Summary
In Fluke, the employee agreed to be bound by non-competition and non-solicitation provisions for the 12-month period "following [his] employment with the Company."
Summary of this case from Total Safety U.S., Inc. v. Code Red Safety & Rental, LLCOpinion
No. 61928-4-I.
February 17, 2009.
Appeal from a judgment of the Superior Court for King County, No. 08-2-08754-9, Michael J. Trickey, J., entered June 23, 2008.
Reversed by unpublished opinion per Leach, J., concurred in by Schindler, C.J., and Dwyer, J.
Jonathan Morrow and the Milwaukee Electric Tool Corporation challenge a preliminary injunction that prohibits Morrow from working for Milwaukee Electric Tool Company in the Test and Measurement field. The Fluke Corporation and its parent, the Danaher Corporation, sought and were granted a preliminary injunction to prevent harm from Morrow's alleged breach of a noncompetition agreement (the Agreement). Because Fluke and Danaher have no clear legal or equitable right under the Agreement, we reverse.
Respondents Fluke and Danaher also filed an "Objection to Petitioners' Notice of Filing Deposition Testimony and Documents Submitted to Trial Court But Omitted From Court Docket" on December 29, 2008, which we considered as a motion to strike. It is undisputed that these materials were presented to the trial court for its consideration. We therefore deny the motion.
Background
In 2002 Jon Morrow began working for the Jacobs Chuck Manufacturing Company, a subsidiary of the Danaher Corporation. Jacobs Chuck manufactures and markets parts for electric drills. In June of 2004, Morrow signed a noncompetition agreement. The Agreement provides in pertinent part:
DANAHER NONCOMPETITION AGREEMENT
Danaher Corporation, an "at will" employer, believes that recruiting and retaining the very best people to work in its highly competitive businesses means treating them fairly, rewarding their contributions, and thereby establishing a strong partnership for our collective well-being and continued success. Employment at Danaher and its divisions typically provides associates with specialized and unique knowledge and confidential information, which, if used in competition with Danaher, would cause harm to Danaher As such, it is reasonable to expect a commitment from our associates that protects Danaher's interests and therefore their own interests. . . .
The Jacobs Chuck Manufacturing Company, Clemson, SC, a division of Danaher Corporation, ("the Company") and Jonathan Morrow . . . ("the Associate") agree as follows:
. . .
2. Noncompetition and nonsolicitation.
. . .
(b) For a 12-month period following the termination of the Associate's employment with the Company, whether the termination is voluntary or involuntary, the Associate will not, directly or indirectly, on behalf of himself or herself or for any entity, business or person other than, the Company, Danaher or any other subsidiary of Danaher:
(A) compete with the Company (for purposes of this Section 2(b)(A), the term "Company" shall be deemed to include, in addition to the Company, all affiliates of the Company with whom the Associate was employed at any time during the 12 month period preceding termination of the Associate's employment with the Company) in North America, Asia, Europe (the "Restricted Area"), or
(i) accept employment . . . with a business, entity . . . or person that competes directly or indirectly with any product or service of the Company within the Restricted Area,
(ii) provide any services similar to the services the Associate provided to or on behalf of the Company, or any other advice or consulting services, to a business, entity . . . or person that competes directly or indirectly with any product or service of the Company within the Restricted Area. . . .
. . .
The businesses, entities and persons referred to in this Section 2(b)(A) shall include, without limitation, those business, entities and persons referred to on Exhibit A attached hereto.
. . .
3. Nonpiracy. During the Associate's employment and for a 12-month period following the termination of the Associate's employment with the Company, whether the termination is voluntary or involuntary, the Associate will not directly or indirectly, on behalf of himself or herself, or for any other entity, business, or person:
(1) hire, entice, induce, solicit or attempt to hire, entice, induce or solicit any employee of the Company to leave the Company's employ (or the employ of Danaher or another subsidiary of Danaher, as applicable) or cause any employee of the Company to become employed in any business that is directly or indirectly competitive with the Company for any reason whatsoever.
A list of Jacobs Chuck's competitors is attached to the Agreement as Exhibit A. The Agreement permits "the Company" to "assign any and all of its rights and/or duties herein to Danaher and/or any other subsidiary or subsidiaries." The Agreement provides that South Carolina law controls its interpretation and construction.
On November 1, 2004, Morrow transferred to a marketing manager position at the Fluke Corporation, another Danaher subsidiary. In October of 2006, Morrow became Business Unit Manager for Amprobe, a division of Fluke that manufactures testing and measurement devices. He did not enter into a new noncompetition agreement with Fluke.
On February 19, 2008, Morrow resigned from Fluke and joined Milwaukee Electric Tool Company's new Test and Measurement business. There, Morrow worked on products designed to compete with Fluke's products. He has also encouraged at least one other Fluke employee to join him at Milwaukee Electric Tool.
On March 10, 2008, Fluke and Danaher filed suit, alleging that Morrow breached the Agreement, misappropriated trade secrets, and breached his fiduciary duties. Plaintiffs also obtained a temporary restraining order prohibiting Morrow from working in the same area at Milwaukee Electric Tool as he worked at Fluke and from using Fluke's confidential information or trade secrets.
On June 3, 2008, after having heard several days of testimony, the superior court granted Fluke's motion for preliminary injunction. The court found that the noncompete provision in the Agreement was enforceable and prohibited Morrow from working for Milwaukee Electric Tool's Test and Measurement Group. The court entered written findings of fact and conclusions of law, and issued the following order:
The court found one provision of the Agreement, Paragraph 2(b)(A)(i), which barred Morrow from accepting employment with a business that competed directly or indirectly with any product or service of the "Company," was overbroad and unenforceable.
1. Plaintiffs' Motion for Preliminary Injunction is GRANTED, and Defendant Morrow is HEREBY ENJOINED from:
(a) Working in any capacity for or with MET's Test and Measurement Group.
(b) Providing any services similar to the services Mr. Morrow provided to or on behalf of Fluke, or providing any other advice or consulting services, to MET's TM Group or any company directly or indirectly competing with any products or services of Fluke within North America, Asia and Europe.
(c) Directly or indirectly soliciting, assisting or encouraging others to solicit, or suggesting or recommending in any manner that MET or its personnel hire or solicit any current Fluke employee to leave Fluke's employ.
(d) Directly or indirectly, using, disclosing or publishing, or knowingly negligently permitting others not so authorized to use, disclose, or publish Fluke's confidential and proprietary information.
The order remains in full force and effect until February 19, 2009.
Morrow and Milwaukee Electric Tool Corporation petitioned this court for discretionary review of the trial court's order granting the preliminary injunction and the findings of fact and conclusions of law entered in conjunction with that order. Discretionary review was granted on August 18, 2008.
Standard of Review
A trial court's decision to grant injunctive relief is reviewed for an abuse of discretion. A trial court abuses its discretion if the decision is based on untenable grounds or if the decision is manifestly unreasonable or arbitrary. A party seeking injunctive relief must show (1) a clear legal or equitable right, (2) a well-grounded fear of immediate invasion of that right, and (3) actual or substantial harm to the party has resulted from or will result from the acts complained of. The moving party must show that it is likely to prevail on the merits, and a court will not issue an injunction in a doubtful case. However, where a purely legal issue is involved, the court must necessarily reach the merits of the purely legal issue in order to decide whether to grant or deny the preliminary injunction. The interpretation of an unambiguous contract is an issue of law we review de novo.
Kucera v. Dep't of Transp., 140 Wn.2d 200, 209, 995 P.2d 63 (2000).
Kucera, 140 Wn.2d at 209.
Kucera, 140 Wn.2d at 209.
Rabon v. City of Seattle, 135 Wn.2d 278, 285-86, 957 P.2d 621 (1998).
Rabon, 135 Wn.2d at 286.
Quality Food Centers v. Mary Jewell T, LLC., 134 Wn. App. 814, 817, 142 P.3d 206 (2006).
Discussion
The Agreement provides that it will be governed by the laws of South Carolina. Under South Carolina law, the interpretation of an unambiguous contract is an issue of law. A contract is ambiguous only when its terms are reasonably susceptible to more than one interpretation, and ambiguity is determined as a matter of law. Here, neither party claims that the Agreement is ambiguous.
South Carolina Dep't of Transp. v. M T Enterprises of Mt. Pleasant, 379 S.C. 645, 655, 667 S.E.2d 7 (Ct.App. 2008).
S. Atl. Fin. Servs., Inc. v. Middleton, 349 S.C. 77, 81, 562 S.E.2d 482, 484 (Ct.App. 2002).
The terms of an unambiguous contract are determined by the plain language of the contract, and "a court must construe its provisions according to the terms the parties used; understood in their plain, ordinary, and popular sense." Only where a contract is ambiguous will extrinsic evidence be admitted to show the intent of the parties. Furthermore, covenants not to compete are critically examined and construed against the employer.
Schulmeyer v. State Farm Fire Cas. Co., 353 S.C. 491, 495, 579 S.E.2d 132 (2003).
Ecclesiastes Prod. Ministries v. Outparcel Assoc., LLC, 374 S.C. 483, 500, 649 S.E.2d 494 (Ct.App. 2007).
Poole v. Incentives Unlimited, Inc., 345 S.C. 378, 381, 548 S.E.2d 207 (2001).
The superior court based its decision on the express terms of the Agreement. In its written decision, the trial court concluded that, "[b]y its express terms, and viewing the Agreement as a whole, Mr. Morrow's obligations under the Agreement contemplated movement between Danaher subsidiaries and the rights and obligations of the Agreement transferred from Jacobs Chuck to Fluke along with Mr. Morrow's employment." In its oral ruling, the trial court stated that while the evidentiary hearing was helpful for background, "[i]n the end it seems to me to come down to essentially a legal analysis of Exhibit 38, which is the noncompetition agreement signed on June 17, 2004 by Mr. Morrow." The trial court also stated that the Agreement "is not ambiguous. It is quite clear." We agree that the Agreement is unambiguous. However, we disagree with the court's interpretation of the Agreement.
When Morrow's counsel asked the court how it concluded that the noncompetition provision's reference to "the Company" included Fluke, the court responded: "I struggled with that. I concluded in the agreement as a whole, reading it, that quite clearly that the intent was to apply when somebody moved from [one] Danaher subsidiary to another." In its findings of facts, the trial court stated: "The rights and obligations of the Agreement transferred from Jacobs Chuck to Fluke along with Mr. Morrow's employment." Although the trial court erroneously described this determination as a finding of fact, it is a conclusion of law because it requires interpretation of the Agreement, and it is therefore subject to this court's review.
Woodruff v. McClellan, 95 Wn.2d 394, 396-97, 622 P.2d 1268 (1980).
A careful reading of plain language of the Agreement reveals that the meaning of "the Company" does not include Fluke. Furthermore, although the Agreement contemplates the possibility that an employee transfer to another Danaher subsidiary, it does not provide that the Agreement is assigned automatically to the new employer upon the employee's transfer.
The Agreement expressly defines the term "Company" as "[t]he Jacobs Chuck Manufacturing Company, Clemson, SC, a division of Danaher Corporation, ("the Company"). . . ." When the parties intended provisions of the Agreement to apply to more entities than just Jacobs Chuck, they so stated. For example, the Agreement is replete with references to "the Company, Danaher, or any other subsidiary of Danaher." Additionally, in section 2(b)(A), the Agreement expressly broadens the term "Company" to include "all affiliates of the Company with whom the Associate was employed at any time during the 12 month period preceding termination of the Associate's employment with the Company." But this broadened definition is expressly limited to section 2(b)(A), which describes entities with whom competition is prohibited. However, in the remainder of section 2, which addresses noncompetition and nonsolicitation, the Agreement's definition of "Company" is not modified and means only Jacobs Chuck.
The noncompetition and nonsolicitation provisions apply "[f]or a 12-month period following the termination of the Associate's employment with the Company." Therefore, because Morrow's employment with Jacobs Chuck terminated in 2004, the prohibitions in the agreement expired 12 months later, in 2005.
Fluke argues that Morrow's transfer did not constitute a "termination" under the agreement for purposes of the noncompetition and nonsolicitation provisions. While a transfer between subsidiaries of a parent corporation is not a termination per se, Morrow's transfer was a termination for purposes of the noncompetition provisions of this contract.
The Agreement states that "a transfer to Danaher or another subsidiary of Danaher shall in no event constitute a `termination' of any kind for purposes of Sections 6 or 7 hereof." The Agreement's limitation of the application of this qualified definition of a termination to only two sections of the Agreement means that for purposes of the remaining sections of the Agreement this transfer constitutes a termination. If the parties had intended this definition to apply to all sections of the Agreement, it makes no sense for them to have expressly limited its application as they did. Thus, Morrow's transfer to Fluke was a termination for purposes of the noncompetition provisions of the Agreement contained in Section 2.
In addition to contemplating the possibility of an Associate's transfer to another Danaher subsidiary, the Agreement also contemplates the possibility of an assignment of the Agreement. However, the Agreement does not provide for automatic assignment of the Agreement to the subsidiary in the case of a transfer. Rather, the Agreement provides that it will remain in effect unless the Company, Jacobs Chuck, terminates the Agreement and the Associate is offered a new agreement in connection with a promotion or transfer. Here, Morrow was not offered a new agreement, and so the Agreement remained in effect. However, by its plain terms, it remains in effect only as to "the Company," which is Jacobs Chuck, and expired 12 months after Morrow's termination from Jacobs Chuck.
Apparently recognizing that no actual assignment of the Agreement took place, Fluke argues that the Agreement was "equitably assigned" to it. Although Fluke argued this position to the trial court, it made no finding of an equitable assignment. "The absence of a finding of fact in favor of the party with the burden of proof about a disputed issue is the equivalent of a finding against that party on that issue." Fluke did not seek review of the trial court's decision and has not assigned error to its failure to find an equitable assignment. Additionally, this argument fails because there is insufficient evidence of an equitable assignment
Wallace Real Estate Inv., Inc. v. Groves, 72 Wn. App. 759, 773, n. 9, 868 P.2d 149 (1994), aff'd, 124 Wn.2d 881, 881 P.2d 1010 (1994).
"An equitable assignment is such an assignment as gives the assignee a title which, though not cognizable at law, will be recognized and protected in equity." The concept of equitable assignment has been rarely discussed in South Carolina appellate decisions over the past 50 years. The doctrine of equitable assignment is typically used to enforce an attempted assignment of rights that is technically defective. Evidence of an equitable assignment must be clear and specific; it is implied from the conduct of the parties rather than established by express words of formal assignment. A court may find an equitable assignment where necessary to effectuate the parties' plain intent or to avoid injustice.
Player v. Player, 240 S.C. 274, 125 S.E.2d 636, 638 (1962).
Recorded Picture Co. v. Nelson Entm't, Inc., 53 Cal. App. 4th 350, 368, 61 Cal. Rptr. 2d 742 (Ct.App. 1997).
Recorded Picture Co., 53 Cal. App. 4th at 368.
SourceTrack, LLC v. Ariba, Inc., 32 Fla. L. Weekly D1419, 958 So. 2d 523, 526 (Dist.Ct.App. 2007).
Fluke argues that the Agreement was equitably assigned and the evidence of equitable assignment is the fact that Jacobs Chuck sent Fluke Morrow's personnel file, which included the Agreement. However, the fact that Jacobs Chuck physically sent Morrow's entire file, which happened to contain the Agreement, does not constitute clear and specific evidence of an equitable assignment. The Agreement was never moved to Morrow's Fluke personnel file with Morrow's Fluke documents, but remained in a separate folder with the rest of the Jacobs Chuck file.
Fluke also points to the fact that Morrow represented himself as a Danaher employee on his resume, to prove that "he believed the Agreement had been transferred and remained in effect." However, Morrow's representation of himself as a Danaher employee, rather than simply an employee of Fluke or Jacobs Chuck, does not show that Jacobs Chuck assigned the Agreement to Fluke.
Morrow's resume stated:
DANAHER CORPORATION
National Sales Manager, Jacobs Chuck Manufacturing
In conclusion, the Agreement provided for a 12-month period of noncompetition and nonsolicitation following Morrow's termination from Jacobs Chuck. The 12-month period began upon Morrow's termination from Jacobs Chuck and expired long before Milwaukee Electric Tool Company employed Morrow. Fluke has no legal rights under the Agreement.
We reverse.
We Concur: