Systematic Business Services v. Bratten

• Decision Date: 31 May 2005
• Docket Number: No. WD 63777.,WD 63777.
• Citation: 162 S.W.3d 41
• Parties: SYSTEMATIC BUSINESS SERVICES, INC., a Missouri Corporation, et al., Respondents, v. Sean BRATTEN, Appellant.
• Court: Missouri Supreme Court

162 S.W.3d 41

SYSTEMATIC BUSINESS SERVICES, INC., a Missouri Corporation, et al., Respondents, v. Sean BRATTEN, Appellant.

No. WD 63777.

Missouri Court of Appeals, Western District.

February 1, 2005.

Motion for Rehearing and/or Transfer to Supreme Court Denied March 29, 2005.

Application for Transfer Denied May 31, 2005.

COPYRIGHT MATERIAL OMITTED

George A. Barton, Kansas City, MO, for appellant.

Clifford B. Wood, Kansas City, MO, for respondents.

Before: VICTOR C. HOWARD, P.J., ROBERT G. ULRICH and PATRICIA A. BRECKENRIDGE, JJ.

ROBERT G. ULRICH, J.

Sean Bratten appeals the judgment and permanent injunction that enforces the non-compete clause in an employment contract, which he signed on August 28, 2000, as a condition of his employment by Systematic Business Services, Inc. (SBSI). Both SBSI, wholly owned by LabOne, Inc., and LabOne sought and obtained injunctive relief that enjoined Mr. Bratten from engaging in the business of "attending physician statement" services (APS), which involves obtaining medical records from medical offices and hospitals relating to individuals who applied for insurance and providing the information to the insurance company clients with whom the applicant has applied for insurance coverage. The injunction precludes Mr. Bratten from engaging in the APS and/or medical records retrieval business for two years from and after July 11, 2003, the date of Mr. Bratten's dismissal from employment with LabOne for cause and from soliciting, accepting or diverting any APS and/or medical records retrieval business from or of any person or entity that was an APS customer of SBSI and/or LabOne as of July 11, 2003.

The judgment of the trial court granting the injunction is affirmed in part and reversed in part.

Facts

Sean Bratten commenced his employment with SBSI on August 28, 2000, as an expert in the APS business. SBSI conducted an APS business for LabOne, the parent company. SBSI had developed a nationwide APS business with an extensive client list. The APS business requires specialized knowledge and depends significantly upon reputation with insurance companies within the industry. As a condition of his employment, Mr. Bratten signed an employment agreement with SBSI that stated his duties and responsibilities to his employer; stated his compensation; provided a signing bonus of $5,000 to Mr. Bratten, to be paid by LabOne; contained restrictive covenants applicable both while employed and upon termination of his employment; and included a number of other provisions. The restrictive covenants were articulated in paragraph 8 of the agreement as a condition of employment and stated:

8. Restrictive Covenants. In consideration for employment with SBSI and in further consideration for the compensation provided for in Paragraph 4 and the post-termination payment, if any, provided for in Paragraph 10, Employee agrees that during the term of employment pursuant to this Employment Agreement, and for a period of two (2) years after the termination for any reason of employment pursuant to this Employment Agreement, Employee will not, without the prior written consent of SBSI, directly or indirectly, individually or in concert with others, or through the medium of any other corporation, partnership, syndicate, officer, director, agent, consultant, partner, member or otherwise:

a. solicit, accept, divert, or service, or attempt to solicit, accept, divert or service, any business similar to the type and character of business then engaged in by SBSI from any person, corporation or other entity who was as of the date of the termination of Employee's employment a customer of SBSI,

b. solicit, induce or encourage any employee, contractor or agent of SBSI to terminate employment or other relationship with SBSI or to compete with SBSI in any manner, or

c. compete with SBSI in the clinical or insurance laboratory testing business or any other businesses of SBSI at the date of termination of Employee's employment.

It is understood and agreed that Paragraph 8(c) shall apply only with respect to the following geographic area: All territory in which LabOne or its representatives or agents, as of the date of the termination of Employee's employment pursuant hereto, sells or offers for sale SBSI's products or services. (Emphasis added)

Paragraph 4(b) of the agreement states: "Signing bonus. LabOne will pay Employee a hiring bonus of $5,000 payable after the signing of this agreement." Upon Mr. Bratten's signing the agreement, LabOne, in accordance with the agreement, paid Mr. Bratten the signing bonus of $5,000.

When Mr. Bratten commenced his employment, he served as Operations Manager in charge of personnel that were conducting the APS retrieval for SBSI. While Operations Manager, for about two years, Mr. Bratten worked at both SBSI's Independence and Lee's Summit offices. In addition to supervising APS sales personnel, Mr. Bratten's duties included speaking to customers when they visited the company or by telephone, making sales trips and calling on clients at their places of business. He also conducted tours for clients and prospective clients that included describing the company's product. He was the product expert in the APS business for the companies.

In 2002, Mr. Bratten's position was changed. He was then located at the Lee's Summit location of SBSI. Because management received several complaints about Mr. Bratten from subordinate employees whom he directly supervised, management eliminated his supervisory duties of APS sales personnel and created the position of Product Manager for him. The companies believed that he related well with clients, but concerns about his professional relationship with company employees resulted in Mr. Bratten being assigned to the Lenexa, Kansas office of LabOne. Although Mr. Bratten reported to a different person as his boss, he continued to assist the companies' sales people in selling the APS product, and he continued to maintain contact with the companies' APS clients. When a new client was obtained, for example, Mr. Bratten's job included engaging in conversations with the client to be certain the client was satisfied and interfacing with the APS department about development matters. From August 2002 until June 26, 2003, Mr. Bratten worked extensively with then current SBSI and LabOne APS customers. SBSI/LabOne had developed a broad nationwide client-base to which the companies sold and continue to sell their APS products, and Mr. Bratten was the principal company contact for all SBSI and LabOne APS customers. As Operations Manager of the companies' APS effort and later as Product Manager of the companies' APS business, Mr. Bratten had access to the entire APS customer list.

Mr. Bratten, while employed by SBSI/LabOne, formed a competing company entitled Allvenner Insurance Services Group in early 2003. He registered his business with the Missouri Secretary of State in February 2003. He also registered the name Allvenner.com. He produced advertising material that stated he had been developing a web-based management system for APS for over two years. He advertised his services as an APS medical records retrieval business. His business advertisement included "underwriting, personal history interviews, MVR's, criminal background checks, examinations, field investigations, surveillance, credit reporting, prescription history checks, and lab testing." LabOne provided the same advertised services.

In April 2003, while still employed by SBSI/LabOne, and unknown by his employer, Mr. Bratten engaged in his own competing business as Allvenner. He inquired whether certain SBSI and LabOne employees would be interested in joining his business. Among the SBSI and LabOne employees that he approached was the development manager of the confidential database and retrieval systems for SBSI/LabOne. Mr. Bratten requested that the employee provide him copies of SBSI/LabOne's APS database and other confidential and proprietary information for use in his own APS business, Allvenner. As Allvenner, Mr. Bratten successfully acquired business from a significant insurance company, an APS customer of SBSI/LabOne, and he processed in excess of two hundred orders for the customer in early 2003 while employed by SBSI/LabOne.

Mr. Bratten's competitive efforts for Allvenner were unknown by his employer on June 26, 2003, when, in accordance with paragraph 11(e) of the employment agreement, Mr. Bratten was informed that he was being terminated without cause effective July 26, 2003. He was told that he would receive a severance payment equivalent to six month's salary commencing July 26, 2003, in compliance with the provisions of paragraph 11(e) of the employment agreement. After he was informed of his termination but before July 26, 2003, Mr. Bratten solicited business from several additional SBSI/LabOne clients by e-mail. He also sent proposals to SBSI/LabOne clients informing them that they were being "overcharged" by SBSI/LabOne, and as Allvenner, he solicited their business, stating, "[h]ere's what I'll do for you for any amount of volume to test us versus LabOne."

A client informed LabOne of Mr. Bratten's efforts, and LabOne sent Mr. Bratten a letter confirming a telephone call made to him by a company representative the same day informing him that his employment was being terminated immediately for cause, and that the provisions referenced in the June 26 letter were "no longer effective." The letter stated that the "cause" for terminating his employment was the company's learning of his breach of the restrictive covenants expressed in paragraph 8 of the employment agreement. The letter further stated that the company learned of the breach after it had informed him in its June 26, 2003, letter that it was terminating his employment without cause in accordance with paragraph 11(e) of the agreement. Mr. Bratten, although initially denying his involvement with Allvenner, acknowledged...