## Facts

- Partners operating Reliance Finance Company, a small-loan business in Mobile, employed H. E. Stokes as manager under a written agreement dated March 20, 1950.
- The agreement set a monthly salary, did not specify a fixed term, and allowed Stokes to resign by written notice effective no earlier than two weeks after notice.
- The agreement provided that if Stokes’s employment ended “for any reason,” he would not engage in the same or similar business in Mobile, for himself or another, for one year after termination.
- The agreement contemplated equitable enforcement and included a liquidated-damages provision of $500 per violation (with potential adjustment if greater loss were shown).
- Stokes worked as manager until August 24, 1954, when he voluntarily quit.
- The next day he allegedly began managing and operating a competing small-loan business in Mobile located near Reliance Finance Company, prompting claims that he could exploit customer relationships and confidential business information.
- The partners filed a bill in equity seeking to enforce the restrictive covenant by injunction and to obtain relief consistent with the liquidated-damages provision.

## Issues

1. Whether the one-year restriction limited to the City of Mobile was a valid and enforceable post-employment noncompetition covenant under Alabama law.
2. Whether the pleadings and circumstances justified equitable relief, including a temporary injunction, to restrain competitive activity during the restricted period.
3. Whether a contractual liquidated-damages provision (and the presence of an injunction bond) barred or limited injunctive enforcement.

## Decision

- The Alabama Supreme Court affirmed the order overruling Stokes’s demurrer, holding the bill stated a claim for equitable relief.
- The Court affirmed the decree issuing a temporary injunction restraining Stokes from competing in Mobile for one year from August 24, 1954.
- The Court treated the covenant’s limits (one year; Mobile only) as reasonable for protecting the employer’s business and goodwill given Stokes’s managerial role and access to customer relationships and confidential information.
- The Court held that the availability of liquidated damages did not preclude injunctive relief where damages were difficult to measure and equitable restraint was otherwise justified.

## Legal Principles

- An employee noncompete is enforceable when ancillary to employment and reasonable in duration and geographic scope, and when needed to protect legitimate employer interests such as goodwill and customer relationships.
- Equity may enjoin breach of a restrictive covenant when legal damages are inadequate or not susceptible of accurate computation, including where competitive harm involves loss of customers and goodwill.
- A liquidated-damages clause does not, by itself, bar injunctive enforcement of a valid restrictive covenant; remedies may coexist when the contract and circumstances support equitable relief.
- Requiring an injunction bond can protect the restrained party if the injunction is later dissolved, without negating the court’s power to grant temporary relief.

## Conclusion

The Alabama Supreme Court upheld temporary injunctive enforcement of a manager’s one-year, Mobile-limited noncompete, concluding the restraint was reasonable and that equitable relief was appropriate despite a liquidated-damages provision.


Stokes v. Moore, 77 So. 2d 331 (Ala. 1955)