Atmel Corp. v. VITESEE SEMICONDUCTOR CORP.

• Decision Date: 15 February 2001
• Docket Number: No. 98CA0586.,98CA0586.
• Citation: 30 P.3d 789
• Parties: ATMEL CORPORATION, a California corporation, Plaintiff-Appellee, v. VITESSE SEMICONDUCTOR CORPORATION, a Delaware corporation; Robert L. West; Patrick H. Jenkins; and Lattie Alejo, Defendants-Appellants.
• Court: Colorado Court of Appeals

30 P.3d 789

ATMEL CORPORATION, a California corporation, Plaintiff-Appellee, v. VITESSE SEMICONDUCTOR CORPORATION, a Delaware corporation; Robert L. West; Patrick H. Jenkins; and Lattie Alejo, Defendants-Appellants.

No. 98CA0586.

Colorado Court of Appeals, Div. I.

February 15, 2001.

Certiorari Denied September 10, 2001.

Holme Roberts & Owen LLP, Richard L. Nagl, Elizabeth A. Gonzalez, Denver, Colorado; Jacobs Chase Frick Kleinkopf & Kelly LLC, John R. Webb, for Plaintiff-Appellee.

Holland & Hart LLP, James E. Hartley, Joseph W. Halpern, Stephen Masciocchi, Lee F. Johnston, Denver, Colorado; Holland & Hart LLP, Edward H. Flitton, III, Colorado Springs, CO, for Defendants-Appellants.

Opinion by Judge METZGER.

Defendants, Vitesse Semiconductor Corporation, Robert L. West, Patrick H. Jenkins, and Lattie Alejo, appeal the preliminary injunction entered in favor of plaintiff, Atmel Corporation. They also appeal the order denying arbitration. We affirm the order, reverse the preliminary injunction to the extent it prohibits the individual defendants from participating in defendant Vitesse's hiring process involving Atmel employees who initiate contact, and to the extent it covers a period longer than the contract term, reverse the order setting Atmel's bond amount, and remand the cause for further proceedings.

Atmel is an established semiconductor company with a manufacturing facility in Colorado Springs that employs over 2,200 persons, constituting over two-thirds of the semiconductor labor force in that area. Vitesse, also a semiconductor company, recently built a manufacturing facility and began to hire employees. Many of its new employees had previously worked at Atmel, including defendants West, Jenkins, and Alejo. Although these companies do not compete in terms of their products or customer base, they do compete for employees in an extremely tight labor market.

When defendants West, Jenkins, and Alejo were hired at Atmel, they were required to sign an employment agreement that contained a "non-solicitation clause" pertaining to Atmel employees. After these defendants left Atmel's employment to work for defendant Vitesse as managers, they assisted in defendant Vitesse's efforts to hire qualified employees. Contending defendants were "raiding" its work force, on November 24, 1997, Atmel filed this action and sought a temporary restraining order (TRO). Atmel's complaint listed the following claims for relief: misappropriation of trade secrets, unfair competition/misappropriation of business value, breach of fiduciary duty, breach of agreements, interference with contractual employment relationships, interference with agreements, conspiracy to induce breach of contract, intentional interference with prospective economic advantage, and unjust enrichment. Two weeks later, the trial court entered a TRO that prohibited the individual defendants from using Atmel's "confidential information" and from soliciting, recruiting, or attempting to persuade Atmel's current employees to leave their employment.

Later, after a four-day hearing, the trial court granted Atmel a preliminary injunction that was to remain in effect until March 5, 1999. That injunction forbade the individual defendants from soliciting Atmel's employees to apply for employment at Vitesse, screening resumes, conducting interviews, participating in hiring decisions, or making employment offers. These activities were prohibited even if employees of Atmel first initiated contact.

I.

Defendants contend the trial court erred in broadly interpreting the non-solicitation clauses so as to preclude the individual defendants' participation in any aspect of Vitesse's hiring process involving Atmel employees. We agree.

The purpose of a preliminary injunction is to prevent a tort or wrong and to preserve the status quo until final hearing and a determination of the controverted rights of the parties. The grant or denial of a preliminary injunction does not amount to an adjudication of the ultimate rights in controversy, and the court should not attempt to do what can be done only after a full hearing and final decree. Litinsky v. Querard, 683 P.2d 816 (Colo.App.1984).

Injunctive relief should not be indiscriminately granted but should be exercised sparingly and cautiously and with a full conviction on the part of the trial court of its urgent necessity. The trial court must find that the moving party has demonstrated:

(1) a reasonable probability of success on the merits; (2) a danger of real, immediate, and irreparable injury which may be prevented by injunctive relief; (3) that there is no plain, speedy, and adequate remedy at law; (4) that the granting of a preliminary injunction will not disserve the public interest; (5) that the balance of equities favors the injunction; and (6) that the injunction will preserve the status quo pending a trial on the merits.

Unless all of these criteria are met, injunctive relief is not available. Rathke v. MacFarlane, 648 P.2d 648, 653-654 (Colo. 1982) (citations omitted).

Defendants argue that issuance of the preliminary injunction was error. They contend that, if the non-solicitation clauses were interpreted correctly, based on settled principles of contract construction and the evidence in the record, they would prohibit only the initiation of contacts with Atmel's employees. We agree.

A contract must be interpreted in accordance with the plain meaning of its terms, Wota v. Blue Cross & Blue Shield, 831 P.2d 1307 (Colo.1992), considering the circumstances that render it intelligible. Lorenzen v. Mustard's Last Stand, Inc., 196 Colo. 265, 586 P.2d 12 (1978). A contract must always be interpreted in light of the intentions of the contracting parties. Cache National Bank v. Lusher, 882 P.2d 952 (Colo.1994).

If a contract term is susceptible of more than one meaning, it is ambiguous. Browder v. United States Fidelity & Guaranty Co., 893 P.2d 132 (Colo.1995).

To clarify ambiguity in a contract, the court may look to extrinsic evidence, including evidence of industry custom. See USI Properties East, Inc. v. Simpson, 938 P.2d 168 (Colo.1997)

. Even if a contract term is not ambiguous, evidence of industry standards may be used to demonstrate the parties' intent. Benham v. Pryke, 744 P.2d 67 (Colo.1987). The determination whether a contract is ambiguous is a question of law; thus, our review is de novo. Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371 (Colo. 1990).

Here, the non-solicitation clauses in the individual defendants' contracts with Atmel provided: "Solicitation of Employees. I agree that I shall not for a period of one year following the termination of my relationship with the Company . . . either directly or indirectly. . . solicit, recruit or attempt to persuade any person to terminate such person's employment with the Company . . . ."

We hold the trial court's interpretation of the non-solicitation clauses was erroneous and, thus, cannot stand.

First, the uncontroverted evidence established that the custom in the semiconductor industry is to interpret non-solicitation covenants to prohibit only solicitation. Two witnesses with extensive experience in the high technology industry (18 and 25 years, respectively) testified that they knew of no instance in that industry in which such a clause had been interpreted to preclude a former employee from having any involvement at all in his or her new employer's hiring process.

Second, recitals and titles may have material influence on the construction of the contract and the determination of the parties' intent. Las Animas Consolidated Canal Co. v. Hinderlider, 100 Colo. 508, 68 P.2d 564 (1937). Here, the titles of the clauses lend support to a restrictive interpretation. The clause in defendant Jenkins' contract is entitled "Non-Solicitation of Company Employees," and those in West's and Alejo's contracts are entitled "Solicitation of Employees." This choice of words supports a narrow construction, especially in light of the principle that, if any uncertainty exists in a contract prepared exclusively by an employer, as here, the contract should be construed against the employer. Kuta v. Joint District No. 50(J), 799 P.2d 379 (Colo.1990); Hamilton v. Stockton Unified School District, 245 Cal.App.2d 944, 54 Cal.Rptr. 463 (5th Dist.1966).

The selection of the sole term "solicitation" for all the contracts at issue establishes the framework of and context for the clauses. Thus, use of the other disputed terms, "directly or indirectly . . . solicit, recruit or attempt to persuade," must be read in light of the titles of the clauses and in favor of the employees. See Kuta v. Joint District No. 50(J), supra.

"Solicit" means to approach with a request or plea. Webster's Third New International Dictionary 2169 (1986). "Recruit" means to "hire or otherwise obtain to provide services. . . secure the services of." Webster's Third New International Dictionary 1899 (1986). "Persuade" means to induce by argument, entreaty, or expostulation into some mental position. Webster's Third New International Dictionary 1687 (1986).

These definitions all imply actively initiated contact. Yet the terms of the preliminary injunction, which prohibit the individual defendants from any participation in the hiring process, are much more expansive.

Atmel argues that, because the non-solicitation clauses prohibited the individual defendants from engaging in the listed activities "directly or indirectly," the preliminary injunction is not overbroad. We disagree.

In the first place, because Atmel, as employer, drafted the non-solicitation clauses, construction and application of the term "indirectly" must be narrow. See Kuta v. Joint District No. 50(J), supra. To that extent, the preclusion of any and all participation in the hiring process is too expansive a remedy.

Moreover, a contract should never be interpreted to yield an absurd result. See Sunshine v. M.R. Mansfield...