Ecolab, Inc. v. Gartland, C4-95-961

• Decision Date: 19 September 1995
• Docket Number: No. C4-95-961,C4-95-961
• Parties: ECOLAB, INC., a Delaware corporation, Respondent, v. Thomas M. GARTLAND, Appellant.
• Court: Minnesota Court of Appeals

Page 291

537 N.W.2d 291

ECOLAB, INC., a Delaware corporation, Respondent, v. Thomas M. GARTLAND, Appellant.

No. C4-95-961.

Court of Appeals of Minnesota.

Sept. 19, 1995.

Syllabus by the Court

Where no evidence is presented regarding the parties' intent at the time a non-compete agreement is signed, ambiguities in the agreement's language must be construed against the drafter and the agreement's restrictions must be read narrowly.

Michael V. Ciresi, Thomas B. Hatch, and Shelley Carthen Watson, Robins, Kaplan, Miller & Ciresi, Minneapolis, for respondent.

Jeffrey J. Keyes, James J. Long, and Jay W. Schlosser, Briggs & Morgan, Minneapolis, for appellant.

Considered and decided by NORTON, P.J., and HUSPENI and KLAPHAKE, JJ.

OPINION

NORTON, Judge.

Respondent Ecolab, Inc. sought temporary and permanent injunctive relief against appellant Thomas Gartland, a former employee, for breach of a non-compete agreement and misappropriation of confidential and proprietary information. The trial court issued a temporary injunction against Gartland. Gartland appeals from this order, arguing the trial court abused its discretion in issuing the injunction. We reverse and remand.

FACTS

Appellant Thomas Gartland began working for respondent Ecolab, Inc. (Ecolab) on October 13, 1980, as a territory manager in training. On October 22, 1980, he signed a non-compete agreement. The pertinent provision of the agreement states:

For a period of one (1) year immediately following the termination of his employment with the Company, the Employee will not service, sell, solicit the sale of, or accept orders for any COMPETING PRODUCTS to any customer of the Company with whom the Employee did business, or whose accounts was supervised by or assigned to the Employee or with regard to which the Employee received commissions or other compensation, at any time during the twelve (12) month period immediately preceding the termination of his employment. During said one year following termination, the Employee also will not assist any COMPETING FIRM to engage in the activities prohibited by the foregoing sentence. A COMPETING FIRM means any person or organization (including one owned in whole or in party by the Employee) which is engaged in the development, production, use, marketing or sale of a COMPETING PRODUCT. A COMPETING PRODUCT means any product or service which is the same as, or similar to, and competes with, a product or service of the Company which was part of the product or service line handled by the employee, or persons supervised by the Employee, during his last two (2) years of employment by the Company.

The agreement also contains a confidentiality provision, under which Gartland agreed not to disclose confidential information acquired while at Ecolab. Although Ecolab had a policy of requiring upper-level management to sign a more restrictive noncompete agreement when promoted, Ecolab did not require Gartland to sign any other agreement than the one at issue here.

Gartland first worked in Ecolab's institutional division, which manufactures and sells soap and detergent products to various institutions. He advanced to the position of district manager, then assistant vice president of national accounts. On January 1, 1989, Gartland moved laterally to the pest elimination division, which provides extermination products and services to restaurants, hotels, and motels. In January 1991, Gartland was promoted to vice president of national accounts for the pest elimination division, and in 1994 to vice president, corporate accounts, pest elimination for North America. He remained with the pest elimination division until he resigned in November 1994.

The pest elimination and institutional divisions of Ecolab are operated as separate organizations, with separate financial structures, sales and service organizations, and management teams. Ecolab encourages cooperative sales efforts between its divisions, however, through a "circle the customer" concept. The goal of this strategy is to have Ecolab service all of a customer's needs that can be met by Ecolab's different divisions.

Gartland utilized Ecolab's "circle the customer" strategy in building business for the pest elimination division. He participated in joint sales calls and joint proposals made to institutional customers as well as market strategy planning with institutional personnel; he required the employees he supervised to do likewise. In addition, he promoted institutional product sales by providing introductions for institutional sales personnel with pest elimination customers.

In November 1994, Gartland accepted a position with Diversey Corp., a major competitor of Ecolab's institutional division. When Ecolab learned Gartland had solicited business for Diversey from Ecolab's institutional customers, it notified Gartland and Diversey by letter dated January 11, 1995, that it considered his actions a breach of the non-compete agreement. Diversey, who interpreted the non-compete agreement as preventing Gartland from competing with Ecolab's pest elimination division only, responded by stating that Gartland would not refrain from soliciting Ecolab's institutional customers.

Ecolab filed this action and moved for a temporary injunction. After a hearing, the trial court issued the injunction, restraining Gartland from

contacting or accepting orders for institutional sales products and services from all former customers constituting [Ecolab's] Institutional Corporate Sales Accounts, whom [Gartland] contacted and had access to, in accordance with employment agreement.

The trial court found that, even though Gartland worked for the pest elimination division, he had "handled" institutional products through his extensive participation in the "circle the customer" concept. It also found Ecolab had proved a threat of irreparable harm through the potential for wrongful disclosure of confidential institutional information to which Gartland had had access through his participation in the "circle the customer" program. Gartland requested, and this court granted, an expedited appeal.

ISSUE

Did the district court err in its interpretation of the noncompete agreement and abuse its discretion by granting the temporary injunction?

ANALYSIS

"A temporary injunction is an extraordinary equitable remedy that preserves the status quo pending a trial on the merits." Central Lakes Educ. Ass'n v. Independent Sch. Dist. No. 743, 411 N.W.2d 875, 878 (Minn.App.1987), review denied (Minn. Nov. 13, 1987). A party seeking a temporary injunction must show it has no adequate remedy at law and interim relief is necessary to prevent "great and irreparable injury." Id. (quoting Cherne Indus. v. Grounds & Assocs., 278 N.W.2d 81, 92 (Minn.1979)). The decision to grant a temporary injunction is committed to the trial court's discretion and should be reversed only upon a clear abuse of discretion. Carl Bolander & Sons Co. v. City of Minneapolis, 502 N.W.2d 203, 209 (Minn.1993). We view the facts in the light most favorable to the party prevailing below. North Star State Bank v. North Star Bank Minnesota, 361 N.W.2d 889, 893 (Minn.App.1985), review denied (Minn. Apr. 26, 1985).

When reviewing a trial court's decision to issue a temporary injunction, this court considers five factors:

(1) the relationship of the parties; (2) the relative harm to the parties if the injunction is or is not granted; (3) the likelihood of success on the merits; (4) public policies expressed in statutes; and (5) the administrative burdens in supervising and enforcing the decree.

Sanborn Mfg. Co. v. Currie, 500 N.W.2d 161, 163 (Minn.App.1993). The factor of greatest concern here is Ecolab's likelihood of success on the merits.

The court dislikes and closely scrutinizes non-compete agreements, because they partially restrict trade. National Recruiters v. Cashman, 323 N.W.2d 736, 740 (Minn.1982). In order to be enforceable, non-compete agreements must be reasonable and supported by consideration. See Davies & Davies Agency v. Davies, 298 N.W.2d 127, 131 (Minn.1980) (discussing policy reasons for these elements). Gartland argues that the trial court erred when it found that Ecolab would likely prove that the non-compete agreement at issue here is enforceable and would preclude him from competing with Ecolab's institutional division. We agree.

The non-compete agreement defines a competing product as one similar to and competitive with "part of the product or service line handled by the Employee." This case turns upon whether that phrase applies only to the products sold by the pest elimination division in which Gartland worked for the last two years of his Ecolab employment or whether that phrase can be applied to the product lines of other divisions with which Gartland had significant interaction. Both parties offer reasonable definitions for "handle." Gartland, relying on several insurance law cases, urges us to adopt a narrow definition: "to buy and sell, or to deal or trade in." See, e.g., Olympic S.S. Co. v. Centennial Ins. Co., 117 Wash.2d 37, 811 P.2d 673, 680 (1991) (adopting similar definition). Ecolab, on the other hand, urges a broad definition the trial court extracted from a Missouri tax law case, State ex rel. Bell v. Phillips Petroleum Co., 349 Mo. 360, 160 S.W.2d 764, 769 (1942). Relying on this case, the trial court here found "handle" meant " 'to control, direct, to deal with, to act upon, and to perform some function with regard to, to manage or operate,' in addition to 'sell, buy, deal, or trade in.' "

A contract is ambiguous when its language is reasonably susceptible to more than one interpretation. Current Technology Concepts v. Irie Enter., 530 N.W.2d 539, 543 (Minn.1995). Although it is unclear whether the trial court found the language at issue here ambiguous, we note that the question of whether an ambiguity exists is one of law. See id. Because both of the definitions offered by the parties could...