Workers' Compensation Recovery, Inc., Respondent, vs. Robin Marvin, Appellant.

This opinion will be unpublished and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

A03-1549

 

Workers' Compensation Recovery, Inc.,

Respondent,

 

vs.

 

Robin Marvin,

Appellant.

 

Filed June 8, 2004

Affirmed

Halbrooks, Judge

 

Washington County District Court

File No. C2-03-3058

 

William M. Hart, Erica Gutmann Strohl, Mary M.L. O'Brien, Meagher & Geer, P.L.L.P., 33 South 6th Street, Suite 4200, Minneapolis, MN 55402 (for respondent)

 

Audra A. Holbeck, 350 West Burnsville Parkway, Suite 625, Burnsville, MN 55337 (for appellant)

 

            Considered and decided by Halbrooks, Presiding Judge, Toussaint, Chief Judge, and Huspeni, Judge.*

U N P U B L I S H E D   O P I N I O N

HALBROOKS, Judge

            Appellant Robin Marvin challenges a temporary injunction enjoining her from conducting business with Benedictine Health Systems (BHS), a former client of Marvin's previous employer, respondent Workers' Compensation Recovery, Inc. (WCR).  Marvin argues that the district court abused its discretion in issuing the injunction because (1) WCR showed neither irreparable harm nor inadequacy of its legal remedy, (2) the district court's factual findings are inadequate, (3) the court violated Minn. R. Civ. P. 65.04 because the injunction order does not contain a specific application of the Dahlberg factors, (4) the evidence does not support the district court's Dahlberg analysis, and (5) a temporary injunction was unnecessary because a temporary restraining order was previously issued.  We affirm.

FACTS

In 1988, William Johansen founded respondent Workers' Compensation Recovery, Inc. (WCR), a company that works primarily with long-term health-care facilities and their injured employees to help minimize their workers' compensation insurance costs.  WCR's methodology focuses on working with a small number of injured employees, whose claims constitute the vast majority of workers' compensation costs, to help them return to productive work as quickly as possible.  According to Johansen, WCR has been more successful than its competitors due to its unique insights and methodology.  Johansen attributes WCR's success to its personal relationships with its customers, its knowledge of the workers' compensation industry, and its innovative methodology.

In October 1992, Johansen hired appellant Robin Marvin as a program manager and began training and educating her on WCR's business methods and procedures.  As program manager, Marvin coordinated injured employees' medical treatment with treating physicians, the employer, and the workers' compensation carrier and often attended doctors' appointments with employees.  Prior to her employment with WCR, Marvin was a registered nurse with no previous experience in the workers' compensation or insurance industries.  But Marvin asserts that her nursing background greatly assisted her in identifying which employees were at risk for costly claims, understanding the employees' injuries, assessing their abilities to return to work, and determining which job duties they were capable of performing.  Marvin did not sign an employment contract or a noncompete agreement with WCR. 

WCR subsequently assigned Marvin to work with Health Dimension, one of its most important clients.  In 1998, Health Dimension merged with Benedictine Health Systems (BHS), an operator of over 80 residential-care facilities.  Although there was no written contract between BHS and WCR, WCR continued working with approximately 15 of BHS's facilities after the merger.  According to Johansen, WCR entrusted Marvin with substantial confidential information during the course of her employment, including WCR's methodology and philosophy, access to key contact people at BHS, and access to billing information.  Using this information, Marvin developed a relationship with BHS on behalf of WCR. 

But by 1999, WCR had lost several clients and employees, and Marvin became increasingly concerned about her job security.  In January 2001, WCR's only clients were BHS and one other facility, and by 2002, BHS was generating more than 90% of WCR's revenue.  Marvin contemplated resigning from WCR, but agreed to stay after receiving a raise and Johansen's assurance that he would acquire new business opportunities.   

In April 2003, Marvin set up a meeting with several BHS executives on behalf of WCR to discuss BHS's upcoming renewal with its insurance carrier and future services with WCR.  Marvin did not apprise Johansen of the meeting.  According to Marvin, during the April 17 meeting, BHS requested that Marvin contact other BHS facilities that had yet to sign on with WCR in an effort to get them to do business with WCR.  Marvin stated that she felt obligated to inform BHS that she would be resigning from WCR to start her own business.  According to Marvin,

[BHS] asked me where I was going.  I informed them I was going out on my own.  At this time they asked me to contact them after I had given my resignation to Mr. Johansen at WCR.  Thus, I did not ask them for BHS's business, we did not discuss any terms or contracts, and the meeting was certainly not to solicit business. 

 

Lowell Larson, a BHS representative, confirms Marvin's version of events, stating that, "Marvin did not ask [for] or request BHS business at the April 17, 2003 meeting." 

Marvin met with Johansen to tender her resignation on April 28.  When Johansen asked if Marvin had met with BHS, Marvin asserts that she told him that she had, but not to solicit business.  Johansen, on the other hand, asserts that Marvin told him that she believed that BHS would be "supportive" of her efforts to start her own business, which he understood to mean that Marvin "had solicited business from BHS on behalf of her new company."  Johansen stated that he was "stunned by [Marvin's] admissions" and asked whether Marvin had "any ethical problems in soliciting business from WCR's main customer on behalf of her own business while still employed by WCR," to which Marvin indicated that she did not.  Marvin contends that Johansen accused her of being unethical and immoral, but that she did not respond to the accusations.  At the conclusion of the meeting, Johansen terminated Marvin. 

Johansen then contacted two BHS representatives, who confirmed that Marvin had met with BHS on April 17.  After speaking with BHS, Johansen was convinced that Marvin had "solicited BHS to direct its business away from WCR and to her new company."  Johansen also states that he subsequently learned that Marvin had prepared marketing materials for her new company that incorporated WCR's methodology.  Marvin denies this allegation and further contends that WCR's methodology was not Johansen's creation, but rather is commonly used throughout the workers' compensation industry and is even advocated on the Minnesota Department of Labor and Industry's website.

After Marvin's termination, WCR moved another employee, Nicole Marvin, into Marvin's position.[1]  Johansen later learned that despite her termination, Marvin attended a doctor's appointment with Nicole Marvin and an injured BHS employee on May 8, 2003.  Johansen believes that Marvin misrepresented her employment status with WCR to maintain her relationship with BHS while starting her own business.  Marvin admits to attending the appointment, explaining that she did so because Nicole Marvin was apprehensive about her new position, but denies misrepresenting her employment status to the client.  Johansen also asserts that Marvin attempted to hire Nicole Marvin away from WCR and even threatened to "bury" Nicole Marvin if she remained employed with WCR.  Marvin denies these allegations.  Nicole Marvin resigned from WCR effective May 20, 2003.  Marvin states that since May 21, Nicole Marvin has been helping with her new business, but continues to look for employment.

On May 7, 2003, WCR received a letter stating that BHS intended to cancel its contract with WCR effective May 20, 2003.  Although the letter did not explicitly state that BHS planned to secure Marvin's services, Johansen believed that to be BHS's intention.  Lowell Larson, a BHS representative, testified that "BHS intended to either extend Ms. Marvin a job offer or contract for her services after she left WCR."  Larson further stated that "BHS would like to continue to work and should be allowed to work with Ms. Marvin in some capacity." 

WCR commenced suit against Marvin, asserting breach of loyalty, breach of fiduciary duty, tortious interference with contracts, and misappropriation of confidential information.  WCR sought both compensatory and injunctive relief.  Marvin counterclaimed, requesting compensatory damages for WCR's intentional interference with a business prospect, payment of accrued vacation time and mileage, release of WCR's profit-sharing account, and attorney fees. 

The district court granted WCR's motion for a temporary restraining order (TRO) and scheduled a hearing.  On August 15, the district court granted WCR's motion for a temporary injunction, thereby enjoining Marvin from (1) conducting business with BHS for six months, (2) assisting any other party in conducting business with BHS for six months, and (3) representing to BHS that she remained employed by WCR.  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 its decision will not be reversed absent a clear abuse of that 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 & Assoc., Inc., 278 N.W.2d 81, 92 (Minn. 1979).  Furthermore, in considering whether to grant or deny a temporary injunction, the district court must consider the five factors set forth in Dahlberg Bros. 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. 

I.

Marvin argues that the district court abused its discretion by granting an injunction because WCR showed neither irreparable harm nor inadequacy of its legal remedy.  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.  Instead, the moving party must make a prima facie showing of irreparable harm through verified pleadings and affidavits.  Thompson v. Barnes, 294 Minn. 528, 533, 200 N.W.2d 921, 925 (1972).  In order to be irreparable, the injury must be of such a nature that money alone will not suffice.  Morse v. City of Waterville, 458 N.W.2d 728, 729-30 (Minn. App. 1990), review denied (Minn. Sept. 28, 1990).  The failure to demonstrate irreparable harm is, by itself, a sufficient ground to deny an injunction.  Id. at 729.  We review de novo whether a party has an adequate remedy at law.  Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 451 (Minn. App. 2001).   

In granting the injunction, the district court determined that WCR "may and likely will suffer irreparable harm if relief is not granted."  The record demonstrates that prior to ending its relationship with WCR, BHS's business made up 90% of WCR's revenue.  Both the complaint and Johansen's affidavit state that Marvin used her position as WCR's employee to establish a business relationship with BHS, and then while still employed with WCR, solicited BHS's business for herself.  The complaint and Johansen's affidavit also state that BHS cancelled its business with WCR because of Marvin's actions.  By granting the injunction, WCR was given the opportunity to fairly compete with Marvin for six months in an effort to convince BHS to work with WCR.  Without an injunction, Marvin would be allowed to profit from her alleged wrongdoing by securing BHS's business while still working at WCR.  Because this is the type of injury that cannot be remedied with monetary damages, we conclude that the district court did not abuse its discretion in concluding that WCR established irreparable harm and inadequacy of its legal remedy.

II.

Marvin argues that the district court's factual findings are inadequate because they were "an almost verbatim adoption of WCR's proposed findings," a practice criticized by this court in Bliss v. Bliss, 493 N.W.2d 583, 590 (Minn. App. 1993) (recognizing that while verbatim adoption of a party's proposed findings and conclusions of law is not reversible error per se, the practice "raises the question of whether the [district] court independently evaluated each party's testimony and evidence"), review denied (Minn. Feb. 12, 1993).  When applying the Dahlberg factors, "the district court must make findings sufficient to permit meaningful appellate review."  Edina Cmty. Lutheran Church v. State, 673 N.W.2d 517, 523 (Minn. App. 2004) (quotation omitted). 

It is true that the district court adopted verbatim the request in WCR's motion that Marvin be enjoined from (1) conducting business with BHS for six months, (2) assisting others in conducting business with BHS for six months, and (3) misrepresenting her employment status with WCR to BHS.  But because the record contains no evidence that WCR submitted any proposed findings, this case is distinguishable from Bliss.  Therefore, because the district court independently evaluated the evidence and its findings are sufficient to permit meaningful review, we conclude that the district court did not abuse its discretion by incorporating WCR's requested relief into its conclusions of law.

III.

Marvin argues that the court violated Minn. R. Civ. P. 65.04 because the August 15 injunction order did not contain a specific application of the Dahlberg factors, but rather referred to its previous analysis in the May 28 order granting the TRO.  Rule 65.04 provides that "[e]very order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained. . . ." 

Here, the district court's August 15 order sets forth specific facts supporting the issuance of the injunction, including that Marvin (1) "breached her duty of loyalty" and her "fiduciary duty" to WCR, (2) the "facts as currently shown support an inference that [Marvin] solicited BHS to discontinue its relationship with [WCR] and to do business with [Marvin's] company," (3) "issuance of a[n injunction, like issuance of the TRO, is] necessary in order to preserve the status quo," and that "[n]o new evidence has been presented to persuade the Court that a preliminary injunction should not issue based on the evaluation of the above-listed Dahlberg factors."  

Additionally, the court's August 15 order describes in reasonable detail the acts sought to be restrained.  The court explains that Marvin is enjoined as follows:

a.         From doing or conducting any business similar to or competitive with the business of [WCR] with BHS for a period of six months.

 

b.         From providing any assistance or information to any other party, whether natural person, corporate entity or otherwise, to enable or assist such party to conduct business similar to or competitive with the business of . . . WCR with BHS, for a period of six months.

 

c.         From representing to BHS, or its employees, that she remains employed by [WCR].

 

We conclude that the district court's August 15 order meets the requirements of Minn. R. Civ. P. 65.04.

IV.

Marvin argues that the evidence does not support the district court's Dahlberg analysis.  We review the district court's findings to determine whether they are clearly erroneous and whether the district court abused its discretion in granting the injunction.  LaValle v. Kulkay, 277 N.W.2d 400, 402 (Minn. 1979); Medtronic, 630 N.W.2d at 451. 

1.         Relationship of the Parties

The purpose of a temporary injunction is to maintain the matter in controversy in its existing condition until judgment, so that the effect of the judgment is not impaired by the parties' actions during litigation.  Berggren v. Town of Duluth, 304 N.W.2d 24, 27 (Minn. 1981).  Maintaining the matter in controversy in its existing condition until judgment does not refer merely to maintaining the facts and circumstances at the time of filing of the application for injunction, but may refer to the last uncontested status preceding the controversy between the parties.  See Cox v. Northwest Airlines, Inc., 319 F. Supp. 92, 95 (D. Minn. 1970) (concluding that the court had "the power to shape relief in a manner which protects the basic rights of the parties, even if in some cases it requires disturbing the status quo").  Here, the district court acted to preserve the facts and circumstances as they existed immediately before the actions of Marvin which WCR challenges.  Therefore, we reject Marvin's argument that the injunction is deficient for failure to preserve the status quo.

            The district court concluded that "[t]he nature of the parties' pre-existing relationship was one in which [Marvin] was an employee of [WCR] who was entrusted with crucial client contacts.  This factor weighs in favor of granting temporary equitable relief[.]"  The record amply supports the conclusion that Marvin worked substantially with WCR's largest client for approximately ten years, during which time she was "entrusted with crucial client contacts" such as "the identities, job duties and titles of key contacts at [BHS]."  Because WCR's claims are based on Marvin's use of this information to solicit BHS away from WCR while in her capacity as a WCR representative, the district court did not abuse its discretion in concluding that this factor weighs in favor of the injunction.

2.         Balance of Harms

A temporary injunction should be issued "only when it is clear that the rights of a party will be irreparably injured before a trial on the merits is held."  Miller, 317 N.W.2d at 712.  Here, the district court concluded that "[t]he balance of harms favors granting the temporary equitable relief.  [WCR] may and likely will suffer irreparable harm if relief is not granted; harm resulting to [Marvin] from granting this relief is less substantial than the harm to [WCR] from denying it." 

The record supports this finding.  Without an injunction, Marvin would be permitted to profit from her alleged wrongdoing by securing BHS's business while working as a WCR employee.  As already noted, we agree with the district court that this harm would be irreparable.  By granting injunctive relief, the harm is minimized by allowing both Marvin and WCR six months to fairly compete for BHS's business.  Therefore, we conclude that the district court did not abuse its discretion in concluding that the balance of harms favors issuance of the injunction.

3.         Likelihood of Success on the Merits

The district court concluded that WCR would likely prevail on one or more of its claims for breach of loyalty, breach of fiduciary duty, tortious interference with contracts, and misappropriation of confidential information.  "An employee's duty of loyalty prohibits her from soliciting the employer's customers for herself, or from otherwise competing with her employer, while she is employed."  Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301, 304 (Minn. App. 1987).  The fact that WCR did not have a written contract with BHS does not preclude a finding that Marvin was competing with WCR in violation of her duty of loyalty.  See id. at 305.  Nor was WCR required to have a noncompete agreement with Marvin in order to prevent her from soliciting business from BHS during Marvin's employment with WCR.  See id. at 304. 

We recognize that employees who wish to start their own businesses should not be unduly hindered from doing so, and thus an employee has the right, while still employed, to prepare to enter into competition with her employer.  Id.; see also Sanitary Farm Dairies, Inc. v. Wolf, 261 Minn. 166, 175-76, 112 N.W.2d 42, 48-49 (1961).  But in Koering, this court recognized that

[t]here is no precise line between acts by an employee which constitute prohibited "solicitation" and acts which constitute permissible "preparation."  Because of the competing interests, the actionable wrong is a matter of degree.  Whether an employee's actions constituted a breach of her duty of loyalty is a question of fact to be determined based on all the circumstances of the case.

 

404 N.W.2d at 305 (citations omitted).  The Koering court recognized that even passive conduct by the employee in soliciting the employer's customer will "not necessarily shield her from liability."  Id. (citing Cmty. Counseling Serv., Inc. v. Reilly, 317 F.2d 239, 244 (4th Cir. 1963) (stating that "[i]f prospective customers undertake the opening of negotiations which the employee could not initiate, he must decline to participate in them")).

            Here, the district court made several factual findings supporting its conclusion that WCR would likely be successful on the merits of its claims, including that (1) WCR provided Marvin with its "methodology, its customer relationships, and other important and confidential information"; (2) Marvin told BHS of her availability to provide services for them at the April 17 meeting; (3) Marvin did not inform WCR of her plan to start a new business until April 28, when she told Johansen that BHS would support her efforts to establish her own business; and (4) these facts supported an inference that Marvin solicited BHS to discontinue its relationship with WCR and to do business with Marvin.  The court then concluded that "[t]he facts as set forth herein if proven by [WCR] would establish that [Marvin] breached her duty of loyalty to [WCR]" pursuant to Koering.  These findings have adequate support in the record, and therefore, they are not clearly erroneous.  Moreover, the findings support the district court's conclusion that WCR would likely succeed on its breach of loyalty claim.  Therefore, we conclude that the court did not abuse its discretion by concluding that this factor weighed in favor of issuance of the injunction.  Because there is a likelihood of success on one of WCR's claims, there is no need to address the viability of WCR's other claims.

4.         Public Policy

The district court found simply that public policy favors granting the injunction.  The public interest is not served if a former employee is allowed to derive benefit from violating his employer's confidence and confidentiality after enjoying a relationship that provided her with considerable training and experience over the years.  Therefore, we conclude that the district court did not abuse its discretion in finding that public policy favors issuance of the injunction.

5.         Administrative Burden

In issuing a temporary injunction, the district court must evaluate the administrative burden associated with issuing the injunction.  The district court is in the best position to judge the administrative burden that will result from its orders.  See Dahlberg, 272 Minn. at 283, 137 N.W.2d at 326.  Here, the district court concluded that the requested relief was "limited" and would place "little or no administrative burden on the Court."  Because the injunction was only a restraint on Marvin's ability to represent BHS for six months, we conclude that the court did not abuse its discretion in concluding that this factor weighed in favor of issuance of the injunction.

            We conclude that the district court did not abuse its discretion in granting a temporary injunction in favor of WCR.  Consequently, we do not address Marvin's argument that the injunction was unnecessary in light of the previously granted TRO.

            Affirmed.

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. 

[1] Nicole Marvin is Marvin's daughter-in-law.