VOLT SERVICES v. Adecco Employment Services

• Citation: 35 P.3d 329,178 Or. App. 121
• Parties: VOLT SERVICES GROUP, a DIVISION OF VOLT MANAGEMENT CORPORATION, a Delaware corporation, Appellant, v. ADECCO EMPLOYMENT SERVICES, INC., a Delaware corporation, and Adecco Field Management, Inc., a Delaware corporation, Respondents.
• Decision Date: 14 November 2001
• Court: Court of Appeals of Oregon

35 P.3d 329

178 Or. App. 121

VOLT SERVICES GROUP, a DIVISION OF VOLT MANAGEMENT CORPORATION, a Delaware corporation, Appellant, v. ADECCO EMPLOYMENT SERVICES, INC., a Delaware corporation, and Adecco Field Management, Inc., a Delaware corporation, Respondents.

9901-00240; A109509

Court of Appeals of Oregon.

Argued and Submitted June 18, 2001.

Decided November 14, 2001.

Timothy R. Volpert, Portland, argued the cause for appellant. With him on the briefs were Richard N. Van Cleave, Mark J. Hackett, and Davis Wright Tremaine LLP.

Richard C. Hunt, Portland, argued the cause for respondents. With him on the brief were Allyson S. Krueger and Barran Liebman LLP.

Before LANDAU, Presiding Judge, and BREWER and SCHUMAN, Judges.

BREWER, J.

Plaintiff appeals from a summary judgment for defendant on plaintiff's claims for intentional interference with economic relations, unfair competition, and unjust enrichment.¹ Plaintiff assigns error to the trial court's conclusions that there was no genuine issue of material fact with respect to any of its claims and that defendant was entitled to judgment as a matter of law. Plaintiff also assigns error to the trial court's denial of a portion of its motion to compel production of documents and its motion to file an amended complaint. We reverse the summary judgment on plaintiff's claims for intentional interference with economic relations and unjust enrichment, and we reverse the order denying plaintiff's motion to amend the complaint; otherwise, we affirm.

We state the facts in the light most favorable to plaintiff, the nonmoving party on summary judgment. Olson v. F & D Publishing Co., Inc., 160 Or.App. 582, 584, 982 P.2d 556 (1999). Plaintiff and defendant are businesses that provide temporary employees to perform services for business customers. Large customers typically select one temporary service provider as the vendor responsible for coordinating all temporary employee staffing needs at one location or throughout the customer's facilities nationwide. That provider is known as the "master vendor." The master vendor generally is responsible for recruiting, training, and placing temporary employees within the customer's facilities; for maintaining relationships with the customer's managers; and for handling all personnel matters relating to temporary employees.

In May 1997, Nike, Inc. (Nike) contracted with plaintiff to serve as master vendor for its Beaverton facilities. The contract obligated plaintiff to provide temporary employees to Nike until the date the contract was terminated by either party. At the Nike site, plaintiff employed both administrative employees, whose contracts are at issue in this case, and technical employees. The written contracts between plaintiff and each employee assigned to Nike provided that the employee "will not accept employment directly or indirectly from any customer for a period of ninety (90) days following completion of your assignment with that customer."

On October 14, 1998, Nike notified plaintiff that its contract would be terminated in the near future and that defendant would become Nike's master vendor. On December 4, Nike notified plaintiff that defendant would become Nike's master vendor on January 11, 1999. Between December 4 and January 11, defendant contacted plaintiff's temporary employees who were working at Nike and encouraged them to apply to defendant, as the new master vendor, for the same positions they occupied while employed by plaintiff. In this manner, approximately 150 of plaintiff's temporary employees retained their positions at Nike by entering defendant's employ effective January 11, 1999.

Plaintiff then brought this action against defendant alleging claims for intentional interference with economic relations based on its contracts with its employees, unfair competition, and unjust enrichment.² In response to a request for production made by plaintiff, defendant produced some documents but declined to produce others. Plaintiff filed a motion to compel production of the documents defendant had refused to produce. The court ordered defendant to submit the disputed documents for in camera inspection. After reviewing the documents, the court ordered defendant to produce some of the submitted documents, but it denied the remainder of plaintiff's motion.

Defendant moved for summary judgment on all claims. In response, plaintiff submitted, among other evidence, the deposition testimony of Catherine King, defendant's Northwest regional manager, that the temporary service industry typically allowed for a transition period between master vendors because "there are economics involved, and that's clearly understood."

On January 7, 2000, plaintiff moved, pursuant to ORCP 23 A,³ to amend its complaint by adding an alternative claim for intentional interference with economic relations that was not based on an existing contract. Plaintiff argued that the amendment would not prejudice defendant, because "there is not a single fact in * * * [the] claim that would not also be a matter of proof in the [interference claim] already pled." Defendant responded that, if no new evidence was implicated by the alternate claim, that claim would be subsumed by defendant's pending motion for summary judgment. On February 4, the trial court entered an amended order granting summary judgment in favor of defendant on all claims; on February 8, the trial court denied plaintiff's motion to amend the complaint. This appeal followed.

Plaintiff assigns error first to the trial court's grant of summary judgment on each of its three claims. We review the summary judgment record to determine whether there are any genuine issues of material fact and whether the moving party is entitled to judgment as a matter of law. ORCP 47 C; Jones v. General Motors Corp., 325 Or. 404, 420, 939 P.2d 608 (1997). We view the evidence and all reasonable inferences that may be drawn from the evidence in the light most favorable to the nonmoving party, in this instance plaintiff. Id. at 408, 939 P.2d 608. We will affirm only if no objectively reasonable factfinder could return a verdict for plaintiff. ORCP 47 C.

The elements of plaintiff's first claim, for intentional interference with economic relations, are: (1) intentional interference with a proposed or existing economic relationship; (2) with an improper motive or by use of improper means; and (3) damage beyond the fact of interference itself. Willamette Dental Group v. Oregon Dental Service, 130 Or.App. 487, 498, 882 P.2d 637 (1994), rev. den. 320 Or. 508, 888 P.2d 569 (1995). Plaintiff argues that defendant improperly interfered with the restrictive covenant in plaintiff's contracts with its employees by hiring those employees before their assignments ended at Nike. Defendant replies that, as a matter of law: (1) the restrictive covenant is unenforceable and that, therefore, its actions did not interfere with plaintiff's contractual relationship with its employees; (2) it did not act with an improper motive or use improper means; and (3) its actions as a business competitor were privileged.

We begin by considering whether the restrictive covenant in plaintiff's contracts with its employees is unenforceable as a matter of law. A noncompetition provision in an employment contract is a covenant in restraint of trade. North Pacific Lbr. Co. v. Moore, 275 Or. 359, 364, 551 P.2d 431 (1976).

"Three things are essential to the validity of a contract in restraint of trade[:] (1) it must be partial or restricted in its operation in respect either to time or place; (2) it must come on good consideration; and (3) it must be reasonable, that is, it should afford only a fair protection to the interests of the party in whose favor it is made, and must not be so large in its operation as to interfere with the interests of the public." Id. (citing Eldridge et al. v. Johnston, 195 Or. 379, 403, 245 P.2d 239 (1952)).

Defendant contends that the covenant is unreasonable for three reasons, which we analyze in turn. First, relying on Rem Metals Corp. v. Logan, 278 Or. 715, 565 P.2d 1080 (1977), defendant argues that plaintiff has no legitimate interest in its relationship with its temporary employees that is entitled to any protection. Rem Metals holds that "[t]he fact that [an employee's knowledge, skill or facility] were acquired or developed during the employment does not, by itself, give the employer a sufficient interest to support a restraining covenant, even though the on-the-job training has been extensive and costly." Id. at 720-21, 565 P.2d 1080 (quoting Harlan M. Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625, 652 (1960)). Plaintiff responds that the employer's interest "need not be in the form of a trade secret or a secret formula; it may consist of nothing more than valuable `customer contacts.'" North Pacific Lbr.,275 Or. at 364,551 P.2d 431 (citing Blake, 73 Harv. L. Rev. at 657). Plaintiff contends that its customer contacts — including its relationship with Nike — constitute a protectible interest.

Contacts between an employer's employees and its customers can create a protectible interest when the nature of the contact is such that there is a substantial risk that the employee may be able to divert all or part of the customer's business. Blake, 73 Harv. L. Rev. at 657. In turn, "[w]hether the risk will be sufficiently great to warrant a restriction, and how broad a restriction will be permitted, depends upon the extent to which the employee is likely to be identified in the customer's mind with the product or service being sold." Id. at 658-59, 551 P.2d 431. Several Oregon cases construing restrictive covenants have held that customer contacts created a protectible interest. See Cascade Exchange v. Reed, 278 Or. 749, 565 P.2d 1095 (1977)

("[E]mployees' work necessarily involved access to plaintiff's `customer lists,' as well as some other `specialized' information relating to...