United Sates Environmental Services, L.L.C. VS Gerard F. Nelson
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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NO 2010 CA 1817 UNITED STATES ENVIRONMENTAL SERVICES L C VERSUS GERARD F NELSON Judgment Rendered AUG 2 5 2011 EWWWWWWWA Appealed from the 21st Judicial District Court In and for the Parish of Tangipahoa State of Louisiana Case No 2010 000548 The Honorable W Ray Chutz Judge Presiding Lance J Arnold Counsel for PlaintiffAppellant Scott L Sternberg United States Environmental New Orleans Louisiana Services L C Greg Murphy Baton Rouge Louisiana Counsel for DefendantAppellee Gerard F Nelson BEFORE CARTER C GAIDRY AND WELCH JJ J GAIDRY J An environmental dismissing its petition remediation for company appeals a injunctive relief and damages judgment related agreements containing non competition and non disclosure provisions to For the following reasons we dismiss the appeal in part as moot reverse in part and remand FACTS AND PROCEDURAL HISTORY United States Environmental Services L USES is engaged in C the business of environmental emergency response and remediation of oil and other hazardous material releases and contamination underground storage tank removal environmental air monitoring and related activities On May 21 2007 USES employed Gerard F Nelson as an estimator with the duties of estimating the pricing of projects for potential customers On the same day Mr Nelson executed an employment contract with no fixed term entitled Noncompetition and Confidentiality Agreement the 2007 agreement That contract set forth the terms of his compensation and other perquisites of employment as well as covenants on his part not to disclose confidential or proprietary information documents or trade secrets the confidentiality covenant not to solicit USES customers or perform services or organize a business in competition with USES the non competition covenant and not to solicit any USES employee to work for him or any other business in competition with USES the employee non solicitation covenant The noncompetition and employee nonsolicitation covenants were effective during a restrictive period of two years from the date of termination of Mr Nelson employment with USES s covenant had no stated restrictive period or term 2 The confidentiality Mr Nelson employment with USES ended on May 22 2009 based s upon a reduction in USES workforce s entered into another agreement Confidentiality Agreement entitled the 2009 On the same date the parties Compensation Release agreement That and agreement documented Mr Nelson stermination as of that date the payment of a lump sum of 269 in lieu of any amounts wages or benefits that were 22 otherwise due him an agreement by Mr Nelson to release USES from and indemnify it for all past and present claims relating to his employment and restrictive covenants of confidentiality and non disparagement on Mr s Nelson part in favor of USES In late July 2009 Mr Nelson began work for ESH Inc a competitor of USES in the capacity of an estimator for tank cleaning projects On January 28 2010 USES though its attorney wrote to Mr Nelson to advise him that he was in violation of the restrictive covenants of the 2007 and 2009 agreements and that USES intended to seek injunctive relief On February 4 2010 USES instituted the present action by filing a verified petition for a temporary restraining order other injunctive relief and damages against Mr Nelson In its petition USES alleged that it had learned of Mr Nelson employment by one of its direct competitors and s that by providing services to his new employer he had breached the non competition covenant of the 2007 agreement Nelson was utilizing confidential It further alleged that Mr information gained through his employment with USES thereby breaching the confidentiality covenants of the 2007 and 2009 agreements The trial court signed an order denying USES request for a s temporary restraining order and fixed the hearing on the request for a 91 preliminary injunction and a permanent injunction for March 1 2010 On that date the trial court granted Mr Nelson motion to continue and refix s the hearing on the request for the preliminary injunction for March 22 2010 but issued a temporary restraining order prohibiting him from violating the terms of the 2007 and 2009 agreements At the hearing of March 22 2010 the testimony of Mr Nelson certain officers and employees of USES and a representative of a USES customer was presented and documentary evidence was introduced including an e sent by Mr Nelson to the USES customer advising of mail his employment by a competitor of USES that provide the same d services and requesting the opportunity to provide the customer with pricing as he did before At the conclusion of the hearing the trial court took the matter under advisement and requested posttrial memoranda from the parties On April 27 2010 the trial court issued its written reasons for judgment The trial court held that the terms of the 2007 agreement were not dispositive of the issue before the court Rather the court held that the 2009 agreement included language that amounted to a compromise and release of any claims that could be brought between the parties arising out of Mr Nelson employment with USES The trial court further held that s because the restrictive covenants in the 2009 agreement had an indefinite term they were in derogation of La S R C 921 23 and therefore unenforceable Finally the court stated its factual finding that Mr Nelson s actions were not in violation of any enforceable provision of any agreement entered into between the parties The trial court judgment was signed on June 16 2010 and simply s provided that USES p s etition was DENIED sic at its cost 4 USES appeals ASSIGNMENTS OF ERROR USES has itemized its contentions of error on the part of the trial court as follows 1 The t c erred when it found that the May 22 rial ourt 2009 greement a released or modified the restrictive covenants of the May 21 2007 a specifically greement its non competition and confidentiality agreements 2 The t c erred when it found the May 22 2009 rial ourt greement a acted as a release of future violations of restrictive covenants contained in the May 21 2007 greement a 3 The t c erred when it found that La R rial ourt S non to and C 921 23 applies confidentiality disparagement covenants 4 The rial ourt t c erred in not analyzing the non competition agreement contained in the May 22 2009 greement a as to its statutory provisions s compliance with Louisiana regarding non competition agreements DISCUSSION Context and Scope of the Judgment A final appealable judgment must contain decretal language and it must name the party in favor of whom the ruling is ordered the party against whom the ruling is ordered and the relief that is granted or denied Ball v Heritage Manor of Mandeville 061379 p 1 La App 1 st Cir 5 961 07 4 2d So 414 415 The judgment appealed provides that USES Petition s for Temporary Restraining Order and Injunctive Relief is hereby DENIED at it sic cost s As so worded the judgment denies all relief sought by USES against Mr Nelson in its petition thereby effectively dismissing the action in its entirety The original order fixing the hearing on USES request was in the s form of a rule to show cause why a preliminary or permanent injunction 5 should not issue The order continuing and refixing the hearing provided for a temporary restraining order and described the hearing as related to the request for a preliminary injunction A preliminary injunction is essentially an interlocutory order issued in summary proceedings incidental to the main demand for permanent injunctive relief and is designed to preserve the status quo pending a trial of the issues on the merits of the case Farmer s Seafood Co Inc v State ex rel Dep of Pub Safety 101746 p 4 La t App 1 st Cir 2 56 So 1263 1266 11 14 3d It is likewise clear from the hearing transcript that the hearing related only to the request by USES for a preliminary injunction and not to the merits of the action including its claim for damages arising from Mr Nelson alleged violation of the s agreements Given the trial court written reasons it is apparent that it raised or s noticed the peremptory exception of res judicata on its own motion based upon its interpretation of the compromise or release in the 2009 agreement See La C art 927 La C art 3080 and La R 13 P B S 4231 However the trial court judgment dismissing the petition s in effect addressed the merits of all of USES claims asserted in its petition s including its existing claims for damages and any potential future claims for damages and injunctive relief not subject to the twoyear restrictive period of La R 23 and the 2007 agreement S 921 C The matter was not set for determination on the merits and the parties were not otherwise given notice and an opportunity to be heard on the issue of the purported compromise of s USES claims unrelated to its claim for injunctive relief The judgment was I During the hearing USES president was asked on cross examination whether USES s suffered any damages by reason of Mr Nelson working for ES H prompting an objection from USES counsel who emphasized that the hearing was not a damage s portion of the trial The trial court sustained the objection Later during the course of closing argument by counsel the trial court expressly recognized that the parties and the trial court were not here for damages R thus overly broad in scope and should arguably have been limited to determination of the issue of USES entitlement to injunctive relief under s both agreements as of the time of the hearing Nevertheless we have determined that it is not appropriate to attempt to resolve the issues of this appeal solely on that procedural basis but on the following grounds Injunctive Relief Under La R 23 S 921 Louisiana has long had a strong public policy disfavoring non competition agreements between employers and employees SWAT 24 ShreveportBossier Inc v Bond 00 1695 p 4 La 6 808 So 01 29 2d 294 298 Louisiana Revised Statutes 23 embodies that general policy 921 but sets forth specific exceptions defining the limited circumstances under which such agreements may be valid The exception applicable to the circumstances of this matter is La R 23 which provides in S 921 C relevant part Any person who is employed as an agent servant or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer andor from soliciting customers of the employer within a specified parish or parishes municipality or municipalities or parts thereof so long as the employer carries on a like business therein not to exceed a period of two years from termination of employment z While the trial court was technically authorized to notice res judicata on its own motion under La C art 927 extinguishment of an obligation by compromise is P B an affirmative defense that normally must be raised by the party seeking its benefit See La C art 1005 and Richardson v Richardson 022415 p 4 La App 1st Cir P 03 9 7 859 So 81 85 Mr Nelson did not plead compromise as a defense to 2d enforcement of the 2007 agreement in his answer or at trial The purpose of the requirement that some defenses be affirmatively pleaded is to give the plaintiff fair and adequate notice of the nature of the defense and thereby prevent last minute surprise to the plaintiff Johnson v Steele 981726 p 5 La App 1st Cir 9 754 So 99 24 2d 1006 1009 In exercising its right to notice res judicata on its own motion especially after a case has been submitted for decision a court should consider the procedural status and context of the action to determine if that issue is ripe for consideration and appropriate to resolve the issues actually presented for decision See e Parish of g lberville Sales Tax Dep City of St Gabriel 08 1780 p 11 n La App 1st Cir tv 7 09 22 7 21 So 955 961 n en Banc 3d 7 7 A non competition agreement complying with the requirements of La S 921 R 23 shall be considered an obligation not to do and the former C employer is entitled to seek recovery of damages for the loss sustained and the profit of which he has been deprived as well as injunctive relief enforcing the agreement without the necessity of proving irreparable injury s La R 23 However an employee agreement not to S 921 H solicit employees of his former employer to work for him or another employer after he leaves his employer does not fall within the restrictions of La R 23 See CDI Corp v Hough 08 021 pp 814 La App 1st S 921 8 Cir 3 9 So 282 28892 and cases cited therein 09 27 3d The twoyear period applicable to the non competition covenant and the employee non solicitation covenant expired by their terms on May 22 2011 Only those acts of Mr Nelson that were violative of those covenants and capable of accomplishment within that period could have been enjoined When an appeal is taken from an order denying injunctive relief and the act sought to be enjoined is accomplished pending appeal the appeal will be dismissed as moot Silliman Private Sch Corp v Shareholder Group 00 0065 p 5 La App 1 st Cir 2 789 So 20 23 writ denied 01 01 16 2d 0594 La 3788 So 1194 On the record before us USES claim 01 30 2d s for injunctive relief under La R 23 and the employee non S 921 H solicitation covenant is therefore moot See Menard v La High Sch Athletic Assn 09 0800 p 3 La App 1st Cir 12 30 So 790 09 23 3d 793 writ denied 10 0169 La 4 31 So 370 10 5 3d Accordingly we must dismiss USES appeal in part to the extent that it seeks injunctive s 3 In the CDI Corporation case we held that such an employee non solicitation agreement although not by its terms governed by La R 23 is nevertheless subject S 921 to a public policy requirement of reasonableness in scope and duration Id 080218 at pp 9 n and 13 14 9 So at 289 n and 292 4 3d 4 8 relief under La R 23 and the employee non solicitation covenant S 921 H of the 2007 agreement However although the issue of USES entitlement to the above s described injunctive relief is moot we are not precluded from determining the status of this controversy insofar as it relates to USES claims for s preliminary injunctive relief under other provisions of the 2007 agreement and for damages which would remain viable in the event that the 2009 agreement did not compromise those claims Similarly we are not precluded from considering the status of any claims for injunctive relief and damages founded upon those covenants in the 2009 agreement not subject to the limitations of La R S 23 C 921 The Compromise in the 2009 Agreement The proper interpretation of a contract is a question of law subject to de novo review on appeal Solet v Brooks 090568 p 5 La App 1 st Cir 09 16 12 30 So 96 99 Accordingly we need not accord deference to 3d the trial court legal conclusions as to the scope and meaning of the s compromise incorporated in the 2009 agreement but must independently review its language to determine the parties mutual intent See Toomy v La State Employees Ret Sys 10 1072 p 5 La App 1st Cir 3 63 11 25 3d So 198 201 2 Interpretation of a contract is the determination of the common intent of the parties La C art 2045 This is an objective inquiry thus a s party declaration ofwill becomes an integral part ofhis will La C art 2045 Revision Comments clear and explicit and 1984 b When the words of a contract are lead to no absurd consequences interpretation may be made in search of the parties intent 2046 no further La C art Each provision in a contract must be interpreted in light of the other Z provisions so that each is given the meaning suggested by the contract as a whole La C art 2050 A compromise is a contract whereby the parties through concessions made by one or more of them settle a dispute or an uncertainty concerning an obligation or other legal relationship La C art 3071 A compromise settles only those differences that the parties clearly intended to settle including the necessary consequences of what they express La C art 3076 In holding that the 2009 agreement compromised all claims between the parties related to Mr Nelson employment by USES the trial court s relied upon the introductory paragraph of that agreement which provides This Release and Compensation Confidentiality Agreement Agreement is entered into as of the 22 day of May 2009 the Effective Date by and between United and States Environmental Services L Company C Gerard F Nelson Employee to resolve any and all claims demands and causes of action which could arise out of the employment relationship between Employee and Company and the termination ofthat relationship as ofthe Effective Date Following that introductory paragraph the following preamble to the rest ofthe agreement appears NOW for THEREFORE good and valuable consideration the receipt and sufficiency of which are duly acknowledged by the Parties Employee and Company agree as follows Emphasis added The agreement then sets forth six numbered sections section forth the Disclosure and non disparagement Disparage The third section is entitled Release and begins with the sets restrictive The fourth covenants of confidentiality Agreement Not to Non Harm or language In consideration of Company undertakings and agreements s hereunder and other good and valuable consideration Employee hereby 10 releases Company and Company Related Parties all others acting on behalf of Company the and agrees to hold the Company Related Parties harmless from and against any and all known and unknown claims liabilities demands causes of action s attorney fees of any kind costs or expenses including The section goes on to recite specific types of causes of action covered by the release under various federal and state laws and recites Mr Nelson agreement regarding the broad scope of s claims released his agreement not to initiate any action against USES for any such claims and his acknowledgment that he is not entitled to any further payment for wages or other compensation other than the payment of the sum described in the agreement There is no language in the third section or elsewhere in the agreement purporting to release Mr Nelson from any obligations owed to USES Although the introductory paragraph of the 2009 agreement read in isolation injects some ambiguity as to the matters intended to be released we cannot end our inquiry by a mere examination and 1 reading iteral of the introductory paragraph See Sloane v Davis 619 So 585 58990 2d La App 3rd Cir writ denied 629 So 355 La 1993 2d See also Succession of Ramp 252 La 660 671 212 So 419 423 La 1968 2d Apart from the introductory paragraph the 2009 agreement srelease section unequivocally relates only to claims that might be made by Mr Nelson against USES arising from his employment In Moak v American Auto Ins Co 242 La 160 134 So 911 La 2d 1961 the Louisiana Supreme Court held that when a dispute arises as to the scope of a compromise agreement extrinsic evidence can be considered to determine exactly what differences the parties intended to settle This rule is a special exception to the general rule of La C art 2046 based upon the 11 supplementary rule of construction in La C art 3076 to the effect that compromises do not extend to differences that the parties never intended to include in them Brown v Drillers Inc 93 1019 La 1 630 So 94 14 2d 741 748 49 Thus in the case of a compromise agreement the intent which its words express in light of the surrounding circumstances at the time of execution of the agreement is controlling Brown 630 So at 748 2d Although Mr Nelson did not assert the affirmative defense of compromise as a bar to USES claims at trial testimony relating to the purpose and s amount of the payment made to Mr Nelson as part of the 2009 agreement was offered without objection at trial for other purposes Under the circumstances we may appropriately consider such evidence in interpreting the scope of the compromise or release As USES points out it is significant that in the trial court Mr Nelson never raised the affirmative defense of compromise in opposition to USES s claims under the 2007 agreement The testimony at the hearing relating to the release in the 2009 agreement and the basis of the payment to Mr Nelson likewise supports its position that the subject of the release was his claims for any compensation owed him upon his termination and any other potential claims he might have against his former employer and that the only party giving up rights under that agreement was Mr Nelson In summary reading the agreement as a whole we conclude that the compromise at issue did not effect the release or discharge of Mr Nelson s obligations to USES under the 2007 agreement and that the trial court erred in holding otherwise Although injunctive relief is now moot as to the non competition and employee non solicitation covenants of the 2007 agreement s USES claims for damages for Mr Nelson alleged violations of those s covenants during the twoyear restrictive period are still viable and were not 12 compromised Accordingly the trial court judgment is reversed in part s insofar as it dismissed the foregoing claims and any other claims for damages under the 2009 agreement Injunctive Relief Under the 2009 Agreement The only issue to be considered at a hearing on a preliminary injunction is whether the moving party has met a prima facie showing that it will suffer irreparable injury loss or damage if the injunction is not issued that it is entitled to the relief sought as a matter of law and that it will likely prevail on the merits of the case Farmer sSeafood Co 101746 at p 6 56 3d So at 1267 An appeal may be taken as a matter of right from an order or judgment relating to a preliminary or final injunction La C art 3612 P Appellate review of a trial court issuance of a preliminary injunction is s limited The issuance of a preliminary injunction addresses itself to the sound discretion of the trial court and will not be disturbed on review unless a clear abuse of discretion has been shown Farmer Seafood Co 10 1746 s at p 6 56 So3d at 1267 A trial court reasons for judgment while defining and elucidating a s case form no part of the official judgment it signs and from which appeals are taken Peters v Harmsen 03 1296 p 9 La App lst Cir 4 879 04 2 2d So 157 162 Regardless of the trier of fact reasons if a judgment is s correct it should be affirmed Id We have carefully reviewed the testimony of the witnesses and the documentary evidence introduced at the hearing relating to Mr Nelson alleged violation of the confidentiality s covenants of both agreements and the non disparagement covenant of the 2009 agreement and we conclude that the trial court implicit factual s finding that no violations of such covenants occurred is supported by the evidence Its finding is not manifestly erroneous and its decision to deny 13 the issuance of a preliminary injunction as to those elements of the agreements was not an abuse of discretion Accordingly we affirm the judgment in part insofar as it denied preliminary injunctive relief based upon the confidentiality covenants of both agreements and the non disparagement covenant of the 2009 agreement Dismissal of USES Claims for Damages Under Both Agreements s As explained above the trial court judgment relating to the s enforceability of the 2007 agreement sprovisions was based upon its legally erroneous conclusion that USES claims under that agreement were s compromised by the 2009 agreement decision The trial court did not base its regarding the validity and enforceability of the 2007 non competition covenant upon its substantive compliance with La RS 23 921 and made no specific factual findings regarding USES actual geographic s business area and other relevant factors relating to the 2007 agreement The hearing at issue also did not address the issue of damages and therefore no evidence of any damages sustained by USES was introduced Because the substantive merits of USES entitlement to injunctive relief under the 2007 s non competition and employee non solicitation covenants were not actually determined by the trial court at the hearing and the related issues of any resulting damages sustained by USES and its right to permanent injunctive relief were not procedurally before the trial court at that time we conclude that this matter should be remanded to the trial court for a full evidentiary hearing on the merits of those issues USES also contends that the trial court erred in ruling in its written reasons that the 2009 restrictive covenants of confidentiality and non disparagement were subject to and violative of La R 23 those S 921 0as covenants were subject to an indefinite term We agree By its terms La 14 S 921 R 23 does not impose any time geographic or other limitations C upon voluntary agreements relating to nondisclosure of confidential or proprietary information or trade secrets or upon agreements by employees not to make or publish disparaging statements that could damage the reputation or business of former employers While we affirm the trial s court judgment in part on substantive grounds as to the denial of preliminary injunctive relief under the confidentiality and non disparagement covenants we reverse it in part to the extent that it purports to dismiss any claims by USES for damages on the merits its request for permanent injunctive relief and any potential claims arising from alleged future violations of those covenants and remand it for further proceedings on those issues DECREE The appeal is dismissed in part as moot to the extent that the appellant United States Environmental Services L seeks injunctive C relief under the non competition covenant of the 2007 agreement under La S 921 R 23 and under the employee non solicitation covenant of the H 2007 agreement The judgment of the trial court is affirmed in part insofar as it denied preliminary injunctive relief based upon the confidentiality covenants of both agreements and the non disparagement covenant of the 2009 agreement In all other respects the judgment of the trial court is reversed in part and this matter is remanded to the trial court for further 4 As emphasized by USES the confidentiality covenant relates to interests that are similar if not identical to interests also protected under the Unfair Trade Practices and Consumer Protection Law La R 51 1401 27 and the Uniform Trade Secrets Act La S S 1431 R 51 39 neither of which imposes any time limit on the protection afforded thereunder As to the non disparagement covenant the only conceivable restriction as to its enforcement that suggests itself would be considerations of freedom of speech under the First Amendment 15 proceedings consistent with this opinion The costs of this appeal are assessed to the opposing parties in equal proportions APPEAL DISMISSED IN PART JUDGMENT AFFIRMED IN PART AND REVERSED IN PART AND CASE REMANDED 100
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