MedX, Inc. v. Ranger

• Decision Date: 13 March 1992
• Docket Number: Civ. A. No. 91-3099.
• Citation: 788 F. Supp. 288
• Parties: MEDX, INC. v. Raymond T. RANGER.
• Court: U.S. District Court — Eastern District of Louisiana

788 F. Supp. 288

MEDX, INC. v. Raymond T. RANGER.

Civ. A. No. 91-3099.

United States District Court, E.D. Louisiana.

March 13, 1992.

Tom W. Thornhill, David L. Thornhill, Thornhill & Thornhill, New Orleans, La., S. Daniel Ponce, Zack, Hanzman, Ponce & Tucker, P.A., Miami, Fla., for plaintiff.

Edward F. Kohnke, IV, James H. Brown, Jr., Lemle & Kelleher, New Orleans, La., for defendant.

MEMORANDUM OPINION

MENTZ, District Judge.

Before the Court is the above-styled action, presented on briefs and documents and taken under submission for consideration of the issue of permanent injunctive relief. The Court hereby issues its findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a). To the extent that any of the following findings of fact constitute conclusions of law, they are adopted as such; to the extent that any conclusions of law constitute findings of fact, they are so adopted. The findings of fact and conclusions of law contained in this Court's opinion of October 30, 1991, are incorporated by reference into this opinion.

I. Findings of fact

On July 22, 1988, defendant Raymond T. Ranger entered into two interrelated contracts with plaintiff MedX, Inc. of Florida, a medical waste disposal company. These contracts consisted of an "Asset Purchase Agreement" and an "Employment Agreement." In section 1(a)(i) of the asset purchase contract, Mr. Ranger agreed to sell MedX his business, Specialty Waste Management, Inc. The purchase contract specifically provided that MedX was buying Specialty Waste's name, goodwill, going concern value, and substantially all of its assets. Mr. Ranger worked for MedX under the terms of the employment contract from July 22, 1988 until March 16, 1990.

MedX has brought suit to enforce its rights under the employment contract. Section 6 of that contract contains a covenant that purports to prevent Mr. Ranger from competing with MedX, accepting employment from its competitors, soliciting its clients or employees, or revealing its trade secrets, all for a period of two years from the end of his employment with MedX. Mr. Ranger was in violation of this covenant from January 1, 1991, to at least August 27, 1991, when this Court issued a temporary restraining order against him.¹

On October 30, 1991, this Court granted MedX a preliminary injunction "to preserve the relative positions of the parties until a trial on the merits could be held." University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981).² MedX now demands that the Court grant permanent injunctive relief that would extend beyond the period called for by the covenant.³ MedX asserts that Mr. Ranger competed with it for a period of some ten months, and that it is entitled to an extension of the noncompete period for an additional ten months beyond its contractual expiration date of March 16, 1992.

II. Legal background

The standard for a permanent injunction is essentially the same as the standard for the preliminary injunction that is currently in effect. Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531, 546 n. 12, 107 S.Ct. 1396, 1404 n. 12, 94 L.Ed.2d 542 (1987).⁴ The primary difference is that the purpose of a permanent injunction is remedial: rather than locking the parties into the positions they held as of the outset of litigation, a permanent injunction should set aright wrongs that are not effectively compensable at law. See id., 480 U.S. at 546, 107 S.Ct. at 1404; Silvers v. Dis-Com Secs., Inc., 403 So.2d 1133, 1137 (Fla.App. 4th Dist.1981). As the parties have stipulated, MedX is clearly entitled to a permanent injunction to protect its interests until the expiration of the covenant on March 16, 1992. The question at bar is whether MedX is entitled to an extended period of injunctive relief after that covenant expires. This question in turn raises three issues: whether extended injunctive relief is available under Florida law; whether MedX's claim for extended relief is justiciable; and whether equitable defenses available to Mr. Ranger warrant denial of the relief that MedX has demanded.⁵

III. Conclusions of law

A. Florida law permits extended injunctive relief.

"Injunctive relief has become the favored remedy in cases involving covenants not to compete because money damages for breach of non-competition agreements are either not susceptible to proof with the required degree of certainty, or `if susceptible of reasonable proof, may not compensate for all aspects of such a violation.'" Cordis Corp. v. Prooslin, 482 So.2d 486, 489 (Fla.App. 3d Dist.1986).⁶ Accordingly, the Supreme Court of Florida has specifically approved the grant of extended injunctive relief:

Inasmuch as the appellant had been in competition with the appellee continuously since his resignation, the chancellor must have determined that this was the only way to give the appellee its two competition-free years. We can find no fault with this theory or with the result of its application..... We think that the procedure followed by the chancellor is the only way by which the provisions of the contract and the statute could be effectuated.

Capelouto v. Orkin Exterminating Co., 183 So.2d 532, 535 (Fla.), appeal dism'd, 385 U.S. 11, 87 S.Ct. 78, 17 L.Ed.2d 10 (1966).⁷ Denial of extended relief on the facts of this dispute might even constitute reversible error. See Kverne v. Rollins Protective Servs., 515 So.2d 1320, 1321-22 (Fla.App. 3d Dist.1987).

Despite the authority set out above, Mr. Ranger asserts that a recent amendment to the Florida statute governing non-compete covenants requires MedX to demonstrate that he has caused it specific, ascertainable harm in order for the permanent injunction to extend beyond the contractual period. Citing Hapney v. Central Garage, Inc., 579 So.2d 127, 133 (Fla.App. 2d Dist.), review denied, 591 So.2d 180 (Fla.1991),⁸ he argues:

In order to be enforced in Florida, anticompetitive agreements must be reasonably related to a protection sic of a legitimate business interest of the employer. The implication which flows from that holding.... is that competition alone by the employee is not enough to warrant the courts upholding the anticompetitive contract. Instead, there must be a showing by the employer of the effect of that competition and that the competition by the former employee caused him some greater harm by virtue of the prior relationship existing between the employer and the employee. Simply put, MedX has not offered any proof that Ranger's competition prior to the Court's Order caused it any specific harm. The Court should, for that reason, deny the claimed extension.⁹

This argument misinterprets Hapney. While that opinion did hold that "the existence of a legitimate interest of the employer to be protected is a threshold condition to the validity of a covenant not to compete ...," it also specifically recognized the following as legitimate business interests under Fla.Stat. § 542.33: "(1) trade secrets and confidential business lists, records, and information, (2) customer goodwill, and (3) to a limited degree, extraordinary or specialized training provided by the employer." Id. at 131. The third of these interests is not implicated by the facts of this case, but the first and second are central to the dispute at bar. Moreover, the statutory revision does not increase the required showing of harm for covenants like the one between Mr. Ranger and MedX.¹⁰ Thus, in light of the showing that MedX has made of the substantial threat that Mr. Ranger poses to its legitimate business interests,¹¹ the covenant is reasonably related to the protection of those interests under Hapney.

Finally, as this Court's prior opinion noted at some length, it can be extremely difficult to prove that specific, concrete harm has resulted from the violation of a noncompete covenant. It is for precisely this reason that the Court ruled that the preliminary injunction was necessary to protect MedX from suffering harm for which it would have no meaningful remedy at law in the courts. See Canal Auth. of Florida v. Callaway, 489 F.2d 567, 573 (5th Cir.1974).¹² Accordingly, because MedX has already made the requisite showing of "irreparable injury", requiring it to show specific, concrete injury would defeat the raison d'etre for injunctive relief.¹³ Thus, Florida law admits of the remedy that MedX seeks.

B. MedX's claim for extended injunctive relief is justiciable.

There is substantial support among the Federal courts of appeals for the proposition that it is inappropriate "to grant an injunction to enforce an agreement by a former employee not to compete after the period during which the employee agreed not to compete has expired." Economics Laboratory, Inc. v. Donnolo, 612 F.2d 405, 408 (9th Cir.1979).¹⁴ On facts similar to those of the case at bar, some courts have characterized disputes over expired covenants as nonjusticiable due to mootness. See, e.g., Olin Water Servs. v. Midland Research Laboratories, Inc., 774 F.2d 303, 306 (8th Cir.1985) ("Because the district court's preliminary injunction was premised on the contractual agreement , which has expired by its own terms, there is no possibility of future injunctive relief, preliminary or permanent, being imposed against a defendant on this ground.").¹⁵

Similarly, the Fifth Circuit has ruled that a dispute over a Louisiana noncompete covenant was moot due to the expiration of the term of a proposed preliminary injunction based upon the covenant. Gaylord Broadcasting Co. v. Cosmos Broadcasting Co., 746 F.2d 251 (5th Cir.1984). Moreover, the court specifically refused to extend the term of the covenant: "The parties may contractually provide for the tolling of the noncompete period, if an employee breaches a covenant not to compete and the resulting civil proceedings to enforce the covenant consume more time than the period of the covenant itself. The contract in this case did not so provide." Id. at 253 n. 1....