Naegele v. Biomedical Systems Corp.

• Decision Date: 28 October 2008
• Docket Number: No. ED 90584.,ED 90584.
• Citation: 272 S.W.3d 385
• Parties: Mary Anastasia NAEGELE, Appellant, v. BIOMEDICAL SYSTEMS CORPORATION, Respondent.
• Court: Missouri Court of Appeals

272 S.W.3d 385

Mary Anastasia NAEGELE, Appellant, v. BIOMEDICAL SYSTEMS CORPORATION, Respondent.

No. ED 90584.

Missouri Court of Appeals, Eastern District, Division One.

October 28, 2008.

Motion for Rehearing and/or Transfer to Supreme Court Denied December 9, 2008.

Application for Transfer Denied January 27, 2009.

Robert J. Tomaso, Geoffrey Gerber, Saint Louis, MO, for Appellant.

Douglas W. King, Mark B. Leadlove, Kimberly A. Mohr, Saint Louis, MO, for Respondent.

OPINION

GLENN A. NORTON, Judge.

Mary Anastasia Naegele appeals the judgment dismissing her petition for declaratory judgment and granting Biomedical Systems Corporation's counterclaim for a permanent injunction. We affirm in part and reverse in part.¹

I. BACKGROUND

Naegele worked for Matria Health Care for twelve years, providing monitoring services to obstetric physicians specializing in managing high risk pregnancies. While working for Matria, Naegele accepted an offer from the Vice-President of Biomedical, Patrick Barrett, to become Biomedical's national director of sales for the company's Women's Health Services division.

Naegele began her position at Biomedical on June 30, 2004, despite the fact that she had previously entered into a covenant not to compete with Matria. Naegele filed a petition against Matria seeking a judicial declaration that the Matria covenant not to compete was unenforceable. Ultimately, the lawsuit was settled and Naegele began marketing Biomedical products and services to physicians in the territory previously restricted by the Matria covenant not to compete.

On January 10, 2006, Naegele entered into the Biomedical Systems Corporation Confidentiality, Nondisclosure and Noncompetition Agreement (the "Biomedical noncompete"). Under Paragraph 2 of the Biomedical noncompete, Naegele agreed to "keep secret and confidential ... any proprietary and/or confidential information acquired during the course of [her] employment, including any such information relating to any ... customers [and] customer lists...." Naegele also agreed to be bound by certain post-termination restrictions for a period of two years following her termination. Specifically, under Paragraph 3 of the Biomedical noncompete, Naegele agreed that she would not directly or indirectly:

(a) provide Competitive Goods or Services ... to any person, firm, corporation or entity that was a customer, at any time during the one-year period immediately preceding my termination of employment with the Company,[²] or any division or subsidiary or other affiliated or related entity of the Company in or for which I worked during that one-year period;

(b) cause or attempt to cause any person, firm, corporation or entity that was a customer, at any time during the one-year period immediately preceding my termination of employment with the Company, or any division or subsidiary or other affiliated or related entity of the Company in or for which I worked during that one year period, to divert, terminate, limit or in any manner modify or fail to enter into, any actual or potential business relationship or opportunity with the Company;

(c) cause or attempt to cause any customer or prospective customer of the Company with whom I or anyone under my supervision dealt, or regarding whom I was provided or had access to any confidential information, at any time during my last one year of employment with the Company, to divert, terminate, limit or in any manner modify or fail to enter into, any actual or potential business relationship with the Company; or

(d) solicit, entice, hire, employ or seek to employ any employee of the Company, who was employed by the Company at any time during my last one year of employment with the Company, to provide any Competitive Goods or Services.

The Biomedical noncompete set forth Biomedical's right to seek injunctive relief enforcing the restrictions contained therein and also provided that, upon any breach or threatened breach thereof, Biomedical could seek to recover attorneys' fees and costs incurred in enforcing its rights thereunder.

On August 1, 2006, Naegele informed Barrett that she would be leaving Biomedical and returning to Matria. Naegele immediately filed a petition for declaratory judgment, but continued to work for Biomedical for two weeks, during which time she continued to go on sales calls. At some point during this two week period, Biomedical filed a counterclaim seeking an injunction and attorneys' fees and costs.

The parties entered into a consent temporary restraining order in which Naegele agreed to abide by the terms of the Biomedical noncompete. The parties engaged in expedited discovery and a three-day hearing was held beginning on August 21, 2006. Based on evidence heard at the hearing, the court issued a preliminary injunction enforcing the terms of the Biomedical noncompete. The parties thereafter engaged in additional discovery, during which several discovery disputes arose.

A bench trial was held on March 14, 2007. Over Naegele's objection, the trial court admitted evidence related to Dan Ketcherside, a former Biomedical employee hired by Matria, who allegedly provided Matria employees with access to Biomedical's confidential information. The evidence showed that during Naegele's initial employment with Matria, Naegele was told that she could access certain Biomedical confidential information obtained by Ketcherside, including patient census data and information regarding Biomedical's relationships with certain insurers.

The evidence also showed that, as Vice-President for Matria's Mid-Atlantic region, Naegele's new job would include contact with some of the same customers that she provided services to while working for Biomedical, and that her current job description is "much like" what she did for Biomedical. Nevertheless, when asked by Barrett how she intended to perform her responsibilities at Matria in light of the Biomedical noncompete, she stated that "it was not going to be a problem" because "it is not going to restrict me in what I need to do." Naegele also testified that she told Barrett that the Biomedical noncompete was not going to be an issue because, "I knew I was not going to violate it. I was going to seek the Court's order on what I could and couldn't do because I knew there was a gray area." In fact, Matria told Naegele she could not work until they had an opinion of the court outlining what she could and could not do. Matria knew they would have to adjust Naegele's territory if the "noncompete had any kind of affect on it," and therefore Naegele's territory was determined after the court issued the preliminary injunction. The states in Naegele's region were ultimately chosen "because they did not have a customer in which [she] had dealings with in [her] last year at Biomedical."

Naegele testified that "Matria has made it very clear to me that I am in no uncertain terms to breach that agreement or attempt to breach that agreement." When asked whether she had attempted to divert any customers of Biomedical, Naegele responded, "absolutely not." In fact, when asked whether he had any evidence that Naegele had disclosed confidential information about Biomedical to anyone at Matria, Barrett responded, "I don't have any evidence of that, no.... I cannot tell you I have evidence to date that she did anything specifically to violate the agreement."

Following the trial, the court issued an order granting a permanent injunction prohibiting Naegele from directly or indirectly "using or disclosing to any third parties ... any proprietary and/or confidential information acquired during the course of Naegele's employment with Biomedical." The court further enjoined Naegele from serving any customers who were customers or prospective customers of Biomedical in the year preceding her termination, including those customers that Naegele brought with her from Matria, until August 15, 2008. The trial court found that a permanent injunction "was appropriate as monetary damages will not adequately compensate Biomedical for the harm which would result if Naegele were allowed to breach her obligations under the [Biomedical noncompete]."

In addition, the trial court entered an order granting Biomedical's motion to recover its attorneys' fees and costs. The trial court found that Biomedical was entitled to recover its fees and costs from Naegele because her employment at Matria constituted a threatened breach of the Biomedical noncompete, which forced Biomedical to file its counterclaim. The trial court ordered Naegele to pay Biomedical's fees and costs in the amount of $313,062.09. Naegele appeals.

II. DISCUSSION

A. Standard of Review

We review the trial court's judgment pursuant to the standard set forth in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We will affirm the judgment unless it is not supported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Id. We review the evidence and all reasonable inferences in the light most favorable to the judgment and disregard all contrary evidence and inferences. Sheppard v. East, 192 S.W.3d 518, 522 (Mo.App. E.D.2006).

B. Biomedical had a Legitimate Interest in Protecting its Customer Contacts, Including those Customers that Naegele Originally Developed a Relationship with While at Matria

In her first point on appeal, Naegele argues that the trial court erred in entering a permanent injunction enforcing the terms of the Biomedical noncompete. In support of her claim, Naegele first argues that Biomedical had no protectable interest in "preexisting customers" that she initially developed a relationship with when she worked at Matria because they were not "contributed as part of an equity investment in a business venture" and "Biomedical did not assist in developing these contacts." Second, Naegele argues that Biomedical failed to establish that its confidential customer-related...