Clark Sales & Service, Inc. v. John D. Smith and Ferguson Enterprises, Inc. ( 2013 )

Pursuant to Ind.Appellate Rule 65(D), this
Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing Mar 08 2013, 9:27 am
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEES:
ANDREW M. MCNEIL DANNY E. GLASS
Bose McKinney & Evans LLP ADAM F. GLASS
Indianapolis, Indiana Fine & Hatfield
Evansville, Indiana
ROBERT M. BAKER, III
Law Office of Robert M. Baker, III
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
CLARK SALES & SERVICE, INC., )
)
Appellant-Plaintiff, )
)
vs. ) No. 49A04-1208-PL-387
)
JOHN D. SMITH and FERGUSON )
ENTERPRISES, INC., )
)
Appellees-Defendants. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Timothy W. Oakes, Judge
Cause No. 49D13-1205-PL-20492
March 8, 2013
MEMORANDUM DECISION - NOT FOR PUBLICATION
FRIEDLANDER, Judge
Clark’s Sales & Services, Inc. (Clark’s) brings this interlocutory appeal from the trial
court’s order granting in part Clark’s motion for a preliminary injunction based upon the
terms of a non-disclosure agreement and denying in part Clark’s motion for preliminary
injunction as to a restrictive covenant, each sought to be enforced against John D. Smith and
his new employer, Ferguson Enterprises, Inc. The following issue is presented for review:
Did the trial court erroneously conclude that Clark’s did not establish a likelihood of success
on the merits in support of his application for a preliminary injunction by finding and
concluding that the non-competition provision in Smith’s employment agreement was not
supported by adequate consideration?
We reverse and remand.
Smith worked for HH Gregg Appliances and Electronics (Gregg) for four years prior
to commencing employment with Clark’s in 1998. Bill Wilson, a current employee of
Clark’s, trained Smith while they were both working at Gregg and recruited Smith to work
for Clark’s. While employed by Gregg, Smith became familiar with and sold high-end
appliances, often training with manufacturing representatives of high-end appliances.
Clark’s, a family-owned business since it was founded in 1913, is involved in builder-
distributor appliance sales and service in Indiana and concentrates its efforts in high-end
appliance sales. Clark’s generated approximately $750,000 in sales in 1986, when Bob Clark
purchased the business from his parents, and he grew the business to a peak of $28 million in
sales during the first decade of the 2000s. Clark’s prefers to hire sales consultants with prior
experience, but does not consider its business to be similar to that of Sears, Lowes, or Gregg,
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which do business in a traditional retail setting offering low-end, middle, and high-end
appliances. Smith acquired knowledge, skill and information in connection with his
employment as an appliance sales representative with Clark’s.
In 2004, one of Clark’s high-level managers left to join Gregg in a position Clark’s
viewed to be a competitive role. As a result, Clark’s asked Smith and other, but not all,
employees to sign a written employment agreement, which contained both a confidentiality
clause and a restrictive covenant. Smith signed the employment agreement. Other
employees signed an employee handbook, which contained a confidentiality requirement, but
not a restrictive covenant.
Smith, who had previously attended Clark’s management meetings, did not do so after
2007, and was made an assistant store manager in 2009 at Clark’s Castleton showroom.
Smith’s duties involved inside sales in the showroom and did not include visiting with or
calling on customers. Smith did not have assigned customers or a book of business of his
own.
After twelve years working for Clark’s, Smith tendered his resignation on April 13,
2012. Prior to tendering his resignation, Smith emailed copies of Clark’s 2010 and 2011
monthly and quarterly sales bonus reports for all of Clark’s sales personnel to his personal e-
mail account from his company e-mail address, even though he was not authorized to do so.
The reports contained information about all of the sales made by each of Clark’s salespeople
and included customer and builder contact information, the price of the materials sold,
Clark’s costs on those items, and Clark’s profit margin on each sale. On April 18, 2012,
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which was Smith’s last day with Clark’s, Smith accepted an offer of employment with
Ferguson Enterprises, Inc.
Ferguson was also in the business of high-end appliance sales and service, although it
was principally engaged in the plumbing and lighting business. Smith currently works for
Ferguson at its builder and designer showroom in Carmel as an appliance manager. The
showroom is within a 50-mile radius of where Smith’s principal office with Clark’s was.
Smith’s employment does not involve direct sales, but includes the training of sales
employees, coordination with vendors, and assisting with service, installation and delivery.
Smith’s position is salaried and he is compensated for the overall growth of the department.
Clark Cutshaw, Ferguson’s sales manager for the Indianapolis area, testified that the
information contained in Clark’s sales reports were of no value to Ferguson because
Ferguson’s corporate office dictates its cost and pricing. He further testified that Smith was
expected to develop close relationships with building and remodeling contractors, but had no
direct selling responsibilities. John Hoover, Ferguson’s general manager for the central
Indiana area, and Cutshaw’s boss, testified that appliances constituted only one percent of the
“spend” by Ferguson’s customers and that he was trying to increase those sales. He testified
that he expected Smith to close the loop with Ferguson’s customers on appliance sales. In
other words, Smith was expected to convince builders, remodelers, and kitchen designers
who had not previously done so, to purchase appliances from Ferguson.
Although Smith claimed that he had no direct sales responsibility, he confirmed that
he worked on landing sales through focusing on builder and remodeler referral sources, and
4
then allowed a salesperson to complete the actual sale. While working for Ferguson, Smith
has solicited and offered to provide competitive services to business accounts and customers
of Clark’s.
On May 21, 2012, Clark’s filed a verified complaint for preliminary and permanent
injunctive relief and compensatory damages and a motion for preliminary injunction against
Smith and Ferguson. Clark’s subsequently filed an amended complaint that was followed
shortly thereafter by the filing of a motion for entry of stipulated protective order and a
motion to seal exhibits. The trial court signed the parties’ stipulated protective order and
granted the motion to seal the exhibits. Smith and Ferguson filed their answer, affirmative
defenses, and memorandum in opposition to Clark’s motion for a preliminary injunction.
The next day, Smith filed a counterclaim for damages, to which Clark’s filed a reply.
The trial court held a hearing on the application for the preliminary injunction on June
8, 2012. Both parties tendered their proposed findings of fact and conclusions thereon on
June 12, 2012. On July 3, 2012, the trial court issued its special findings of fact and
conclusions thereon granting in part and denying in part Clark’s request for preliminary
injunctive relief. More specifically, the trial court granted Clark’s request for a preliminary
injunction with respect to the nondisclosure agreement provision of Smith’s employment
agreement and issued an order for the return of the confidential information to Clark’s. The
trial court denied Clark’s request for injunctive relief, however, with respect to the restrictive
covenant, or noncompetition, portion of Smith’s employment agreement due to a lack of
5
consideration. The trial court supported this conclusion by setting forth in pertinent part the
following:
In contrast, Smith gained nothing by signing the Restrictive Covenant. Smith
was employed on a sales floor and did not have an exclusive right to a
territory. Additionally, Smith had already received special sales training from
Clark’s. . . . because Clark’s did not give anything of value and Smith did not
gain anything by signing the non-compete agreement, this Court finds there is
not adequate consideration to enforce the Restrictive Covenant between
Clark’s and Smith. . . . because Smith had been employed by Clark’s for six
years before signing the contract. There was no incentive for Smith to sign the
contract, no commencement of a new job, and no pay raise. Therefore, this
Court finds a lack of consideration for the Restrictive Covenant on these
grounds as well.
Appellant’s Appendix at 14-15. Clark’s filed a motion to reconsider the partial denial of
preliminary injunction on July 5, 2012, which was denied by the trial court.
Clark’s now brings this interlocutory appeal of right from the trial court’s partial
refusal to grant Clark’s request for a preliminary injunction with respect to the
noncompetition portion of its employment agreement with Smith. In order to obtain a
preliminary injunction, the moving party, here Clark’s, must demonstrate by a preponderance
of the evidence: (1) a reasonable likelihood of success at trial; 2) the remedies at law are
inadequate; (3) the threatened injury to the movant outweighs the potential harm to the
nonmoving party from the granting of an injunction; and (4) the public interest would not be
disserved by granting the requested injunction. Central Ind. Podiatry, P.C. v. Krueger, 882
N.E.2d 723 (Ind. 2008). Our review on appeal from the grant or denial of the request for
preliminary injunctive relief is for an abuse of discretion. Id.6
“The power to issue a preliminary injunction should be used sparingly, and such relief
should not be granted except in rare instances in which the law and facts are clearly within
the moving party’s favor.” Barlow v. Sipes, 744 N.E.2d 1, 5 (Ind. Ct. App. 2001), trans.
denied. If the moving party fails to prove any of the four requisites for obtaining preliminary
injunctive relief, then the trial court’s order granting such relief is an abuse of that discretion.
Apple Glen Crossing, LLC v. Trademark Retail, Inc., 784 N.E.2d 484 (Ind. 2003).
A trial court is required to issue special findings of fact and conclusions thereon when
determining whether to grant a preliminary injunction. Pathfinder Communic’ns Corp. v.
Macy, 795 N.E.2d 1103 (Ind. Ct. App. 2003); Ind. Trial Rule 52(A). Upon review we must
make the determination whether the evidence supports the trial court’s findings, and whether
the findings support the judgment. Zimmer, Inc. v. Davis, 922 N.E.2d 68 (Ind. Ct. App.
2010). If the record lacks evidence or reasonable inferences from the evidence to support
them, then the findings of fact are clearly erroneous. Id. The judgment is clearly erroneous
when our review of the record leaves us with the firm conviction that a mistake has been
made. Id. Our consideration is limited to a review of the evidence in the light most
favorable to the trial court’s judgment and we liberally construe the findings as a whole in
favor of the judgment. Id.Here, the trial court found that the non-competition clause in Smith’s employment
agreement was not supported by consideration. In particular, the trial court found as follows:
8. Smith did not have a written employment agreement until 2004, after
working for Clark’s for almost six years. At that time, after Clark’s had one of
its high level managers leave to join HH Gregg’s in a competitive role (and
which lead to litigation between Clark’s and the former employee over certain
7
information the employee took from Clark’s), Clark’s asked Smith and other
employees to sign employment agreements with Clark’s that included certain
restrictive covenants.
9. Smith was presented a document titled “Employment Agreement” which
contained a confidentiality clause and a restrictive covenant in September
2004.
10. Smith signed the Employment Agreement (Exhibit 1) on September 29,
2004.
....
12. Paragraph 7 of the Employment Agreement (hereinafter “Restrictive
Covenant”) provides, in pertinent part:
Restrictive Covenants. During the term of Employee’s employment and this
Agreement and for a period of two (2) years following the termination of
Employee’s employment, Employee agrees not to, directly or indirectly,
whether individually or as a partner, shareholder, officer, director, employee,
independent representative, broker, agent, consultant or in any other capacity
for any other individual, partnership, firm, corporation, company or other
entity, engage in the following prohibited activities:
....
(C) Solicit or provide, or offer to solicit or provide, services competitive to
those offered by Employer, or those provided by Employee on behalf of
Employer, to any business account or customer of Employer who was a
business account or customer of Employer during the term of Employee’s
employment, including but not limited to any business account or customer
serviced or contacted by Employee, or for whom Employee had direct or
indirect responsibility, on behalf of Employer within the 12-month period
preceding the termination [of] Employee’s employment or about whom
Employee obtained Confidential Information.
(D) Work in a competitive capacity for HH Gregg’s in Indianapolis, Indiana,
within the State of Indiana, or in any state or municipal corporation, city, town,
village, township, county or other governmental association in which HH
Gregg’s does business, or for an individual, partnership, firm, corporation,
company or other entity providing services similar or competitive to those
offered by Employer to the residential or commercial builder and remodeling
8
business sectors during the term Employee’s employment with Employer,
including but not limited to providing those services performed by Employee
while employed by or working for Employer, within Marion County, Indiana,
any county contiguous to Marion County, Indiana (including Hamilton County,
Hancock County, Shelby County, Johnson County, Morgan County, Hendricks
County, and Boone County), any county in Indiana in which Employer
provided services or has at least one customer or client, the State of Indiana, or
within a 50 mile radius of Employee’s principal office with Employer.
....
28. Smith currently works for Ferguson in its Carmel, Hamilton County,
Indiana showroom, which is within a 50-mile radius of Smith’s principal office
with Clark’s. Ferguson, which is a nationwide company with thousands of
employees, is principally engaged in the business of plumbing and lighting.
More recently, it has attempted to expand into appliances and, even more
recently, kitchen cabinets.
....
Conclusions of Law
....
2. Indiana courts have, on numerous occasions, addressed the enforceability of
restrictive covenants such as the one involved herein. Licocci v. Cardinal
Associates, Inc., 445 N.E.2d 556 (Ind. 1983); Donahue v. Permacel Tape
Corp., 234 Ind. 398, 127 N.E.2d 235 (1955); Captain & Co., Inc. v. Towne,
404 N.E.2d 1159 (Ind. Ct. App. 1980). From these cases certain general
principles may be distilled.
3. Covenants not to compete are in restraint of trade and are not favored by the
law. Burk v. Heritage Food Serv. Equip. Inc., 737 N.E.2d 803, 811 (Ind. Ct.
App. 2000). Noncompetition agreements are strictly construed against the
employer and are enforced only if reasonable with respect to the legitimate
interests of the employer, the restrictions on the employee, and the public
interest. Bridgestone/Firestone, Inc. v. Lockhart, 5 F. Supp. 667, 682 (S.D.
Ind. 1997). The most serious hurdle[] the “likelihood of success,” which
involves a two-step process; first determining if the plaintiff has any chance of
winning and then what those chances are balanced by the harm that will result
if the court guesses wrong. AM Gen’l Corp. v. DaimlerChrisler Corp., 311
F.3d 796, 804 (7th Cir. 2002); Harper/Love Adhesives Corp. v. Can
9
Witzenberg, 2008 WL 740362 *4 (Ind. Ct. App. 2008). This Court first
addresses the Restrictive Covenant and then the Nondisclosure Agreement.
4. It is fundamental that a restrictive covenant is unenforceable if it fails to
obligate the parties to do anything, but the court will consider the entire
contract and the presence of an acceptance clause alone will not invalidate it.
Licocci, 445 N.E.2d at 556. Licocci found that a non-compete agreement was
valid because the salesmen obtained exclusive territorial rights in the handling
[of] the company’s products in exchange for their agreement not to compete
with the company. 445 N.E.2d at 559-60. In contrast, Smith gained nothing
by signing the Restrictive Covenant. Smith was employed on a sales floor and
did not have an exclusive right to a territory. Additionally, Smith had already
received special sales training from Clark’s. Licocci noted that an employment
contract binding a sales representative to a non-compete contract, but not
binding the corporation to any obligation was unenforceable for want of
certainty and mutuality because it created “no obligation which either party can
legally enforce against the other.” 445 N.E.2d at 556. See also Zeyher v. S.S.
& S. Manufacturing Co., 319 F.2d 606 (7th Cir. 1963); Schlumberger Well
Services, a Div. of Schlumberger Techology Corp. v. Blaker, 859 F.2d 512 (7th
Cir. 1988) (noting the mere fact that an employee has acquired skill and
efficiency in the performance of the work as a result of his employment does
not suffice to warrant the enforcement of a covenant on his part not to
compete)(quotations omitted). Cf Wood v. Lucy, Lady Duff-Gordon, 118 N.E.
214 (N.Y. 1917) (the court found consideration was implied when the
company owner gave the employee salesman exclusive agency, and until the
employee gave his efforts, the company owner could not get anything).
Therefore, because Clark’s did not give anything of value and Smith did not
gain anything by signing the non-compete agreement, this Court finds there is
not adequate consideration to enforce the Restrictive Covenant between
Clark’s and Smith.
5. Licocci further reasoned that the salesmen signed the non-compete
agreements several months before starting work. 445 N.E.2d at 564. The
Supreme Court noted that the subsequent commencement of work was
therefore adequate consideration for being employed by the company. Id. The
company’s employment of the salesmen likewise was adequate consideration
for their labor and for their limited relinquishment of certain future
opportunities. Id. Again, this case is distinguishable from Licocci because
Smith had been employed by Clark’s for six years before signing the contract.
There was no incentive for Smith to sign the contract, no commencement of a
new job, and no pay raise. Therefore this Court finds a lack of consideration
for the Restrictive Covenant on these grounds as well.
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6. If a court finds that portions of a noncompetition agreement or covenant not
to compete are unreasonable, it may not create a reasonable restriction under
the guise of interpretation, since this would subject the parties to an agreement
they have not made. Burk, 737 N.E. 2d at 811. However, if such a covenant is
clearly divisible into parts, and some parts are reasonable while others are
unreasonable, a court may enforce the reasonable portions only. Id. See also
Dicen v. New Sesco, Inc., 839 N.E.2d 684, 687 (Ind. 2005) (holding that a
contract is divisible and subject to the “blue pencil” rule, where the clearly
divisible and unenforceable portions of the contract may be struck and still
enforce the reasonable portion of the contract).
7. “When applying the blue pencil rule, a court must not add terms that were
not originally part of the agreement.” Burk, 737 N.E.2d at 811. Rather,
“unreasonable restraints are rendered reasonable by scratching out any
offensive clauses to give effect to the parties’ intentions.” Id. In this case, the
Restrictive Covenant cannot be blue-penciled to add consideration to the
agreement. This Court is not at liberty to add terms that are not part of the
original provision in order to make the contract enforceable.
....
10. Given the egregious level of Smith’s pre-departure act of misusing Clark’s
confidential information, this Court finds it troubling that Smith will continue
his employment at Ferguson. However, the law unfortunately finds the
Restrictive Covenant is unenforceable for lack of consideration.
11. Since the Restrictive Covenant is unenforceable, it is unnecessary for this
Court to address the reasonableness of the non-compete provision, or the claim
that Clark’s breached the contract by lowering Smith’s salary by more than
10%.
Appellant’s Appendix at 7-17.
Clark’s contends that the trial court erred by finding and concluding that the non-
competition provision of the employment agreement was not supported by consideration and
that the trial court reached that erroneous conclusion by taking into account only a portion of
11
the holding in Licocci v. Cardinal Assocs., Inc., 445 N.E.2d 556 (Ind. 1983). We agree with
Clark’s.
Licocci involved the employment agreement entered into by two commissioned
salesmen hired to promote the employer’s products and to solicit orders. Licocci’s initial
employment contract was for one year and provided that for sixty days after termination of
employment, Licocci would neither compete with the employer within his assigned territory
or contact any of the employer’s customers anywhere. Licocci signed a second employment
contract that contained the same two provisions and included the additional term that Licocci
would not sell or help anyone else sell the same products to the same customers he dealt with
while working for the employer.
Papp signed an employment contract similar to Licocci’s first contract. One day prior
to commencing work for the employer, Papp agreed to a substitute employment contract
adding the one-year restriction on sales, which was the additional term of Licocci’s second
employment contract. The employment contracts of both salesmen were amended to create
escrow accounts from which they could withdraw funds against their commissions. Both
men tendered thirty-day notices of termination to the employer. Licocci and Papp each
requested weekly or special draws from the escrow accounts after the resignations. The
employer refused, claiming, in part, that the salesmen were in violation of the non-
competition provision of their contracts. The trial court granted the employer’s request for a
preliminary injunction enforcing both the sixty-day ban on competition and the one-year ban
12
on selling identical products to former customers. Licocci and Papp appealed the trial court’s
refusal to dissolve the preliminary injunction.
In discussing whether there was the exchange of adequate consideration to support the
one-year ban on selling identical products to former customers, our Supreme Court held as
follows:
Both Licocci and Papp claim that restriction number three [one-year ban on
sales] was added to their employment contracts after they were employed and
without any additional consideration. Licocci’s argument clearly fails upon an
examination of the facts. On May 9, 1978, Licocci signed an employment
contract for a one-year term beginning August 1, 1978. Restrictions one and
two were in that contract but restriction number three was not. Upon the
expiration of his initial contract, Licocci signed a new contract on July 31,
1979, which contained all three restrictions. Obviously, Licocci’s execution of
the new contract did not amend the previous contract since the one-year period
of the first contract was over and the second contract covered a new and
subsequent period. Licocci’s continued employment clearly was not the
subject of the first contract and therefore constituted due and adequate
consideration for all of the provisions contained in the new contract.
On May 2, 1979, Papp signed an employment contract similar to Licocci’s
original contract of May 9, 1978. Papp’s contract provided for a one-year term
of employment commencing on August 1, 1979. On July 31, 1979, Papp and
Cardinal agreed to a substitute contract which added restriction number three.
Both Papp and Cardinal agreed to the substitute contract containing restriction
number three before Papp began his Cardinal employment. Papp’s
commencement of work on August 1st, therefore, was adequate consideration
for being employed by Cardinal. Cardinal’s employment of Papp likewise was
adequate consideration for Papp’s labor and for his limited relinquishment of
certain future opportunities.
....
Papp and Licocci further argue that their situation corresponds to that
considered by the Court of Appeals in Advanced Copy Products, Inc. v. Cool,
(1977) 173 Ind. App. 363, 363 N.E.2d 1070, reh. denied. We do not agree. In
Advanced Copy Products, Cool’s employment contract was amended during
the term of the original contract. Specifically, the situation was that of the
13
modification of a contract in force. The Court of Appeals there found that any
modification which imposes a new burden on an employee must be supported
by additional adequate consideration. Advanced Copy Products cites Puetz v.
Cozmas, (1958) 237 Ind. 500, 147 N.E.2d 227. In Puetz, this Court found that
the involved parties had never clearly fixed the amount of rent to be charged
under the contested renewal lease and therefore had demonstrated no meeting
of the minds on the subject of the rent. Accordingly, we held ourselves unable
to determine whether or not there had been an exchange of adequate
consideration. None of these conditions decisive in Advanced Copy Products
and Puetz exist with respect to Papp. The conditions of his employment
contract were clearly stated and the consideration tendered by both parties was
quite apparent. Papp’s contract was not modified after in force and being
acted under since the substitute contract was agreed to by both Papp and
Cardinal at the instance of their employment relationship. We cannot,
therefore, hold that there was a failure of consideration because the parties
themselves agreed to a different contract before they entered into the period
and transactions subject to their contract.
Licocci v. Cardinal Assocs., 445 N.E.2d at 564-65.
Later, in Ackerman v. Kimball Intern., Inc., 652 N.E.2d 507 (Ind. 1995), our Supreme
Court granted transfer from the decision of this court, Ackerman v. Kimball Intern., Inc., 634
N.E.2d 778 (Ind. Ct. App. 1994). In deciding the appeal, the Supreme Court “expressly
adopt[ed] and incorporate[d] by reference that portion of the Court of Appeals’ opinion
captioned ‘Issue One: Consideration for At-Will Employment Contract.’” Ackerman v.
Kimball Intern., Inc., 652 N.E.2d at 509.
Ackerman began working for Kimball in 1963 and entered into an employment
contract with Kimball in 1974. Kimball agreed to continue to employ Ackerman, and
Ackerman agreed to remain in Kimball’s employ, but that either party could terminate
Ackerman’s employment at any time. The employment contract contained both a non-
disclosure provision and a non-competition provision. By the late 1970’s, Ackerman had
14
advanced to Executive Vice-President of the Ply Products Division of Kimball, but by late
1992, was demoted to General Manager of Evansville Veneer, with a reduction in his annual
salary. Ackerman interviewed with and received an offer of employment from one of
Kimball’s competitors. While considering the most attractive of the offers from the
competitor, Ackerman learned that his employment with Kimball would be terminated. At
that meeting, Ackerman executed a separation agreement, which contained a provision
protecting trade secrets and the statement that the separation agreement did not supersede the
1974 employment agreement.
The day prior to and on the morning of his termination from employment with
Kimball, Ackerman requested and received, unbeknownst to Kimball, Kimball’s customer
and supplier lists. When Kimball later learned of the requests, Kimball inquired of
Ackerman about the location of the lists. Ackerman claimed that they were stored in an old
office, but the lists were never located. Kimball then sought a temporary restraining order
and preliminary injunction to prohibit Ackerman’s employment with its competitor and other
remedies under the terms of the employment agreement and separation agreement. The trial
court granted Kimball’s requests and Ackerman appealed.
The portion of our opinion that was adopted and incorporated includes the following
discussion of the issue:
According to Ackerman, the Employment Agreement, including the covenant
not to compete in Paragraph 4, is unenforceable for lack of consideration
because Kimball “gave nothing,” was not required to provide any additional
benefits to him and reserved the right to terminate his employment at will. See
Brief of Appellant at 19.
15
We agree that the Employment Agreement favors Kimball. Only one
provision of the Employment Agreement, Paragraph 1, places an obligation
upon Kimball; all others [sic] provisions set forth Ackerman’s obligations.
Paragraph 1, while a promise by Kimball to continue Ackerman’s employment,
also reserves the right to terminate his employment “at any time.” Record at
13.
Nevertheless, we do not inquire into the adequacy of the consideration
exchanged in a contract. Hamlin v. Steward (1993), Ind. App., 622 N.E.2d
535, 539. Here, in exchange for his promise not to compete with Kimball or
divulge Kimball’s confidential business information, Ackerman received
Kimball’s promise to continue his at-will employment. An employer’s
promise to continue at-will employment is valid consideration for the
employee’s promise not to compete with the employer after his termination.
See Leatherman v. Management Advisors, Inc. (1983), Ind., 448 N.E.2d 1048,
1050; Rollins v. American State Bank (1986), Ind. App., 487 N.E.2d 842, 843,
trans. denied. We conclude that Ackerman and Kimball exchanged valid
consideration in the Employment Agreement and that the Employment
Agreement is not unenforceable for lack of consideration.
Ackerman v. Kimball Intern., Inc., 634 N.E.2d at 781.
Thus, we conclude that the trial court’s judgment with respect to the restrictive
covenant was clearly erroneous and its decision to deny injunctive relief to Clark’s was
clearly erroneous. We do not inquire into the adequacy of the consideration exchanged in the
employment contract. Ackerman v. Kimball Intern., Inc., 634 N.E.2d 778. As in Ackerman,
in exchange for Smith’s promise not to compete or divulge confidential information, Clark’s
promised to continue Smith’s at-will employment. The fact that Smith had been employed
for a number of years prior to entering into the employment agreement has no bearing on the
consideration exchanged in this case.
Because the trial court did not reach the issues of the reasonableness of the non-
competition provision, or the claim that Clark’s breached the contract by lowering Smith’s
16
salary by more than 10%, we are left with an inadequate record from which to direct the
issuance of preliminary injunctive relief. Clark’s urges that we follow our decision in
Robert’s Hair Designers, Inc. v. Pearson, 780 N.E.2d 858 (Ind. Ct. App. 2002), and direct
the trial court to enter the preliminary injunction without further proceedings. In Robert’s,
however, we found the trial court’s conclusions supporting its decision to deny injunctive
relief to be clearly erroneous and remanded the matter for further proceedings consistent with
our opinion. Here, we are left with no findings on the reasonableness of the restrictive
covenant and no findings with respect to whether Clark’s breached the employment
agreement first. We remand this matter to the trial court for a determination of the remaining
issues.
Judgment reversed and remanded.
NAJAM, J., and BRADFORD, J., concur.
17