Holloway v. Faw, Casson & Co.

RODOWSKY, Judge. This is an action for money damages brought by a firm of accountants against a former partner based on breaches of provisions in the written partnership agreement governing voluntary withdrawal. The controversy focuses on the withdrawing partner’s promise to pay to the firm, in the event a client of the firm engages the services of the former partner in that person’s new practice of public accountancy, an amount equal to the firm’s billings to that client for the twelve months preceding that engagement. The former partner principally contends that the provision is an illegal restraint of trade which is totally void.

The trial court and the Court of Special Appeals held, inter alia, that the five year restriction is void, but that it could be judicially modified to three years and, as modified, enforced. Holloway v. Faw, Casson & Co., 78 Md.App. 205 , 552 A.2d 1311 (1989). We shall hold, as hereinafter explained, that the provision is severable on a client by client basis. Hence ³²⁷ we do not reach whether the rule applied by the lower courts is part of Maryland law.

The accounting firm is Faw, Casson & Co. (FC). The withdrawing partner is Robert E. Holloway, C.P.A. (Holloway). The relevant partnership agreement is that effective as of June 1, 1980 (the Agreement).

Holloway had been initially employed by FC as a staff accountant upon his graduation from college in 1968. He progressed from junior accountant, to senior accountant, to supervisor, to manager and, in 1979, to partner. Holloway voluntarily withdrew from FC on December 8, 1984. At that time FC maintained offices in Salisbury, Ocean City, Easton and Annapolis, Maryland and in Dover, Wilmington, Georgetown, Milford and Rehobeth, Delaware.

Holloway had worked for a number of years out of FC’s Ocean City office and was one of the partners in the Salisbury office when he withdrew. Holloway left FC to practice with another public accounting firm, Twilloy & Rommel, which was also located in Salisbury within five miles of the FC office there. At the time Holloway mailed his resignation to his FC partners, he also mailed an announcement of his new professional affiliation to FC’s clients. At least 171 of them followed him to his new firm.

In 1987 Holloway left Twilley & Rommel and formed a new firm, also in Salisbury. Paragraph XXI of the Agreement, dealing with voluntary withdrawal from the firm, includes provision for a five year payout by FC to a former partner of the latter’s capital account. The paragraph also addresses competition between a withdrawing partner and FC: “Any partner withdrawing from the partnership voluntarily or involuntarily hereby covenants and agrees that he or she will not engage in the general practice of public accountancy or any of its allied branches, either individually or with any other person, firm or corporation, either directly or indirectly, at any place within a forty mile radius of any of our offices for a period of five years from the date of such withdrawal. If within these limits the partner engages in the general practice of public ³²⁸ accountancy or any of its allied branches, either individually or with any other person, firm or corporation, he or she agrees to pay Faw, Casson & Co. or its successor, 100% of the prior year’s fee for any clients that were Faw, Casson & Co.’s who engage the services of the withdrawing partner during the five year period.

Any amounts due such partner under item XVII shall be forfeited by such partner. However, such forfeited vested amounts will be used to offset payments above. If there is a balance due Faw, Casson & Co. after offsetting of vested amounts, the partner’s individual capital account will be used to offset the balance. Any remaining balance will be secured by a note to Faw, Casson & Co. from the partner payable over a three year period.” Paragraph XVII deals with continued income participation (CIP).

CIP payments are equal, monthly payments made by FC, without interest, to a terminated partner for a period of ten years following termination. In broad outline computation of one’s CIP payment involves several steps. Annually FC determined as to each partner the product of the firm’s gross professional fees for the year multiplied by that partner’s distribution percentage. FC partners earned a “vested” interest in the respective amounts so determined at rates set forth in schedules in the Agreement.

Holloway, who had six years service as a partner, had thirty percent of his current CIP vested. For the fiscal year ending May 31, 1984, Holloway’s 100% CIP figure was $118,416 and his vested portion was $35,525. FC filed a complaint in the Circuit Court for Wicomico County against Holloway in February 1986 seeking damages pursuant to Paragraph XXI. No injunctive relief has ever been claimed by FC.

Indeed, FC disclaims that it is available under Paragraph XXI. Holloway filed a counterclaim seeking damages for breach of express contract, for breach of quasi-contractual obligations, and for conversion, and seeking a declaratory judgment that Paragraph XXI of the Agreement was invalid. ³²⁹ The circuit court decided the validity of Paragraph XXI on cross motions for partial summary judgment. Before addressing the validity of the paragraph, that court interpreted the Agreement in three aspects. The trial judge read “100% of the prior year’s fee for any clients” to refer to the twelve months prior to a client’s going with the partner who withdrew.

The language “any place within a forty mile radius of any of our offices” was interpreted to apply only to offices in existence at the time a partner withdrew. Further, the court concluded that, although Paragraph XXI contained a covenant against competition, the Agreement limited the remedy to damages calculated as set forth in the Agreement, so that injunctive relief would not be available even if it had been sought by FC. The court then undertook an analysis of Paragraph XXI under the law applicable to covenants not to compete with an employer, made by an employee, ancillary to an existing employment relationship, and relating to post employment activity by the employee. The trial judge concluded that the covenant was unreasonable in that its terms could include clients who might first become FC clients after Holloway left but who then might decide to engage Holloway.

Further, the court thought that three years would be a reasonable duration of the covenant. The court reasoned that “once the partner ... has been completely away from Faw, Casson for that three year period of time ... any client-accountant relationship I think would clearly have been severed ... and if there were any future contacts between the accountant and client, it would not have been something that was generated by virtue of their employment with Faw, Casson. I believe that it is unreasonable for five years but not as to three.” The circuit court then applied a rule which has been blessed by the legal commentators and applied by some courts. It is described by its proponents as partial enforcement of a restrictive covenant and by its detractors as ³³⁰ judicial rewriting of a contract.

The circuit court adjudicated that “the provisions of Paragraph XXI of [PC's] partnership agreement relating to payments to be made by withdrawing partners who provide services to clients of Paw, Casson & Co. after their withdrawal are declared to be reasonable and valid as a matter of law with respect to the clients of Paw, Casson & Co. who engage their services within three years from the dates of their withdrawals from Paw, Casson & Co.” Trial was had before a jury on December 7 and 8, 1987. FC presented proof in support of damages in the amount of $95,976, including prejudgment interest. PC listed in an exhibit the names and former account numbers of some 171 clients whom FC contended had followed Holloway in his new practice. Next to each name PC set forth the professional fee earned by it for work done for that client in the twelve months preceding December 3, 1984.

There was no objection to the period selected for the damage computation which in effect treated each former PC client as having changed accountants on the date Holloway withdrew. These fees totaled $160,194. FC credited Holloway with $37,417, representing Holloway’s capital account, and with $35,525, representing Holloway’s vested CIP, leaving a balance due of $87,252. Under the Agreement, this balance was payable over three years, in equal annual payments of $29,084, beginning December 3, 1985.

PC also claimed $8,724 in interest at the rate of ten percent per year on the deferred installments, for a total claim of $95,976. In his direct testimony in the defendant’s case, Holloway identified the names on PC’s damage computation exhibit as “a list of my clients that I was servicing at Paw, Casson.” He stated that he did not contest that he has “serviced them at some point in time since [his] departure from Faw, Casson.” Neither party sought, through the proffer of factual evidence, to reopen the interlocutory declaratory judgment on the issue of contract validity. The case was submitted to ³³¹ the jury on questions of damages and prejudgment interest only. The jury returned a verdict of $75,655.90 in damages and $6,367.59 in prejudgment interest in favor of FC. 1 Holloway appealed and FC cross appealed to the Court of Special Appeals.

In all material respects the Court of Special Appeals, by a divided panel, affirmed the circuit court. 2 The Court of Special Appeals analyzed the validity of the Agreement’s Paragraph XXI by relying to a considerable extent on law developed in cases involving covenants not to compete made ancillary to employment. That court applied a rule of reason which weighed the interests of employer, employee and the public. The court concluded that FC had a protectable interest in existing clients, but vis-a-vis Holloway, only as to clients with whom Holloway came in contact. From the standpoint of the effect on Holloway, the court concluded that the covenant was not per se invalid, particularly in the form to which the majority of the panel in the Court of Special Appeals intended to modify the covenant as written.

Although viewing the issue as a close one, the Court of Special Appeals concluded that the public interest permitted restrictive covenants in the public accountancy profession. The panel majority held that the fourth and fifth years of the covenant’s duration created an invalid restriction, and that the class of clients within the covenant would have to be limited to those with whom Holloway had had direct contact, in order for the restriction to be valid. Under that ³³² analysis the provision excluding Holloway from competition in areas within a forty mile radius of any FC office became a limitation on FC’s rights. Thus it was unnecessary for the majority to decide the reasonableness of the area encompassed by the restriction.

Finally, on the contract construction phase of the case, the Court of Special Appeals concluded that the provision for damages in Paragraph XXI was intended as a substitute for any other remedy, so that injunctive relief would not be available. The panel majority, after reviewing the principal authorities concerning restrictions against competition which are valid in part and invalid in part, concluded that it should adopt and apply the doctrine of partial enforcement. The majority would enforce the covenant for the three years, as would the circuit court, but only as to clients with whom Holloway had had “direct contact.” Chief Judge Gilbert, in dissent, was “unable to accept the proposition that courts should rewrite agreements in order to save the parties from themselves.” 78 Md.App. at 251 , 552 A.2d at 1334 . The Court of Special Appeals then turned to Holloway’s alternative arguments which characterized the damage provisions in Agreement Paragraph XXI as invalid penalties which were not proper liquidated damage provisions.

The court held valid the requirement for payment by Holloway, over a three year period, of an amount equal to a client’s prior year’s fees. This requirement bore a reasonable relation to actual damages, particularly in the light of evidence that substantially the same standard is used for valuing accounting practices when they are bought and sold. Forfeiture of CIP, on the other hand, bore no reasonable relationship to actual damages and was not an enforceable liquidated damage provision. This conclusion did not affect the judgment under review because Holloway’s CIP had been offset against the principal amount of his obligation under the “liquidated damage” clause. 3 ³³³ Holloway petitioned, and FC cross petitioned, for the writ of certiorari which we issued.

In combination the certiorari petitions raise ten questions for review. We shall answer them in the course of our discussion, and not by the numbers. I. A. The covenants in Paragraph XXI are sufficiently similar to covenants not to compete to invoke, in general, the analysis applied under the law bearing on covenants not to compete. In Food Fair Stores, Inc. v. Greeley, 264 Md. 105 , 285 A.2d 632 (1972), this Court reasoned that a provision in the corporate pension plan there involved, under which benefits accrued under the plan were forfeited if the employee engaged in a competing business, did not differ from a covenant not to compete.

Greeley focused on the fact that a total prohibition against competition, enforced by a forfeiture of accrued benefits, subjected the employee to an economic loss designed to deter competition. See id. at 116 , 285 A.2d at 638 ; see also MacIntosh v. Brunswick Corp., 241 Md. 24, 30 , 215 A.2d 222, 225 (1965) (forfeiture of deferred bonus upon competition with former employer contained in revised bonus plan “constituted an unlawful restriction on the employee to seek similar employment elsewhere”). The one year’s fees clause and the forfeiture provision in Holloway’s agreement are similarly designed to protect FC from the loss of clients by reducing the economic benefit which a withdrawing partner might otherwise derive from rendering services to former clients of the firm. Many jurisdictions which have addressed the validity of somewhat comparable damage clauses in employment contracts or partnership agreements analyze the provisions as restrictive covenants.

See, e.g., Olliver/Pilcher Ins., Inc. v. ³³⁴ Daniels, 148 Ariz. 530, 531-32 , 715 P.2d 1218, 1219-20 (1986); Rhoads v. Clifton, Gunderson & Co., 89 Ill.App.3d 751 , 44 Ill.Dec. 914 , 411 N.E.2d 1380 (1980); Philip G. Johnson & Co. v. Salmen, 211 Neb. 123, 127-28 , 317 N.W.2d 900, 903 (1982); Smith, Batchelder & Rugg v. Foster, 119 N.H. 679 , 406 A.2d 1310 (1979); McElreath v. Riquelmy, 444 S.W.2d 853 (Tex.Civ.App.1969); Foti v. Cook, 220 Va. 800 , 263 S.E.2d 430 (1980); Perry v. Moran, 109 Wash.2d 691 , 748 P.2d 224 (1987), modified on other grounds on reconsideration, 111 Wash.2d 885 , 766 P.2d 1096 , cert. denied, — U.S. -, 109 S.Ct. 3228 , 106 L.Ed.2d 577 (1989); Knight, Vale & Gregory v. McDaniel, 37 Wash.App. 366 , 680 P.2d 448 , rev. denied, 101 Wash.2d 1025 (1984); see also Follmer, Rudzewicz & Co. v. Kosco, 420 Mich. 394, 408 , 362 N.W.2d 676, 683 (1984) (“whether such an agreement is characterized as in restraint of trade or not, it must be reasonable to be enforced”). B. The enforceability of a covenant not to compete depends on the facts of a given case. See Millward v. Gerstung Int’l Sports Educ., Inc., 268 Md. 483, 488 , 302 A.2d 14, 16 (1973); Ruhl v. F.A. Bartlett Tree Expert Co., 245 Md. 118, 123-24 , 225 A.2d 288, 291 (1967). In Maryland, as in most jurisdictions, the general rule “is that ‘restrictive covenants in a contract of employment, by which an employee as a part of his agreement undertakes not to engage in a competing business or vocation with that of his employer on leaving the employment, will be sustained “if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of ’the employer and do not impose undue hardship on the employee or disregard the interests of the public.” ’ ” Ruhl, 245 Md. at 123-24 , 225 A.2d at 291 (quoting MacIntosh v. Brunswick Corp., 241 Md. at 31 , 215 A.2d at 225 (1965)); see also Becker v. Bailey, 268 Md. 93, 96 , 299 A.2d 835, 838 (1973); Gill v. Computer Equip.

Corp., 266 Md. ³³⁵ 170, 180, 292 A.2d 54, 59 (1972); Tuttle v. Riggs-Warfield-Roloson, Inc., 251 Md. 45, 49 , 246 A.2d 588, 590 (1968); Silver v. Goldberger, 231 Md. 1, 6 , 188 A.2d 155, 158 (1963). Persons in business have a protectable interest in preventing an employee from using the contacts established during employment to pirate the employer’s customers. See Millward, 268 Md. at 489 , 302 A.2d at 17 ; Becker v. Bailey, 268 Md. at 97-98, 299 A.2d at 838-39 ; Tuttle, 251 Md. at 49-50 , 246 A.2d at 590 ; Ruhl, 245 Md. at 124-25 , 225 A.2d at 291-92 . Thus in Silver v. Goldberger, this Court stated: “There is a line of cases which holds that restraint is justified if a part of the compensated services of the former employee consisted in the creation of the good will of customers and clients which is likely to follow the person of the former employee.

And there is another line of cases which holds that restraint is not justified if the harm caused by service to another consists merely in the fact that the former employee becomes a more efficient competitor just as the former employer did through having a competent and efficient employee. See 6A Corbin, Contracts, § 1394.” 231 Md. at 7 , 188 A.2d at 158 (footnote omitted) (emphasis in original). Illustrating the latter is Budget Rent A Car, Inc. v. Raab, 268 Md. 478 , 302 A.2d 11 (1973) (operation of car rental franchise did not create contact with customers as an integral part of the job). Illustrating the former is Tuttle v. Riggs-Warfield-Roloson, supra (insurance agent’s former representative enjoined from servicing clients of agent).

The case at hand involves a protectable interest of FC. Holloway was in a position to establish a personal relationship with FC’s clients. If Holloway left the firm it could be anticipated that those clients would follow him. That an accounting firm has a legitimate and protectable interest in the ongoing business relationship it has established with its ³³⁶ clients has been recognized in Faw, Casson & Co. v. Cranston, 375 A.2d 463, 468 (Del.Ch.1977); Rhoads v. Clifton, Gunderson & Co., 89 Ill.App.3d 751, 754 , 44 Ill.Dec. 914, 917 , 411 N.E.2d 1380, 1383 (1980); Ebbeskotte v. Tyler, 127 Ind.App. 433, 440-41 , 142 N.E.2d 905, 909 (1957); Scott v. Gillis, 197 N.C. 223, 227 , 148 S.E. 315, 317 (1929); McElreath v. Riquelmy, 444 S.W.2d 853, 856 (Tex.Civ.App.); Perry v. Moran, 109 Wash.2d 691, 700 , 748 P.2d 224, 229 ; Racine v. Bender, 141 Wash. 606 , 252 P. 115 (1927); Knight, Vale & Gregory v. McDaniel, 37 Wash.App. 366, 369-70 , 680 P.2d 448, 452 .

The issues in the present case revolve around whether the protection FC sought exceeds its legitimate interest, imposes too harsh a burden on Holloway or clashes with the public interest. C. Holloway “goes for the jugular” by arguing that covenants against competition between accountants should be per se unlawful as violative of Maryland public policy. He likens the accountant-client relationship to the lawyer-client relationship and argues that the policy underlying the prohibition against noncompetition agreements between attorneys should be judicially applied to the accounting profession. See Maryland Rules of Professional Conduct, Rule 5.6(a).

In support, Holloway sees Md.Code (1974, 1989 Repl.Vol.), § 9-110 of the Courts and Judicial Proceedings Article (CJ) as a legislative finding “that the accountant-client relationship is entitled to extraordinary considerations.” There is a fiduciary relationship between accountant and client and that feature distinguishes the accounting profession from a typical commercial business. See Mailman, Ross, Toyes & Shapiro v. Edelson, 183 N.J.Super. 434, 443-44 , 444 A.2d 75, 80 (1982) See generally Pachman, Accountants and Restrictive Covenants: The Client Com ³³⁷ modity, 13 Seton Hall L.Rev. 312 (1983). Thus, in Edelson the court stated: “Accountants are not commercial business people like the salespersons restricted by noncompetition agreements in Solari [Indus., Inc. v. Malady, 55 N.J. 571 , 264 A.2d 53 (1970)] and Whitmyer [Bros., Inc. v. Doyle, 58 N.J. 25 , 274 A.2d 577 (1971)]. Accountants, like doctors and lawyers, are engaged in a profession which necessarily requires clients to reveal personal and confidential information to them in the course of the professional relationship.

Like the lawyer-client relationship characterized in Dwyer [v. Jung, 133 N.J.Super. 343 , 336 A.2d 498 (Ch. Div.1975)], the accountant-client relationship is consensual and fiduciary, and the right of the client to repose confidence in the accountant of his or her choice should not readily be circumscribed. It is this distinction between restrictive covenants in a commercial or business setting, where primarily economic interests are at stake, and those binding professionals who depend largely on unconditional confidential relationships to serve their clients satisfactorily, which underscores the greater degree of injury to the public that may occur in the latter instance.” 183 N.J.Super. at 443-44 , 444 A.2d at 80 (footnote omitted). As far as we are informed by counsel and as our own research discloses, only Smith, Batchelder & Rugg v. Foster, 119 N.H. 679, 685 , 406 A.2d 1310, 1313 , and Edelson, 183 N.J.Super. at 443-44 , 444 A.2d at 79-80 , have held a restrictive covenant to be unreasonable because it adversely affected the public’s ability to choose an accountant.

Neither court, however, proposed that restrictive covenants between accountants were per se unreasonable. We recognize that an accountant becomes privy to the confidential details of a client’s financial affairs and often guides the client through the complexities of the tax code. Nevertheless, the relationship does not require a judicially adopted ban against an accountant’s voluntarily entering into a reasonable agreement restricting access to a given ³³⁸ market. The better argument lies with those courts that reject a per se rule.

See Faw, Casson & Co. v. Cranston, 375 A.2d at 467-68 ; Ebbeskotte v. Tyler, 127 Ind.App. at 440-41 , 142 N.E.2d at 909 ; Knight, Vale & Gregory v. McDaniel, 37 Wash.App. at 370-71 , 680 P.2d at 452 . In Faw, Casson & Co. v. Cranston, supra, the defendant also argued, based on the analogy between accountants and lawyers, that no-compete clauses between accountants were per se illegal. The court pointed out that no ethical rule, similar to the one regulating attorneys, banned restrictive covenants in the accounting profession. 375 A.2d at 468 . In addition the evidence in that case suggested that non-competition agreements were widely used in the accounting profession. 4 Id.

The court found that the restrictive covenant represented a legitimate means for protecting the ongoing business of the accounting firm. See id. For like reasons, courts have rejected a per se prohibition against noncompetition agreements between physicians. See, e.g., Karlin v. Weinberg, 77 N.J. 408, 417-21 , 390 A.2d 1161, 1166-68 (1978) (distinguishing between attorneys and physicians).

Warfield v. Booth, 33 Md. 63 (1870) enforced a covenant which was ancillary to the sale of a medical practice without any issue of per se invalidity having been raised. See generally Annot., Validity & Construction of Contractual Restrictions on Right of Medical Practitioner to Practice, Incident to Employment Agreement, 62 A.L.R.3d 1014 (1975). Nothing in CJ § 9-110 suggests that the General Assembly intended a blanket prohibition against noncompetition agreements between accountants. Nor will we fashion one.

The rule of reason by which current Maryland common law tests the validity of restrictive covenants considers the ³³⁹ public interest as a factor. Holloway has not convinced us that, when applied to the accountants’ profession, the current rule fails adequately to protect the public. D. By Paragraph XXI Holloway agreed that he “will not engage in the general practice of public accountancy ... at any place within a forty mile radius of any of [FC’s] offices for a period of five years from the date of [Holloway’s] withdrawal.” The Agreement expressly provides two remedies for FC if the noncompetition covenant is breached. First, the competing former partner “agrees to pay [FC] 100% of the prior year’s fee for any clients that were [FC’s] who engage the services of the withdrawing partner during the five year period.” Second, “[a]ny amounts due such partner [in CIP payments] shall be forfeited by such partner.” The Agreement further provides that vested CIP will be initially applied toward satisfying an obligation to pay one year’s fees, and next the withdrawing partner’s capital account will be applied against that obligation.

If any balance remains due from the withdrawing partner to FC after application of those credits, the Agreement contemplates that the former partner will execute a note to FC, payable over three years, evidencing that balance. 1. Whether the noncompete covenant, when combined with the CIP forfeiture, is invalid either as a restraint of trade or as a penalty, is immaterial to the outcome of this case. If the covenant, enforced by the forfeiture remedy, is valid, the Agreement dictates that the “forfeited” amount be applied, before applying the withdrawing partner’s capital, against the obligation to pay the equivalent of one year’s fees per client. Here the jury’s verdict quantified that obligation in an amount exceeding the total of Holloway’s vested CIP and capital and the CIP was credited against the fee equivalent obligation of Holloway.

If the noncompete covenant, enforced by the CIP forfeiture, is invalid, then ³⁴⁰ Holloway would have a right to be paid his CIP (over ten years, as agreed), unless Holloway were indebted to FC so that FC could set off, against its debt to Holloway, Holloway’s debt to FC. Here, per the verdict, Holloway’s debt to FC exceeds the total of payments of vested CIP otherwise to be made by FC to Holloway. If the restrictive covenant enforced by forfeiture is invalid, FC still has a right of set off and the result of invalidity in this case is the same as it would be were the restriction, enforced by forfeiture, valid. 2. Our conclusion that the validity vel non of the restriction when enforced by CIP forfeiture is immaterial does not deprive Holloway of a weapon which he could use to assault the validity of the restriction when enforced by the fee equivalent payment obligation.

This is because the CIP forfeiture provision is a separate, free standing remedy, independent of the fee equivalent provision. Under a strict reading of Paragraph XXI, a partner withdrawing from FC who engages in the general practice of public accountancy within five years in the delineated areas forfeits CIP even if that former partner never renders any service for an FC client. Under a literal reading of Paragraph XXI, FC in that instance could retain CIP but would have no claim for one year’s fees of any client because FC would not have lost any client to the withdrawing partner. In other words, the CIP forfeiture provision is severable in the classic sense.

The principal is illustrated by Tawney v. Mutual Sys. of Md., Inc., 186 Md. 508 , 47 A.2d 372 (1946). The field of business activity involved in that case was “small” loans, i.e., consumer loans máde pursuant to a special statute by regulated lenders who are permitted to charge interest higher than that permitted by the general usury statute. The plaintiff was a small loan company which had been active in areas outside of Baltimore City and which had begun doing business in Baltimore City by acquiring a portfolio of loans from other small loan companies. The defendant managed the plaintiff’s Baltimore office pursu ³⁴¹ ant to an agreement which contained various restrictions.

Paragraphs (J), (K) and (L) prohibited the defendant from disclosing, or using for competitive purposes, customer information for three years following termination of employment. Paragraph (M) restricted competition “in the Baltimore City trading area” for two years following termination. When the defendant left the plaintiff’s employ in order to open his own small loan company, many of the plaintiff’s customers refinanced their loans with the defendant. The plaintiff sued for an injunction and an accounting.

This Court held that the restriction in paragraph (M) went beyond that necessary to protect the goodwill of the employer and that it worked an undue hardship upon the defendant. The Court also held, however, “that the covenants contained in clauses (J), (K) and (L) of the contracts, are severable and enforceable in terms.” 186 Md. at 521 , 47 A.2d at 379 . The portion of the lower court’s decree which had directed an accounting was also approved. The principle applied in Tawney is articulated in § 518 of Restatement, Contracts (1932) which reads: “When a promise in reasonable restraint of trade in a bargain has added to it a promise in unreasonable restraint, the former promise is enforceable unless the entire agreement is part of a plan to obtain a monopoly; but if full performance of a promise indivisible in terms, would involve unreasonable restraint, the promise is illegal and is not enforceable even for so much of the performance as would be a reasonable restraint.” Like the promises in Tawney , the CIP forfeiture provision of the Agreement is divisible in terms from the promise to pay fee equivalents.

Further, because Holloway’s vested CIP is totally exhausted when applied as a credit against his fee equivalent obligation, and because we shall in part Part I. E., infra, affirm the judgment on the jury’s verdict fixing that fee equivalent obligation, a declaratory judgment on the validity of the CIP forfeiture can have no future application between the parties to this litigation. The issue is moot. ³⁴² E. The noncompete clause, when combined with the fee equivalent remedy, is transformed. No longer is there a complete prohibition against competition. Holloway at any time and at any place may engage “in the general practice of public accountancy or any of its allied branches, either individually or with any other person, firm or corporation” and he may compete against FC for any account, except an FC client, without incurring any fee equivalent obligation.

The only relevant consideration, as a practical matter, in applying the fee equivalent remedy is whether a FC client, within five years after Holloway left the firm, engages Holloway to render accounting services. If that occurs, then the Agreement says that Holloway is obliged, in effect, to purchase the account from his former firm. Perry v. Moran, supra, explained the philosophy underlying the type of provision now under consideration. “ ‘The rules of the law that surround restrictive covenants strive to achieve a balance between the rights and duties of contending interests. By restricting the accountant covenantee from rendering professional services to clients of his or her former firm, the court is within the ambit of the traditional rules of restrictive covenant law although there may be some adverse effect on the public; that is, those clients who would prefer to enjoy the continued services of the accountant leaving the firm.

That effect, however, is avoided or lessened if instead of granting injunctive relief, the court requires the former employee or partner to pay for the clients “taken.” By providing the purchase price and terms in the agreement, the court’s task is made easier and the likelihood of enforcement is enhanced. Thus, the legitimate interest of the employer is protected without imposing undue hardship on the employee or being overly injurious to the public.’ ” 109 Wash.2d at 702 , 748 P.2d at 230 (quoting Pachman, Accountants & Restrictive Covenants, supra, 13 Seton Hall L.Rev. at 322). ³⁴³ The covenant in Perry ran for five years from term!nation of employment and required the employee to pay fifty percent of the fees charged by the employee to former clients of the employer for three years commencing with the date the employee first rendered services to any of those clients. The court held, inasmuch as only seventeen months had elapsed between termination of employment and trial of the breach of covenant case, it was immaterial whether the five year duration of the covenant was unreasonably long. 5 109 Wash.2d at 703-04 , 748 P.2d at 230-31 . A principal part of the court’s rationale is found in the following passage: “One unpleasant alternative for accounting firms and other employers who rely upon covenants not to compete to protect their business, if such covenants are not upheld, is to forever rotate the employees who service clients with other employees, thereby limiting employee client contact as much as possible.

Another unattractive alternative is constant management supervision or monitoring of the employee’s work so that the client looks always to management rather than the employee for answers. It is readily apparent that forcing such courses of conduct upon an employer is costly, inefficient and would lead to unsatisfactory firm-client relationships. No rule of law should force employers into such actions.” 109 Wash.2d at 700-01 , 748 P.2d at 229 . We are in substantial agreement with the approach taken in Perry v. Moran, supra.

The covenant in the Agreement, as limited by the fee equivalent remedy, ties the restriction closely to FC’s interest in its client base, inhibits Holloway’s practice of accountancy only with respect to that client ³⁴⁴ base, and gives the general public, outside of that client base, the benefit of unfettered competition. The reasonableness of the provision is further reinforced by its ready analogy to the purchase of an accounting practice, or of part of an accounting practice. In connection with the summary declaratory judgment on the validity issue, FC presented certain deposition testimony and the affidavit of a very experienced accountant with a firm other than FC. That proof, which Holloway did not controvert, was that