Utah Medical Products, Inc. v. Searcy
| Decision Date | 24 April 1998 |
| Docket Number | No. 960544,960544 |
| Parties | 341 Utah Adv. Rep. 20 UTAH MEDICAL PRODUCTS, INC., a Utah corporation, Plaintiff and Appellant, v. Joanne SEARCY, an individual; Clinical Innovations, Inc., a Utah corporation; and Does 1 through 10, Defendant and Appellees. |
| Court | Utah Supreme Court |
This court granted the petition of Utah Medical Products, Inc., for an interlocutory appeal from the district court's denial of a preliminary injunction. The district court originally granted a temporary restraining order against Joanne Searcy and Clinical Innovations, Inc. However, after a hearing on the matter, the district court denied the motion for a preliminary injunction. We affirm.
Utah Medical Products, Inc. (Utah Medical), a corporation that develops, markets, and sells medical devices, hired Joanne Searcy to be a "Contract Technology Specialist" on January 30, 1995. Her responsibilities included monitoring contract bids, new contracts, existing contracts and contract compliance; interacting with parties regarding terms and conditions of the contract; and reporting on contract and sales staff performance. As part of the terms of her employment, she signed a confidentiality agreement in which she agreed not to disclose any confidential proprietary information. The agreement also prohibited Searcy, for a period of one year after her termination, from soliciting, inducing, or attempting to induce any of Utah Medical's customers to do business with any of the company's direct competitors. Utah Medical terminated her employment on January 30, 1996.
Subsequently, Clinical Innovations, Inc. (CII), a competitor of Utah Medical's and co-defendant in this action, expressed some interest in hiring Searcy but was concerned about her confidentiality agreement with Utah Medical that was still in effect. Searcy contacted Utah Medical and requested that she be released from her obligations under the agreement, but Utah Medical declined to release her. CII did not hire Searcy. Although Utah Medical claims that she was not hired because of the confidentiality agreement, CII maintains that she was not hired because a full-time position was not available. Later, in the summer of 1996, Searcy contacted CII and inquired about possible part-time employment. CII hired her for part-time work on August 5, 1996, to create a computer database and to provide clerical assistance.
During this time, Utah Medical had been selling an intrauterine pressure catheter ("IUPC") called "Intran" to Columbia Hospital Corporation (Columbia) pursuant to a two-year contract which was to expire on October 31, 1996. Columbia, an operator of a large number of hospitals, was one of Utah Medical's most significant customers. However, as the contract neared expiration in October of 1996, Columbia solicited bids for a new IUPC contract. CII set out to submit a bid to sell its own IUPC, the "Koala," to Columbia.
Searcy's supervisor at CII, Jeffery Bradford, asked Searcy to call Columbia and find out how to submit a bid for the contract. Upon telephoning Columbia, she was told to contact Scott Minniear at MetaCon, an entity Columbia designated to review and screen new products and, if appropriate, present them to Columbia for consideration. After relaying this information, Searcy informed Bradford, who was aware of the confidentiality agreement, that she had met Minniear while she was employed at Utah Medical.
Searcy assisted in assembling a promotional package to be sent to Minniear at MetaCon. She then called Minniear and scheduled a meeting where he could visit CII and learn more about the Koala. Searcy attended that meeting and helped explain the informational materials. After the meeting, Bradford told Minniear that in the future, if he could not reach Bradford directly, he should contact Searcy.
After CII's presentation, Minniear informed them that he would recommend the Upon receiving the fax, Utah Medical commenced this action, seeking to enjoin both Searcy and CII from (1) using any confidential information about Utah Medical's products, (2) soliciting, inducing, or attempting to induce any Utah Medical customers with whom Searcy had contact while at CII to do business with anyone other than Utah Medical, and (3) attempting to market or sell products in competition with Utah Medical.
Koala to Columbia and that the next step was for CII to make similar presentations before various Columbia hospitals. In preparation for these presentations, Bradford told Searcy to get the contact names for the hospitals where these evaluations were to take place. As part of this preparation, Minniear faxed a request to Searcy for more information on the Koala. Minniear mistakenly sent the request to Searcy's attention at Utah Medical instead of CII.
The trial court originally granted a temporary restraining order against Searcy and CII. However, after a hearing, the trial court denied Utah Medical's motion for a preliminary injunction. The court denied the injunction on numerous grounds. It found that Utah Medical failed to show a substantial likelihood that it could prove at trial that Searcy's employment at CII violated the agreement or that Searcy's employment at CII created an unfair competitive advantage to CII. The trial court also found that Searcy's involvement with marketing at CII was merely clerical or administrative and that Utah Medical failed to show a substantial likelihood that it could prove at trial that Searcy represented or in any way used Utah Medical's good will to CII's advantage. Furthermore, it found that the requested preliminary injunction would be adverse to the public interest since it would remove a valuable medical device, the Koala, from certain markets.
On interlocutory appeal, Utah Medical argues that the trial court erred in not granting the preliminary injunction because the agreement was enforceable against both CII and Searcy and the evidence demonstrated a violation of the confidentiality agreement. It also argues that the trial court erred in not considering the alternative element for preliminary injunctions provided in rule 65A(e)(4) of the Utah Rules of Civil Procedure, which allows a preliminary injunction to be issued if other elements are present and "the case presents serious issues on the merits which should be the subject of further litigation." Utah Medical also claims that the trial court erred in requiring it to show that Searcy's services were unique and that CII thereby gained an unfair advantage.
In response, CII and Searcy assert the following arguments: 1 First, Utah Medical's claim that the trial court erred in not finding a violation of the agreement amounts to a challenge of the court's findings of fact. As the challenger, Utah Medical has the burden of marshaling the evidence. Utah Medical did not marshal the evidence, and therefore, this court must assume that the evidence supports the trial court's findings and ruling. Second, the trial court was correct in denying the injunction because (1) confidentiality agreements drafted by the employer are to be construed narrowly, (2) Utah Medical failed to show irreparable harm, and (3) one can infer from the court's failure to specifically cite the alternative element under rule 65A(e)(4) that the court found that element lacking. Third, Utah Medical failed to raise the alternative element issue below, and therefore, the issue is not properly before this court. Finally, Searcy individually argues that she and CII are entitled to attorney fees because Utah Medical's appeal was frivolous or, alternatively, that Searcy is entitled to attorney fees pursuant to the confidentiality agreement.
Thus, there are three issues before this court: (1) whether Utah Medical has adequately challenged the trial court's findings of fact relating to the alleged breach of the confidentiality agreement, (2) whether the trial court committed reversible error in not applying the alternative element of rule 65A(e)(4), and (3) whether Searcy or CII is entitled to attorney fees.
Utah Rule of Civil Procedure 52(a) states:
[I]n granting or refusing interlocutory injunctions the court shall similarly set forth the findings of fact ... [which] shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.
Utah R.Civ.P. 52(a) (emphasis added). Therefore, this court will reverse the trial court's findings of fact concerning the alleged violation of the agreement only if they are "clearly erroneous" as demonstrated by the challenger's marshaling of the evidence. Valcarce v. Fitzgerald, 331 Utah Adv.Rep. 68, 70 (December 5, 1997) (citing In re Estate of Bartell, 776 P.2d 885, 886 (Utah 1989)). The application of rule 65A(e)(4) is a question of law which we review for correctness. State v. One Hundred Seventy-Five Thousand Eight Hundred Dollars, United States Currency, 942 P.2d 343, 346 (Utah 1997).
The first issue we must decide is whether Utah Medical has adequately challenged the trial court's findings of fact regarding the alleged breach of the confidentiality agreement. In addressing this issue, we initially set forth the standards for issuing a preliminary injunction and the trial court's factual findings. The Utah Rules of Civil Procedure specifically provide that a restraining order or preliminary injunction may issue only upon a showing by the applicant that:
(1) The applicant will suffer irreparable harm unless the order or injunction issues;
(2) The threatened injury to the applicant outweighs whatever damage the proposed order or...
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