All Star Gas, Inc. v. BECHART

• Decision Date: 02 May 2000
• Docket Number: No. 18161-8-III.,18161-8-III.
• Citation: 998 P.2d 367,100 Wash.App. 732
• Court: Washington Court of Appeals
• Parties: ALL STAR GAS, INC., OF WASHINGTON, a Washington Corporation, f/k/a Empiregas, Inc., Of Washington, Appellant, v. Randy BECHARD and Linda Bechard, husband and wife, Defendants, Rick Bechard and Jane Doe Bechard, husband and wife; Yakima Energy Systems, a Washington partnership, Respondents.

998 P.2d 367

100 Wash.App. 732

ALL STAR GAS, INC., OF WASHINGTON, a Washington Corporation, f/k/a Empiregas, Inc., Of Washington, Appellant, v. Randy BECHARD and Linda Bechard, husband and wife, Defendants, Rick Bechard and Jane Doe Bechard, husband and wife; Yakima Energy Systems, a Washington partnership, Respondents.

No. 18161-8-III.

Court of Appeals of Washington, Division 3, Panel Four.

May 2, 2000.

Blaine G. Gibson, Talbott, Simpson, Gibson & Davis, Yakima, for Appellant.

Walter G. Meyer, Jr., Jeffrey M. Kreutz, Meyer, Fluegge & Tenney, Yakima, for Respondents.

KATO, J.

All Star Gas, Inc., of Washington, obtained an injunction against Randy Bechard, its former employee, and his partnership, Yakima Energy Systems (YES). Randy's brother, Rick Bechard, was the other partner in YES. All Star Gas then filed a complaint against Rick, alleging he violated the injunction and conspired with Randy to violate a noncompetition agreement and the injunction. On summary judgment, the court determined Rick was not bound by the injunction. After a bench trial, it further concluded there was no conspiracy. The court awarded attorney fees to Rick for defending himself on the injunction claim. Claiming these rulings were error, All Star Gas appeals. Because material facts exist as to whether Rick was bound by the injunction, we reverse the order of summary judgment and the award of attorney fees. The court's decision on the conspiracy claims are affirmed.

All Star Gas is a Washington corporation engaged in the business of selling propane and related products and services. Randy worked for All Star as a retail manager. His written contract contained a noncompetition agreement prohibiting him from "directly or indirectly, by himself or through others, competing with All Star for a period of three years from the termination of his employment with All Star." He was also prohibited from using or divulging confidential business information, including the identity of All Star customers and their needs for propane. On August 19, 1994, Randy resigned.

In June 1994, Randy and Rick had formed YES, a partnership engaged in the business of selling propane and related products and services. Randy used business information he obtained from his position with All Star in forming YES, a direct competitor of All Star Gas.

In November 1994, All Star sought an injunction against Randy and YES because Randy had breached the noncompetition agreement. On December 16, 1994, a temporary restraining order was issued prohibiting Randy and YES from "soliciting or servicing" All Stars' customers.

In January 1995, a bench trial was held before Judge Stephen M. Brown. On January 12, 1996, Judge Brown entered findings of fact and conclusions of law which, among other things, found that All Star's business sales had suffered and would continue to suffer as a result of competition from Randy and YES unless enjoined. On January 26, 1996, Judge Brown issued a final injunction:

[E]ffective January 20, 1995, Randy Bechard and Linda Bechard, husband and wife, d/b/a Yakima Energy Systems, as that entity existed on January 20, 1995, are enjoined from, directly or indirectly, by themselves or through others, soliciting, diverting, taking away, delivering to, selling, servicing, or otherwise dealing with any people or entities who were customers of [All Star] between August 19, 1992, and August 19, 1994.

The injunction was to remain in effect until August 19, 1996.

In February 1995, Randy and Linda Bechard sold their one-half interest in YES to Rick for $60,000. Randy notified the court of the sale prior to the issuance of its written findings and conclusions.

In April 1996, All Star filed a complaint alleging that both Randy and Rick had violated the final injunction and conspired to violate both the noncompetition agreement and the injunction. Judge Michael W. Leavitt found by summary judgment that Rick had not violated the injunction because it did not bind him.

A three-day bench trial followed in which the court considered All Star's claims.¹ It found All Star failed to prove that Rick had conspired with Randy to violate the noncompetition agreement or the injunction. The court then awarded Rick $11,154.11 in attorney fees and costs incurred for defending himself on the injunction claim. This appeal follows.

All Star first contests the court's summary judgment order which found Rick was not bound by the final injunction. We review orders of summary judgment de novo. Hudson v. City of Wenatchee, 94 Wash.App. 990, 994, 974 P.2d 342 (1999). "Conducting the same inquiry as the lower court, we view all the facts and their reasonable inferences in the light most favorable to the nonmoving party." Id. "Summary judgment may be granted only if the pleadings, depositions, and admissions on file demonstrate there is no genuine issue of material fact, and the moving party is entitled to a judgment as a matter of law." Id. (citing CR 56(c)). "Summary judgment is appropriate if reasonable persons could reach but one conclusion from all the evidence." Id.

CR 65(d) sets forth the form and scope of an injunction. An injunction "is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise." CR 65(d). The question here is whether Rick Bechard, not a party to the original action and unnamed in the injunction, should be bound by it.

Washington case law neither addresses the precise issue presented nor does it provide a test for making the required determination.² But Federal Rule of Civil Procedure 65(d) is identical to CR 65(d) so cases interpreting the federal rule can be used for guidance. See American Discount Corp. v. Saratoga West, Inc., 81 Wash.2d 34, 37, 499 P.2d 869 (1972)

.

Under federal law, an injunction binds only nonparties who are "so identified in interest with those named in the decree that it would be reasonable to conclude that their rights and interests have been represented and adjudicated in the original injunction proceeding." Harris County, Tex. v. CarMax Auto Superstores, Inc., 177 F.3d 306, 314 (5th Cir.1999) (quoting 11A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2956, at 340-41 (1995)). In G. & C. Merriam Co. v. Webster Dictionary Co., Inc., 639 F.2d 29 (1st Cir.1980), the court considered the issue whether an individual is so legally identified with a party as to bind him by an injunction in which he is not named. The case involved a closely-held corporation operating out of the adjacent apartments of two brothers. Id. at 32-33. Only one of the two brothers and the corporation were named in an injunction. In determining whether the nonparty brother was bound, the court noted his responsibilities in the corporation were substantial and he was a principal actor with respect to the activities that were the occasion for invoking the injunction. Id. at 38. However, the court found

[t]he evidence raises a fact issue as to whether this is a case of the same person continuing to do essentially the same thing with the same high degree of practical control, discretion and responsibility, before and after the injunction, with knowledge of the injunction, and after participating in the enjoined firm's corporate decisionmaking regarding its position in the injunction proceedings.

Id. It remanded for additional fact finding on this issue, primarily because the record was sparse with respect to the nonparty's participation in the injunction proceeding. Id. at 39-40.

Here, Rick had substantial responsibilities at YES and was a principal actor in contacting former customers of All Star, the actions which precipitated the injunction. He also conceded he had knowledge of the injunction. But it is not entirely clear what his level of participation was with respect to the injunction proceedings. Merriam, 639 F.2d at 39-40. This raises a question of fact as to whether he was "legally identified" with YES in the sense of his having had his day in court on the injunction's validity and thus bound by the injunction even though he was not a party. The court erred by deciding on summary judgment that Rick was not bound. Moreover, a person may be legally identified with a party by virtue of being a "successor or assign." Id. at 36. In dicta, the First Circuit indicated a successor may be an instrumentality through which an enjoined party seeks to evade an order. Id. The court did not consider whether such facts were present in its case, but noted that if there were a finding that a successor was such an instrumentality, the successor might be within the permissible scope of a contempt proceeding. The successor must also have received a transfer of the business or some part of it from the enjoined party. Id.

Rick was undoubtedly a successor to Randy in YES. Immediately after the injunction was issued, Randy transferred his entire interest in YES to Rick. The record, however, does not indicate whether the sale was a vehicle to evade the injunction. Again, a question of fact precludes summary judgment.

When ruling on the summary judgment motion, the trial court determined as a matter of law Judge Brown's intent in issuing the injunction. But the issuing judge's intent is not the appropriate test for determining who is bound by an injunction. We thus remand with instructions to the trial court to reconsider this issue in light of the federal test.

All Star further contends the court erred by awarding Rick attorney fees associated with defending himself against its claim that he violated the injunction. "Washington courts traditionally follow the American rule in not awarding attorney fees as costs absent a contract, statute, or recognized equitable exception." City of Seattle v. McCready, 131 Wash.2d 266, 273-74, 931 P.2d 156 (19...