Emerson Elec. Co. v. Rogers

• Decision Date: 08 August 2005
• Docket Number: No. 05-1441.,05-1441.
• Citation: 418 F.3d 841
• Parties: EMERSON ELECTRIC CO., Plaintiff—Appellee, v. Guy ROGERS; Guy Rogers Sales, Inc., Defendants—Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 841

418 F.3d 841

EMERSON ELECTRIC CO., Plaintiff—Appellee, v. Guy ROGERS; Guy Rogers Sales, Inc., Defendants—Appellants.

No. 05-1441.

United States Court of Appeals, Eighth Circuit.

Submitted: June 21, 2005.

Filed: August 8, 2005.

Gregory P. Goonan, argued, San Diego, CA (John Gianoulakis, David A. Castleman, St. Louis, MO, on the brief), for appellant.

JoAnn T. Sandifer, argued, St. Louis, MO (Gerard K. Rodriguez, on the brief), for appellee.

Before MURPHY, RILEY, and SMITH, Circuit Judges.

MURPHY, Circuit Judge.

Guy Rogers worked as a manufacturer's representative for Emerson Electric Co. (Emerson), selling its ceiling fans to retailers in the southeast. When he left Emerson to begin selling the fans of a competitor, Minka Lighting Company, Emerson filed this lawsuit, alleging that Rogers misappropriated trade secrets and violated the covenant not to compete in their Sales Representation Agreement. The district court¹ granted Emerson's motion for a preliminary injunction, and Rogers appeals. We affirm.

Guyan T. Rogers has worked as a manufacturer's representative for various manufacturers since 1969. As a manufacturer's representative, Rogers markets and sells products to retailers who then market the products to the general public. He is currently the president and sole shareholder of Guy Rogers Sales, Inc., an incorporated entity that represents lighting and fan manufacturers to retailers in Georgia, Alabama, Tennessee, and Florida. The company pays three independent contractors to serve as representatives, and Rogers himself continues to visit and make sales calls to customers on a regular basis. He is presently 69 years old.

Rogers started selling Emerson's ceiling fans in 1988, and he began selling Minka lighting products in 1987. Minka became his largest account, generating approximately three million dollars annually in gross sales and $200,000 in annual commissions. When Minka started manufacturing fans in 1994, it attempted to persuade Rogers to sell its fans instead of Emerson's, but Rogers declined. Before leaving Emerson in the fall of 2004, Rogers was selling approximately one million dollars annually of its ceiling fan products, generating approximately $50,000 in annual commissions.

Emerson first asked Rogers to sign a covenant not to compete in 1997 and then asked him to sign another copy of the covenant in 1999. In their standard Sales Representation Agreement, which contained the entire covenant, the parties acknowledged that "customer relationships can often be difficult to develop and require a significant investment of time and effort." Emerson agreed to engage and compensate Rogers based upon his promise "not to divert [its] customer contacts, loyalty and goodwill." If the parties were to end their relationship, Emerson "would need certain protections to prevent its competitors from gaining an unfair competitive advantage," loss of its goodwill, and misuse of proprietary information. By entering into the agreement, Rogers would be obliged not to sell competitive products for a period of one year after their relationship ended and during that period he would not:

(a) in the Territory, enter the employment of, or act as a sales representative, manufacturer's representative or agent for, any person or entity which is engaged in the manufacture, supply or sale of ceiling fans and accessories . . . which are competitive with those products manufactured, supplied or sold by Manufacturer ("Competitive Product"), or

(b) sell or provide any Competitive Product to any Customer with whom Sales Representative dealt, for which Sales Representative was responsible, or with respect to which Sales Representative was provided or had access to Confidential Information . . . .

In the fall of 2004, Rogers terminated his relationship with Emerson. He believed Minka was going to hire a new representative to represent its lighting products unless he agreed to discontinue his relationship with Emerson and begin to sell Minka's ceiling fans. On October 11 Rogers sent his resignation to Emerson to be effective November 1, 2004; the letter was dated October 1, 2004. Rogers also called his supervisor, Ed Springer, and informed him of his decision to leave Emerson and to begin selling Minka fans. Springer did not warn Rogers that he was contractually bound to wait one year before he began working for Minka or remind Rogers of any other contractual obligations after he left Emerson.

Rogers took measures contrary to Emerson's interests almost immediately after he terminated his relationship with it. After giving Emerson his resignation, Rogers visited his contacts at Georgia Lighting. Georgia Lighting has been a valuable customer for both Rogers and Emerson; it has been one of Rogers' top two accounts and one of Emerson's top five national accounts. During this visit Rogers talked with Roxanne Todd and Mary Hardy, who influence the types and quantities of fan products purchased by Georgia Lighting. He told them that he was leaving Emerson and would be representing Minka's ceiling fan products and would like to continue doing business with them. Rogers did not return any of Emerson's materials until after its attorney sent him a "cease and desist" letter demanding immediate return of all Emerson materials. Even after he received the letter, Rogers did not return all of the materials; he claims he did not understand the breadth of materials which Emerson deemed confidential.

At the time Rogers left Emerson, the parties suspected that Georgia Lighting was going to go out of business. The district court found that a notice had been circulated that Georgia Lighting would no longer operate its retail stores as of January 25, 2005, and the record indicates that Georgia Lighting is no longer operational. There is evidence that its employees would likely remain in the ceiling fan and home lighting industries, however.

On November 8, 2004, Emerson filed this action in state court, alleging that Rogers had breached his agreement and misappropriated trade secrets under Missouri's Uniform Trade Secrets Act. Emerson sought both monetary and injunctive relief. After Emerson moved for a temporary restraining order and a preliminary injunction, Rogers successfully petitioned to remove the case to federal court. Minka has paid for his defense in this action.

The federal district court granted Emerson's motion for a temporary restraining order and then held two evidentiary hearings before granting Emerson's motion for a preliminary injunction. It also permitted Emerson to amend its pleadings to add Guy Rogers Sales, Inc. as a defendant. The injunction enjoined Guy Rogers and all agents of Guy Rogers Sales, Inc. from engaging in the sale of ceiling fans competitive with those manufactured by Emerson Electric Company for a period of one year from November 1, 2004, in the territory of Georgia, Alabama, and the panhandle of Florida.

Rogers appeals, arguing that the district court abused its discretion when it issued the injunction. Although the injunction only restricts Rogers from selling ceiling fans in competition with Emerson in the defined territory, he maintains that we should look at the broader language of the covenant which would prevent him and his company from working in any capacity for a competitor of Emerson. He argues that the covenant is unenforceable in any respect because of its breadth. He also argues that the district court should not have barred him from selling ceiling fans to all potential customers in the geographic region, but only to customers of Emerson. Rogers also maintains that the district court erred by applying Missouri law in deciding whether the covenant is enforceable and by issuing an injunction without considering whether to impose a bond.

In determining whether to grant a preliminary injunction a court considers (1) the probability of the movant's success on the merits; (2) the threat of irreparable harm to the movant; (3) the balance between this harm and the injury that granting the injunction will inflict on other interested parties; and (4) whether the issuance of the preliminary injunction is in the public interest. See Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir.1981). A district court has broad discretion when ruling on preliminary injunction requests, and we will reverse only for clearly erroneous factual determinations, an error of law, or an abuse of discretion. United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1179 (8th Cir.1998).

In Missouri there are two primary considerations governing the enforceability of covenants not to compete: the parties' agreement must protect well recognized employer interests, and the terms must be reasonable in geographic and temporal scope. Furniture Mfr. Corp. v. Joseph, 900 S.W.2d 642, 647 (Mo.Ct.App.1995). Emerson argues that its covenant not to compete is necessary to protect its trade secrets and its...