numbers in its database became incorrect, and the brokers rapidly solicited former customers through overnight mailings.
- Morgan Stanley alleged that more than 30 customers contacted Morgan Stanley to transfer their accounts to the brokers at PaineWebber.
- Morgan Stanley filed a diversity action seeking a temporary restraining order to enforce the non-solicitation covenant and prevent use of customer information.

## Issues

1. Whether the employment non-solicitation covenant was enforceable under Georgia law governing restrictive covenants.
2. Whether Morgan Stanley satisfied the federal requirements for a temporary restraining order, including a substantial likelihood of success on the merits.

## Decision

- The court denied Morgan Stanley’s motion for a temporary restraining order.
- The court found Morgan Stanley failed to show a substantial likelihood of success on the merits because the non-solicitation covenant was unenforceable under Georgia law.
- The court concluded it could not revise or narrow the covenant to make it enforceable.

## Legal Principles

- A temporary restraining order requires proof of: (1) substantial likelihood of success on the merits, (2) irreparable injury absent relief, (3) balance of harms favoring the movant, and (4) consistency with the public interest.
- Under Georgia law, employment restrictive covenants are restraints of trade and are enforceable only if strictly limited and reasonably necessary to protect the employer’s legitimate interests.
- Georgia courts apply strict scrutiny to restrictive covenants; overbreadth or ambiguity can render the covenant unenforceable.
- Georgia law generally prohibits judicial modification (“blue penciling”) of an unreasonable restrictive covenant; if a material part is unreasonable, the restriction fails as written.
- A non-solicitation clause that extends to customers the employee merely “learned about,” especially when coupled with broad geographic limits, risks functioning as an impermissible de facto non-compete and may be unenforceable.

## Conclusion

The court denied emergency injunctive relief because the non-solicitation covenant’s customer scope and geographic reach were overbroad under Georgia law, and the court lacked authority to rewrite the restriction to create an enforceable contract.


Morgan Stanley DW, Inc. v. Frisby, 163 F. Supp. 2d 1371 (N.D. Ga. 2001)