THOMAS J. STIEGEL , Plaintiff - Appell ant , vs. HMA, INC., an Iowa Corporation, and Subsidiaries, and HOLMES MURPHY & ASSOCIATES, INC., an Iowa Corporation , Defendant s - Appel l ees .
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IN THE COURT OF APPEALS OF IOWA
No. 8-1035 / 08-0424
Filed March 26, 2009
THOMAS J. STIEGEL,
Plaintiff-Appellant,
vs.
HMA, INC., an Iowa Corporation,
and Subsidiaries, and
HOLMES MURPHY & ASSOCIATES, INC.,
an Iowa Corporation,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Michael D. Huppert,
Judge.
Stiegel appeals from the district court‟s order denying his request for a
declaratory judgment and a jury verdict denying his claim for age discrimination.
AFFIRMED.
Thomas Hanson of Hanson, Bjork & Russell, L.L.P., Des Moines, for
appellant.
Gene R. LaSuer and Sharon K. Malherio of Davis, Brown, Koehn, Shors &
Roberts, P.C., Des Moines, for appellees.
Heard by Vogel, P.J., and Vaitheswaran and Eisenhauer, JJ.
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VOGEL, P.J.
Thomas Stiegel filed suit against his former employer, HMA, Inc. and
Holmes Murphy & Associates, Inc. (HMA), seeking (1) a declaratory judgment
that a non-compete clause of an employment contract between the parties was
void; and (2) damages for wrongful termination based upon age discrimination.
HMA counterclaimed for enforcement of the employment agreement. The district
court denied Stiegel‟s request for a declaratory judgment and granted in part and
denied in part HMA‟s counterclaim seeking a declaration as to the enforceability
of the non-compete clause.
Further, the district court dismissed HMA‟s
counterclaim for money damages “without prejudice.” A jury found Stiegel had
not proved his age discrimination claim. Stiegel appeals. We affirm.
I. Background Facts and Proceedings
Since 1982, Stiegel has been employed as an account executive in the
insurance industry in Des Moines. From February 1998 to May 2006, Stiegel
was employed by HMA in a similar capacity. As a condition of employment,
Stiegel was required to sign an Employment Agreement, which contained a noncompete clause. That clause prohibited a terminated employee from directly or
indirectly competing with HMA for a two-year period. This prohibition applied to
current customers and future potential customers of HMA that the former
employee became familiar with while employed by HMA.
The non-compete
clause also stated that “there is no geographical boundary to the restrictions.”
Finally, the clause provided that a former employee was allowed to solicit a
current or future customer of HMA if the former employee notified HMA in
advance of any solicitation and paid HMA a sum equal to two times the past
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twelve months commission revenue. On May 15, 2006, Stiegel‟s employment
with HMA was terminated “without cause.”
In August 2006, Stiegel began
working for True North Companies, which is a competitor of HMA.
On July 17, 2006, Stiegel filed a petition seeking a declaratory judgment
that the employment agreement‟s non-compete clause was void. On August 1,
2006, HMA filed an answer and counterclaim requesting the district court enforce
the non-compete clause. On January 25, 2007, Stiegel filed an amended petition
asserting an additional claim for wrongful termination based upon age
discrimination.
On August 27, 2007, Stiegel moved to amend his petition for a second
time seeking damages caused by HMA since Stiegel‟s termination.
HMA
resisted the motion and a hearing was held. On October 12, 2007, the district
denied Stiegel‟s amended claim inferring it was a new theory of recovery, “akin to
intentional interference with contract or contractual relationships.” The court then
noted that as Stiegel‟s motion was “filed just within the applicable deadline for
pleadings, the proposed amendment would substantially change the issues for
trial and necessitate considerable discovery.” Further, the deadline for experts
and dispositive motions had already passed, discovery closed in approximately
one week, and the case had previously been continued. The court concluded
HMA would be significantly prejudiced if it was forced to defend a new claim
added a few weeks before trial, and therefore denied Stiegel‟s motion to amend.
On January 7, 2008 to January 11, 2008, Stiegel‟s age discrimination
claim was tried to a jury. On January 11, 2008, the jury returned a verdict in
favor of HMA.
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Stiegel‟s request for a declaratory judgment was tried to the district court.
On February 5, 2008, the district court found that the twenty-four month
restriction was reasonable, but the covenant was overbroad as it prohibited
nationwide competition and defined a customer base that Stiegel may have had
no contact with. Thus, the district court denied Stiegel‟s petition for a declaratory
judgment requesting the non-compete clause be declared void. The district court
granted in part and denied in part HMA‟s counterclaim, enforcing the noncompete clause for a period of twenty-four months, but limiting it to the
customers HMA had at the time of Stiegel‟s termination and imposing a
geographical limit to the state of Iowa.
The district court dismissed HMA‟s
counterclaim seeking damages without prejudice.1
II. Non-Compete Clause
As the petition for declaratory judgment was tried in equity, our review is
de novo. Iowa R. App. P. 6.4; see Owens v. Brownlie, 610 N.W.2d 860, 865
(Iowa 2000) (“We review declaratory judgment actions according to the manner
[in which] the case was tried in the district court. If tried in equity, as in this case,
our review is de novo.”). We give weight to the factual findings of the district
1
HMA‟s counterclaim requested that the non-compete clause be enforced, including but
not limited to ordering Stiegel to: (1) notify HMA of customers he intends to solicit; (2)
pay HMA a sum equal to two times the past twelve month commission revenue for such
solicitations (3) refrain from disclosing HMA‟s confidential information; and (4) refrain
from attempting to or actually inducing employees of HMA to leave their employment at
HMA. Although a single counterclaim requesting enforcement of the non-compete
clause, the district court treated the request that Stiegel pay HMA for the customers he
intends to solicit as a separate counterclaim for money damages, which included
dismissing this claim without prejudice. On appeal, both parties also treat this portion of
the counterclaim as a separate counterclaim for money damages and neither party
asserts that the district court erred in doing so.
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court, but are not bound by them.
Iowa R. App. P. 6.14(6)(g); Owens, 610
N.W.2d at 865.
Stiegel asserts, regarding his declaratory judgment claim, that the district
court erred by (1) enforcing the non-compete clause because he was fired
without cause and in bad faith; (2) misapplying the balancing test; and (3)
dismissing HMA‟s counterclaim for damages without prejudice. HMA responds
that Stiegel did not preserve the first claim and all three claims are moot. We
agree with HMA that Stiegel did not preserve the first claim as it was not raised
nor ruled on below. Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2006) (“It is
a fundamental doctrine of appellate review that issues must ordinarily be both
raised and decided by the district court before we will decide them on appeal.”).
Further, Stiegel did not preserve this issue in his post-trial motion pursuant to
Iowa Rule of Civil Procedure 1.904(2). See id. (“When a district court fails to rule
on an issue properly raised by a party, the party who raised the issue must file a
motion requesting a ruling in order to preserve error for appeal.”). Thus, we
conclude that error was not preserved on this argument.
Regardless, we agree with HMA that all three claims are moot. Stiegel‟s
employment with HMA was terminated on May 15, 2006, and the non-compete
clause was enforceable for a period of two years, which has expired.2 Stiegel
asserts that HMA‟s counterclaim seeking damages is a compulsory counterclaim.
At oral argument, HMA conceded that all claims regarding the non-compete
clause are moot because HMA‟s counterclaim is a compulsory counterclaim. We
2
Stiegel asserts we should decide the issue regardless of its mootness, as it is a
practical impossibility for a plaintiff to bring a similar action and have it reach the
appellate courts before the expiration of the restricted time. We decline his invitation.
6
agree with the parties that HMA‟s counterclaim is a compulsory counterclaim and
as such HMA is precluded from attempting to litigate this issue. See Iowa R. Civ.
P. 1.241 (defining a compulsory counterclaim). The non-compete clause is no
longer enforceable and no damages may be sought for breach of the noncompete clause; thus, the issues raised by Stiegel as well as HMA‟s claim for
damages are moot. See Knauss v. Kemin Indus., Inc., 267 N.W.2d 56, 57 (Iowa
1978) (holding that where an employer appealed the district court‟s denial of its
suit to enforce a non-compete clause and the duration of the non-compete clause
had expired, the issue was moot).
III. Age Discrimination Claim
Stiegel next asserts, regarding his age discrimination claim, that the
district court erred by (1) denying Stiegel‟s August 2007 request to amend his
petition or allow certain witnesses to testify; (2) allowing a juror to continue to
serve despite Stiegel‟s objection for cause; and (3) denying Stiegel‟s request to
give a jury instruction regarding future lost earnings.
The district court‟s ruling on pretrial motions regarding amendments to
pleadings, testimony of witnesses, and jury selection and management are
reviewed for an abuse of discretion. See Rife v. D.T. Corner, Inc., 641 N.W.2d
761, 766 (Iowa 2002) (stating a district court‟s ruling on a motion for leave to
amend is reviewed for an abuse of discretion); Dettmann v. Kruckenberg, 613
N.W.2d 238, 249 (Iowa 2000) (stating a district court‟s ruling on the admission of
evidence is reviewed for an abuse of discretion); State v. Mitchell, 573 N.W.2d
239, 239-40 (Iowa 1994) (stating that a district court‟s ruling on challenges to
prospective jurors for cause is reviewed for an abuse of discretion). We review a
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challenge to a jury instruction for errors at law. Iowa R. App. P. 6.4; Anderson v.
Webster City, 620 N.W.2d 263, 265 (Iowa 2000). “Although our review is on
error, we will not reverse unless „prejudicial error by the trial court has occurred.‟”
Anderson, 620 N.W.2d at 265 (quoting Thavenet v. Davis, 589 N.W.2d 233, 236
(Iowa 1999)).
Stiegel asserts that the district court abused its discretion when it denied
his motion to amend his petition arguing the amendment would not have
substantially changed the issues.
On July 17, 2006, Stiegel filed his initial
petition requesting the district court declare the non-compete clause void. On
January 25, 2007, Stiegel filed an amended petition seeking damages for
wrongful termination based upon age discrimination.
On August 27, 2007,
Stiegel sought to amend his petition for a second time to seek damages for
HMA‟s conduct after Stiegel was terminated. We agree with the district court that
Stiegel‟s proposed amendment would have substantially changed the issues to
be tried and necessitated substantial discovery, which would have required
another continuance. See Glenn v. Carlstrom, 556 N.W.2d 800, 804 (Iowa 1996)
(holding that the district court did not abuse its discretion by denying the plaintiff‟s
motion to amend the petition where “the proposed amendment would have
substantially changed the issues to be tried, potentially deprived defendants of
adequate representation if they were not granted a continuance, and would also
have completely altered the course of trial preparation by reopening the entire
discovery process”). Therefore, we conclude that the district court did not abuse
its discretion by not allowing the amendment.
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Stiegel next asserts that the district court abused its discretion when it
excluded four witnesses that Stiegel planned on calling at trial.
On Friday
January 4, 2008, Stiegel informed HMA of four witnesses it planned on calling at
trial, which was to begin the following Monday, January 7. HMA moved to strike
these four witnesses, which the district court granted. The district court found
that Stiegel had a continuing obligation to supplement interrogatory answers and
its witness list. As that was not done in regards to these witnesses, the court
concluded HMA would be prejudiced should they be allowed to testify without
HMA having the benefit of pretrial discovery. We agree with the district court and
find no abuse of its discretion in striking these witnesses.
Stiegel next claims that the district court abused its discretion by allowing
a juror to continue to serve following his objection.
During voir dire, a juror
indicated that she knew Steve Flood, one of the witnesses HMA planned on
calling. Stiegel did not move to strike this juror. On the second day of trial, the
juror gave a note to the court, which stated:
In light of information disclosed in the trial yesterday afternoon
about Steve Flood‟s role in the plaintiff‟s employment termination, I
believe it may be important to the parties to have more information
about our family‟s relationship with the Flood family.
Our 8 year old daughters attend the same parish school – St.
Augustin, a rather small community of families. Our daughters play
together at each others‟ homes on occasion and I have served at
several parish and school events alongside Steve‟s wife, Ann, over
the course of the last ten years that I have known them. I consider
Ann a friend. She and her family brought a meal to our home this
summer following the birth of our baby and our families exchange
Christmas cards during the holidays.
Knowing now that Steve may be a major player in this trial, I am
questioning my ability to be fair. The plaintiff deserves a fair trial.
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However, I don‟t want to be in a position of having to pass judgment
on Steve Flood.
While I am not personally close to Steve, he is part of our St.
Augustin family and it would be next to impossible for me to set that
aside.
The court then met privately with the juror. Stiegel declined to question the juror
further, but moved to strike the juror for cause. The district court stated:
I am convinced from that discussion that she remains able to
discharge her obligations as a juror, in that she would be able to
continue to keep an open mind throughout all of the evidence and
make the decisions that she will be asked to make based solely
upon that evidence and the law contained in the Court‟s
instructions. And that while the association with Mr. Flood and his
family while present is not such as to impede those responsibilities
in a manner I believe would rise to the level of a challenge for
cause.
The district court denied Stiegel‟s request to strike the juror for cause. The jurors
began their deliberations on Friday and the district court noted that in the event
the jurors did not reach a verdict that day, they would continue deliberations on
Monday in spite of the fact that two of the jurors were college students who were
unable to return on Monday. However, the jurors returned a verdict on Friday.
Stiegel asserts that the college students “emphasized the importance” of the juror
he challenged for cause and had she been dismissed, the deliberations and
hence the verdict may have been different. After interviewing the witness in light
of her forthright disclosure, the court made a reasoned decision. We find no
abuse of discretion.
Finally, Stiegel asserts that the district court erred in refusing to give a jury
instruction regarding future lost earnings. HMA asserts that the district court did
not err in refusing to instruct the jury on this issue and even if it did, reversal
10
would not be warranted because there was no prejudice to Stiegel. “[E]rror in
giving a challenged instruction will not result in a reversal unless the challenging
party has been prejudiced by it.” Conner v. Menard, 705 N.W.2d 318, 322 (Iowa
2005). Because the jury found Stiegel did not prove his age discrimination claim,
he cannot establish prejudice for an error in a jury instruction regarding damages.
See id.; accord Sonnek v. Warren, 522 N.W.2d 45, 47 (Iowa 1994). Therefore,
there is no basis for awarding a new trial based upon this challenged jury
instruction.
We have considered all the arguments on appeal and affirm the district
court.
AFFIRMED.
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