Bristol Window and Door, Inc. v. Hoogenstyn

• Decision Date: 11 July 2002
• Docket Number: Docket No. 226138,Docket No. 226139.,Docket No. 226114
• Citation: 250 Mich. App. 478,650 N.W.2d 670
• Parties: BRISTOL WINDOW AND DOOR, INC., Plaintiff-Appellant, v. Gary HOOGENSTYN, Defendant-Appellee. Bristol Window and Door, Inc., Plaintiff-Appellant, v. Kenneth Ned Hoffman, Defendant-Appellee. Bristol Window and Door, Inc., Plaintiff-Appellant, v. Robert Sanford, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

650 N.W.2d 670

250 Mich. App. 478

BRISTOL WINDOW AND DOOR, INC., Plaintiff-Appellant, v. Gary HOOGENSTYN, Defendant-Appellee.

Bristol Window and Door, Inc., Plaintiff-Appellant, v. Kenneth Ned Hoffman, Defendant-Appellee.

Bristol Window and Door, Inc., Plaintiff-Appellant, v. Robert Sanford, Defendant-Appellee.

Docket Nos. 226114, 226138, 226139.

Court of Appeals of Michigan.

Submitted October 10, 2001, at Grand Rapids.

Decided March 22, 2002, at 9:00 a.m.

Released for Publication July 11, 2002.

Robert J. Riley, Grand Rapids, for the plaintiff.

Before: GAGE, P.J., and JANSEN and O'CONNELL, JJ.

GAGE, P.J.

In these consolidated cases, plaintiff appeals as of right the trial court's order granting defendants summary disposition with respect to plaintiff's claims seeking to enforce noncompetition agreements. We reverse and remand.

I

Plaintiff is a company that offers for sale to residential homeowners various home improvement products including windows, doors, and siding. Each individual defendant worked for plaintiff as an "independent sales representative" or "self-employed sales representative" until defendants all ceased working for plaintiff and directed their efforts toward establishing a competing home improvement business. Plaintiff filed separate complaints against each defendant, alleging that defendants misappropriated trade secrets and that defendants' acts of participation in a competing business and disparagement of plaintiff "to its business contacts and accounts" and other independent sales representatives of plaintiff violated the terms of a noncompetition provision within the parties' contract:

Non-Complete [sic] agreement: In consideration of this agreement I the Representative hereby agree that upon termination of this agreement and notwithstanding the cause of termination of this agreement I the undersigned, shall not compete with the business of the Company, or its successors or assigns. The term "Non-Compete," as used in this agreement means that I shall not directly or indirectly own, be employed by or work on behalf of any firms engaged in a business substantially similar or competitive with the company. I further agree that this agreement shall be extended only for the State of Michigan and shall be in full force and effect for a period of three (3) years from the date of my termination. Furthermore, the undersigned hereby agrees not to induce or attempt to induce any employee to leave the Company or interfere with or disrupt the Company relationship with any of its employees, customers, clients, suppliers, or vendors; or solicit or employ any person employed by the Company.

Defendants filed counterclaims arguing that the noncompetition agreements constituted unreasonable restraints of trade in violation of the Michigan Antitrust Reform Act (MARA), M.C.L. § 445.771 et seq.¹

After the trial court consolidated the cases, defendants sought partial summary disposition pursuant to MCR 2.116(C)(8) and (10) on the basis that the noncompetition agreements were invalid under the MARA, asserting that the MARA plainly permits noncompetition agreements only within the scope of an employer-employee relationship. Defendants undisputedly worked for plaintiff as independent contractors. The trial court concurred with defendants, reasoning as follows:

The question is, whether covenants not to compete may be lawfully exacted of independent contractors in the manner which is sought by the plaintiff in the present case and, to my knowledge, this is a matter of first impression under the current Michigan statute [the MARA]....

The absence of specific case authority under the current statute naturally drives us back to the statutory language itself. And it has to be said in that connection that the statute seems clearly limited to employer-employee relationships. It would also seem that since the statute in question is an exception to the general policy which prohibits any agreement in restraintive [sic] trade, that as such it must be limited in its enforceability to the specific language that it employees [sic]. Had the Legislature intended a broader viability for covenants not to compete, it seems the Legislature could have expressed itself in language which would be easily understood and applied.

The choice by the Legislature of employer-employee language seems, to the Court, to suggest that it did not intend for covenants not to compete to be enforceable in other context[s]. Since we have manifestly before us another context, namely, independent constractors and not employees, it seems to me that the statut is not available to bring legal force to a covenant not to compete in such a relationship and since the covenants not to compete are not recognized for independent contractor relationships, they are beyond the sweep of the exception and, therefore, caught by the general rule that any agreement in restraintive [sic] trade is a violation of this state's policy and unlawful.

Consequently, the court dismissed plaintiff's claims alleging violations of the non-competition agreements.

Defendants later filed a motion for summary disposition pursuant to MCR 2.116(C)(10) with respect to plaintiff's remaining claims that defendants interfered with plaintiff's customer and employee relationships and misappropriated trade secrets. According to defendants, plaintiff had produced no evidence substantiating these claims. After plaintiff failed to respond to defendants' motion, the trial court granted defendants summary disposition with respect to plaintiff's remaining claims, which are not at issue in this appeal.

II

A

Plaintiff contends that the trial court erroneously granted defendants summary disposition because the court mistakenly interpreted the MARA to preclude the utilization of noncompetition agreements beyond the employer-employee context. We review de novo the trial court's summary disposition ruling. Maiden v. Rozwood, 461 Mich. 109, 118, 597 N.W.2d 817 (1999). The trial court apparently granted defendants summary disposition pursuant to MCR 2.116(C)(10),² which tests the factual sufficiency of a claim. In reviewing a motion based on this subrule, we consider the pleadings and relevant documentary evidence submitted by the parties in the light most favorable to the party opposing the motion to determine whether any genuine issue of fact exists to warrant a trial, or whether the moving party is entitled to judgment as a matter of law. Maiden, supra at 120, 597 N.W.2d 817.

This case involves questions of statutory interpretation that we also review de novo. In re MCI Telecommunications Complaint, 460 Mich. 396, 413, 596 N.W.2d 164 (1999). The primary goal of statutory interpretation is to give effect to the intent of the Legislature, and the first step in that determination is to review the statutory language. Id. at 411, 596 N.W.2d 164. If the statutory language is unambiguous, the Legislature must have intended the meaning clearly expressed, and the statute must be enforced as written. No further judicial construction is required or permitted. Sun Valley Foods Co. v. Ward, 460 Mich. 230, 236, 596 N.W.2d 119 (1999). If reasonable minds can differ regarding its meaning, then judicial construction is appropriate. Adrian School Dist. v. Michigan Public School Employees' Retirement Sys., 458 Mich. 326, 332, 582 N.W.2d 767 (1998). The language of a statute should be read in light of previously established rules of the common law, including common-law adjudicatory principles. B & B Investment Group v. Gitler, 229 Mich.App. 1, 7, 581 N.W.2d 17 (1998). A phrase or word that has acquired a unique meaning at common law is interpreted to have the same meaning when used in a statute dealing with the same subject. Daniel v. Dep't of Corrections, 248 Mich.App. 95, 103, 638 N.W.2d 175 (2001).

Our resolution of this case requires that we consider two provisions of the MARA. Section 2 of the MARA, M.C.L. § 445.772, which was derived from the Uniform State Antitrust Act, sets forth the following general proposition: "A contract, combination, or conspiracy between 2 or more persons in restraint of, or to monopolize, trade or commerce in a relevant market is unlawful."³ A subsequent provision of the MARA that specifically addresses covenants not to compete § 4a, M.C.L. § 445.774a, states, in relevant part, as follows:

(1) An employer may obtain from an employee an agreement or covenant which protects an employer's reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

The Legislature enacted § 4a more than two years after the rest of the MARA had taken effect, but provided that § 4a "shall apply to covenants and agreements which are entered into after March 29, 1985." M.C.L. § 445.774a(2). While the language of these provisions at first glance appears plain, the parties and the trial court reached different conclusions regarding the meaning of these sections.

B

An understanding of the history of antitrust law in Michigan will enhance our analysis of the current provisions of the MARA. Long ago, before any statutory scheme of business regulation existed in Michigan, a common-law rule of reason governed what constituted a permissible restraint of trade. In Hubbard v. Miller, 27 Mich. 15, 16-17 (1873), the Michigan Supreme Court considered the propriety of a noncompetition agreement entered into when the plaintiff purchased the defendants' well excavation business. The defendants had agreed "`not to keep well-drivers' tools or...