Miller v. Honkamp Krueger Fin. Servs., Inc.

Decision Date24 August 2021
Docket Number No. 20-3081,No. 20-3061, No. 20-3400,20-3061
Citation9 F.4th 1011
Parties Cara MILLER, Plaintiff - Appellant v. HONKAMP KRUEGER FINANCIAL SERVICES, INC., Defendant - Appellee Blucora, Inc., Defendant Mariner Wealth Advisors, LLC, Third Party Defendant - Appellant Cara Miller, Plaintiff - Appellant v. Honkamp Krueger Financial Services, Inc., Defendant - Appellee Blucora, Inc., Defendant Mariner Wealth Advisors, LLC, Third Party Defendant - Appellant Cara Miller, Plaintiff - Appellant v. Honkamp Krueger Financial Services, Inc., Defendant - Appellee Blucora, Inc., Defendant Mariner Wealth Advisors, LLC, Third Party Defendant - Appellant
CourtU.S. Court of Appeals — Eighth Circuit

Katie M. Connolly, Joel O'Malley, Daniel John Supalla, Nilan & Johnson, Minneapolis, MN, Michael Martin Hickey, Emily M. Smoragiewicz, Bangs & McCullen, Rapid City, SD, for Plaintiff-Appellant.

Lauren E. Clements, Michael R. Link, Jeremy D. Sosna, Littler & Mendelson, Minneapolis, MN, Tim R. Shattuck, Woods & Fuller, Sioux Falls, SD, for Defendant-Appellee.

Katie M. Connolly, Joel O'Malley, Daniel John Supalla, Nilan & Johnson, Minneapolis, MN, Michael Martin Hickey, Emily M. Smoragiewicz, Bangs & McCullen, Rapid City, SD, for Third Party Defendant - Appellant Mariner Wealth Advisors, LLC.

Before SHEPHERD, ERICKSON, and KOBES, Circuit Judges.

ERICKSON, Circuit Judge.

Cara Miller left her employment at Honkamp Krueger Financial Services, Inc. ("HKFS") and commenced this action, seeking a declaratory judgment that the restrictive covenants in her various employment contracts were unenforceable. HKFS brought counterclaims against Miller and a third-party complaint against Miller's new employer, Mariner Wealth Advisors, LLC ("Mariner"). HKFS successfully sought preliminary injunctions enjoining Miller from breaching the non-compete and non-solicitation provisions in her employment contracts. Miller and Mariner appeal. We reverse and vacate the preliminary injunctions.

I. BACKGROUND

In 2006, Miller entered into a written employment agreement with HKFS (the "Employment Agreement") and began working as a financial advisor. The Employment Agreement contained restrictive covenants, including non-compete and non-solicitation provisions. On July 25, 2016, Miller and HKFS entered into an Agreement Ancillary to Employment (the "Ancillary Agreement") that updated the non-solicitation provision. Notably, the Ancillary Agreement did not include a non-compete provision.

Blucora, Inc. acquired HKFS and Miller responded by terminating her employment on September 4, 2020. That same day she commenced this action against HKFS and Blucora seeking a declaration that the restrictive covenants in the Ancillary Agreement are unenforceable. Miller immediately began working for Mariner who is a direct competitor of HKFS.

On September 7, 2020, Miller sent a letter to John Darrah, the chief executive officer for HKFS, informing him that she was terminating the Employment Agreement to the extent it survived the Ancillary Agreement. The next day she amended her complaint, alleging that the Employment Agreement was superseded by the Ancillary Agreement (which would have the effect of abrogating the Employment Agreement's non-compete provision).

HKFS answered the amended complaint, filed a third-party complaint against Mariner, and raised a number of counterclaims against Miller. HKFS then moved for a preliminary injunction against Miller, seeking to enforce, among other things, the non-compete and non-solicitation provisions. Following a two-day evidentiary hearing, the district court entered an oral order enforcing the non-compete provision, which it subsequently supplemented with a written Memorandum and Order. The district court also requested and received supplemental briefing on the non-solicitation provision, which it considered before granting a preliminary injunction with respect to that restrictive covenant. Miller and Mariner appeal.

II. DISCUSSION

We review a district court's grant of a preliminary injunction for abuse of discretion. See PCTV Gold, Inc. v. SpeedNet, LLC, 508 F.3d 1137, 1142 (8th Cir. 2007). A district court abuses its discretion when it "rests its conclusion on clearly erroneous factual findings or erroneous legal conclusions." Jones v. Kelley, 854 F.3d 1009, 1013 (8th Cir. 2017) (per curiam) (citation omitted). A district court's interpretation of a contract is a legal question that we review de novo . See MPAY Inc. v. Erie Custom Comput. Applications, Inc., 970 F.3d 1010, 1015–16 (8th Cir. 2020).

When deciding a motion for a preliminary injunction, the district court must consider the familiar Dataphase factors, which include: "(1) the threat of irreparable harm to the movant; (2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest." Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc). "The likelihood of success on the merits is the most important of the Dataphase factors." Craig v. Simon, 980 F.3d 614, 617 (8th Cir. 2020) (per curiam) (cleaned up). In considering the likelihood of success on the merits, a movant must show that it has at least a "fair chance of prevailing." Kroupa v. Nielsen, 731 F.3d 813, 818 (8th Cir. 2013) (quoting Planned Parenthood Minn., N.D., S.D. v. Rounds, 530 F.3d 724, 732 (8th Cir.2008) (en banc)).

On appeal, Miller and Mariner challenge the district court's determination that HKFS was likely to succeed on its breach of contract claim with respect to the non-compete and non-solicitation provisions. We analyze each of the provisions in turn.

A. Non-Compete Provision

The district court, finding that HKFS was likely to prevail on its breach of contract claim, preliminarily enjoined Miller "from taking action of any character that results in violation of or interference with the non-competition provisions of the Employment Agreement, including, but not limited to, continued employment with Mariner."1 Miller and Mariner present two main arguments in support of their claim that the issuance of the non-compete injunction was an abuse of discretion. First, they argue the Ancillary Agreement, which did not contain a non-compete provision, superseded the non-compete provision in the Employment Agreement. Second, they argue the non-compete provision did not survive her termination of the Employment Agreement. We find Miller and Mariner's second argument persuasive and therefore do not address their first argument.

The Employment Agreement contains the non-compete provision:

Employee further covenants that for a period of one year following the termination of Employee's employment for whatever reason, Employee will not, within the Company's market area, directly or indirectly, either as a sole proprietor, partner, stockholder, director, officer, employee, consultant or in any other capacity, conduct or engage in, or be interested in or associated with, any person or entity which engages in the "Business" (as defined above), working with CPA firms. For purposes of this Paragraph, the "Company's market area" includes, but is not limited to, any state in which HKFS has conducted business at any time in the preceding twelve months.

By its terms, the non-compete provision survived the termination of Miller's "employment." But there is nothing in the non-compete provision to suggest the parties intended it to survive the termination of the Employment Agreement. And the contract treats the term of employment and the term of the Employment Agreement as two distinct concepts. See Fulton v. Honkamp Krueger Fin. Servs., No. 20-CV-1063 (PJS/DTS), 2020 WL 7041766, at *3–4 (D. Minn. Dec. 1, 2020) (reviewing an identical non-compete provision in an employment contract between HKFS and a different former employee and determining that the contract distinguished between the term of employment and the term of the employment agreement such that the termination of the agreement abrogated the non-compete provision).

Specifically, Section 2 of the Employment Agreement provides: "Term. Employment is at will; however the parties agree that either party may terminate the Agreement on written notice." The subject of the two clauses is not the same. The first clause "employment is at will" refers to the term of employment, while the second clause allowing either party to "terminate the Agreement on written notice" refers to the term of the Employment Agreement. The meaning of Section 2 is plain: the first clause provides that employment is "at will," and the second clause instructs that the Employment Agreement is freely terminable on written notice. By its plain meaning, Miller could quit or be fired at any time or for any reason; however, written notice was required to terminate the Employment Agreement.

Section 2's distinction between the term of employment and the term of the Employment Agreement is critical because, as noted above, the non-compete provision only survives the termination of Miller's employment. There is nothing in the non-compete provision to suggest that it survives the termination of the Employment Agreement. It follows that when Miller left her employment with HKFS on September 4, the non-compete provision remained in force, assuming, arguendo , that the Ancillary Agreement did not supersede the Employment Agreement with respect to the non-compete provision. Nonetheless, when Miller terminated the Employment Agreement in writing on September 7, the non-compete provision became inoperable.

We understand this may not be the result HKFS envisioned when it drafted the Employment Agreement. Indeed, the Employment Agreement is no exemplar of precision; it is possible that HKFS actually intended for the term of employment and the term of the Employment Agreement to be coextensive. But that is not what the contract actually says. We will not...

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