Warner Co. v. Solberg

• Decision Date: 05 September 2001
• Docket Number: No. 20000327.,20000327.
• Citation: 2001 ND 156,634 N.W.2d 65
• Parties: WARNER AND COMPANY, a North Dakota corporation, Plaintiff and Appellant, v. Shirley M. SOLBERG, Defendant and Appellee.
• Court: North Dakota Supreme Court

634 N.W.2d 65

2001 ND 156

WARNER AND COMPANY, a North Dakota corporation, Plaintiff and Appellant, v. Shirley M. SOLBERG, Defendant and Appellee.

No. 20000327.

Supreme Court of North Dakota.

September 5, 2001.

Ronald H. McLean (argued) and Jane L. Dynes, Serkland Law Firm, Fargo, ND, for plaintiff and appellant.

Robert Vaaler (argued), and Rebecca Jo Heigaard McGurran (appeared), Grand Forks, ND, for defendant and appellee.

VANDE WALLE, Chief Justice.

[¶ 1] Warner and Company ("Warner") appealed the summary judgment dismissing its breach of contract claim against Shirley Solberg. The trial court held the contract was an unlawful restraint of trade in violation of N.D.C.C. § 9-08-06. We hold a portion of the contract does violate N.D.C.C. § 9-08-06 and there are genuine issues of material fact precluding summary judgment with respect to the remaining portions of the contract. We affirm the judgment in part, reverse the judgment in part, and remand for further proceedings.

I

[¶ 2] Warner is an independent insurance agency with its principal office in Fargo, North Dakota. In 1980, Solberg was hired by Warner. Solberg worked for Warner as a personal lines underwriter, marketing manager, and an insurance agent. In 1982, Solberg was made a vice president of Warner and purchased 500 shares of Warner stock.

[¶ 3] In 1992, Solberg signed a producer agreement. Paragraph 5 of the agreement covers the protection of trade secrets. Paragraph 6 contains limitations after termination of employment on efforts to discontinue existing policies, writing replacement policies, and soliciting former employees. Paragraph 7 contains the agreement on liquidated damages, specifying loss of renewal commissions and payment of two times the current annual commission, for insurance business lost to the agency as a result of a breach.

[¶ 4] In 1996, Solberg began to seek other employment. Solberg contacted Vaaler Insurance, Inc. ("Vaaler") and in December 1996, Vaaler offered Solberg a position. On March 2, 1997, Solberg resigned her position at Warner. Solberg sold her stock in Warner. Solberg accepted a position with Vaaler effective April 1, 1997.

[¶ 5] Solberg retained files of Warner's after she resigned. One box of files containing information on policyholders was retrieved within weeks. Another box containing personnel files was retrieved months later.

[¶ 6] Within a few months of Solberg's resignation, Warner lost the business of Phoenix International, Inc., and the business of related companies of Ag Air Manufacturing, Agris Corporation, InterAg Tec and InterAg Food, to Vaaler Insurance. Solberg was the insurance producer for these policies at Warner and is the producer for these policies now at Vaaler. Warner stated the lost business is approximately $50,000 in commissions. Warner claimed Solberg has accepted and written policies for Vaaler representing approximately 85-90% of the commissions she was handling for Warner.

[¶ 7] Eight months after Solberg left Warner, Susan Hilkerbaumer, an employee of Warner, was hired by Vaaler and was assigned to work for Solberg. Hilkerbaumer was supervised by Solberg when Solberg worked for Warner.

[¶ 8] Warner brought a suit against Solberg alleging she had breached Paragraph 6 of the agreement by her actions to "affect the discontinuance" of the policies Phoenix International, Inc. and related companies had with Warner, and by writing those same policies for Vaaler. Additionally, Warner alleged Solberg breached her contract by soliciting Hilkerbaumer to leave her job at Warner for a new position at Vaaler. Also, by retaining files and using trade secrets, Warner contended Solberg breached Paragraph 5 of the agreement. Solberg denied any breach and argued the agreement was void as a restraint of trade in violation of N.D.C.C. § 9-08-06.

[¶ 9] Solberg moved for summary judgment. The district court granted the summary judgment on the basis there were no questions of material fact and Solberg was entitled to judgment as a matter of law because the agreement was void as a restraint of trade in violation of N.D.C.C. § 9-08-06.

II

[¶ 10] Summary judgment is a procedural device for the prompt and expeditious disposition of a controversy without a trial. Hall Family Living Trust v. Mutual Service Life Ins. Co., 2001 ND 46, ¶ 6, 623 N.W.2d 32. Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.D.R.Civ.P. 56(c). The party opposing summary judgment cannot simply rely on factual assertions in a brief or pleadings and cannot rely on unsupported allegations; such conclusory assertions are insufficient to raise an issue of material fact. Jones v. Barnett, 2000 ND 207, ¶ 5, 619 N.W.2d 490. However, the evidence must be viewed in the light most favorable to the party opposing the motion, who must be given the benefit of all favorable inferences which can reasonably be drawn from the evidence. Mandan Educ. Ass'n v. Mandan Public School Dist. No. 1, 2000 ND 92, ¶ 6, 610 N.W.2d 64. Whether the trial judge properly granted summary judgment is a question of law and is reviewed de novo. Garofalo v. St. Joseph's Hosp., 2000 ND 149, ¶ 6, 615 N.W.2d 160.

III

[¶ 11] Warner argues the activity prohibited by the agreement between Solberg and Warner is not within the purview of N.D.C.C. § 9-08-06 and therefore the agreement is not void as a restraint of trade. Paragraph 6 of the agreement states:

6. During the Producer's employment and for a period of three (3) years following the date of termination of the Producer's employment with the Agency, the Producer will not engage directly or indirectly, personally or through any other person in any of the following prohibited activities:

a. The Producer will not solicit, contact or in any way attempt to affect the discontinuance of any of the Agency's insurance business.

b. The Producer will not on the Producer's own behalf or for any other agency, broker, salesman, or insurance company accept or write any policy of insurance in replacement of any policy issued by the Agency prior to the termination of this agreement, or otherwise be involved in or assist with the replacement of any such insurance business.

c. The Producer will not solicit or seek to influence any other employee of the Agency to become directly or indirectly the employee or representative of any other insurance agency or insurance company.

[¶ 12] Section 9-08-06, N.D.C.C., declares contracts that constitute a restraint of business are void, with two exceptions:

Every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void, except:

1. One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or a part of either, so long as the buyer or any person deriving title to the goodwill from him carries on a like business therein.

2. Partners, upon or in anticipation of a dissolution of the partnership, may agree that all or any number of them will not carry on a similar business within the same city where the partnership business has been transacted, or within a specified part thereof.

[¶ 13] Concluding neither of the exceptions applied, the trial court held the agreement was void because N.D.C.C. § 9-08-06 prohibits any restraint of trade. Citing this Court's decision in Werlinger v. Mutual Service Casualty Ins. Co., 496 N.W.2d 26, 29 (N.D.1993), the trial court highlighted that case's recognition of the long-standing public policy against restraints upon free trade.

[¶ 14] Although the statute may appear to protect the party against whom a contract not to compete is sought to be enforced, statutes making void contracts in restraint of trade are based upon consideration of public policy and not necessarily upon consideration for the party against whom relief is sought. Herman v. Newman Signs, Inc., 417 N.W.2d 179, 181 (N.D.1987); Hill Medical Corp. v. Wycoff, 86 Cal.App.4th 895, 103 Cal.Rptr.2d 779, 784 (2001). It is the right of the public's access to the services offered by the employee that is more significant than the employee's interests. In Werlinger, 496 N.W.2d at 29-30, the Court recognized the statute invalidates provisions in employment contracts prohibiting an employee from working for a competitor after completion of his employment or imposing a penalty if he does so. In Spectrum Emergency Care, Inc. v. St. Joseph's Hospital & Health Ctr., 479 N.W.2d 848, 852 (N.D. 1992), the Court held the statute prohibits an excessive restraint on a person's exercise of a lawful profession, trade, or business as an employer as well as an employee. See Earthworks, Inc. v. Sehn, 553 N.W.2d 490, 493 (N.D.1996).

[¶ 15] In Werlinger, 496 N.W.2d at 30, the Court held the agreement was void because it violated N.D.C.C. § 9-08-06; however, that agreement was different than the agreement between Solberg and Warner. In Werlinger, 496 N.W.2d at 27, the agreement prohibited the insurance agent to work or "in any way be connected" with property, casualty, health, or life insurance business within one year of termination within 25 miles of his former business. The activity prohibited in Paragraph 6(a) of the agreement Solberg signed is any "attempt to affect the discontinuance" of any of Warner's existing insurance business.

[¶ 16] In Werlinger we cited with approval decisions of the California courts because California statutes contain the same provision from the Field Code as N.D.C.C. § 9-08-06.¹ In Buskuhl v. Family Life Ins. Co., 271 Cal.App.2d 514, 76 Cal.Rptr. 602 (1969), the court invalidated a provision in an employment contract prohibiting an employee from working for a competitor after completion of employment...