D.L. Ricci Corp, Respondent, vs. Jackie Forsman, a/k/a Jackie Duden, Appellant.

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (1996).

STATE OF MINNESOTA

IN COURT OF APPEALS

C8-97-1597

C8-97-1969

D.L. Ricci Corp,

Respondent,

vs.

Jackie Forsman, a/k/a Jackie Duden,

Appellant.

Filed April 28, 1998

Affirmed

Randall, Judge

Goodhue County District Court

File No. 25-C7-97-950

James L. Volling, Timothy C. Rank, Kara L. Benson, Faegre & Benson, L.L.P., 2200 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 (for respondent)

Paul M. Zeig, Holst, Vogel, Erdmann, & Vogel, Masonic Building, P.O. Box 39, Red Wing, MN 55066 (for respondent)

Richard T. Ostlund, Michael Olafson, Lindquist & Vennum P.L.L.P., 4200 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for appellant)

Considered and decided by Randall, Presiding Judge, Klaphake, Judge, and Willis, Judge.

U N P U B L I S H E D O P I N I O N

RANDALL, Judge

Appellant argues the district court abused its discretion when it granted respondent a temporary restraining order, prohibiting her from working for a competitor of respondent's. Appellant also argues the court abused its discretion when it refused to vacate the temporary restraining order. We affirm.

FACTS

Appellant Jackie Forsman was an employee of Express Services Temporary and Permanent Personnel (Express Services), a temporary employment agency in Red Wing. On July 6, 1995, Forsman was placed in a temporary-to-hire position at the offices of respondent D.L. Ricci, Inc., as a billing clerk and sales coordinator, earning $8.00 an hour. Ricci paid Express Services for Forsman's services and Express Services, in turn, paid Forsman.

In late June 1995 and prior to her placement at Ricci, Forsman was interviewed by Tad Achterberg and the founder of Ricci, Donato L. Ricci. The parties dispute whether Forsman was informed during the interview that she would be required to sign a non-compete agreement as a condition of her employment at Ricci. However, on July 6, 1995, Forsman's first day at Ricci in her temporary-to-hire position, Forsman did sign a series of documents, including a confidentiality and a non-compete agreement. The confidential information clause provided that Forsman would not disclose confidential information that she acquired to any third party during or after her employment with Ricci. Confidential information included, among other things, various financial information, customer lists, and business strategies. The non-compete clause provided that Forsman agreed not to compete with Ricci or engage in employment with a competitor of Ricci during her employment with Ricci or for a period of two years after she left the employ of Ricci.

On October 9, 1995, Ricci hired Forsman as a permanent full-time employee. Her rate of pay was increased to approximately $9.00 an hour. Forsman did not sign any additional documents. Forsman's duties included taking product orders over the phone from Ricci's customers, taking those orders to the shop, and having the shop employees ship the product to the customer. Eventually Forsman began calculating commissions for Ricci's sales people, creating invoices for customer orders, and contacting shippers to arrange for shipment of customer orders.

On July 7, 1997, Forsman voluntarily left her employment with Ricci. According to the affidavit of Donato Ricci, a number of confidential items were missing following Forsman's departure, including Forsman's daily notepad, a copy of the company's Customer Contact Book, and a customer information file that had been in Forsman's possession. Forsman maintains that, except for some personal items, she took nothing from the office.

The next morning, Forsman spent several hours in the office of Express Services retesting and interviewing so she could once again become an employee of Express Services. A friend then suggested that she inquire about a job at Mactech, a competitor of Ricci. That afternoon, Forsman met with Joel Wittenbraker, the president of Mactech, and three days later was offered a job to assist in developing a marketing plan. Forsman began working at Mactech on July 14, 1997. The next day, Ricci learned from a customer that Forsman was working at Mactech. Ricci's counsel then contacted Mactech by telephone to inform the company that Forsman was under a noncompete agreement.

Because Forsman continued her employment with Mactech, Ricci filed suit against Forsman in Goodhue County District Court, seeking to enforce its noncompete clause. On July 25, the district court heard Ricci's motion for a temporary injunction to prohibit Forsman from continuing her employment at Mactech. The district court granted Ricci's motion and issued a temporary injunction. Forsman appealed that decision on September 2. On September 29, Forsman moved the district court to vacate the temporary injunction, arguing the noncompete agreement was unenforceable for lack of consideration. Following a hearing, the district court denied Forsman's motion. Forsman filed a notice of appeal with this court, along with a motion to consolidate her appeal of the temporary injunction order. This court granted Forsman's motion to consolidate on October 29, 1997.

D E C I S I O N

The decision to grant a temporary injunction is within the discretion of the district court, and this court will not reverse that decision absent a clear abuse of that discretion. Carl Bolander & Sons Co. v. City of Minneapolis, 502 N.W.2d 203, 209 (Minn. 1993). In determining whether to issue a temporary injunction, the district court must consider the following five factors: (1) the relationship of the parties before the dispute; (2) the relative harm to the parties if the injunction is granted; (3) the likelihood that one party will succeed on the merits; (4) public policy considerations; and (5) the administrative burdens in supervising and enforcing the decree. Dahlberg Bros. v. Ford Motor Co., 272 Minn. 264, 274-75, 137 N.W.2d 314, 321-22 (1965). When considering whether to grant equitable injunctive relief, in the context of noncompetition agreements,

the court must consider not only the nature of the business and character of the employment but all the circumstances of the case, including the situation of the parties, the necessity of the restriction for the protection of the employer's business, and the right of the employee to work and to earn a livelihood and better his status within the limits of his skill, talent, and continued productivity.

Edin v. Josten's, Inc., 343 N.W.2d 691, 693 (Minn. App. 1984) (quoting Bennet v. Storz Broadcasting Co., 270 Minn. 525, 536, 134 N.W.2d 892, 900 (1965)). Because noncompetition agreements are partial restraints of trade, such contracts are disfavored, cautiously considered, and carefully scrutinized. Bennett, 270 Minn. at 533, 134 N.W.2d at 898.

If it is not ancillary to an employment contract, a noncompetition agreement must be supported by independent consideration. Sanborn Mfg. Co. v. Currie, 500 N.W.2d 161, 164 (Minn. App. 1993). Satellite Indus., Inc. v. Keeling, 396 N.W.2d 635, 639 (Minn. App. 1986). Continued employment is insufficient consideration for a noncompetition agreement, unless the employer provides the employee with "real benefits beyond those already obtained by the employee in a previous contract." Id. The adequacy of consideration for a noncompetition agreement in an ongoing employment relationship depends on the facts of each case. Davies & Davies Agency, Inc. v. Davies, 298 N.W.2d 127, 130 (Minn. 1980).

Forsman argues that the district court erred in granting Ricci a temporary injunction because the noncompete clause that she signed is unenforceable for lack of consideration. Forsman claims that the noncompete is invalid because it was executed after she began her employment with Ricci and it was not supported by independent consideration. We disagree.

The noncompete agreement was a condition of Forsman taking the temporary assignment at Ricci and without it, Ricci would not have allowed her to work on the premises. As an employee of Express Services, Forsman was not required to sign the noncompete agreement to continue her employment with Express Services. When Forsman reported to her temporary assignment and was presented with the noncompete agreement, she could have simply refused and returned to Express Services for a new temporary assignment. There is no evidence Forsman was coerced into signing the noncompete agreement. Forsman was presented with the noncompete before she started her assignment with Ricci and she signed it, agreeing to be bound by its terms. On these facts, the noncompete agreement signed by Forsman is supported by adequate consideration.

Independent consideration was also there when she was hired as a permanent employee of Ricci in October 1995. When Forsman was hired on as a permanent employee, she was aware of the noncompete agreement. By becoming a permanent employee, Forsman gained real advantages that she would not have otherwise enjoyed as a temporary employee of Express Services. The permanent status provided Forsman with an increase in pay, greater benefits, and more job security than she otherwise enjoyed as a temporary. Even without the initial consideration, sufficient independent consideration was given when Forsman was hired as a permanent employee of Ricci.

Next, Forsman argues that the noncompete fails to protect any legitimate interest of Ricci. Because noncompete agreements are restraints of trade, Minnesota courts will enforce noncompete agreements only to the extent that they protect the legitimate business interests of the employer. Webb Publ'g Co. v. Fosshage, 426 N.W.2d 445, 450 (Minn. App. 1988). Legitimate interests that may be protected by an employer through a noncompete agreement include the company's goodwill, trade secrets, or

confidential information. Roth v. Gamble-Skogmo, Inc., 532 F. Supp. 1029, 1031 (D. Minn. 1982).

It is clear that during the course of her employment, Forsman had access to and used customers' lists, sales projections, sales figures, margin figures, pricing calculations, bids, estimates, and other proprietary and financial information. This is information that Ricci could legitimately seek to protect through a noncompete agreement. Forsman contends that the customer information is not confidential because, given the nature of the business in which Ricci is engaged, the identity of customers is widely known by other competitors. If information is generally known, it cannot be considered a trade secret. See Widmark v. Northrup King Co., 530 N.W.2d 588, 592 (Minn. App. 1995) (noting under Uniform Trade Secrets Act information must not be generally known nor readily ascertainable to qualify as trade secret), review denied (Minn. June 14, 1995). Even assuming that contention is true, Ricci had a legitimate interest in protecting the other types of information to which Forsman had access. This includes sales projections, sales figures, margins figures, pricing calculations, bids, estimates, and other such information.

Irreparable 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.

Fosshage, 426 N.W.2d at 448. This inference may be rebutted if the former employee presents evidence that he or she had no hold on the goodwill of the business or its clientele. Id. Irreparable harm may also be inferred based on an employee's access to confidential information and the threat that such information will be disclosed by the former employee. See Menter Co. v. Brock, 147 Minn. 407, 410 180 N.W. 553, 554 (1920) (holding injunctive relief may be granted where it is shown former employee obtained knowledge of secrets that would result in irreparable damage to employer if such secrets were disclosed). The mere fact that a former employee begins work for a competitor is insufficient to infer irreparable harm. See id. (holding injury not shown by mere fact employee enters employ of rival concern).

It is undisputed that Forsman had access to and knowledge of confidential information, regarding among other things, Ricci's customers lists, pricing information, cost information, profit margins, inventory lists, sales representative information. Forsman's knowledge of this information would allow a competitor of Ricci to underbid Ricci and interfere with Ricci's ability to obtain new work. We note that only days after leaving Ricci, Forsman was hired by Mactech to develop a marketing plan and to do the exact work she was doing at Ricci. Here, a monetary remedy would be inadequate to compensate Ricci if Forsman disclosed the confidential information she obtained while employed at Ricci.

Forsman argues that the district court abused its discretion when it found that the balance of harms weighs in Ricci's favor. While the former employer must show irreparable harm for a temporary injunction to issue, the employee need only show substantial harm to bar it. Yager v. Thompson, 352 N.W.2d 71, 75 (Minn. App. 1984). Forsman claims that because the temporary injunction bars her from her employment with Mactech, she has suffered "substantial harm."

Concededly, Forsman will suffer some harm if the temporary injunction is allowed to stand. However, we affirm the district court's conclusion that the harm is not substantial. As the district court found, while Forsman claimed that there were no other jobs in Red Wing that were comparable in pay to Mactech, Forsman spent only one morning looking for other employment. Forsman has made no showing that other jobs were not available in Red Wing or that she made any significant effort to find another job, but was unable to do so. We also note that Forsman voluntarily left her employment with Ricci, thus creating the situation in which she finds herself. Given these facts, the district court did not abuse its discretion when it found that the balance of harms weighs in Ricci's favor.

In light of the foregoing analysis, we conclude that Ricci would likely succeed on the merits. We also conclude that the three remaining Dahlberg factors have also been satisfied. Forsman was in a position of trust and confidence when she was employed at Ricci; public policy supports a business's right to protect confidential and proprietary information from being disclosed or utilized by former employees through the use of reasonable noncompete agreements; and there would be little, if any, administrative burden on the court if the temporary injunction is allowed to stand in the present case.

Finally, Forsman argues that the district court erred when it refused to vacate the temporary injunction. After the temporary injunction was issued, Forsman obtained copies of her personnel file from Express Services and Ricci. Forsman claims the district court should have vacated the temporary injunction because there is no evidence in these files that she was informed that she would be required to sign a temporary injunction before she reported for her temporary assignment at Ricci on July 6, 1995. The decision of whether to vacate a temporary restraining order lies within the discretion of the district court. See AMF Pinspotters, Inc. v. Harkins Bowling, Inc., 260 Minn. 499, 504, 110 N.W.2d 348, 351 (1961) (holding right to and necessity for granting or refusing injunctive relief lies within discretion of district court).

The information contained in Forsman's personnel file, or the lack thereof, is immaterial. As discussed previously, Forsman was not required to sign the noncompete to continue her employment with Express Services. The noncompete agreement is supported by sufficient independent consideration. We cannot say that as a matter of law the district court abused its discretion in refusing to vacate the temporary injunction.

Affirmed.