Duluth/Superior Communications, Inc., d/b/a DSC Communications, Appellant, vs. Steve Shouts, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-1495

 

Duluth/Superior Communications, Inc.,

d/b/a DSC Communications,

Appellant,

 

vs.

 

Steve Shouts,

Respondent.

 

Filed June 15, 2004

Affirmed

Halbrooks, Judge

 

 

St. Louis County District Court

File No. C6-03-601361

 

Kenneth D. Butler, 11 East Superior Street, #555, Duluth, MN 55802 (for appellant)

 

Thomas F. Andrew, Brown, Andrew & Signorelli, P.A., 306 West Superior Street, Suite 300, Duluth, MN 55802 (for respondent)

 

            Considered and decided by Harten, Presiding Judge, Halbrooks, Judge, and Minge, Judge.

U N P U B L I S H E D   O P I N I O N

HALBROOKS, Judge

Appellant Duluth/Superior Communications, Inc. challenges the district court's order denying its motion for an injunction to enforce a noncompete agreement against respondent Steve Shouts, its former employee.  We affirm.

FACTS

Appellant Duluth/Superior Communications, Inc. is a wireless communications business with a trade area consisting of 13 counties in northeastern Minnesota and northwestern Wisconsin.  Appellant's clients include industrial entities, retail operations, municipalities, school districts, and colleges; its business includes working with low voltage (LV) products, such as close-circuit television surveillance systems (CCTV), voice-data cabling, fiber optics, security systems, and sound systems, as well as with radio frequency (RF) electronics.  In terms of revenue, appellant's primary business is two-way radio communication.  Appellant employs approximately 15 employees as technicians, office staff, and salespersons.

            Respondent Steve Shouts has an avionics degree from Alexandria Technical College, where he trained in electronics and two-way radio equipment for airplanes.  From June 1994 through December 1995, respondent worked as a technician for Marcom, a Motorola two-way radio dealer, where he installed and repaired two-way radios.  In January 1996, appellant hired respondent as a technician.  Like Marcom, appellant is a two-way radio dealer for Motorola, and respondent's job duties with appellant also included the bench repair and field repair of two-way radios. 

In November 1996, after approximately 11 months of employment, appellant asked respondent to sign a noncompete agreement that prohibited him from engaging in commercial activity in competition with any part of appellant's business within appellant's trade area for one year following termination of his employment for any reason.  Respondent testified that he believed he had no choice but to sign the agreement because otherwise he "wouldn't have a job anymore."  Appellant's owner, Dale Thompson, contends that no one was told that they would be fired, but that appellant "would not invest into them or their careers" unless they signed the agreement.  Appellant paid respondent $50 in exchange for signing the agreement.  Although respondent testified that his job duties did not change after signing the agreement, appellant maintains that respondent received additional training and responsibilities in exchange for signing the noncompete agreement.  The record indicates that respondent also received training through factory courses, in-house seminars, and on-the-job training prior to signing the agreement.

On May 2, 2003, respondent terminated his employment with appellant, intending to begin working at Mesaba Electric, an electrical company located within appellant's trade area.  At the time respondent left, he was appellant's only senior field technician.  Appellant petitioned the district court for a temporary restraining order or a temporary injunction enforcing the noncompete agreement, but the district court denied the motion and scheduled an evidentiary hearing. 

At the hearing, Thompson opined that Mesaba is a direct competitor because "their product offerings are the same as some of [appellant's]."  According to Thompson, these products offerings include "CCTV, the security systems, access control, and things of that nature."  Additionally, both Mesaba and appellant work with voice-data cabling, fiber optics, and sound systems.  Mesaba and appellant have clients in common, including FDL College and Floodwood School. 

But there was evidence that there are also several differences between the two companies.  For instance, unlike appellant, Mesaba does not work in the RF business.  And while Mesaba is an electrical contractor (EC) that works with EC-type wiring, appellant is not.  Appellant's primary business is two-way radio communication, while Mesaba does not sell or service two-way radios.  Mesaba's primary business is the installation of cabling in newly constructed or remodeled buildings. 

Respondent testified that the training he received from appellant is not relevant to the type of work he does for Mesaba.  While employed by appellant, respondent worked on terminations, hookup, programming, and customer training.  According to respondent, this differs from his work with Mesaba where he only does the initial cabling, not the final terminations.  Furthermore, while respondent is trained in the areas of RF/wireless and limited energy/cable communication, respondent estimated that he spent approximately 90-95% of his time working on two-way radios while employed by appellant.  Respondent testified none of his work at Mesaba involves two-way radios.  Appellant believes these distinctions are irrelevant, arguing that "[c]able is cable.  [Appellant] just also [does] the termination side of it too." 

Thompson also testified that appellant gave respondent confidential and proprietary information, including Exhibit 5, a handbook containing a compilation of information on various resources, contacts, and design systems from many of appellant's customers.  Thompson stated that respondent also had access to appellant's pricing, vendors, and internal information.  Benjamin Crowson, appellant's service manager, testified that disclosure of this information to third parties would be harmful to appellant's business.  But appellant does not assert that respondent took any of these documents with him when he left, nor does it allege that respondent used any of this information to appellant's detriment while working for Mesaba.  Respondent testified that none of the information contained in Exhibit 5 relates to his work at Mesaba and that he did not have the type of relationship with appellant's clients where he could suggest that they move their business to Mesaba.

The district court denied appellant's request for a temporary injunction.  Relying on Bennett v. Storz Broad. Co., 270 Minn. 525, 134 N.W.2d 892 (1965), the court determined that an injunction was not necessary to safeguard appellant's interests in customer goodwill, confidential information, trade secures, or customer contacts.  The court concluded that appellant failed to demonstrate that it would suffer irreparable harm without an injunction, while respondent proved that he would suffer substantial damages by being forced to work away from home for one year.  Appellant subsequently moved for a new trial or, in the alternative, amended findings.  The district court denied that motion, and this appeal follows. 

D E C I S I O N

A district court has discretion to grant or deny a motion for a temporary injunction, and we will not overturn its decision absent a clear abuse of discretion.  Carl Bolander & Sons Co. v. City of Minneapolis, 502 N.W.2d 203, 209 (Minn. 1993).  The purpose of a temporary injunction is to preserve the status quo until there is an adjudication of the case on the merits.  Miller v. Foley, 317 N.W.2d 710, 712 (Minn. 1982).  Because an injunction is an equitable remedy, the party seeking an injunction must establish that there is no adequate legal remedy and that an injunction is necessary to prevent irreparable harm.  Cherne Indus., Inc. v. Grounds & Assocs., Inc., 278 N.W.2d 81, 92 (Minn.1979).  In considering whether to grant or deny a temporary injunction, the district court must consider the five factors set forth in Dahlberg Bros., Inc. v. Ford Motor Co., 272 Minn. 264, 274-75, 137 N.W.2d 314, 321-22 (1965).  These factors are (1) the relationship between the parties, (2) the balancing of harms to both parties, (3) the likelihood of success on the merits, (4) public policy considerations, and (5) any administrative burdens.  Id. 

Here, while the district court did not explicitly analyze each of the Dahlberg factors, the court's findings and conclusions demonstrate that the factors were considered.  Ultimately, the court concluded that

[appellant's] request for an injunction may be denied as an injunction is not necessary to safeguard [appellant's] protectable interests in (1) customer goodwill; (2) confidential information; (3) trade secrets; or (4) customer contacts.  See Bennett v. Storz Broad. Co., [270 Minn. 525, 533,] 134 N.W.2d 892, 898 (Minn. 1965), nor has [appellant] demonstrated that it will suffer irreparable harm if an injunction is not granted to it, while [respondent] has proved that he will suffer substantial damages by being forced to work for a year at a great distance from his home.  See Midwest Systems, Inc. v. Faulkner, [No. C9-97-2029 (Minn. App. May 19, 1998)].

 

Appellant challenges this conclusion,[1] along with several of the district court's findings supporting it.  "Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the [district] court to judge the credibility of the witnesses."  Minn. R. Civ. P. 52.01.  "[W]e view the record in the light most favorable to the judgment of the district court."  Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999).  Findings are not defective simply because the record might support findings other than those made by the district court, Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn. App. 2000), rather, the court's findings must be clearly erroneous or "manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole" to warrant reversal.  Rogers, 603 N.W.2d at 656 (quotation omitted).  "If there is reasonable evidence to support the district court's findings, [this court] will not disturb them."  Id.

A.        Direct Competitor

            Appellant first argues the district court's finding that "Mesaba is not a direct competitor of [appellant]" is clearly erroneous.  The district court based this finding on several other findings, including that (1) "Mesaba does not sell or service two-way radios"; (2) respondent's work at Mesaba includes "installation of fire alarm systems, sound systems, and burglar alarm systems in newly constructed buildings or major remodelings," while his work with appellant consisted of "bench repair of two-way radios and repairs of two-way radios in the field for police departments, fire departments, emergency services, and corporations, and work on customer tower sites"; and (3) "Mesaba does the cabling but does not install the actual end fire alarm system, sound system, etc."[2]  Appellant argues that "the fact that both [a]ppellant and Mesaba perform low voltage cabling, CCTV work, and optic fibering for the same customers makes them directly competitive with each other, regardless of whether Mesaba does nor does not do final hookups." 

Although appellant's owner, Dale Thompson, opined that Mesaba is a direct competitor, explaining that "their product offerings are the same as some of [appellant's]" and that both Mesaba and appellant work in the low voltage/limited energy business, he also testified that appellant works in the RF business, while Mesaba does not, and that Mesaba does EC wiring, while appellant does not.  On cross-examination, Thompson stated that appellant's "primary business" was two-way radio communication, but that Mesaba was not engaged in that business at all. 

Additionally, respondent testified that at Mesaba, he works with "[v]oice data, coaxial cabling, fiber optics, [and] fire alarm cabling" but has not done any two-way radio work at all.  Respondent stated that his work with appellant differed from his work with Mesaba because Mesaba does not "do any of the final terminations . . . [they just] do the cabling."  Respondent even agreed that the work with Mesaba is "a total flip-flop of [the] . . . work [he did with appellant]."  Although respondent admitted on cross-examination that "the cabling that [he was] performing for Mesaba . . . is the same type of cabling, voice data cabling . . . that [he] had done . . . for [appellant]," he later qualified that statement by testifying that "I may have been using cables [while working for appellant], but it was for two-way radios."  Respondent also testified that, unlike appellant, Mesaba does not get its business through salesmen, but rather "receives bids though the construction industry." 

Viewing the record in the light most favorable to the district court's judgment, and giving due regard for the district court's opportunity to judge the credibility of the witnesses, we conclude that the district court's finding that Mesaba is not a direct competitor of appellant is not clearly erroneous. 

B.        Respondent's Duties

Appellant next challenges the district court's finding that "[respondent] spent between 90-95% of his time while employed with [appellant] repairing two-way radios."  On direct examination, respondent's counsel asked, "[W]hen you worked for [appellant], what percent of your total work time . . . was spent on two-way radios, either repairing them . . . on the site at [appellant's] bench-work, . . . or out in the field, or putting up antennas?"  Respondent replied, "By far the vast majority; maybe 90, 95 percent of my time . . . was doing . . . two-way radio work on things relating to it directly." 

Appellant argues that the district court's finding is clearly erroneous because the court ignored respondent's "recantation" on cross-examination and Benjamin Crowson's rebuttal testimony.  On cross-examination, the following exchange took place:

Q:        Of this . . . 90 to 95 percent time that you dealt with radio communications, or the . . . RF side of [appellant's business], did any of that 90 to 95 percent deal with the integration of voice data cabling[?]

 

A:        Sure.

 

. . . .

 

Q:        And in that respect, when you say 90 to 95 percent, then it wasn't purely limited to, it still required your training and -- and development and execution of that training with regard to low . . . energy, or limited energy projects[?]

 

A:        I may have been using cables, but it was for two-way radios.

 

Q:        Right.  But it was still using cables, wasn't it?

 

A:        Yes.

 

Q:        And using cables is designated generally in the industry to the low voltage part of it.

 

A:        Yes.

 

Q:        And this is, what, a part which [appellant] did?

 

A:        Yes.

 

Q:        And this is part of what Mesaba Electric is doing today?

 

A:        Yes.

 

Furthermore, on rebuttal, appellant's counsel asked appellant's service manager, Benjamin Crowson, "In your opinion, . . . when [respondent] says 90 to 95 percent, that's an intermingling or a commingling of both low voltage and radio frequency?"  Crowson responded, "Yes, I would say there's a large overlap." 

The cross-examination and rebuttal testimony do not change the fact that respondent said that he spent 90-95% of his time "doing . . . two-way radio work or things relating to it directly."  Instead, the testimony merely elaborates on the specific nature of that work.  Given this court's standard of review, we conclude that the district court's finding that respondent spent "90-95% of his time while employed with [appellant] repairing two-way radios" is not clearly erroneous.

C.        Confidential Information

Appellant next contends that the district court's finding that "[respondent] was not given any confidential information of [appellant]" is clearly erroneous.  The district court stated:

The material that [appellant] introduced in Exhibit 5 is a compilation of material from a number of different files and was primarily used by the on-call service technician to make necessary repairs for [appellant's] customer's two-way radios on weekends.  [Respondent] did not take a copy of Exhibit 5 or similar materials with him when he left [appellant's] employment.  The only portion of Exhibit 5 that would relate to cabling are the diagrams that are the last two documents of Exhibit 5.  These diagrams have not been shown to be the type of confidential information that [respondent] has or will use to the detriment of [appellant].  [Appellant] only provided [respondent] enough information for him to perform his job as a service technician. 

 

Appellant does not assert that respondent took confidential information with him when he resigned, nor does appellant allege that respondent used any confidential information to its detriment while working for Mesaba.  Furthermore, respondent testified that none of the information contained in Exhibit 5 relates to his work at Mesaba.  Therefore, viewing the evidence in the light most favorable to the district court's judgment, we conclude that the district court's finding regarding confidential information is not clearly erroneous.

D.        Irreparable Harm

A party seeking temporary injunctive relief must establish that an injunction is necessary "to prevent great and irreparable injury."  Metro. Sports Facilities Comm'n v. Minn. Twins P'ship, 638 N.W.2d 214, 222 (Minn. App. 2002), review denied (Minn. Feb. 4, 2002).  To be granted relief, the moving party must offer more than a "mere statement that it is suffering or will suffer irreparable injury."  Bolander, 502 N.W.2d at 209.  Generally, the failure to show irreparable harm is, by itself, a sufficient ground for denying a temporary injunction.  Morse v. City of Waterville, 458 N.W.2d 728, 729 (Minn. App. 1990), review denied (Minn. Sept. 28, 1990). 

Appellant contends that it established that its customer relationships were critical to its success and that disclosure of confidential information would be harmful to those relationships.  Based on this testimony, appellant argues that the district court's finding that "[t]here are no customers of [appellant] that [respondent] established a relationship with that would make them leave [appellant] even if [respondent] was working for a company that competed with [appellant]" is clearly erroneous.  Appellant further argues that because respondent was given confidential information and there is a possibility that the information could be disclosed in the future, it is appropriate to infer irreparable harm.  See, e.g., Thermorama, Inc. v. Buckwold, 267 Minn. 551, 552-53, 125 N.W.2d 844, 845 (1964) (inferring irreparable harm). 

We disagree.  It is true that "[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."  Webb Publ'g Co. v. Fosshage, 426 N.W.2d 445, 448 (Minn. App. 1988); see also Eutectic Welding Alloys Corp. v. West, 281 Minn. 13, 16 n.4, 160 N.W.2d 566, 569 n.4 (1968) (noting "inherent threat of irreparable injury may be inferred from the breach of an otherwise valid and enforceable restrictive covenant [not to compete or not to disclose trade secrets], sufficient to invoke at least temporary equitable relief").  But appellant would be entitled to an inference of harm only if that inference was not rebutted.  See Edin v. Jostens, Inc., 343 N.W.2d 691, 694 (Minn. App. 1984).  Here, the inference was rebutted by respondent's testimony that he did not have the type of relationship with appellant's clients where he could suggest that they move their business to Mesaba and his testimony that appellant's confidential information was of no use to him at Mesaba.  As previously noted, appellant does not assert that respondent took any confidential information with him to Mesaba or that he is using any confidential information to appellant's detriment, and the allegation that its confidential information would be useful to its competitors if ever disclosed does not establish the requisite irreparable harm.  Consequently, we conclude that the district court did not abuse its discretion in finding that appellant failed to demonstrate irreparable harm.  The district court could have appropriately denied injunctive relief on this factor alone, and consequently, it is unnecessary to address appellant's argument with respect to Finding #11.[3]  

E.        Weighing of Harm

Appellant argues that the district court improperly weighed the relative harm to the parties by finding that "[i]t would cause severe financial hardship for [respondent] if he was not allowed to work in the area covered by the non-compete agreement for a year."  But we defer to the district court's ability to determine the weight and credibility of testimony, and we conclude that the record supports the district court's finding.  See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating appellate courts defer to district court credibility determinations); see also Minn. R. Civ. P. 52.01 (requiring "due regard" to be given to district court's ability to judge witness credibility).  Respondent testified that his spouse is employed as a transcription coordinator and that if he could not work within appellant's trade area, he would need to "find a job in the Twin Cities and commute or rent an apartment down there and live there during the week and come home on the weekends."  Appellant failed to establish in any detail the harm it would suffer by allowing respondent to continue working at Mesaba.  Consequently, the district court properly found that this factor weighed in favor of respondent.  The court's finding is not clearly erroneous.

F.        Adequacy of Consideration for the Noncompete Agreement

Finally, appellant argues that the noncompete agreement was supported by independent consideration and is, therefore, enforceable.  But the district court did not expressly determine whether the noncompete agreement was supported by adequate consideration.[4]  Generally, a reviewing court considers "only those issues that the record shows were presented and considered by the [district] court in deciding the matter before it."  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).  Therefore, we decline to address this issue.  For the same reason, we also decline to address respondent's argument that he is the type of "average employee" against whom a noncompete agreement is unenforceable.  See id.

            Affirmed.

 

[1] Appellant also seems to challenge language included in the district court's memorandum denying its motion for a temporary restraining order, but because the district court held an evidentiary hearing after issuing that order and then made additional findings and conclusions of law in support of its denial of appellant's motion, only the arguments relating to the district court's August 2003 order are relevant on appeal.

[2] Appellant does not seem to challenge these findings.  It asserts only that the district court's finding that Mesaba is not a direct competitor was clearly erroneous.

[3] In Finding #11, the district court concluded that "[d]uring the two month period [respondent] has worked for Mesaba he has not contacted any of [appellant's] customers and [appellant] has not lost any business because [respondent] quit."  Appellant argues that this finding is clearly erroneous for failing to recognize that appellant did not need to establish an actual injury to show irreparable harm.  But having already concluded that a showing of irreparable harm was lacking, it is unnecessary to address this issue.  

[4] In its May 2003 order denying appellant's request for a temporary restraining order, the court did note that respondent signed a noncompete agreement "for what appears to be both separate and adequate consideration."  But this was prior to the evidentiary hearing and the district court did not address the issue in its August 2003 order denying the temporary injunction.