648 Fed.Appx. 709 (9th Cir. 2016), 15-35608, Ocean Beauty Seafoods, LLC v. Pacific Seafood Group Acquisition Company, Inc.

Docket Nº:15-35608
Citation:648 Fed.Appx. 709
Party Name:OCEAN BEAUTY SEAFOODS, LLC, an Alaska limited liability company; MICHAEL COULSTON, an individual, Plaintiffs-Counter-Defendants - Appellees, v. PACIFIC SEAFOOD GROUP ACQUISITION COMPANY, INC., an Oregon corporation, d/b/a Pacific Seafood Group, d/b/a Pacific Seafood Group Inc, Defendant-Counter-Claimant - Appellant, DULCICH, INC., Intervenor-...
Attorney:For OCEAN BEAUTY SEAFOODS LLC, an Alaska limited liability company, MICHAEL COULSTON, an individual, Plaintiff-counter-defendants - Appellees: Joshua D. Brittingham, Attorney, Marcia P. Ellsworth, Esquire, Attorney, David C. Kelly, Attorney, Peterson Russell Kelly, PLLC, Bellevue, WA. For PACIFIC...
Judge Panel:Before: GOULD and FARRIS, Circuit Judges, and BLOCK, District Judge.[**] FARRIS, Circuit Judge, dissenting. FARRIS, Circuit Judge, dissenting:
Case Date:April 18, 2016
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 709

648 Fed.Appx. 709 (9th Cir. 2016)

OCEAN BEAUTY SEAFOODS, LLC, an Alaska limited liability company; MICHAEL COULSTON, an individual, Plaintiffs-Counter-Defendants - Appellees,

v.

PACIFIC SEAFOOD GROUP ACQUISITION COMPANY, INC., an Oregon corporation, d/b/a Pacific Seafood Group, d/b/a Pacific Seafood Group Inc, Defendant-Counter-Claimant - Appellant,

DULCICH, INC., Intervenor-Defendant - Appellant

No. 15-35608

United States Court of Appeals, Ninth Circuit

April 18, 2016

Argued and Submitted, April 1, 2016, Seattle, Washington

NOT FOR PUBLICATION. (See Federal Rule of Appellate Procedure Rule 32.1)

On Appeal from the United States District Court for the Western District of Washington. D.C. No. 2:14-cv-01072-RSM. Ricardo S. Martinez, District Judge, Presiding.

VACATED AND REMANDED WITH INSTRUCTIONS.

For OCEAN BEAUTY SEAFOODS LLC, an Alaska limited liability company, MICHAEL COULSTON, an individual, Plaintiff-counter-defendants - Appellees: Joshua D. Brittingham, Attorney, Marcia P. Ellsworth, Esquire, Attorney, David C. Kelly, Attorney, Peterson Russell Kelly, PLLC, Bellevue, WA.

For PACIFIC SEAFOOD GROUP ACQUISITION COMPANY INC, an Oregon corporation, DBA Pacific Seafood Group, DBA Pacific Seafood Group Inc, DULCICH, INC., Intervenor-Defendants - Appellants: Bruce L. Campbell, Attorney, Miller Nash Graham & Dunn LLP, Portland, OR; James L. Phillips, Attorney, Miller Nash Graham & Dunn, LLP, Seattle, WA.

Before: GOULD and FARRIS, Circuit Judges, and BLOCK, District Judge.[**] FARRIS, Circuit Judge, dissenting.

Page 710

MEMORANDUM [*]

Michael Coulston breached an agreement not to compete with his former employer, Pacific Seafood Group Acquisition Company, Inc., by accepting employment with Ocean Beauty Seafoods, LLC. The district court denied Pacific Seafood's motion for a preliminary injunction enforcing the agreement, and Pacific Seafood appealed. We vacated and remanded. See

Ocean Beauty Seafoods, LLC v. Pacific Seafood Grp. Acquisition Co., 611 Fed.Appx. 385 (9th Cir. 2015). The district court again denied preliminary injunctive relief, and Pacific Seafood again appealed. For the reasons set forth below, we conclude that Pacific Seafood is entitled to the requested injunction.

First, Pacific Seafood has established a likelihood of success in enforcing the agreement. As we previously held, an overly broad territorial limitation does not automatically make an agreement not to compete unenforceable. Rather, the Oregon Supreme Court has said the agreement " will be interpreted, if possible, so as to make the extent and character of its operation reasonable." Lavey v. Edwards, 264 Or. 331, 505 P.2d 342, 344 (Or. 1973). In addition, Oregon law endorses reformation

Page 711

if necessary to make a noncompete agreement reasonable in scope. See Eldridge v. Johnston, 195 Or. 379, 245 P.2d 239, 253 (Or. 1952) (restricting agreement covering Oregon and Washington to four Oregon counties). Therefore, we assess the agreement in light of Pacific Seafood's proposal to limit the geographic scope of the injunction to its " Clackamas Region" and a 100-mile radius from Mukilteo, Washington. Furthermore, rather than rely on a stale record, we assess the agreement based on the record as developed on remand, which included a supplemental declaration from Coulston.

Coulston's supplemental declaration establishes that he spent at least ten months of the one-year noncompete period as Ocean Beauty's " General Manager--Seattle Distribution." Having compared the responsibilities of that job with Coulston's duties at Pacific Seafood, we conclude that there was a " substantial risk" that Coulston could use proprietary information he acquired at Pacific Seafood to " divert all or part of the employer's business." Nike, Inc. v. McCarthy, 379 F.3d 576, 586 (9th Cir. 2004) (citing Volt Servs. Group v. Adecco Emp't Servs., Inc., 178 Or.App. 121, 35 P.3d 329, 334 (Or. Ct.App. 2001)). It is well-established that a noncompete agreement is a reasonable means of protecting against such a risk. See id. (citing Cascade Exch., Inc. v. Reed, 278 Or. 749, 565 P.2d 1095, 1097 (Or. 1977), North P. Lumber Co. v. Moore, 275 Or. 359, 551 P.2d 431, 434 (Or. 1976), and Kelite Prods., Inc. v. Brandt, 206 Or. 636, 294 P.2d 320, 322-23 (Or. 1956)). We repeat that McCarthy is not distinguishable based on differences in the industries involved, see Ocean Beauty, 611 Fed.Appx. at 386, and add that the risk at issue goes beyond direct solicitation of customers and explicit disclosure of confidential information. See McCarthy, 379 F.3d at 586.

The argument that the agreement is likely not enforceable due to " drafting problems" was foreclosed by the prior appeal. We adhere to our holding that the agreement was one of the " standard terms and conditions of employment" referred to in the 2014 letter offering Coulston the position of assistant general manager. See Ocean Beauty, 611 Fed.Appx. at 386.

Pacific Seafood has also established a likelihood of irreparable harm. We previously held that a showing of actual harm was not required, and the district court complied with our mandate in that regard. However, its concept of the relevant harm remained too narrow. An enforceable noncompete agreement affords fair...

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