Ethan & Associates, Inc. v. McKay, No. 2005 CA 2567 (La. App. 12/6/2006)
| Decision Date | 06 December 2006 |
| Docket Number | No. 2005 CA 2567.,2005 CA 2567. |
| Parties | ETHAN ASSOCIATES, INC. v. CHARLOTTE McKAY, DAN MOSELY, NANCY SCEARCE AND CATALINA ASSOCIATES, L.L.C. |
| Court | Court of Appeal of Louisiana — District of US |
ON APPEAL FROM THE TWENTY SECOND JUDICIAL DISTRICT COURT, (NUMBER 2005-11314 "D"), PARISH OF ST. TAMMANY, STATE OF LOUISIANA, HONORABLE PETER J. GARCIA JUDGE.
W. PAUL ANDERSSON, MICHAEL J. GAUTIER JR., WILLIAM W. NEWTON, New Orleans Louisiana, Counsel for Plaintiff/Appellee, Ethan Associates Inc.
ROY H. MAUGHAN JR., Baton Rouge Louisiana, Counsel for Defendants/Appellants, Charlotte McKay and Dan Mosely.
Before KUHN, GAIDRY and WELCH JJ.
Plaintiff, Ethan & Associates, Inc. ("Ethan"), a commercial debt collection company, filed suit against its former employees, Charlotte McKay and Dan Mosely, seeking injunctive relief to enforce the provisions of certain non-competition agreements that they had signed while employed by Ethan. The trial court initially signed a temporary restraining order ("TRO") and later signed a judgment granting preliminary injunctive relief. McKay and Mosely have appealed, challenging the validity of the trial court's actions of granting the TRO and the preliminary injunction. For the following reasons, we amend that portion of the trial court's judgment that granted the preliminary injunction to provide that Ethan is required to furnish security for the injunction. We remand for the trial court to fix the appropriate amount of the security. Otherwise, we affirm the trial court's judgment.
Ethan filed suit against McKay and Mosely on March 18, 2005.1 In its verified petition, Ethan alleged that while it employed McKay and Mosely, each of them had signed employment agreements, whereby they agreed not to work for another commercial debt collection company for a period of one hundred twenty days after leaving Ethan. Ethan also asserted that McKay and Mosely agreed that for a period of one year after the end of their employment with Ethan, they would not solicit clients they had serviced while in Ethan's employ.
Ethan further alleged that: 1) McKay and Mosely have violated their agreement through their work with Catalina & Associates, L.L.C. ("Catalina"), who is a "recently formed competitor company engaged in commercial debt collection," and 2) both McKay and Mosely have engaged in business activity in direct competition with Ethan and/or have solicited Ethan's clients, causing Ethan damages. Pursuant to the provisions of Louisiana Revised Statutes 23:921, Ethan sought a TRO, a preliminary injunction, a permanent injunction, and damages.
On March 18, 2005, the trial court issued a TRO enjoining McKay and Mosely "from soliciting clients or potential clients of [Ethan]" and "from working for any commercial debt collection agency or company for a period of one hundred twenty (120) days after leaving [Ethan]. McKay and Mosely filed an exception and rule to dissolve the TRO, urging that: 1) the TRO had been wrongfully issued; 2) the employment agreements were overly broad and unenforceable; and 3) Ethan had no cause of action. McKay and Mosely also prayed for "damages, expenses, and attorney fees rendered in connection with the dissolution of the [TRO]."
The trial court conducted a hearing that addressed Ethan's request for preliminary injunctive relief and defendants' exception of no cause of action and rule to dissolve the TRO. At this hearing, Chet Hingle, owner and officer of Ethan, testified that Ethan collects commercial debt. He stated that he requires all of his collectors and sales personnel to sign employment agreements that contain non-competition covenants; he explained that if they refused to sign the employment agreement, he discharged them. He also testified that such employment agreements are an industry standard; he did not know of any commercial collection agencies that did not impose such a requirement.
Hingle testified that McKay had worked for him for about four to five years, and Mosely had worked for Ethan since 2003. According to Hingle's testimony, neither McKay nor Mosely had ever worked for him without signing the current employment agreement. If they had not signed each agreement, they would have been terminated.
Hingle stated that the most recent employment agreement had been presented to McKay and Mosely in February 2005. Hingle testified that Mosely signed the 2005 agreement, but McKay did not. Upon her refusal to sign the agreement, McKay was discharged. One week later, Hingle learned that Catalina had been formed. At that time, Mosely was still employed by Ethan, but he had taken time off of work. Soon after, Mosely also left Ethan's employment.2
In March 2005, Hingle learned that McKay was soliciting clients of Ethan, who were in the business of placing debt collection business. One of Hingle's clients forwarded to Hingle a March 5, 2005 e-mail that McKay had sent to various recipients. Hingle identified several of these recipients as clients of Ethan. Within this e-mail, McKay indicated that she was no longer working for Ethan and provided her new business contact information for Catalina.
Mosely and McKay do not dispute that they each signed a 2003 employment agreement.3 Ethan further introduced into evidence the unsigned employment agreements that were used by Ethan during 2004 and 2005. Hingle testified that he had kept all of the employment agreements in a file cabinet, and that Nancy Scearce, his former office manager who now owns Catalina, had maintained these files. Hingle testified that he did not presently know the whereabouts of the 2004 and 2005 agreements. When asked whether it was his testimony that someone went into his personnel files and stole the 2004 and 2005 agreements, he stated, "I know of no other way."
McKay testified that during her employment with Ethan, she had signed a September 2003 employment agreement, but that she had not signed another one in 2004. She further testified that on February 11, 2005, Hingle presented her with another employment agreement that she refused to sign, and upon her refusal, Hingle had terminated her employment. She acknowledged that all collectors and sales personnel had been asked to sign an employment agreement in 2004.
Dan Mosely testified that he worked for Ethan for a little over two years. He remembered signing Ethan's employment agreement in February 2003. Although he thought that he had been presented with another employment agreement in January 2004, he did not recall whether he had actually signed it, but he acknowledged that he did not recall refusing to sign it. He testified that he had previously worked for other commercial debt collection agencies, and he acknowledged that he had never worked for such an agency without being required to sign a non-competition employment agreement. However, he denied having signed Ethan's employment agreement in 2005.
Mosely also acknowledged that he sent a debt collection letter for Catalina using the alias of Paul Gunn. This letter was dated March 16, 2005. He explained that the use of an alias is a common practice in the business of debt collection.
The trial court signed a May 26, 2005 judgment that denied the defendants' "exception of no cause of action and rule to dissolve [the TRO]."4 The judgment further granted a preliminary injunction in favor of Ethan and against McKay "in accordance with the terms of the 2004 non-competition agreement" and against Mosely "in accordance with the terms of the 2005 non-competition agreement....5 The judgment further ordered that the provision in the 2004 and 2005 agreements referring to a "150 mile radius" was severed because it was "invalid and unenforceable."
McKay and Mosely have appealed, urging the trial court erred in issuing the TRO, in granting injunctive relief, and in failing to grant their exceptions because: 1) no proof was offered that defendants had solicited any client who had been serviced or contacted within the past 6 or 12 months; 2) no proof was offered that Ethan was carrying out a like business therein or that Ethan had completed activities in any of the 52 parishes or municipalities listed in Exhibit A [an exhibit to the non-competition agreement]; 3) the employment agreements are not enforceable because they are ambiguous; 4) the employment agreements are not enforceable because they fail to define the employer's business or the employees' duties; and 5) the employment agreements are not enforceable because they are overly broad in territorial restriction.
Louisiana Code of Civil Procedure article 3612 expressly states, "There shall be no appeal from an order relating to a temporary restraining order." However, a party may seek review of a TRO by way of an application for supervisory writs to the Court of Appeal. La. C.C.P. art. 2201. In this case, the TRO lapsed 10 days after its issuance, La. C.C.P. art. 3604, and the trial court subsequently issued the preliminary injunction that enjoined defendants' conduct in accordance with the terms of the non-competition agreements. Thus, whether the TRO was wrongfully issued is a moot issue, except to the extent that it relates to defendants' claims for damages and attorney fees. La. C.C.P. art. 3608.
Without addressing the propriety of the TRO, we conclude that defendants are not entitled to recover damages and attorney fees. Our review of the record reveals that defendants did not introduce any evidence of actual damages sustained as a result of the TRO's issuance. As such, they are not entitled to recover monetary damages. Likewise, because the TRO dissolved by operation of law prior to the time defendants filed their rule to dissolve the TRO, defendants have not established that they incurred attorney fees for services rendered in connection with the dissolution of the TRO. Thus, they are not entitled to recover attorney fees. La. C.C.P. art....
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