Electronic Payment v. Kennedy ( 2021 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
ELECTRONIC PAYMENT PROVIDERS, INC. dba BILLINGTREE,1
Plaintiff/Appellant,
v.
ROBERT F. KENNEDY, et al., Defendants/Appellees.
No. 1 CA-CV 20-0382
FILED 12-23-2021
Appeal from the Superior Court in Maricopa County
No. CV2017-011715
The Honorable Daniel G. Martin, Judge
AFFIRMED IN PART; REVERSED AND REMANDED IN PART;
VACATED IN PART
COUNSEL
Snell & Wilmer L.L.P., Phoenix
By Joshua R. Woodard, Shalayne L. Pillar
Counsel for Plaintiff/Appellant
Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Phoenix
By Joseph T. Clees, L. Eric Dowell
Counsel for Defendants/Appellees
1This caption is amended as reflected. The amended caption shall be used on
all further documents filed in this appeal.
ELECTRONIC PAYMENT v. KENNEDY, et al.
Decision of the Court
MEMORANDUM DECISION
Presiding Judge D. Steven Williams delivered the decision of the Court, in
which Judge Jennifer B. Campbell and Judge James B. Morse Jr. joined.
W I L L I A M S, Judge:
¶1 Plaintiff Electronic Payment Providers, Inc. d/b/a BillingTree
(“BillingTree”) appeals from summary judgment in favor of defendants
Robert Kennedy and Benjamin Lange, on BillingTree’s claims for breach of
contract, breach of the duty of good faith and fair dealing, and tortious
interference with business expectancy, arising out of employment
agreements between BillingTree and the defendants. For reasons that
follow, we affirm in part, reverse in part, vacate in part, and remand for
further proceedings consistent with this decision.
FACTUAL AND PROCEDURAL HISTORY
¶2 BillingTree, an Arizona corporation, provides electronic
payment processing products and services including automated
clearinghouse processing, credit and debit card processing, payment
gateways, and web payment portals. BillingTree primarily provides its
products and services to collection agencies. In 2009, BillingTree hired
Kennedy as a regional sales manager, and, in 2013, hired Lange as an
account manager. Both Kennedy and Lange were assigned to specific
geographical areas within the United States and were responsible for selling
BillingTree’s products and services in those territories. Although the parties
dispute which regions of the United States the defendants serviced,
BillingTree does not contend the defendants serviced every region of the
United States.
¶3 While at BillingTree, Kennedy and Lange each entered into
various written agreements, including a 2016 employment agreement
(collectively, the “Agreements”). In the Agreements, defendants agreed to
non-competition and non-solicitation covenants. The non-competition
covenant, which restricted defendants’ right to compete with BillingTree
for a period of twelve months after termination, prohibited the following
conduct:
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Decision of the Court
[T]he Employee shall not, directly or indirectly, (A) engage in
any Competing Business within the Restricted Territory or (B)
own, invest in, finance, manage, control, operate, provide
services, advice or other support to, participate in, enter into
any partnership or joint venture with, a Competing Business
within the Restricted Territory; provided, that the Employee
shall not be in violation of the foregoing by reason of his/her
ownership of not more than five percent (5%) of the
outstanding shares of the stock of any corporation which is
listed on a national securities exchange.
¶4 “Restricted Territory,” i.e., the territory in which defendants
were prohibited from competing with BillingTree, was defined using the
following “step-down” provision:
[T]he United States, Canada and Europe; provided, however,
that if (and only if) required by a final decision or order of a
court of competent jurisdiction or arbitrator in order for the
provisions of this Section 9 to remain valid and enforceable
against the Employee, “Restricted Territory” means the
United States and Canada; provided, however, that if (and
only if) required by a final decision or order of a court of
competent jurisdiction or arbitrator in order for the provisions
of this Section 9 to remain valid and enforceable against the
Employee, “Restricted Territory” means the United States.
Thus, defendants were, in its most restrictive step, prohibited from
competing with BillingTree in the United States, Canada, and Europe and,
in its least restrictive step, prohibited from competing with BillingTree
anywhere in the United States.
¶5 The non-solicitation covenant, which similarly covered the
twelve-month period following defendants’ termination, restricted
defendants’ right to:
(A) call on or solicit any client of the Company for purposes
of diverting such client to a Competing Business; or (B)
induce, solicit, encourage or cause (or attempt to induce,
solicit, encourage or cause) any client, vendor, supplier,
strategic alliance partner, bank, licensor, licensee or other
party to cease conducting business or reduce the amount of
business it does with the Company; or (C) in any way
interfere with the relationship between any client, vendor,
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Decision of the Court
supplier, strategic alliance partner, bank, licensor, licensee or
other party and the Company.
“Client” was defined to include:
(i) the actual clients and customers of the Company, and (ii)
those active prospective clients or customers of the Company
which the Employee alone, or in combination with others,
handled, serviced, or solicited at any time during the one (1)
year period immediately preceding the termination of the
Employee’s employment with the Company.
¶6 In November 2016, Lange terminated his employment with
BillingTree; Kennedy followed in February 2017. In December 2016,
defendants formed LucentPay, a company which, like BillingTree, sells
electronic payment processing products and services, with a focus on
providing such services to collection agencies. In the year following their
departure, defendants successfully solicited BillingTree’s customers for the
purpose of converting their payment processing products from BillingTree
to LucentPay’s products and services. LucentPay’s client base includes
approximately twenty of BillingTree’s former customers.
¶7 BillingTree responded by filing this action against defendants
for breach of contract, breach of the duty of good faith and fair dealing, and
tortious interference with business expectancy. BillingTree moved for
partial summary judgment on the issue of liability and defendants moved
for summary judgment on all claims, contending the non-competition and
non-solicitation covenants were overly broad and unenforceable as a matter
of law.2 The court denied BillingTree’s motion, granted defendants’ motion
finding both covenants overbroad and unenforceable as a matter of law,
and held BillingTree could not proceed on its claims for breach of contract,
breach of the duty of good faith and fair dealing, and tortious interference
2 Defendants also moved for summary judgment on the basis that a
nondisclosure and assignment agreement, which the parties signed after
the Agreements, superseded the Agreements and effectively removed the
non-competition and non-solicitation covenants. However, the court
refused to enter summary judgment on that ground, finding a genuine
dispute of material fact as to the intent of the parties in entering into the
nondisclosure and assignment agreement. Because defendants do not
advance this argument on appeal, we consider the issue waived. Van Loan
v. Van Loan, 116 Ariz. 272, 274 (1977) (“The failure to raise an issue . . . in
briefs on appeal constitutes waiver of the issue.”).
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Decision of the Court
“to the extent such claims are based on an alleged breach of the covenant
not to compete.”
¶8 BillingTree moved the court for clarification to determine
“whether BillingTree may pursue its tortious interference claim to the
extent its claim is not based on the alleged breach of either the non-compete
or non-solicit.” The court clarified that it granted judgment in favor of
defendants as to all of BillingTree’s claims and awarded defendants their
reasonable attorneys’ fees and taxable costs.
¶9 BillingTree timely appealed following entry of final
judgment. Ariz. R. Civ. P. 54(c). We have jurisdiction pursuant to Article 6,
Section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21(A)(1) and
-2101(A)(1).
DISCUSSION
¶10 We review a grant of summary judgment de novo. Chalpin v.
Snyder, 220 Ariz. 413, 418, ¶ 17 (App. 2008). Summary judgment is
appropriate if “there is no genuine dispute as to any material fact and the
moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P.
56(a). “We view the facts and any inferences drawn from those facts in the
light most favorable to the party against whom judgment was entered.”
Tierra Ranchos Homeowners Ass’n v. Kitchukov, 216 Ariz. 195, 199, ¶ 15 (App.
2007). We will affirm summary judgment if it is correct for any reason.
Hawkins v. State, 183 Ariz. 100, 103 (App. 1995).
¶11 Non-competition and non-solicitation covenants that restrict
an employee’s right to compete with an employer after termination of
employment will generally be upheld if the restrictions are reasonable.
Fearnow v. Ridenour, Swenson, Cleere & Evans, P.C., 213 Ariz. 24, 26, ¶ 8
(2006). A restriction is unreasonable, and thus will not be enforced: “(1) if
the restraint is greater than necessary to protect the employer’s legitimate
interest; or (2) if that interest is outweighed by the hardship to the employee
and the likely injury to the public.” Valley Med. Specialists v. Farber, 194 Ariz.
363, 369, ¶ 20 (1999). In determining whether a restraint is reasonable, i.e.,
no greater than necessary to protect the employer’s interest, we assess the
duration, geographic area, and scope of the activity prohibited by the
restraint. Id. at 370-71, ¶¶ 25, 27.
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Decision of the Court
I. The Non-Competition Covenant Is Unenforceable
a. The Geographic Area Prohibited by the Non-Competition Covenant
Is Overbroad and Unenforceable as a Matter of Law
¶12 According to the superior court, the step-down provision
rendered the non-competition covenant unenforceable as a matter of law
and thus did not expressly address whether the covenant would be
enforceable in its least restrictive form. As noted, supra ¶ 10, we “will affirm
summary judgment if it is correct for any reason supported by the record,
even if not explicitly considered by the superior court.” KB Home Tucson,
Inc. v. Charter Oak Fire Ins. Co., 236 Ariz. 326, 329, ¶ 14 (App. 2014).
¶13 BillingTree argues the non-competition agreement is
enforceable because the “geographic scope . . . is severable and can be ‘blue
penciled’ to eliminate Canada and Europe, [thereby] limiting its scope to
the United States.” Assuming, without deciding, that the very nature of the
step-down provision does not render the covenant unenforceable, we
address whether the covenant, in its least restrictive form, is reasonable.
In its least restrictive form, the step-down provision prohibits defendants
from engaging in a competing business, in this case LucentPay, anywhere
in the United States.
¶14 Restrictive covenants that prevent employees from pursuing
a similar vocation after termination of employment are disfavored.
Bryceland v. Northey, 160 Ariz. 213, 216 (App. 1989). Thus, a covenant not to
compete will not be upheld unless “it protects some legitimate interest
beyond the employer’s desire to protect itself from competition,” Farber, 194
Ariz. at 367, ¶ 12, and is no broader than necessary to protect that interest,
Amex Distrib. Co. v. Mascari, 150 Ariz. 510, 515 (App. 1986). The legitimate
interest of a post-employment restraint is “to prevent competitive use, for
a time, of information or relationships which pertain peculiarly to the
employer and which the employee acquired in the course of the
employment.” Farber, 194 Ariz. at 367, ¶ 12 (quoting Harlan M. Blake,
Employee Agreements not to Compete, 73 Harv. L. Rev. 625, 647 (1960)). “The
burden is on the employer to prove the extent of its protectable interest.”
Bryceland, 160 Ariz. at 216.
¶15 Here, BillingTree contends that “if the geographic scope were
limited to the United States, the covenant could be deemed reasonable
given [the] small number of competitors and nationwide presence of
BillingTree’s clients.” BillingTree also argues, in the alternative, a genuine
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ELECTRONIC PAYMENT v. KENNEDY, et al.
Decision of the Court
issue of material fact exists regarding the reasonableness of a nationwide
non-compete, which precludes entry of summary judgment.
¶16 Although the parties dispute the exact locations in which
defendants serviced BillingTree’s clients, they agree that Kennedy covered
a geographic region encompassing approximately nine to thirteen states
from Texas to South Dakota and that Lange serviced a geographic region
encompassing eight to ten states in the Eastern region of the United States.
The parties dispute whether Kennedy was also assigned the Northeast
region of the United States and disagree as to the number of states that
Lange serviced outside of his region.
¶17 BillingTree, however, has made no contention that
defendants serviced customers in every region of the United States or that
the restriction is reasonable on that basis. Rather, BillingTree suggests a
non-compete covering the United States is reasonable because “BillingTree
services customers across the United States, many of whom operate at a
national scale with numerous locations” and because defendants, too,
worked with such clients. Under BillingTree’s proposed holding, whether
a geographic restriction is deemed reasonable would be determined by the
range of a third party’s business. We are not persuaded.
¶18 BillingTree has provided no controlling legal authority
demonstrating they have a protectable interest in denying defendants the
right to compete in geographic areas in which they never provided service
while working for BillingTree. To be sure, Arizona law is contrary. See
Varsity Gold, Inc. v. Porzio, 202 Ariz. 355, 356, ¶ 18 (App. 2002) (geographical
provision in covenant not to compete, which encompassed the entire state
and contiguous states, was unreasonable, where employee worked only in
one portion of one city); Olliver/Pilcher Ins., Inc. v. Daniels, 148 Ariz. 530, 532
(1986) (holding statewide non-competition covenant unenforceable because
plaintiff worked almost entirely in Northern Arizona). We similarly reject
BillingTree’s contention that the restriction is reasonable because
BillingTree has “few competitors.”
¶19 Because we conclude the covenant is unenforceable in its least
restrictive form, we need not address the propriety of the step-down
provision or the scope of activity prohibited by the non-competition
covenant. Further, because BillingTree has failed to show that the
geographical restrictions contained in the Agreements do anything other
“than simply prohibit fair competition by the [defendants],” Farber, 194
Ariz. at 367, ¶ 12, we hold that the nationwide non-competition covenant is
overbroad and unenforceable as a matter of law.
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ELECTRONIC PAYMENT v. KENNEDY, et al.
Decision of the Court
II. The Non-Solicitation Covenant is Not Unenforceable as a Matter of
Law
¶20 The superior court, finding the non-solicitation covenant
applicable to “all of BillingTree’s clients and customers, including those
with whom [d]efendants had no contact,” held the covenant was overbroad
as to the customer interests it purported to protect and thus unenforceable
as a matter of law.
¶21 We agree with the superior court’s interpretation of the
non-solicitation covenant, in that it prohibits defendants from soliciting all
clients of BillingTree for a period of twelve months following termination
of employment. While the term “client” is defined by the Agreements, the
parties dispute the proper interpretation of the definition.
¶22 The Agreements define “client” as follows:
(i) the actual clients and customers of the Company, and (ii)
those active prospective clients or customers of the Company
which the Employee alone, or in combination with others,
handled, serviced, or solicited at any time during the one (1)
year period immediately preceding the termination of the
Employee’s employment with the Company.
¶23 BillingTree argues, based on this definition, the
non-solicitation covenant prohibits only the solicitation of actual or
prospective clients or customers defendants handled, serviced, or solicited
at any time during the one year immediately preceding their termination
from BillingTree.
¶24 By contrast, defendants argue, and the superior court agreed,
the non-solicitation covenant prohibits defendants from soliciting: (1) all of
BillingTree’s clients; and, (2) those active prospective clients which
defendants handled, serviced, or solicited at any time during the one-year
period immediately preceding their termination from BillingTree.
¶25 Contract interpretation is a question of law we review de
novo. Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593, ¶ 9 (App. 2009).
We construe a contract to determine and enforce the parties’ intent. Taylor
v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152 (1993). “If the contractual
language is clear, we will afford it its plain and ordinary meaning and apply
it as written.” Liberty Ins. Underwriters, Inc. v. Weitz Co., 215 Ariz. 80, 83, ¶ 8
(App. 2007).
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ELECTRONIC PAYMENT v. KENNEDY, et al.
Decision of the Court
¶26 Here, “client” is unambiguously defined as including: (1) the
actual clients and customers of BillingTree; and (2) those active prospective
clients or customers of BillingTree which defendants handled, serviced, or
solicited at any time during the one-year period immediately preceding the
termination. As written, the non-solicitation covenant prohibits defendants
from soliciting all of BillingTree’s clients, not just those with whom the
defendants contacted during their employment.
¶27 However, we disagree with the superior court that, as a
matter of law, this renders the non-solicitation covenant unenforceable.
Accordingly, we decline BillingTree’s invitation to blue-pencil the
non-solicitation covenant. See Farber, 194 Ariz. at 372, ¶ 30 (noting a court
may blue pencil restrictive covenants to “eliminat[e] grammatically
severable, unreasonable provisions”).
¶28 While a covenant not to solicit is “less restrictive on the
employee . . . than a covenant not to compete,” Hilb, Rogal & Hamilton Co. of
Ariz. v. McKinney, 190 Ariz. 213, 216 (App. 1997), the test of validity remains
one of reasonableness, Fearnow, 213 Ariz. at 26, ¶ 10. A non-solicitation
covenant is reasonable if it is “no broader than necessary to protect the
employer’s legitimate business interest.” Hilb, 190 Ariz. at 216.
¶29 Contrary to defendants’ assertion, Amex Distrib. Co. v. Mascari
did not decide that “the employer’s protectable interest [is limited] to those
customers to whom the employee represented the employer’s goodwill.”
150 Ariz. at 517-18. The Amex court only noted “in passing” that cases from
other jurisdictions impose such a limit, explicitly declined to decide that
issue under Arizona law, and, instead, rejected a 36-month
non-competition covenant as overbroad. See id. (“We pass that issue,
however, and focus upon the first part of subparagraph 10a, which
prohibits Mascari from competing with Amex for 36 months.”).
¶30 Defendants’ reliance on Olliver/Pilcher Ins., Inc. v. Daniels, 148
Ariz. at 532, is also misplaced. There, our supreme court noted that “[i]f the
contract dealt only with preventing piracy of accounts by former
employees, its statewide scope would not be considered unreasonable or
oppressive.” Id. at 531-32. The supreme court did not reject the anti-piracy
provisions based on the employee’s lack of prior contacts with the
customer. Id. Instead, it found the covenant unreasonable because the
employee would be liable for damages for any customer of the former
employer that did business with the new employer even if the employee
was not responsible for the switch. Id. at 532 (“In his new employment,
Daniels runs the risk, if the covenant is enforced, of paying a penalty for
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Decision of the Court
every former Olliver/Pilcher customer who transfers to AIS, irrespective of
Daniels’ total lack of responsibility for obtaining the business.”).
¶31 In Alpha Tax Services v. Stuart, this court considered an
agreement not to solicit the employer’s clients and held that, “[s]uch an
agreement, statewide in scope, is not considered unreasonable or
oppressive and is valid.” 158 Ariz. 169, 171 (App. 1988). When Arizona
courts have declined to enforce non-solicitation covenants, we have not
looked to the relationship between the former employee and the customer
but have based our decisions on the reasonableness of restrictions applied to
prospective and former customers. See Orca Commc’ns Unlimited, LLC v.
Noder, 233 Ariz. 411, 418, ¶ 22 (App. 2013) (noting covenant applies “not
only to ‘actual’ customers, but also to ‘potential’ customers” and rejecting a
ban on solicitation of potential customers as “so broad that anyone could
be included as a potential customer . . . [including] former customers, with
whom Orca no longer does business”), decision aff’d and depublished in part,
236 Ariz. 180, 185, ¶ 23 (2014) (depublishing ¶¶ 28-31); see also Hilb, 190 Ariz.
at 216 (finding the employer had no protectable interest in a former client).
¶32 Accordingly, because defendants have not shown the
non-solicitation covenant is unreasonable as a matter of law, we reverse the
grant of summary judgment and remand for the trier of fact to determine
the reasonableness of the covenant in its application to all current clients of
BillingTree and to prospective clients whom defendants handled, serviced,
or solicited within the year immediately preceding termination of their
employment.
III. The Court Erred in Granting Summary Judgment on BillingTree’s
Claims for Breach of the Duty of Good Faith and Fair Dealing and
Tortious Interference with Business Expectancy
a. Breach of the Duty of Good Faith and Fair Dealing
¶33 BillingTree contends the court improperly granted summary
judgment on its claim for breach of the implied covenant of good faith and
fair dealing, arguing such claim was not defeated by the court’s
invalidation of the non-competition and non-solicitation covenants.
Defendants argue the invalidation of the covenants bars BillingTree’s claim
for breach of the covenant of good faith and fair dealing.
¶34 The covenant of good faith and fair dealing is implied in every
contract, Bike Fashion Corp. v. Kramer, 202 Ariz. 420, 423, ¶ 13 (App. 2002),
and prevents a party to a contract from doing “anything that will injure the
rights or interests” of the other party. Diagnostic Lab’y, Inc. v. PBL
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Decision of the Court
Consultants, 136 Ariz. 415, 419 (App. 1983). “This obligation preserve[s] the
spirit of the bargain rather than the letter and guarantees the protection of
the parties’ reasonable expectations.” Bike Fashion Corp., 202 Ariz. at 423,
¶ 13 (alteration in original) (internal quotation omitted); see also Wells Fargo
Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Tr.
Fund, 201 Ariz. 474, 491, ¶ 63 (2002) (“The duty of good faith extends
beyond the written words of the contract.”). Thus, a party may breach the
covenant of good faith and fair dealing without actually breaching an
express covenant in the contract. Wells Fargo Bank, 201 Ariz. at 491, ¶ 64;
Rawlings v. Apodaca, 151 Ariz. 149, 163 (1986) (noting that the implied
covenant of good faith and fair dealing can be breached in the absence of a
breach of express covenants in the contract); United Dairymen of Ariz. v.
Schugg, 212 Ariz. 133, 137, ¶ 15 (App. 2006) (“A party can breach the implied
covenant of good faith and fair dealing without breaching an express
provision of the underlying contract.”).
¶35 Because breach of an express covenant in a contract is not a
prerequisite to a claim for breach of the covenant of good faith and fair
dealing, see, e.g., United Dairymen of Ariz., 212 Ariz. at 137, ¶ 15, the superior
court’s invalidation of the non-solicitation and non-competition covenants
did not act as an automatic bar to BillingTree’s claim.3 The inquiry is not
whether defendants breached an express covenant but whether defendants
“exercis[ed] express discretion in a way inconsistent with [BillingTree’s]
reasonable expectations and [acted] in ways not expressly excluded by the
contract’s terms but which nevertheless [bore] adversely on [BillingTree’s]
reasonably expected benefits of the bargain.” Bike Fashion Corp., 202 Ariz. at
424, ¶ 14. This is a question of fact for the jury. Keg Rests. Ariz., Inc. v. Jones,
240 Ariz. 64, 77, ¶ 45 (App. 2016).
¶36 Defendants, having rested on a mistaken belief that
invalidation of the covenants defeated BillingTree’s claim for breach of the
implied covenant of good faith and fair dealing, have failed to establish that
no genuine issue of material fact exists and that they are entitled to
judgment as a matter of law. Ariz. R. Civ. P. 56(a). Consequently, we reverse
the superior court’s grant of summary judgment in favor of defendants on
BillingTree’s claim for breach of the covenant of good faith and fair dealing.
3We note that, as a result of the severability clause, the invalidation of one
or more covenants does not invalidate the entirety of the Agreements.
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b. Tortious Interference with Business Expectancy
¶37 BillingTree contends that the superior court should not have
granted summary judgment in favor of defendants because defendants
failed to present evidence entitling them to summary judgment.
¶38 To succeed on a claim for tortious interference with business
expectancy, the plaintiff must prove: “(1) the existence of a valid contractual
relationship; (2) knowledge of the relationship on the part of the interferor;
(3) intentional interference inducing or causing a breach; (4) resultant
damage to the party whose relationship has been disrupted; and (5)
improper action on the part of the defendant.” Bar J Bar Cattle Co. v. Pace,
158 Ariz. 481, 483 (App. 1988). Whether conduct is improper is determined
by consideration of seven factors:
(a) the nature of the actor’s conduct, (b) the actor’s motive, (c)
the interests of the other with which the actor’s conduct
interferes, (d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of
the actor and the contractual interests of the other, (f) the
proximity or remoteness of the actor’s conduct to the
interference and (g) the relations between the parties.
Neonatology Assocs. v. Phx. Perinatal Assocs., 216 Ariz. 185, 188, ¶ 8 (App.
2007).
¶39 To obtain judgment under Rule 56, defendants needed to
“point out by specific reference to the relevant discovery that no evidence
existed to support an essential element of [BillingTree’s] claim.” Orme Sch.
v. Reeves, 166 Ariz. 301, 310 (1990). Defendants, having argued only that
their actions were proper because they were not restricted by any
enforceable covenants not to compete or solicit, have failed to meet this
burden. Defendants rested simply on a mistaken conclusion of law—that
the absence of enforceable covenants made their conduct per se
reasonable—and failed to point to any evidence in the record indicating
BillingTree’s inability to meet their burden. Conclusory statements, such as
those made by defendants, will not suffice. Id. Moreover, because the record
is rife with evidence demonstrating the existence of a genuine factual
dispute as to the propriety of defendants’ actions, summary judgment was
improper.
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Decision of the Court
IV. Attorneys’ Fees
¶40 Because defendants are no longer entirely successful on their
motion for summary judgment, we vacate the superior court’s award of
attorneys’ fees and costs to defendants.
¶41 Both parties have requested attorneys’ fees and costs on
appeal pursuant to A.R.S. §§ 12-341.01 and -342 and the Agreements.
Because neither party is fully successful on appeal, we decline to award fees
or costs to either party. After the case is resolved on the merits, the superior
court may consider fees incurred on appeal in determining any fee award
to the prevailing party. Baseline Fin. Servs. v. Madison, 229 Ariz. 543, 546,
¶ 17 (App. 2012).
CONCLUSION
¶42 We affirm the superior court’s grant of summary judgment in
favor of defendants on BillingTree’s claim for breach of contract arising out
of the non-competition covenant, but reverse the ruling on BillingTree’s
claims for breach of contract arising out of the non-solicitation covenant,
breach of the covenant of good faith and fair dealing and tortious
interference with business expectancy, and vacate the award of attorneys’
fees and costs in favor of defendants. We remand for further proceedings
consistent with this decision.
AMY M. WOOD • Clerk of the Court
FILED: AA
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