Hassler v. Circle C Res., S-21-0132

CourtUnited States State Supreme Court of Wyoming
Writing for the CourtKAUTZ, Justice.
Parties Charlene HASSLER, Appellant (Defendant), v. CIRCLE C RESOURCES, Appellee (Plaintiff).
Docket NumberS-21-0132
Decision Date25 February 2022

505 P.3d 169

Charlene HASSLER, Appellant (Defendant),
v.
CIRCLE C RESOURCES, Appellee (Plaintiff).

S-21-0132

Supreme Court of Wyoming.

February 25, 2022


Representing Appellant: Jeremy J. Hugus, Platte River Injury Law, Casper, Wyoming.

Representing Appellee: Timothy M. Stubson and Holly Tysse, Crowley Fleck PLLP, Casper, Wyoming. Argument by Ms. Tysse.

Before FOX, C.J., and DAVIS* , KAUTZ, BOOMGAARDEN, and GRAY, JJ.

KAUTZ, Justice.

¶1] Circle C Resources sued its former employee, Charlene Hassler, for breach of a noncompete agreement. Ms. Hassler claimed the agreement was unenforceable and void as against public policy. The district court used the blue pencil rule to modify some of the restrictions in the noncompete agreement to make them reasonable (in the district court's opinion), ruled Ms. Hassler had breached the court-modified agreement, and granted summary judgment to Circle C. We conclude it is no longer tenable for courts to use the blue pencil rule to modify unreasonable noncompete agreements. Because Circle C's noncompete agreement with Ms. Hassler is unreasonable on its face, it is void in violation of public policy. We reverse and remand to the district court for entry of summary judgment in favor of Ms. Hassler.

ISSUE

[¶2] Ms. Hassler's initial arguments on appeal were primarily that Circle C did not prove her breach of the noncompete agreement was the proximate cause of its damages and the terms of the noncompete agreement were unreasonable, making it void in violation of public policy. We requested supplemental briefing from the parties on the appropriateness of using the blue pencil rule to revise noncompete agreements. In light of the arguments raised in that briefing, we conclude the dispositive issue in this case is whether the district court erred by using the blue pencil rule to modify the unreasonable terms in Circle C's noncompete agreement with Ms. Hassler.

FACTS

[¶3] Circle C provides day and residential habilitation services to disabled clients in Natrona and Converse counties. It is also authorized by the Wyoming Department of Health to provide services in Fremont, Weston, Laramie, Johnson, and Campbell counties. Circle C has a day habilitation facility in Casper where clients interact with each other and participate in activities. Circle C also engages employees to provide residential habilitation services to clients in the employees’ homes.

[¶4] Circle C hired Ms. Hassler, a CNA, on March 17, 2015, to provide residential habilitation care in her home in Converse County for one of its long-term adult clients (hereinafter referred to as Client). At the time of her hire, Ms. Hassler signed Circle C's "Confidentiality and Noncompetition Agreement." The noncompete aspect of the agreement was set out in Section 2. Paragraph A of that section stated:

A. Employee Conduct with Respect to Competitors. During the term of employee's employment by employer and for 24 months after the end of such employment, employee agrees that employee will not, without the prior written consent of employer, directly or indirectly, whether as an employee, officer, director, independent contractor or service provider, consultant, stockholder, partner, or otherwise, engage in or assist others to engage in or have any interest in any business which competes with employer, or provide services themselves similar to the services provided by employer, or provide such services to any of employer's clients or customers (served by employer at any time during employee's term of employment with employer), in any geographic area in which employer markets or has marketed its services during the year preceding separation from employment. Such geographic area shall include, but not be limited to, the counties of Natrona, Converse, Fremont, Weston, Laramie, Johnson and Campbell in Wyoming, which employer and employee agree is the geographic area that employer presently services. Employee agrees that 24 months is a reasonable term for this agreement given the unique character of employer's business.

Paragraph B prohibited Ms. Hassler from soliciting Circle C's clients for 24 months after their employment relationship ended. Paragraph C stated:

C. Maximum Restrictions of Time, Scope, and Geographic Area Intended. The parties agree and acknowledge that the time, scope and geographic area and other provisions of this agreement have been specifically negotiated by the parties, and employee

[505 P.3d 172

specifically agrees that such time, scope, and geographic areas, and other provisions are reasonable under these circumstances. Employee further agrees that if, despite the express agreement of the parties to this agreement, a court should hold any portion of this agreement unenforceable for any reason, the maximum restrictions of time, scope, and geographic area reasonable under the circumstances, as determined by the court, will be substituted for the restrictions held unenforceable.

The noncompete agreement also listed remedies available to Circle C for an employee's breach of the agreement.

¶5] Circle C trained Ms. Hassler for approximately one month before Client moved into her home. Client was nonverbal and required full-time habilitation care. Ms. Hassler's duties included waking, feeding, toileting, bathing, and dressing Client in the morning, transporting Client to and from Circle C's day habilitation facility in Casper, feeding Client dinner, engaging in activities with Client in the evening, and putting her to bed. Circle C was paid $121,142.10 per year through Medicaid waiver programs for Client's residential habilitation services. Circle C, in turn, paid Ms. Hassler approximately $26,400 per year, resulting in an annual net profit to Circle C of $94,742.10.

[¶6] Client's mother, who was also her legal guardian, became dissatisfied with Circle C's day habilitation services and decided to find another provider. On January 7, 2017, Client's case manager1 notified Circle C that Client was changing providers and Ms. Hassler was leaving its employ. Client remained in Ms. Hassler's home for residential habilitation services and transferred to another provider for day rehabilitation. While Ms. Hassler, with assistance from the case manager, worked to obtain her own Medicaid number so she could be a provider, Client's residential habilitation care was billed under another Medicaid provider. Ms. Hassler was paid significantly more by the new provider than she was by Circle C.

[¶7] On May 31, 2017, Circle C's attorney sent a letter to Ms. Hassler informing her that she was violating the noncompete agreement by soliciting and providing services to Client. Circle C demanded Ms. Hassler "cease and desist" her activities "for at least 12 consecutive months" or it would file suit to enjoin her from violating the agreement and to recover its damages. Although Ms. Hassler received her Medicaid number in July 2017, she responded to Circle C's demand letter by stating she would not "do paid service[ ]s starting 8-7-17" until the matter was resolved. Ms. Hassler stopped providing paid services to Client until August 2018, but Client continued to live in her home and she occasionally helped with Client's care. Ms. Hassler's husband and daughter cared for Client most of the time and were paid, through Medicaid, for their services.

[¶8] Circle C filed a complaint against Ms. Hassler in July 2019, seeking damages for breach of the noncompete agreement. Ms. Hassler answered the complaint asserting, among other things, the noncompete agreement was unenforceable and void as against public policy. Both parties moved for summary judgment, and the district court ruled in favor of Circle C. It decided the noncompete agreement was reasonable and enforceable if the geographical area subject to restriction was narrowed to include only Natrona and Converse counties and the duration of the restriction was changed from 24 to 12 months. Applying the blue pencil rule, the district court narrowed the restrictions accordingly. The district court concluded Circle C was damaged in the amount of its projected profit for the modified 12-month term of the agreement and granted judgment in its favor for $94,742.10. Ms. Hassler appealed.

DISCUSSION

[¶9] Ms. Hassler challenges the district court's summary judgment ruling that her noncompete agreement with Circle C, with modifications to its duration and geographical scope,

[505 P.3d 173

was consistent with public policy and enforceable. She claims the district court should have granted judgment in her favor because, as a matter of law, the terms of the noncompete agreement were unreasonable, making it void as against public policy, and it was improper for the district court to revise the agreement to make it reasonable. Although Ms. Hassler moved for summary judgment in her favor, she did not originally assert unreasonableness of the noncompete agreement's duration and geographical restrictions as a basis for her motion. She did raise those claims in support of summary judgment in her response to our request for supplemental briefing about the blue pencil rule.

[¶10] We review a district court's summary judgment order de novo. Gowdy v. Cook, 2020 WY 3, ¶ 21, 455 P.3d 1201, 1206-07 (Wyo. 2020) (citing Bear Peak Res., LLC v. Peak Powder River Res., LLC, 2017 WY 124, ¶ 10, 403 P.3d 1033, 1040 (Wyo. 2017), and Int'l Assoc. of Fire Fighters, Local Union No. 5058 v. Gillette/Wright/Campbell Cnty. Fire Protection Jt. Powers Bd., 2018 WY 75, ¶ 19, 421...

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