Opinion
No. C9-02-1348.
Filed March 4, 2003.
Appeal from the District Court, Dakota County, File No. C2028084.
Terese A. West, David P. Jendrzejek, Moss Barnett, (for respondents)
Patrick J. Neaton, Neaton, Puklich Klassen, (for appellants)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Respondents Al's Cabinets, Inc., and Quality Kitchens, Inc., brought this action against their former employee, appellant Jack Thurk, and Thurk's new employer, appellant Diversified Distributors, Inc. (DDI), alleging that Thurk breached a nonsolicitation agreement. In this appeal from an order granting respondents a temporary injunction, appellants contend that (1) the preparation of a bid in response to a specific request for a bid does not violate the nonsolicitation restriction and (2) the record does not support the granting of injunctive relief. We affirm in part and reverse in part.
FACTS
Al's Cabinets employed Thurk as a salesperson from 1997 until December 2000. In December 2000, Thurk accepted an employment offer from Quality Kitchens, a corporation formed by Al's Cabinets to market premanufactured cabinets sold by Al's Cabinets.
Thurk and Al's Cabinets entered into three employment agreements: the first in November 1997, the second in December 1998, and the third in April 2000. Thurk and Quality Kitchens entered into an employment agreement in March 2001. All of the employment agreements contained the following nonsolicitation provision:
There are minor variations in the language of the nonsolicitation provisions in the various agreements, but none of the variations is substantive.
Non-Solicitation Agreement. As used in this Agreement, the term "Person" means any individual, corporation, joint venture, partnership, limited liability company, association or other entity. From and after the date hereof and continuing until eighteen (18) months after the voluntary or involuntary termination of Employee's employment with the Company, with or without cause, Employee covenants and agrees that he will not, whether for his own account or for the account of any Person, directly or indirectly, interfere with the Company's relationship with, or endeavor to divert or entice away from the Company any Person who or which at any time during the term of Employee's employment by the Company is or was an employee, independent contractor or customer of or otherwise in the habit of dealing with the Company. Furthermore, Employee agrees from the date hereof and for a period of eighteen (18) months after the voluntary or involuntary termination of Employee's employment with the Company, with or without cause, Employee covenants and agrees that he will not attempt to sell or market any products to any person who has been a customer of the Company at any time during Employee's employment with the company. Provided, however, that Employee shall not be prohibited from selling or marketing products to any person if the products are not competitive with the products marketed or sold by the Company.
In July 2001, Thurk voluntarily terminated his employment with Quality Kitchens and accepted employment as a builder's sales representative for DDI, which competes with respondents in the business of selling and distributing premanufactured cabinets. Thurk and Josh Mortensen, DDI's principal shareholder, stated in affidavits that when Thurk became employed by DDI, he was assigned to handle a substantial number of existing DDI customers and that he was hired to take over some sales and marketing responsibilities from Mortensen. Thurk and Mortensen stated that Thurk was not hired for the purpose of, nor was he expected to, solicit any business from customers with whom he had dealt while employed by Al's Cabinets or Quality Kitchens. Thurk stated that while employed by DDI, the customer initiated any contact that he had with customers of Al's Cabinets or Quality Kitchens.
One of respondents' former customers, Kitchen Tune-up S.W., Inc., owned by George Fryman, contacted DDI in about July 2001 about becoming its customer. Thurk stated in his affidavit that the contact between DDI and Kitchen Tune-up to establish Kitchen Tune-up as a DDI customer occurred without his knowledge or participation. Thurk stated that after he learned about Fryman's initiative to establish Kitchen Tune-up as a DDI customer, he did accept two orders from Kitchen Tune-up that resulted in gross sales of about $2,340.
After Al's Cabinets learned about the contact between Kitchen Tune-up and DDI, respondents' attorney sent a letter to DDI and to Thurk stating that Thurk had called on respondents' customer Kitchen Tune-up and requesting that he refrain from calling on any customers of respondents that had been customers of either Al's Cabinets or Quality Kitchens during Thurk's employment with Al's Cabinets or Quality Kitchens. When Mortensen discussed the letter with Thurk, Thurk advised Mortensen that Thurk was not calling on any customers that he had dealt with while employed by Al's Cabinets or Quality Kitchens and that Kitchen Tune-up had initiated contact and filed a credit application with DDI without any involvement or knowledge by Thurk.
Later, DDI received a telephone call from Jim Miles, the vice president of Craftsman Construction, Inc., requesting that DDI prepare a bid for cabinetry for the Capital Heights construction project. Craftsman Construction was a customer of respondents that Thurk had dealt with while employed by respondents. Craftsman Construction had also previously done business with DDI in November 1996. Mortensen directed Thurk to prepare the bid for Craftsman Construction's Capital Heights project, and Thurk did so. Mortensen stated in his affidavit that although he may have been aware that Thurk had dealt with Craftsman Construction while employed by respondents, Mortensen did not see a problem with Thurk preparing a bid for Craftsman Construction on DDI's behalf because Craftsman Construction was a former customer of DDI and because Craftsman Construction was soliciting a bid from DDI.
Thurk admitted that he dealt with a third customer of respondents, Eagle Builders, that he had dealt with while employed by respondents but stated that Eagle Builders initiated the contact with DDI.
The district court found:
7. There is no showing that Thurk directly solicited business from any company or entity that had been a prior customer of [respondents] but there is evidence that a former customer of [respondents], Craftsman Construction, did solicit a bid from DDI. This bid was prepared by Thurk.
8. The preparation of a bid by DDI and Thurk constitutes a violation of the non-solicitation agreement contained within the employment contract between Quality and Thurk.
Based on its findings that appellants violated the nonsolicitation agreement and that the agreement was likely supported by adequate consideration, the district court temporarily enjoined appellants
from directly or indirectly soliciting or selling any competitive products, or endeavoring to divert or entice away from the [respondents] any customer of the [respondents] that was a customer at the time of Thurk's employment with the [respondents], and from interfering with the [respondents'] relationships with their customers.
The district court stated the following rationale for granting the temporary injunction:
Thurk and DDI rely upon the claim that they did not solicit any prior customers of the [respondents] but that the customers solicited them for bids. If this were the case it would not appear to be in violation of the non-solicitation agreement. However, Thurk's assignment by DDI to prepare the bid for Craftsman Construction constitutes a solicitation. The bid contains pricing, delivery guarantees and other items which are designed to induce the customer to enter into a contract with DDI. It is not the normal solicitation of a salesman knocking on a door or sending letters, but it is nonetheless a solicitation and is prohibited by the contract existing between the parties.
The bid prepared by Thurk on DDI's behalf for Craftsman Construction was not part of the record before the district court when it granted the temporary injunction.
DECISION
1. A district court's findings of fact will not be reversed on appeal unless clearly erroneous. Minn.R.Civ.P. 52.01. "Clearly erroneous means manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole." Novack v. Northwest Airlines, Inc., 525 N.W.2d 592, 597 (Minn.App. 1995) (quotation omitted). Questions of law are subject to de novo review. In re Welfare of R.J.E., 642 N.W.2d 708, 710-11 (Minn. 2002).
Appellants argue that because the bid Thurk prepared for Craftsman Construction was not part of the record before the district court, the record does not support the district court's finding that "[t]he bid contains pricing, delivery guarantees and other items which are designed to induce the customer to enter into a contract with DDI." Appellants assert that the bid consisted only of the prices at which DDI would provide various types of cabinets to Craftsman Construction. Appellants' admission that the bid contained prices together with the evidence that the bid was for a specific project support an inference that the bid was intended to induce Craftsman Construction to enter into a contract with DDI. We, therefore, affirm the district court's finding that the bid was intended to induce Craftsman Construction to enter into a contract with DDI.
Appellants also contend that the district court erred in interpreting the nonsolicitation provision.
The determination of whether a contract is ambiguous is a question of law. In making that determination, a court must give the contract language its plain and ordinary meaning. * * * A contract is ambiguous if its language is reasonably susceptible of more than one interpretation. If a contract is ambiguous, it must be construed against its drafter.
Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn. 1995) (citations omitted). But when the terms of the contract are clear and unambiguous, the court will give effect to their plain meaning. Brown v. Weeres Industries, Inc., 375 N.W.2d 64, 66 (Minn.App. 1985), review denied (Minn. Dec. 13, 1985).
Appellants argue that the nonsolicitation provision prohibits Thurk only from initiating efforts to entice respondents' customers to do business with DDI or from undertaking an affirmative action intended to lure respondents' customers away from respondents, not from selling products to anyone that was a former customer of respondents. But the nonsolicitation provision does not just prohibit endeavors to "divert or entice away" business from respondents; it also expressly prohibits Thurk from "attempt[ing] to sell or market any products to" respondents' customers. Product pricing is an important aspect of inducing a customer to enter into a contract. Therefore, regardless of who initiates the contact, it would be unreasonable to construe the preparation of a bid for a potential customer in connection with a specific project as anything other than an "attempt to sell" a product. The district court did not err in determining that Thurk's preparation of the bid for Craftsman Construction violated the nonsolicitation provision.
2. The district court has discretion to grant a temporary injunction, and its decision will not be reversed absent a clear abuse of discretion. Carl Bolander Sons Co. v. City of Minneapolis, 502 N.W.2d 203, 209 (Minn. 1993). This court views "the facts alleged in the pleadings and affidavits as favorably as possible to the party who prevailed below." Pac. Equip. Irrigation, Inc. v. Toro Co., 519 N.W.2d 911, 914 (Minn.App. 1994) (citation omitted), review denied (Minn. Sept. 16, 1994).
One of the factors that the district court must evaluate in determining whether a party is entitled to temporary injunctive relief is the harm to be suffered by the "plaintiff if the temporary restraint is denied as compared to that inflicted on [the] defendant if the injunction issues pending trial. Id. (citing Dahlberg Bros. v. Ford Motor Co., 272 Minn. 264, 274-75, 137 N.W.2d 314, 321-22 (1965).
Because a temporary injunction is granted prior to a complete trial on the merits, it should be granted only when it is clear that the rights of a party will be irreparably injured before a trial on the merits is held.Miller v. Foley, 317 N.W.2d 710, 712 (Minn. 1982) (citation omitted).
The party seeking the injunction must establish that the legal remedy is not adequate and that the injunction is necessary to prevent great and irreparable injury.
Pac. Equip., 519 N.W.2d at 914 (citation omitted).
[I]rreparable injury can be inferred from the breach of a restrictive covenant if the former employee came into contact with the employer's customers in a way which obtains a personal hold on the good will of the business.
Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 452 (Minn.App. 2001) (citation omitted). "Whether a party has an adequate remedy at law is a legal question that an appellate court reviews independently." Id. at 451 (citation omitted).
The evidence supports the district court's finding that respondents failed to show "that Thurk directly solicited business from any company or entity that had been a prior customer of the [respondents]." The only violation of the nonsolicitation agreement found by the district court was Thurk's preparation of the bid for Craftsman Construction, and the record contains evidence that Craftsman Construction had already decided not to do business with respondents due to a dispute concerning a previous contract between Craftsman Construction and Quality Kitchens. The record does not show that the contacts between Thurk and respondents' customers occurred in a way that interfered with respondents' good will. Compare id. (affirming temporary injunction when employee had acquired personal influence over customers, market for product was limited, and the formation of relationships within this limited market was critical), with Webb Publ'g. Co. v. Fosshage, 426 N.W.2d 445, 448-49 (Minn.App. 1988) (finding irreparable harm where former employee had worked closely with clients and considered them friends, and success in soliciting their business demonstrated the "personal hold" he had on them), and Creative Communications Consultants, Inc. vs. Gaylord, 403 N.W.2d 654, 657 (Minn.App. 1987) (finding of irreparable harm based on loss of clients and threat that former employee would disclose confidential information). If respondents demonstrate at trial that they lost any contracts as a result of Thurk's violation of the nonsolicitation provision, money damages will adequately compensate them. We, therefore, reverse the temporary injunction.
3. Appellants argue that the district court erred by failing to require respondents to post security. Whether to require an applicant for a temporary injunction to post security under Minn.R.Civ.P. 65.03 is a decision committed to the district court's discretion. Bio-Line, Inc. v. Burman, 404 N.W.2d 318, 321-22 (Minn.App. 1987). Appellants did not raise the issue of security until their motion for reconsideration, which was filed after the notice of appeal and stricken by the district court. This court, therefore, will not address the security issue. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (this court generally will not consider matters not presented to and decided by the district court); In re Fairview-Univ. Med. Ctr., 590 N.W.2d 150, 155 (Minn.App. 1999) (documents filed in the district court after the order on appeal cannot be considered by this court).
Because we are reversing the temporary injunction, we need not determine whether it applied to DDI under the doctrine of respondeat superior.