Gleeson v. Preferred Sourcing, LLC

• Decision Date: 25 March 2008
• Docket Number: No. 49A02-0608-CV-669.,49A02-0608-CV-669.
• Citation: 883 N.E.2d 164
• Parties: Sherri GLEESON, Appellant-Defendant, v. PREFERRED SOURCING, LLC, Appellee-Plaintiff.
• Court: Indiana Appellate Court

883 N.E.2d 164

Sherri GLEESON, Appellant-Defendant, v. PREFERRED SOURCING, LLC, Appellee-Plaintiff.

No. 49A02-0608-CV-669.

Court of Appeals of Indiana.

March 25, 2008.

Joseph A. Christoff, Heidi K. Koeneman, Fort Wayne, IN, Attorneys for Appellant.

Thomas R. Devoe, John D. Papageorge, Sommer Barnard P.C., Indianapolis, IN, Attorneys for Appellee.

OPINION

VAIDIK, Judge.

Case Summary

Sherri Gleeson appeals the trial court's grant of her former employer Preferred Sourcing, LLC's ("Preferred") motion for a preliminary injunction against her, which sought to enforce the terms of a noncompete agreement that she signed. Finding that Preferred has proven the requirements for a preliminary injunction and that several defenses do not apply, we conclude that the trial court did not abuse its discretion in granting the preliminary injunction. In addition, we conclude that the court abused its discretion in refusing to order security for the preliminary injunction. Accordingly, we affirm in part and reverse in part;

Facts and Procedural History

Preferred¹ is an Indiana company with several locations throughout the State as well as in other states and countries. Among other things, Preferred provides inspection services and technical and engineering support services primarily for the automobile industry. Preferred, which first started in Indianapolis in January 1998, opened a location in Fort Wayne, Indiana, in mid-2000.

In September 2000, soon after moving from Michigan to Fort Wayne, Gleeson became the sales manager at Preferred's Fort Wayne location. She was the only sales representative at this location. On October 4, 2000, Jeff Weisenauer, president of Preferred and Gleeson's supervisor, presented Gleeson with a Non-Competition and Confidentiality Agreement ("Agreement"), which she signed that same day. The Agreement contains the following relevant provisions:

5. Non-Competition. Employee shall be subject to the following restrictions on competition:

a. During Employee's employment with the Company and for a period of 18 months (which shall be extended by the length of any period during which Employee is in violation of this paragraph 5a) immediately following the Termination Date, Employee (on Employee's own behalf or that of any other person or entity) shall not within the Territory directly or indirectly own, manage, operate, control, invest in, lend to, acquire an interest in, or otherwise engage or participate in (whether as an employee, independent contractor, consultant, partner, shareholder, joint venturer, investor, or any other type of participant), or use or permit Employee's name to be used in, any business (including the sale of any product or service) which directly or indirectly competes with any Business of the Company.

b.[²] During Employee's employment with the Company and for a period of 18 months (which shall be extended by the length of any period during which Employee is in violation of this paragraph 5b) immediately following the Termination Date, Employee (on Employee's own behalf or that of any other person or entity) shall not directly or indirectly sell or otherwise provide or solicit the sale or provision of any product or service which competes directly or indirectly with any Business of the Company to any customer or prospective customer as to which, during the 12 months immediately preceding the Termination Date, Employee (i) engaged in any solicitation, sales activity, or other direct contact (in person, in writing, by telephone or electronically) on behalf of the Company; (ii) performed any duties or services on behalf of the Company; and/or (iii) received any Confidential Information.

6.[³] Non-Solicitation. For a period of 18 months (which period shall be extended to include any period of time during which the Employee is in violation of this paragraph 6) immediately following the Termination Date, Employee (on Employee's own behalf or that of any other person or entity) shall not directly or indirectly solicit, induce, or influence any Company customer, Company employee or any other person or entity who has an actual or prospective business or employment relationship with the Company to discontinue, reduce, reject or otherwise change in any manner adverse to the interests of the Company the nature or extent of such relationship with the Company.

Appellant's App. p. 172-73.

Gleeson was instrumental in growing Preferred's Fort Wayne location from a new, start-up facility in 2000 to one of its more profitable facilities by 2004, grossing almost two million dollars annually. Preferred has a niche market, which requires that its sales representatives make contacts and create customer relationships, and, as Preferred's Senior Vice President of Operations testified, customer relationships are "key" to Preferred's success. Tr. p. 107. Gleeson was one of Preferred's most successful sales representatives in creating and maintaining these customer relationships. While working for Preferred, Gleeson's primary sales territory included a radius of approximately 150 miles around Fort Wayne. However, Gleeson sometimes solicited business outside of this territory as well.

Gleeson resigned from Preferred in January 2005. At about the same time, Gleeson interviewed with a Detroit-based holding company that owns PTI Management Group, Inc. ("PTI") and Quality Containment Solutions, LLC ("QCS"). PTI is in the business of, among other things, placing engineers and managers. Some of its services, such as placement of engineers, compete with Preferred. QCS is in the business of providing inspection and containment services and related services. It is a direct competitor of Preferred. In February 2005, Gleeson began working for PTI in the Fort Wayne area to create the appearance that she would not be directly competing against Preferred for inspection and containment services.

Soon after joining PTI, Gleeson began soliciting sales on behalf of QCS, including contacting customers of Preferred. Upon learning of these activities, Preferred sent several cease and desist letters to Gleeson, the first one on April 14, 2005. Despite Gleeson's receipt of these letters and assurance to Preferred in a letter dated May 9, 2005, that she had discontinued working for QCS, Gleeson continued to engage in sales efforts on behalf of QCS. After discovering these continuing violations, on June 6, 2005, Preferred filed a Complaint for Damages and Permanent Injunction against Gleeson. Thereafter, on June 24, 2005, Gleeson formally transferred her employment over to QCS and became the Interim Operations Manager for the Fort Wayne office.

On October 11, 2005, Preferred filed a Verified Motion for Preliminary Injunction.⁴ A hearing on this motion was held on December 7, 2005. On July 14, 2006, the trial court issued extensive findings of fact and conclusions of law granting the preliminary injunction. Specifically, the trial court concluded that "Preferred has a strong likelihood of success on the merits"; "Preferred has no adequate remedy at law for these breaches, and these continuing breaches will cause or threaten to cause irreparable harm to Preferred unless Gleeson is enjoined"; "[t]he harm Preferred would suffer if a preliminary injunction were denied exceeds the harm Gleeson would suffer if it were granted"; and "[t]he issuance of the requested injunction does not disserve the public interest." Appellant's App. p. 13, 15, 16. Accordingly, the court ordered:

(a) Gleeson is enjoined for a period of 18 months from the date of this Order from (independently or as an employee, independent contractor, consultant, partner, shareholder, joint venturer, investor, or any other type of participant) directly or indirectly selling or otherwise providing or soliciting the sale or provision of any product or service which competes directly or indirectly with any business of Preferred to any customer or prospective customer as to which, during the 12 months preceding Gleeson's termination of employment with Preferred, Gleeson engaged in any solicitation, sales activity, or other direct contact on behalf of Preferred; performed any duties or services on behalf of Preferred; or received any confidential information.

(b) Gleeson is enjoined for a period of 18 months from the date of this Order from directly or indirectly owning, managing, operating, controlling, investing in, lending to, acquiring an interest in, or otherwise engaging or participating in (independently or as an employee, independent contractor, consultant, partner, shareholder, joint venturer, investor, or any other type of participant) or permitting Gleeson's name to be used in any business which directly or indirectly competes with any business of Preferred within a 150-mile radius of Preferred facility in Fort Wayne, Indiana.

(c) Gleeson is enjoined from directly or indirectly disclosing, using or exploiting any of Preferred's confidential information for Gleeson's own benefit or for the benefit of any other person or entity.

Id. at 17.⁵ Gleeson now appeals.

Discussion and Decision

We first observe that the issues in this case are now moot. The trial court enjoined Gleeson for a period of eighteen months beginning on July 14, 2006, the date it issued the preliminary injunction. Therefore, the preliminary injunction expired on January 14, 2008. Generally, we decline to address the merits of moot claims unless the matter is of public interest and capable of repetition. Cent. Ind. Podiatry, P.C. v. Krueger, 882 N.E.2d 723, 2008 WL 642529, *2 (Ind. Mar. 11, 2008). Injunctive actions based on noncompetition agreements for salespeople raise some fairly significant policy concerns and are likely to recur. Moreover, "full appellate review will often require more time than the term of the noncompetition agreement, so the need for guidance to trial courts in the future dictates that we address" Gleeson's arguments. See id.

Gleeson raises ten issues on...