Midcom, Inc. v. Oehlerking

• Decision Date: 27 September 2006
• Docket Number: No. 23623.,23623.
• Citation: 2006 SD 87,722 N.W.2d 722
• Parties: MIDCOM, INC., Plaintiff and Appellee, v. Anthony J. OEHLERKING, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 722

722 N.W.2d 722

2006 SD 87

MIDCOM, INC., Plaintiff and Appellee, v. Anthony J. OEHLERKING, Defendant and Appellant.

No. 23623.

Supreme Court of South Dakota.

Considered on Briefs March 20, 2006.

Decided September 27, 2006.

Roberto A. Lange of Davenport, Evans, Hurwitz & Smith, L.L.P., Sioux Falls, SD, for plaintiff and appellee.

Courtney R. Clayborne, Michael C. Loos of Clayborne & Loos, P.C., Rapid City, SD, for defendant and appellant.

KONENKAMP, Justice.

[¶ 1.] While employed at Midcom, Inc., Anthony J. Oehlerking signed a covenant not to compete. When he resigned to work for a direct competitor, Midcom sought to enforce the covenant. Oehlerking claimed, however, that it was void and otherwise unenforceable. After a trial, the circuit court ruled that the covenant was valid and enforceable. The court issued two judgments, one enjoining Oehlerking from violating the covenant, and one awarding Midcom attorney's fees based on a provision in the contract allowing a reasonable award of fees to the prevailing party. Oehlerking appeals both judgments. Because Oehlerking's notice of appeal from the first judgment was untimely, we dismiss that appeal. On the second judgment, we affirm the award of attorney's fees.

Background

[¶ 2.] Midcom is based in Watertown, South Dakota. It produces electronic components primarily for the telecommunications industry. Just after he received his degree in electrical engineering, Oehlerking was hired by Midcom in 1994 as a design engineer. Over the next several years, he earned promotions and salary increases. Then, in 1998, Midcom offered him a "Performance Stock Unit Appreciation Rights Agreement." Included in the agreement was a covenant not to compete provision. He signed a second similar agreement in February 2000 with another noncompetition clause. By its terms, Oehlerking was restricted from competing directly or indirectly with Midcom anywhere it does business for at least two years after leaving his job with Midcom.

[¶ 3.] In the late 1990s, Midcom's business did particularly well. Oehlerking received sizable bonuses in addition to his $85,000 salary as the manager of the LAN business unit. According to Midcom, for fiscal years 1999 and 2000, the bonuses Oehlerking received in addition to his salary were $36,517 and $20,984 respectively. In the latter part of 2000, however, Midcom suffered a significant downturn in business. Effective April 2001, Midcom discontinued employee bonuses, reduced salaries, and ceased its contributions to retirement plans.

[¶ 4.] As a consequence, Oehlerking suffered a twenty percent salary reduction. He believed that the true effect was a sixty-five percent reduction because he lost the bonuses and contributions to his retirement account. His taxable income before the reduction, as reflected by his tax documents, was $115,901 in 2000, and $90,041 in 2001. In 2002, his income fell to $71,404, and, in 2003, it increased to $79,055. According to Midcom, though, his income before the reductions was "unusually high" because of the bonuses paid for fiscal years 1999 and 2000.

[¶ 5.] Nonetheless, when Midcom instituted its benefits reductions, it assured Oehlerking and other employees that the salaries would eventually be restored. Indeed, Midcom began increasing salaries in July 2002. Oehlerking's salary went from $70,054 during the reduction, to $85,800 after the restoration. For Oehlerking, however, this was not a "restoration" because he still did not receive bonuses or retirement contributions. Equally detrimental, in Oehlerking's view, was his demotion from the manager of the LAN business unit to a product manager. In losing his managerial responsibilities, he felt "deeply saddened, psychologically distressed, and humiliated." According to Midcom, however, he was demoted because the company had restructured. In fact, Oehlerking's last performance review, in April 2004, was positive. Also, the demotion did not affect his salary. And, according to the company, he retained the same, if not more, job responsibilities.

[¶ 6.] Despite these changes, which began in 2001, Oehlerking continued with the company. In 2004, however, he was contacted by Pulse Engineering of San Diego, California and offered employment that would return some of the benefits he originally enjoyed with Midcom. This opportunity was attractive to Oehlerking, and, on June 25, 2004, he gave Midcom his resignation letter. Thereafter, he was invited to meet with his supervisor, in-house counsel, and Midcom's president. Oehlerking went to the meeting thinking that Midcom might present him with a counteroffer. But the covenant not to compete was the only item on the agenda. Pulse Engineering is a direct competitor of Midcom, selling the same products for the same applications.

[¶ 7.] After he left in July 2004, Midcom brought suit to enforce the covenant not to compete by seeking an injunction, as well as attorney's fees allowable under the agreement Oehlerking had signed. On July 29, 2004, after an evidentiary hearing, the circuit court issued a preliminary injunction enforcing the terms of the agreement and enjoining Oehlerking from accepting or continuing employment with Pulse Engineering.

[¶ 8.] In trial the following October, Oehlerking argued that Midcom detrimentally altered all material aspects of his employment so much that it amounted to a "constructive discharge." Under this theory, he claimed that the covenant was void. He further asserted that Midcom was estopped from enforcing the covenant against him because it had not enforced the same covenant against at least three other employees. The court rejected Oehlerking's arguments, finding that the covenant was enforceable and that Midcom was not estopped from enforcing the agreement.

[¶ 9.] After the trial, Midcom requested attorney's fees and costs of $18,360.05.¹ Oehlerking objected, claiming that the fee was unreasonable in light of the fact that this case proceeded so quickly, the issues were not new, and his total fees, by contrast, were $3,029. A hearing was held on February 2005, and the court concluded that the fees were reasonable and awarded Midcom the entire amount requested.

[¶ 10.] On appeal, Oehlerking argues that (1) the circuit court erred in enforcing the covenant not to compete, and (2) the court erred in its award of attorney's fees. Midcom contends that Oehlerking failed to timely file his notice of appeal on the first issue.

1. Timeliness of Appeal

[¶ 11.] If Oehlerking failed to timely appeal, we will have no jurisdiction to consider his arguments. Long v. Knight Const. Co., Inc., 262 N.W.2d 207, 208-09 (S.D.1978). Under our former version of the rule, in effect at the time, an appeal was timely when a notice of appeal was filed "within sixty days after the judgment or order shall be signed, attested, filed, and written notice of entry thereof shall have been given to the adverse party." SDCL 15-26A-6.² See Sawyer v. Farm Bureau Mut. Ins. Co., 2000 SD 144, ¶ 9, 619 N.W.2d 644, 647. We regard the term "judgment" to mean a "judgment which is final rather than interlocutory." Riede v. Phillips, 277 N.W.2d 720, 722 (S.D.1979) (citations omitted). To be final, a judgment must "finally and completely adjudicate all of the issues of fact and law involved in the case." Griffin v. Dwyer, 88 S.D. 357, 358, 220 N.W.2d 1, 2 (1974) (citing Dolan v. Hudson, 83 S.D. 144, 156 N.W.2d 78 (1968)); see also Riede, 277 N.W.2d at 722. As the test for finality, we consider the "substance of the decision rather than its form or name[.]" Griffin, 88 S.D. at 359, 220 N.W.2d at 2.

[¶ 12.] In this case, Oehlerking seeks review of two judgments. The first judgment was dated November 8, 2004, and was filed on December 9, 2004. Notice of entry of the judgment was sent by first class mail to Oehlerking on December 14, 2004. The second judgment was dated and filed on February 23, 2005. Notice of entry of this judgment was sent by first class mail to Oehlerking on March 10, 2005.

[¶ 13.] The first judgment appears to "finally and completely" adjudicate all issues relating to the enforceability of the covenant not to compete.³ See Griffin, 88 S.D. at 358-59, 220 N.W.2d at 2. It was final on its face and capable of being executed.⁴ The second judgment, on the other hand, addressed issues collateral to the underlying merits of Midcom's claim, and in no way altered or amended the first judgment.⁵ Nonetheless, Oehlerking claims that the first judgment could not become final until the court considered the issue of attorney's fees, because the fees were part of the single action instituted by Midcom under the terms of the covenant. Oehlerking places emphasis on the court's language in the February 23, 2005 judgment that "these Findings of Fact and Conclusions of Law and Judgment, together with the Findings of Fact, Conclusions of Law and Judgment filed December 9, 2004, are and constitute a final judgment in the case." (Emphasis added).

[¶ 14.] This Court has not had occasion to review whether a judgment is final for purposes of an appeal when there is a later judgment that awards attorney's fees based on the first judgment, which adjudicated the underlying merits. This question, however, has been the subject of frequent litigation. The United States Supreme Court's decision in Budinich v. Becton Dickinson & Co. is instructive. 486 U.S. 196, 108 S.Ct. 1717, 100 L.Ed.2d 178 (1988). The specific issue addressed in Budinich was "whether a decision on the merits is a `final decision' as a matter of federal law under [28 USC] § 1291 when the recoverability or amount of attorney's fees for the litigation remains to be determined." Id. at 199, 486 U.S. 196, 108 S.Ct. at 1720, 100 L.Ed.2d 178. In accord with 28 USC § 1291 "`all final decisions of the district courts' are appealable to the court of appeals." Id. at 198-99, 486 U.S. 196, 108 S.Ct. at 1720, 100 L.Ed.2d 178 (quoting 28 USC § 1291).

[¶ 15.] The Supreme...