Former American Tower exec wants restraining order against company he helped found
May 8, 2007 - J. Michael Gearon Jr. had been one of the driving forces behind American Tower Corporation's success. The former vice chairman and director now wants to be their competitor, but he must first win a lawsuit his high profile attorneys have filed that alleges ATC is unfairly preventing him from getting back in the business following his resignation on February 27.Michael Gearon

At stake for Gearon, in addition to being restricted from broadly working in the industry for two years, is the forfeiture of $2,915,468 payable to him by ATC secured by Gearon's requirement to comply with his non-compete agreement.

After discussions with ATC failed, the competitive owner of Atlanta Spirit, LLC, the parent company of the NBA's Atlanta Hawks, the NHL's Atlanta Thrashers and the Philips Arena, hired former Georgia Gov. Roy Barnes of the Barnes Law Group as well as the firm of Ashe, Rafuse & Hill to represent him in the suit.

American Tower is not wavering
ATC isn't intimidated by Gearon's counsel and is steadfast in their belief that their agreement is enforceable, hiring Jones Day, a highly respected global firm with more than 2,200 lawyers, to represent them. As added security, the nation's second largest tower owner is also employing Brock, Clay, Calhoun & Rogers, a firm politically entrenched in Georgia where the suit was filed.

Both sides are convinced they'll prevail, buoyed by the non-compete agreement that states that if there is a dispute between Gearon and ATC that the prevailing party will be reimbursed for legal fees and expenses.

The court is being asked to prevent ATC from enforcing the restrictive agreement that will cause Gearon to "suffer immediate and irreparable injury, loss, or damage if a restraining order and then an injunction are not permitted."

Gearon's suit was filed in Superior Court of Cobb County against ATC, South America Holding Corp. and American Tower International, Inc. on April 13, but ATC's attorneys filed a motion on April 19 before the United States District Court for the Northern District of Georgia to remove the civil action and have the Northern District hear the case.

In the Cobb County action, Gearon said that the restrictive covenants he agreed to in 2004 are legally unenforceable and constitute an illegal restraint of trade.

After Gearon resigned he informed ATC that he intended to work in the same industry. ATC said, according to their agreement, that he could not compete in North America, South America, Latin America, Europe and anywhere in the world where ATC or any of its affiliates has, or may sometime in the future, conduct business.

The suit says that ATC and its subsidiaries and affiliates have no potential or existing customers located in the 47 countries of Europe, Canada, and the 13 Caribbean countries. It also states that other than in Mexico, ATC has no customer base in Central America. It further states that, excluding Brazil, ATC has no potential or existing customers in 11 of the 12 countries in South America and Brazil's business is limited to the southern portion of the country, only one third of the country, with the rest of Brazil equal to the size of the U.S.

In addition, the suit says Gearon has not performed work on ATC's behalf in Alaska and Hawaii, and ATC has limited operations in states such as Montana, Idaho, Oregon, North Dakota, South Dakota, Nebraska, Wyoming, Nevada and Utah, and should be accorded the opportunity.

Agreement said to violate restraint of trade
Gearon's attorneys will argue that contracts forbidding competition violate public policy prohibiting restraint of trade in Georgia. ATC's immediate position is that Gearon was a Georgia resident when he filed the complaint, falsely alleging that ATC is a Georgia corporation, but was incorporated under the State of Delaware as is ATC International and Holding Corp. when the complaint was filed, a violation within the law.

ATC says that the agreement was made between American Tower Corporation and J. Michael Gearon, not South America Holding Corp. and American Tower International, Inc.

Georgia courts consistently hold that a covenant not to compete is unenforceable if it restricts competition over a territory greater than the geographic area in which the employee actually worked at the time of the agreement's execution.

Gearon says that ATC should not be able to prevent him from competing in markets where they have no customers and has no business prospects other than the fact that the potential customers may exist in those markets.

Gearon's agreement said that following his employment termination that he could not solicit work for two years in all other areas in which ATC or any of its affiliates proposed to invest and any other markets where he has been or is involved in or is involved or is negotiating a proposed investment, acquisition or other transaction.

However, the suit says the non-competition covenant is unenforceable because the geographic scope is glaringly overbroad and was indeterminable at the time the agreement was executed.

The suit also says the scope of activities is too encompassing and Gearon is prohibited by the agreement from working for any competitor in any capacity.

"On the face of this Non-Competition Covenant, Mr. Gearon could not work for any competitor worldwide as a janitor, managing that competitor's janitorial staff, advising its service personnel, or in any number of other functional areas such as accounting, marketing, sales, research and development, manufacturing, or human resources. Yet Defendants have no legitimate business interest in prohibiting Mr. Gearon from performing these types of duties - as he did not perform such duties at ATC," the suit says.

Bonuses and options were healthy
Gearon was clearly not handsomely compensated for performing janitorial duties during his employment at ATC. In 1998, ATC's predecessor purchased Gearon & Co. for $35 million in cash and and $45 million in ATC stock. As the sole shareholder of the company he founded in 1990 at age 25, Gearon also received options to purchase ATC stock at a favorable price per share.

He was elected a Director of ATC and became Executive Vice President. In January 2002, ATC made Gearon its Vice Chairman and President/International.

During 2005, Gearon's salary was $447,577. He also received a $360,000 bonus and 125,000 options at a strike price of $18.15. In addition, he received an $11.5 million gain by exercising stock options in a Brazilian cell phone tower subsidiary.

His bonus was dropped to $321,000 in 2006, but his salary was raised to $475,000.

According to a statement filed with the court by ATC's Executive Vice President, Chief Administrative Officer and General Counsel, Ed DiSanto, in addition to his salary and bonuses, Gearon routinely received annual contributions to his 401 (k) and other benefits. As a result of these additional benefits, Gearon's total annual compensation in 2006 was $1,952,674, he said.

DiSanto said Gearon received the benefit of the stock option grants made to him between December 1, 1998 and March 1, 2006 as totaling a gain reflected on a W2 basis of $28,738,977.

In April 2004, ATC repurchased alI of Gearon's shares in ATC Mexico for $3 .7 million in cash and 2,203,968 shares of ATC stock with an aggregate market value on the date of issuance of $24 .8 million. ATC also paid Gearon an additional $7.7 million in cash for those ATC Mexico shares after certain performance criteria were satisfied in February 2005. In 2006, ATC repurchased all of Gearon's shares in Holding Corp. for $20 .5 million, with a gain recognized by Gearon of approximately $14 .1 million.

Family shouldn't be penalized
The lawsuit also objects to the overbroad covenant that prohibits Gearon or "any member of his immediate family" from being "interested, directly or indirectly, as an investor in any other entry, business or enterprise with the covered territory, which is engaged in any proscribed activity."

Gearon's attorneys state these individuals were not signatories to the agreement and Gearon neither had the authority to bind them to the agreement, nor did ATC provide them with any compensation for agreeing to the covenant.

The motion points out that if any one of the non-competition clauses is unenforceable because of "indefiniteness, overbreadth, or unreasonableness," then the whole agreement must be discarded.

A non-recruitment restriction in the agreement prevents Gearon from directly or indirectly hiring or attempting to hire any ATC or its subsidiaries' employees.

Identified as being conspicuously clever, Gearon was described by then American Tower Corporation President and CEO, Steve Dodge, in 2002 as "a tremendously talented executive with an affinity for both deal making and operations."

In 1998, Gearon hired Doug Wiest as chief operating officer for ATC. The former Nextel Communications executive left the Boston-based tower company and was hired as CEO for National Grid Wireless, a national tower consolidator.

Macquarie UK Broadcast Ventures Limited purchased National Grid's UK towers March 4. The structures were previously owned by Crown Castle UK. National Grid is the second largest utility company in the US and has said that they were considering selling their US tower assets as well. They have over 450 towers and over two million electric distribution poles.

American Tower Corporation announced today that it has swung to a first-quarter profit from a year-earlier loss on 10% higher revenue. Earnings were $22.2 million, or $.05 per share, against a loss of $1.9 million or $.01 per share. The company estimates the year's revenue at $1.4 billion to $1.42 billion.

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