Burk v. Heritage Food Service Equipment, Inc.

• Decision Date: 24 October 2000
• Docket Number: No. 02A05-9912-CV-557.,02A05-9912-CV-557.
• Citation: 737 N.E.2d 803
• Parties: Deborah K. BURK, David Rody, Bowman Aviation, Inc., and Aviation Warehousing Services, LLC, Appellants-Defendants and Cross-Appellees, v. HERITAGE FOOD SERVICE EQUIPMENT, INC. d/b/a Tri-State Business Services, Appellee-Plaintiff and Cross-Appellant.
• Court: Indiana Appellate Court

737 N.E.2d 803

Deborah K. BURK, David Rody, Bowman Aviation, Inc., and Aviation Warehousing Services, LLC, Appellants-Defendants and Cross-Appellees, v.HERITAGE FOOD SERVICE EQUIPMENT, INC. d/b/a Tri-State Business Services, Appellee-Plaintiff and Cross-Appellant.

No. 02A05-9912-CV-557.

Court of Appeals of Indiana.

October 24, 2000.

Robert T. Keen, Jr., Heidi K. Ellison, Miller Carson Boxberger & Murphy LLP, Fort Wayne, Indiana, Attorneys for Appellants.

Michael T. Yates, Moss Harris & Yates, Fort Wayne, Indiana, Attorney for Appellee.

OPINION

BAKER, Judge

For the first time we address, under the Indiana Blacklisting statute, a former employee's claim against an employer who unsuccessfully sought to enforce a noncompetition agreement.Further, no Indiana court has addressed any claim under the Blacklisting statute since our supreme court in 1904.This opinion examines, among other things, the statute's protective reach regarding both litigant standing and redressable harm.Moreover, we are called upon to revisit the complexities of restrictive covenants in employment agreements.

Appellants-defendants and cross-appelleesDeborah K. Burk, David Rody and Bowman Aviation, Inc. and Aviation Warehousing Services, LLC(collectively referred to as Bowman) appeal the trial court's judgment concerning: a noncompetition agreement, an injunction, a tortious interference claim, Blacklisting claims, and an award of attorney fees to appellee-plaintiff and cross-appellant Tri-State Business Services (Tri-State).We consolidate the eleven issues that Bowman raises on appeal and restate them as whether the trial court erred by: 1) holding certain portions of a noncompetition agreement enforceable; 2) enjoining Rody from, inter alia, working for Bowman Aviation or working with Tri-State's existing customers for fourteen months and enjoining Bowman Aviation from providing services to Tri-State's existing customers for the same period; 3) denying Rody's and Burk's Blacklisting counterclaims; 4) finding that Bowman Aviation committed tortious interference; and 5) awarding attorney fees to Tri-State and denying Burk and Rody attorney fees.Tri-State also brings a cross-appeal challenging the award of attorney fees.Specifically, Tri-State contends that the court erred in: 1) denying attorney fees against Bowman Aviation and 2) awarding Tri-State only $11,000 in attorney fees.

FACTS

The facts most favorable to the judgment indicate that Burk was employed by Tri-State, a data storage business, from August 30, 1993, to December 31, 1997.As a condition of her employment, Burk signed a noncompetition agreement and a confidentiality agreement.The noncompetition agreement provided in relevant part:

2.Covenants Against Unfair Competition and Disclosure of Confidential Information.

a) Employee agrees that during the term of employment, and for a period of two (2) years following the termination of Employment for whatever reason by any party thereto, Employee will not, directly or indirectly, do any of the following:

i) Own, manage, control or participate in the ownership, management or control of, or be employed or engaged by or otherwise affiliated or associated as consultant, independent contractor or otherwise with any corporation, partnership, proprietorship, firm, association or other business entity which competes with, or otherwise engages in any business of the Corporation, as presently conducted in the States [sic] of Indiana (Territory" [sic]);

ii) Induce, solicit or acquire any current or past customers of the Corporation in the territory where the Corporation has or is currently conducting business as of the date of the execution of this Agreement for the purpose of engaging or soliciting sales, selling or competing with the Corporation in its business;

iii) Induce any person who is currently an employee of the Corporation to terminate his or her employment relationship with the Corporation;

iv) Employ or assist in employing, or otherwise associate as an active participant in business with any person who has been employed by the Corporation and is now employed by Corporation; and

v) Disclose, divulge, discuss, copy or otherwise use or suffer to be used in any manner in competition with, or contrary to the interests of the Corporation, the marketing plans or strategies, inventions, ideas, discoveries, product research or engineering data, if any, or other trade secrets, pertaining to the business of the Corporation, it being acknowledged by Employee that all such information regarding such business of the Corporation compiled or obtained by, or furnished to, Employee while he shall have been employed by or associated with the Corporation is confidential information concerning the business of the Corporation which is now the exclusive property of the Corporation.

R. at 24-25.The Confidentiality Agreement provided in relevant part:

THE UNDERSIGNED ALSO AGREES THAT ALL FILES, FORMS, COMPUTER FORMS, PROCEDURES TRAINING MATERIAL AND CUSTOMER INFORMATION IS OF A PROPRIETARY NATURE AND SHALL REMAIN THE SOLE PROPERTY OF DRAKE.THE UNDERSIGNED ACKNOWLEDGES THAT ALL SUCH INFORMATION IS OF A PROPRIETARY NATURE AND AGREES TO KEEP ALL SUCH INFORMATION CONFIDENTIAL, AND RETURN TO DRAKE SUCH INFORMATION WHEN APPROPRIATE.THE UNDERSIGNED FURTHER AGREES NOT TO DISCLOSE, USE OR ANY WAY [sic] BENEFIT FROM SUCH INFORMATION.IN THE EVENT THAT THE UNDERSIGNED BREACHES THIS AGREEMENT, DRAKE SHALL BE ENTITLED TO ENJOIN UNDERSIGNED FROM FURTHER DISCLOSURE, INCLUDING DAMAGES AND REASONABLE ATTORNEY FEES.

R. at 28.

Burk worked as a clerical employee, earning roughly $5.00 to $8.00 an hour during the span of her employment.Burk's duties at Tri-State included scanning paper documents into a computer by feeding pages into a scanning machine.She did not have access to or knowledge of Tri-State's customer pricing information.

Experiencing job dissatisfaction, Burk responded to several want ads appearing in newspapers.When she responded to an officer manager job listed in a local newspaper, she did not know the identity of the company running the ad, which turned out to be Bowman Aviation.After being offered the position as Bowman Aviation's office manager, she resigned her job with Tri-State.Burk, however, did not copy, take, or memorize any of Tri-State's customer scanning information before assuming employment with Bowman Aviation.Moreover, Burk's new duties varied considerably from her duties at Tri-State, in that at Bowman Aviation she oversaw the scanning department, coordinated OSHA requirements, and was the first report person for accidents.

Rody, meanwhile, was employed as a salesman with Tri-State from June 18, 1996, until May 7, 1997.As a condition of his employment, he signed a noncompetition agreement and a confidentiality agreement that contained identical provisions as those set forth above.During the course of his employment, Rody had significant contact with Tri-State's past, current, and prospective customers.His duties included marketing and selling data storage services to businesses.Thus, Rody had access to current and prospective customer lists.In preparing to meet his employment duties, Rody spent considerable time being trained in Tri-State's marketing methods.

However, a Tri-State executive felt that Rody "wasn't living up to his expectations as a salesman" and that the data storage business "wasn't quite for him."R. at 746.When Rody was terminated from Tri-State on May 7, 1997, he returned all sales information that he had prepared or maintained.He did not take, copy, or memorize any Tri-State files or customer information.

Several months later, Bowman Aviation hired Rody as its national sales manager.In this capacity, Rody was in charge of sales for all of Bowman Aviation's ventures, including aircraft charter services, courier services, warehousing, and data storage.R. at 746-47.The evidence indicates that, when Bowman Aviation hired Rody, it only offered paper warehouse storage and did not offer data storage or scanning services in competition with Tri-State.

Later, upon the suggestions of Doug Horner, president of one of its customers, Bowman Aviation entered the electronic data storage market.Bowman Aviation assigned to Rody the responsibility of developing and selling its electronic record storage services.As part of its business expansion, Bowman Aviation ordered scanning equipment and developed a web-based retrieval technology which was a technology more advanced than Tri-State's CD-Rom storage system.The trial court found that Bowman Aviation became Tri-State's competitor after it became involved in the electronic data storage market.

The trial court also found that Bowman Aviation knew "at all pertinent times" that Tri-State's principal business was providing business records storage services.Bowman Aviation knew, in turn, that an integral part of Tri-State's storage business was converting paper records to digital images capable of storage, indexing, and retrieval by computer.Moreover, the record indicates that Tri-State notified Burk, Rody, and Bowman Aviation of the existence of the Non-Competition and Confidentiality Agreements on February 10, 1998.Tri-State objected to Bowman Aviation's employment of Burk and Rody in capacities Tri-State believed to be competitive with its own business.Tri-State later sent Bowman Aviation's president, Edward Nix, a letter officially informing Bowman Aviation of the agreements and a potential tortious interference claim against the company.R. at 325.Despite this formal notification, Bowman Aviation continued to employ Burk and Rody in the same capacities.

Much of the dispute focused on Dana Corp.-Traffic Div. (Dana Corp.), a prospective client of Tri-State while Rody was still employed with Tri-State.Although Tri-State had not yet secured Dana Corp. as a customer during Rody's employ, Rody did have some contact with Dana Corp....