United Wild Rice, Inc. v. Nelson, 52010
| Decision Date | 05 January 1982 |
| Docket Number | No. 52010,81-309.,52010 |
| Parties | UNITED WILD RICE, INC., Respondent, v. Clifton NELSON, Appellant. |
| Court | Minnesota Supreme Court |
Nichols & Willeke, Donald H. Nichols and Daniel J. Starks, Minneapolis, for appellant.
McGovern Opperman & Paquin, Vance K. Opperman and Richard G. Braman, Minneapolis, for respondent.
Heard, considered, and decided by the court en banc.
This is an appeal from two orders of the Ninth Judicial District Court. The first order, dated October 20, 1980, entered a permanent injunction which enjoined the appellant from:
The second order, dated February 9, 1981, denied appellant's motion for amended findings of fact and conclusions of law, or, in the alternative, for a new trial.
The issue is whether appellant has engaged in unfair competition, deceptive trade practices, Minn.Stat. § 325D.44 (1980), or unfair trade practices, 7 U.S.C. § 2303 (1976). The district court held in the affirmative. We reverse.
Appellant Nelson has been involved in the Minnesota wild rice business for over 25 years. He is an acknowledged expert in the field and is referred to by many as "Mr. Wild Rice" or the "Wild Rice King." Nelson was one of the founders of United Wild Rice, Inc. (hereinafter United)1 and served as its general manager from United's creation in 1971 until December 1972. In addition, he served as a member of United's Board of Directors from 1971 to 1976. In 1975, Nelson expressed to United his desire to get out of the wild rice business. He thereafter negotiated the sale to United of his wild rice processing plant located in Outing, Minnesota. United paid Nelson $210,000 for the plant and a Limited Covenant Not to Compete. The covenant had a 3-year duration.
Appellant's activities during the 3-year period following execution of the covenant were apparently in conformity with the terms of the covenant. During that time, he did not serve on the Board of Directors of United; however, his son Tracy Nelson did. In January 1979, United hired appellant as its interim general manager, the position to be held until such time as United could hire a permanent manager. Although requested to, Nelson did not sign a covenant not to compete when he rejoined United. He held the position of interim general manager, as well as serving as a director, until his resignation became effective in April 1980. United hired a permanent manager in December 1979, at which time Nelson tendered his resignation, to be effective when his replacement became capable of assuming the position.
After leaving United, Nelson formed Northland Wild Rice, Inc. (hereinafter Northland), a wholly-owned corporation. In late May 1980, Northland entered into a Joint Venture Agreement with Ramy Seed Company (hereinafter Ramy) for the purpose of dealing in wild rice. The activities of Northland and Ramy were in direct competition with United.
Northland actively solicited business from wild rice producers, farmers, and buyers.2 This solicitation was accomplished by personal contacts and mailings. Northland solicited customers who had previously dealt with United and at least three customers who were currently under contract with United. Northland offered wild rice for sale at a price lower than United and succeeded in attracting business. It was so successful, in fact, that United "feared for its very existence." United then filed a complaint in Itasca County District Court, alleging that appellant Nelson had violated the Limited Covenant Not to Compete signed in 1976 and was guilty of both common-law and statutory unfair competition. 7 U.S.C. §§ 2301-2306 (1976); Minn.Stat. §§ 325D.43-.48 (1980). Respondent's motion for a temporary injunction was granted on September 3, 1980, and later was extended to include Northland and the members of Nelson's immediate family. United was at that time required to post a $50,000 bond.
Nelson counterclaimed against respondent alleging anti-trust violations and made a motion to the court that the trial on the matter be bifurcated, the first stage of the trial to concern issues relative to the propriety of a permanent injunction, the second stage to concern the damages issues and appellant's counterclaims. This motion was granted.
The first stage of the trial was presented to the court and culminated in the trial court's order granting a permanent injunction to United which enjoined Nelson from engaging in the manufacturing, buying, or selling of wild rice until July 6, 1981, and from circulating false or misleading reports about United's management, finances, membership, or operations. The trial court based the injunction on its finding that Nelson had engaged in unfair and deceptive trade practices and unfair competition. The court further found that the Limited Covenant Not to Compete had expired by its own terms in 1979. The second stage of the trial has not yet been held.
Nelson then made a motion to the trial court for amended findings of fact and conclusions of law or, in the alternative, for a new trial. Prior to receiving a decision from the trial court, appellant filed a notice of appeal with this court. A prehearing conference was held by a Justice of this court which resulted in the court's order that the matter be remanded to the trial court for a decision on the pending post-trial motion; on remand, the trial court denied Nelson's motions. It is from this order denying Nelson's post-trial motions and from the trial court's findings of fact, conclusions of law, and order for judgment that Nelson appeals.3
There are at least two ways by which an individual can be guilty of unfair competition: tortious interference with contractual interests and improper use of trade secrets. Respondent pled both in his complaint.
This state has recognized a cause of action for wrongful interference with both present and prospective contractual relations. Wild v. Rarig, 302 Minn. 419, 234 N.W.2d 775 (1975); Witte Transportation Co. v. Murphy Motor Freight Lines, Inc., 291 Minn. 461, 193 N.W.2d 148 (1971). In its claim that appellant has interfered with United's present contracts, United points to three United employees: Judy Wahl, Larry Carstens, and Tony Sciullo. United does not argue that Nelson induced the breach of any present contracts held by United with its customers.
In an action for tortious interference with contractual relations, the plaintiff carries the burden of proving that interference was caused by the defendant. Electric Service Co. of Duluth, Inc. v. Lakehead Electric Co., 291 Minn. 22, 189 N.W.2d 489 (1971); Snowden v. Sorenson, 246 Minn. 526, 75 N.W.2d 795 (1956). United did not meet its burden in the instant case.
As concerns employees Wahl and Carstens, United has made no showing of activities of Nelson or his company Northland that could be considered interference. Rather, all the record shows is that Judy Wahl, employed by Northland as a secretary, is a former United employee and the wife of a former United general manager, and that Carstens may have himself approached Nelson in search of employment. No wrongdoing or interference on the part of Nelson has been shown. Neither has interference on the part of Nelson been shown as to United's employment contract with Tony Sciullo.
In July 1980, Northland hired Tony Sciullo as its sales manager. Mr. Sciullo was, prior to joining Northland, sales manager for United. He terminated his employment with United after being demoted; United had not cut his pay, but had limited his duties. Although after quitting his job with United, Sciullo became employed almost immediately with Northland, there has been no showing that Nelson induced Sciullo to break with United. In the absence of such a showing, an action for tortious interference will not lie.
Id. It is not disputed that appellant did solicit and enter into contracts with United's potential customers. The question is whether this solicitation was improper.
Competition is favored in the law. The law's preference for competition is illustrated by the establishment of a special privilege for competitors. That privilege is set out by the Restatement as follows:
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