Articles Posted in Missouri Courts

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An interesting case involving enforcement of an employment contract’s restrictive covenant was recently noted by our Illinois covenant not to compete attorneys. Cambridge Engineering Inc. v. Mercury Partners 90 BI, Inc., No. 1-06-0798 (Ill. 1st Dec. 7, 2007). The suit stems from an earlier lawsuit concluded in Missouri in 2001, in which Cambridge Engineering Inc. successfully sued former employee Gregory Degar and his new employer, Brucker Company (legally Mercury Partners 90 BI), to enforce a covenant not to compete signed by Degar. Cambridge then filed this suit against Brucker to recover punitive damages and attorney fees. Cambridge and Brucker compete in the residential and business heating market in the Midwest.

Degar worked at Cambridge as a sales representative starting in 1996, and signed a contract including noncompete and nonsolicitation covenants. The contract restricted him from competing in any way with Cambridge, or soliciting its employees or customers, anywhere in the United States or Canada, for 24 months after leaving. He was terminated in 2001 and was hired by Brucker about a month later as an inside support person rather than a salesperson. Nonetheless, he admitted to using customer contacts developed at Cambridge. Cambridge sued Deger, but not Brucker, in St. Louis and was granted a permanent injunction enforcing the noncompete clause. (At that time, Brucker fired Degar.)

Cambridge then sued Brucker in Illinois for compensatory and punitive damages, for tortious interference with contract. The parties stipulated to limit compensatory damages to attorney fees but said nothing about the punitive damages. The trial court directed a verdict against Cambridge on punitive damages, saying Cambridge hadn’t proven that Brucker’s actions were so outrageous that punitive damages were appropriate. At trial, the president of Cambridge testified that the company believed the contract would prevent Degar from holding any job, even a janitorial position, with any competitor, including in areas where Cambridge does not do business. The jury found for Cambridge on compensatory damages in the amount of $50,000, but Brucker successfully moved for judgment notwithstanding the verdict on the basis that the noncompetition clause was overly broad and unenforceable. Cambridge appealed both judgments against it.

The analysis by the First started by noting that the dispute centered around whether the covenant not to compete was unenforceable under Illinois law. Cambridge argued that the covenant was reasonable on both geographic and activity (despite testimony disputing this), and that the trial court improperly excluded testimony that would show this reasonableness. The court disagreed on all counts. The geographic scope was unreasonable, the court wrote, because it restricted Degar from taking a job with a competitor anywhere in Canada even though Cambridge only had a small amount of business in Canada. This restriction did nothing to protect Cambridge from competitors gaining unfair advantage at its expense, the court wrote. And the evidence Cambridge said was incorrectly excluded would not have changed the court’s decision. Thus, the scope of the covenant was indeed unreasonable.

It next examined the question of the activities prohibited by the noncompete clause, which turned on the interpretation of the contract. However, the court found that the plain language of the contract supports Brucker’s assertion that the contract was overly broad: that Degar may not “engage in any activity for or on behalf of Employer’s competitors,” a phrase that could theoretically bar Degar from taking a job filing papers for a competitor. Furthermore, testimony from Cambridge’s president at trial confirmed this interpretation; he “agreed with counsel’s contention that the St. Louis action was brought to prevent Degar from working for a competitor in any capacity.” Thus, the clause was overly broad and not reasonable, and the trial court’s decision on that issue was also correct.

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Our firm is proud to announce that name partner Vincent DiTommaso won a victory for class-action plaintiffs in Missouri with Dale v. DaimlerChrysler Corp., 204 S.W.3d 151, 172 (Mo. App. 2006). Plaintiff Kevin Dale originally sued the auto manufacturer under the federal Magnuson-Moss Warranty Act, (MMWA) over a breach of warranty for defective power window regulators (the mechanism that raises and lowers the window) on Dodge Durangos. Despite eight repair attempts, Dale contended, Dodge had failed to repair or replace the defective power window regulator in his truck.

Dale’s suit asked the Circuit Court of Boone County, Missouri to certify a class of Dodge Durango owners who’d had similar problems. The court certified two classes: One national class that relied on the MMWA, and one limited to Durango owners in the State of Missouri, which relied on the Missouri Merchandising Practices Act (MMPA). DaimlerChrysler appealed the class certifications on multiple grounds under Missouri’s Rule 52.08, including numerosity and common-question-predominate requirements of the proposed class; typicality and adequacy of Dale as lead plaintiff; the implied definiteness of the class definition; and the superiority of a class action over other forms of adjudication.

The Missouri Court of Appeals for the Western District rejected all of these arguments, finding that the record was sufficient and DaimlerChrysler’s arguments insufficient to prove any of their claims. Two, however, were of interest to class-action attorneys. One had to do with Dale’s adequacy as a class plaintiff. Because Dale’s wife had worked for one of the law firms representing the class, defendants contended that he had an interest in maximizing attorney fees, a conflict of interests that should disqualify him. The judges disagreed, saying Dale’s wife didn’t necessarily stand to gain any extra pay from the case, and they declined to bar lead plaintiffs with such an indirect connection to the class attorneys. In fact, they wrote, “we believe that it should be a matter of discretion with the trial court, decided on a case-by-case basis.”