Vanguard Environmental, Inc. v. Curler

• Decision Date: 03 October 2007
• Docket Number: No. 104,097. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.,104,097. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.
• Citation: 190 P.3d 1158,2008 OK CIV APP 57
• Parties: VANGUARD ENVIRONMENTAL, INC., Plaintiff/Appellant, v. Misty Lynn CURLER, Defendant/Appellee.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

190 P.3d 1158

2008 OK CIV APP 57

VANGUARD ENVIRONMENTAL, INC., Plaintiff/Appellant, v. Misty Lynn CURLER, Defendant/Appellee.

No. 104,097. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.

Court of Civil Appeals of Oklahoma, Division No. 2.

October 3, 2007.

As Corrected April 21, 2008.

Appeal from the District Court of Tulsa County, Oklahoma; Honorable Jefferson D. Sellers, Trial Judge.

AFFIRMED

J. Patrick Mensching, Lyons, Clark & Mensching, Tulsa, OK, for Plaintiff/Appellant.

Robert J. Bartz, Joe M. Fears, Barber & Bartz, Tulsa, OK, for Defendant/Appellee.

JOHN F. FISCHER, Presiding Judge.

¶ 1 This is an employer's appeal from an order granting summary judgment to a former employee in an action seeking injunctive relief and damages arising out of alleged breach of restrictive covenants contained in an employment contract. This appeal has been assigned to the accelerated docket pursuant to Oklahoma Supreme Court Rule 1.36(b), 12 O.S. Supp.2006, ch. 15, app. 1, and the matter stands submitted without appellate briefing. Based on our review of the record on appeal and applicable law, we affirm.

PROCEDURAL AND BACKGROUND FACTS

¶ 2 Plaintiff Vanguard Environmental, Inc., operates an environmental and safety compliance business in Tulsa, Oklahoma. On April 26, 2000, Vanguard entered into a written Employment Agreement with Defendant Misty Curler that contained a restrictive covenant governing Curler's post-employment activities.

¶ 3 On November 28, 2005, Curler resigned her employment with Vanguard and went to work for Cinnabar Environmental Services, a Tulsa based competitor of Vanguard. Vanguard sued Curler, alleging six theories of recovery. Curler filed a motion for summary judgment arguing, among other things, that the restrictions on competition and client solicitation found in the Employment Agreement were overly broad, unreasonable, and, therefore, unenforceable as an illegal restraint of trade within the meaning of 15 O.S.1991 § 217.¹

¶ 4 Vanguard filed an objection arguing that the restrictive covenants were neither overly broad nor in violation of public policy. Vanguard also claimed that material disputed facts precluded summary judgment. However, with two exceptions, Vanguard either unequivocally admitted each of Curler's asserted material facts or admitted those facts adding a "gloss" favorable to its position.² Vanguard did not offer any additional material facts, relying on the factual record in Curler's motion. Following a hearing, the Trial Court granted judgment in favor of Curler as to all of Vanguard's claims.³ It is from that judgment that Vanguard has filed this timely appeal.

ISSUES PRESERVED FOR APPEAL

¶ 5 The petition in error in an accelerated procedure case must comply with the general rules regarding petitions in error. Okla. Sup.Ct. R. 1.36, 12 O.S. Supp. 2006, ch. 15, app. 1. The form of the petition in error is set forth in Rule 1.301, Form No. 5, and requires the appellant to "[i]nclude each point of law alleged as error," and cautions: "Avoid general statements such as `Judgment not supported by law.'"⁴

¶ 6 The "Issues To be Raised on Appeal" section of Vanguard's petition in error consists of two paragraphs.⁵ However, the only preserved appellate challenge to the Trial Court's judgment is Vanguard's assertion that the non-solicitation portion of the restrictive covenant is not an unreasonable restraint of trade.⁶

STANDARD OF REVIEW

¶ 7 Summary judgment is proper only when the pleadings, affidavits, depositions, admissions or other evidentiary materials establish that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Davis v. Leitner, 1989 OK 146, ¶ 9, 782 P.2d 924, 926. In reviewing summary judgment, we must view all inferences and conclusions to be drawn from the evidentiary materials in the light most favorable to the party opposing the motion. Id. However, once the movant has shown the absence of disputed material facts and entitlement to judgment on that record, the burden shifts to the defending party to show the existence of a triable issue. Hughey v. Grand River Dam Auth., 1995 OK 56, ¶ 8, 897 P.2d 1138, 1143.

¶ 8 Determining the enforceability of the kind of restrictive covenants at issue in this appeal is particularly fact dependant, for the reasons we discuss infra, and requires an analysis of the effect of the covenant on competition in the relevant market. Ultimately, however, this involves an interpretation of the contractual provision at issue, an issue of law. See Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, ¶ 11, 780 P.2d 1168, 1171. See also Key Temp. Pers., Inc. v. Cox, 1994 OK CIV APP 123, ¶ 7, 884 P.2d 1213, 1215. Although a trial court considers factual matters when deciding whether summary judgment is appropriate, its ultimate decision, whether one party is entitled to judgment as a matter of law because no material facts are disputed, is purely legal. Carmichael v. Beller, 1996 OK 48, ¶ 2, 914 P.2d 1051, 1053. The record of undisputed material facts before the Trial Court was sufficient to determine the enforceability of the Vanguard covenant. The applicable standard of review of the Trial Court's judgment in favor of Curler is, therefore, de novo. Id.

DISCUSSION

¶ 9 The parties correctly argue that 15 O.S.1991 § 217 is the controlling statute.⁷ The version of section 217 relevant to this appeal provides:

Every contract by which any one is restrained from exercising a lawful profession, trade or business of any kind, otherwise than as provided by Sections 218 and 219 of this title, is to that extent void.⁸

The language of Section 217 was enacted by the first Oklahoma Legislature, remained unchanged until amended in 2001, and is identical to the statute in effect in the Oklahoma Territory immediately prior to statehood. See Wilson's Rev. & Ann. Stat. 1903, ch. 15, art. 4, § 819; see also Hulen v. Earel, 1903 OK 76, 73 P. 927. In addition to a lengthy legislative history, the statute has a well-developed legal history, which is critical to the resolution of this case.

¶ 10 Common law contracts between competitors that fixed the price of goods or services, limited the availability of those goods or services or reduced their quality came to be known as contracts "in restraint of trade." Standard Oil Co. of New Jersey v. U.S., 221 U.S. 1, 54, 31 S.Ct. 502, 55 L.Ed. 2d 619 (1911). Consequently, it is not without significance that "restraint of trade" language was included in section 217 at approximately the same time the United States Congress was passing the Sherman Act, prohibiting "[e]very contract, combination ... or conspiracy in restraint of trade," 15 U.S.C.A. § 1 (1997), and the Oklahoma Legislature was passing the State counterpart prohibiting: "Every act, agreement, contract, or combination ... in restraint of trade." Okla.Rev.Stat. § 8220 § 1 (1912).⁹ "[W]here words are employed in a statute which had at the time a well-known meaning at common law or in the law of this country, they are presumed to have been used in that sense unless the context compels to the contrary." Standard Oil, 221 U.S. at 59, 31 S.Ct. at 515. See also Cooper v. Tanaka, 1978 OK CIV APP 12, ¶ 7, 591 P.2d 1181, 1183. ("[W]e believe that the concept `restraint of trade' as used in 79 O.S.1971, § 1, was used by our legislature in its common law sense and thus declares illegal only contracts unreasonably in restraint of trade.").

¶ 11 Every contract restrains trade to some extent. Board of Trade of City of Chicago v. U.S., 246 U.S. 231, 238, 38 S.Ct. 242, 62 L.Ed. 683 (1918). For example, Curler's employment contract precluded her from providing services to another employer during the term of her employment.¹⁰ Despite the literal prohibition of these statutes, the legality of an employment contract is rarely challenged as a trade restraint during the term of employment.¹¹ Consequently, the United States Supreme Court first announced in Standard Oil that the Sherman Act was to be interpreted pursuant to the "standard of reason which had been applied at common law." Standard Oil, 221 U.S. at 60, 31 S.Ct. at 516. The classic statement of what came to be known as the Rule of Reason is in the Chicago Board of Trade case:

The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.

Board of Trade, 246 U.S. at 238, 38 S.Ct. at 242 (1918). See also Petition of Grand River Dam Auth., 1957 OK 323, 320 P.2d 706 (applying the Rule of Reason standard in a case involving the constitutional prohibition on monopolies in Okla. Const. art. 2, § 32, rather than 79 O.S.2001 § 203(A)).

¶ 12 The Oklahoma Supreme Court adopted the Rule of Reason for the interpretation of 79 O.S.1971 § 1, in Board of Regents of the Univ. of Oklahoma v. National Collegiate Athletic Association, 1977 OK 17, ¶ 15, 561 P.2d 499, 506. This same Rule of Reason analysis has also been adopted for the interpretation of section 217. See Bayly, 1989 OK 122 at ¶ 11, 780 P.2d at 1171 (footnotes omitted) ("Although the rule of reason which requires that in order to be valid, a covenant must be deemed reasonable by the court, had been incorporated as a matter of law into agreements falling within the parameters of 79 O.S.1981 § 1, its application to § 217 was questionable before the Crown Paint and NCAA decisions.").

¶ 13 Consequently, there is no theoretical difference between the analysis required by 79 O.S. § 1 and that required by 15 O.S.1991 § 217. However, no Oklahoma decision has yet employed a comprehensive Rule of Reason analysis to determine the enforceability of a post-employment restraint contained in an employment agreement. Nonetheless, cases decided pursuant to section 1 of title 79 are instructive in determining the extent of that analysis as...