Equifax Services, Inc. v. Hitz

• Decision Date: 29 November 1993
• Citation: 968 F.2d 1224
• Parties: NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1224

968 F.2d 1224

NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of November 29, 1993, suspending 10th Cir. Rule 36.3 until December 31, 1995, or further order.

EQUIFAX SERVICES, INC., doing business as Equifax Commercial Specialists, formerly known as White & White Inspection & Audit Service, Inc. Plaintiff-Appellee, v. Steven A. HITZ, Defendant-Appellant.

No. 91-3109.

United States Court of Appeals, Tenth Circuit.

July 9, 1992.

Before BALDOCK and BARRETT, Circuit Judges, and PARKER ^*, District Judge.

ORDER AND JUDGMENT ^**

BARRET, Senior Circuit Judge.

Steven A. Hitz (Hitz), appeals from the order and judgment of $605,000 entered in favor of Equifax Services, Inc., d/b/a Equifax Commercial Specialists f/k/a White & White Inspection and Audit Service, Inc. (Equifax) ¹ after trial to the district court.

Hitz was employed as a branch manager for White & White Inspection and Audit Service, Inc., a Missouri corporation. (White & White). As branch manager, Hitz was involved with White & White's customers in such a manner as to allow him access to the clients and to confidential information about the different client accounts. During this employment, Hitz signed two employment agreements, one in 1982 and one in 1986. The 1986 employment agreement contained the following covenant not to compete clause:

9. Covenant Not To Compete.

(a) The Branch Manager agrees that for a period of two (2) years following the termination of his employment with White & White for any reason whatsoever, whether such termination is with or without cause, he will not engage, directly or indirectly, in competition with White & White in furnishing Investigations to the Customers on a fee basis in any State(s) in which he as operated as a branch manager within the past two (2) years, either as a principal, agent, partner, officer, director, stockholder, advisor, consultant, employee, contractor, or in any other form, method or capacity. For the same period, the Branch Manager further agrees that he will not in any manner persuade or attempt to persuade any employee or field representative of White & White to discontinue his relationship with White & White or engage in concert with any employee or field representative of White & White in competition with White & White. It is agreed that any breach of this Agreement by the Branch Manager shall entitle White & White, in addition to any other legal remedies available to it, to apply to any court of competent jurisdiction to enjoin any violation of this Agreement.

(Appellee's Appendix, Vol. 2, Tab 119, pp. 3-4). The agreement also contained a paragraph which stated that the agreement would be governed by the laws of the State of Kansas. Id. at 4.

On February 24, 1988, prior to the merger, ² Hitz informed White & White that he intended to resign his position, which he did vacate on March 31, 1988. On April 1, 1988, Hitz went to work for a competing company, Golden Coast Survey and Audit Services, Inc. (Golden Coast).

On April 28, 1988, White & White, through its attorney, notified Hitz that it believed he was in violation of his employment agreement. Specifically, White & White alleged that Hitz was violating the covenant not to compete clause of the agreement. White & White also notified Hitz that it intended to enforce the restrictive covenant. (Appellant's Appendix, Vol. III, Tab 45).

Equifax brought suit in Kansas state court against Hitz on December 19, 1988, for both damages and injunctive relief. Hitz removed the case to the United States District Court for the District of Kansas on diversity grounds. On February 21, 1989, the district court entered a temporary restraining order (TRO) against Hitz. (Appellant's Appendix, Vol. I, Tab 1). The TRO enjoined him from violating the covenants contained in the employment agreement he had with White & White. Thereafter, Hitz moved to dismiss the complaint alleging lack of personal jurisdiction. Alternatively, he sought a change of venue to the United States District Court for the Central District of California. (Appellant's Appendix, Vol. I, Tab 2).

On March 8, 1989, the district court entered a preliminary injunction against Hitz, and denied his motion for a change of venue. (Appellant's Appendix, Vol. I, Tab 3). We affirmed the district court's preliminary injunction and determined that the motion for a change of venue was an interlocutory order and not immediately appealable. See, Equifax Services, Inc., v. Hitz, 905 F.2d 1355 (10th Cir.1990).

While Hitz's first appeal to our court was pending, Equifax filed an amended complaint against Hitz, which alleged: breach of agreement; interference with prospective business or economic advantage; breach of the fiduciary duty of good faith and fair dealing; unfair competition; and misrepresentation. (Appellant's Appendix, Vol. I, Tab 5).

On August 20, 1990, the district court commenced a two day bench trial. At the trial, Equifax alleged that Hitz and his wife formed Golden Coast during March, 1988, prior to his resignation from White & White; that Hitz actively participated in the formation of Golden Coast; that Hitz's wife owned 95% of the shares of stock in Golden Coast ³; that before and after Hitz's resignation from White & White, he solicited business on behalf of Golden Coast from clients of White & White; and that Hitz contacted other employees of White & White regarding possible employment with Golden Coast.

On January 24, 1991, the district court entered judgment in favor of Equifax, awarding Equifax $605,000 in damages. In its detailed judgment, the district court found, inter alia, that: it had personal jurisdiction over Hitz; pursuant to Kansas choice of law principles, Kansas law governed the dispute; the restrictive covenant should be reformed to cover only the Los Angeles branch area, rather than all of California; Hitz had entered an employment agreement with White & White, in which he agreed to the covenant not to compete clause; Hitz had violated the covenant; the transaction between White & White and Equifax was a merger and not a sale; and, Equifax suffered damages as a result of Hitz's breach of the employment agreement. The court determined that the damages suffered by Equifax included lost profits, costs incurred to replace and train employees hired away by Hitz, and the loss of goodwill among many of White & White's former clients. (Appellant's Appendix, Vol. IV, Tab 62). Following the judgment, Hitz filed a motion for a new trial, which was denied by the district court. (Appellant's Appendix, Vol. IV, Tabs 68 and 70).

On appeal, in a lengthy listing of issues, Hitz contends that the district court erred in what basically amounts to all of its findings of facts and conclusions of law. Questions of law are reviewed de novo, while factual findings of the district court are reviewed under the clearly erroneous standard. American Council for the Blind of Colorado, Inc. v. Romer, 1992 WL 90490 * 1 (10th Cir., May 5, 1992).

I.

Hitz here argues many of the same legal issues we dealt with in Equifax Servs., Inc. v. Hitz, 905 F.2d 1355 (10th Cir.1990). We there held in favor of Equifax on the issues regarding personal jurisdiction, standing, and choice of law in the preliminary injunctive stage of the lawsuit. We hold in favor of Equifax on the same issues here.

a.

Regarding the issue of personal jurisdiction, we have held that,

" 'A federal court sitting in diversity "may exercise personal jurisdiction over a nonresident defendant only so long as there exist ' "minimum contacts" ' between the defendant and the forum state." "The defendant's contacts with the forum state must be such that maintenance of the suit 'does not offend "traditional notions of fair play and substantial justice." ' " ' "

Kennedy v. Freeman, 919 F.2d 126, 128 (10th Cir.1990) (citations omitted). We further held that to establish specific jurisdiction, a party must do some act that represents an effort by him to "purposefully avail [ ] [himself] of the privilege of conducting activities within the forum State." Id. (citations omitted).

In Equifax, we held that "the nature of defendant's relationship with his Kansas employer supports the district court's exercise of personal jurisdiction over defendant in Kansas in this dispute arising out of that relationship." Equifax at 1357. Hitz purposefully availed himself of the privilege of conducting activities within Kansas when he agreed to employment with a corporation whose home office and all administrative activities relating to the employment were in Kansas. ⁴ Furthermore, Hitz agreed to an employment agreement which contained a clause providing that the agreement would be governed by the law of the State of Kansas. (Appellee's Appendix, Vol. 2, Tab 119, p. 4).

Hitz argued in Equifax, as he does here, that the district court erred in finding that he was not fraudulently induced to sign the 1986 agreement with White & White. In Equifax, we found nothing in the record to support the claim, nor do we find anything in the present record which would support such a claim. Thus, we hold that the district court properly exercised personal jurisdiction over Hitz.

b.

The 1986 employment agreement signed by Hitz, contained a paragraph which read as follows:

10. Miscellaneous.

* * *

* * *

(f) Inurement and Modification. The duties and obligations of the Branch Manager under this agreement shall inure the benefit of the successors and assigns of White & White....

* * *

* * *

(Appellee's Appendix, Vol. 2, Tab 119, p. 4).

We held in Equifax, that, "[i]n the case of a merger, as here, the surviving corporation automatically succeeds to the rights of the merged corporations to enforce...