JAB, Inc., d/b/a Future Concepts Studio & Spa v. Sara Naegle , 2015 Minn. App. LEXIS 46 ( 2015 )

STATE OF MINNESOTA
IN COURT OF APPEALS
A14-1742
JAB, Inc., d/b/a Future Concepts Studio & Spa,
Appellant,
vs.
Sara Naegle,
Respondent.
Filed July 13, 2015
Affirmed
Connolly, Judge
Hennepin County District Court
File No. 27-CV-14-5706
Christopher P. Parrington, Christopher C. Grecian, Andrew R. Shedlock, Foley &
Mansfield, PLLP, Minneapolis, Minnesota (for appellant)
Mark V. Steffenson, Serena C. Iacono, Henningson & Snoxell, Ltd., Maple Grove,
Minnesota (for respondent)
Considered and decided by Chutich, Presiding Judge; Connolly, Judge; and Kirk,
Judge.
SYLLABUS
Because Minn. Stat. § 513.01 (2014) provides that a contract that cannot be
performed within a year of its making must express consideration in writing either in
itself or in a note or memorandum, a nonsolicitation agreement is not enforceable when it
does not express such consideration and does include an integration clause.
OPINION
CONNOLLY, Judge
Appellant employer challenges the denial of its request for a temporary injunction
in its action against respondent, a former employee, who allegedly breached a
nonsolicitation agreement she signed while employed by appellant. The agreement was
to last two years after the end of respondent’s employment. Because Minn. Stat.
§ 513.01 (the statute of frauds) provides that, in an agreement that cannot be performed
within one year of its making, the consideration must be expressed in writing, and
appellant’s nonsolicitation agreement did not specify any consideration and did include
an integration clause, the nonsolicitation agreement is not enforceable. Because appellant
is not likely to succeed on the merits of its action for breach of contract, we affirm the
denial of appellant’s request for a temporary injunction.
FACTS
In November 2010, appellant JAB Inc., d/b/a Future Concepts Studio & Spa
(JAB), adopted a new computer system that enabled its employees to access their work
and appointment schedules remotely when they were not at work and to access JAB’s
customers’ telephone numbers, addresses, visit frequencies, and service and purchase
histories when they were at work. According to an affidavit of JAB’s owner, the new
system was adopted because “both the [employees] and [JAB] recognized that there was
value and benefit in permitting the [employees] to be able to access certain customer
data.”
2
In December 2010, respondent Sara Naegle, who had been employed as a JAB
stylist since 2007, had her regular monthly meeting with JAB’s owner. At the meeting,
respondent was given a document to sign titled “NON-SOLICITATION AND
CONFIDENTIAL INFORMATION AGREEMENT” (the agreement), and she did so.
Signing the agreement was not presented as optional, and respondent was not told of any
benefit that would accrue to her after she signed it.
The agreement provided in relevant part that, during and for 24 months after their
employment, JAB employees: (1) would not induce other JAB employees or contractors
to leave their employment or terminate their contracts; (2) would not solicit any customer
or potential customer of JAB to cease doing business with JAB or to do business with
former employees; (3) would disclose the agreement and make it available to any future
employer and keep JAB apprised of their post-JAB employment status; and (4) would not
disclose any of JAB’s confidential information, including customer lists and customer
information. The agreement also gave JAB the right to an injunction against any
employee who breached it. Finally, the agreement provided that it “contain[ed] the entire
understanding between and among the parties and supersede[d] any prior understandings
and agreements among them respecting the subject matter of this [a]greement.” Neither
implicitly nor explicitly did the agreement mention consideration or any benefit to be
conferred on employees who signed it.
In March 2014, respondent voluntarily left her employment at JAB and began
working at another salon. She contacted some of her JAB customers to let them know
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where she was working, and JAB contacted respondent’s former customers to let them
know that another JAB employee would provide services for them.
JAB brought this action against respondent alleging breach of contract and unjust
enrichment and obtained a temporary restraining order (TRO). Following a hearing on
JAB’s motion for a temporary injunction, the district court denied the motion and vacated
the TRO.
ISSUE1
Does the statute of frauds preclude enforcement of the agreement?
ANALYSIS
“Statutory construction is . . . a legal issue reviewed de novo. . . . We construe
statutes to effect their essential purpose but will not disregard a statute’s clear language to
pursue the spirit of the law.” Lee v. Fresenius Medical Care, Inc., 741 N.W.2d 117, 122-
23 (Minn. 2007) (quotation and citation omitted).
The statue of frauds provides that:
No action shall be maintained, in either of the following
cases, upon any agreement, unless such agreement, or some
note or memorandum thereof, expressing the consideration, is
in writing, and subscribed by the party charged therewith:
(1) every agreement that by its terms is not to be performed
within one year from the making thereof[.]
1
JAB argues for the first time on appeal that it is entitled to a temporary injunction on the
basis of its unjust-enrichment claim, acknowledging that it “did not rely upon the unjust
enrichment claim as a basis for the issuance of an injunction” before the district court.
Because this court does not consider new arguments raised for the first time on appeal,
we do not address this issue. See Leonard v. Parrish, 420 N.W.2d 629, 632 (Minn. App.
1988).
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Minn. Stat. § 513.01. Because the agreement cannot be performed within one year from
its making, Minn. Stat. § 513.01 applies. Thus, because the agreement does not express
consideration and does include an integration clause stating that it “contain[s] the entire
understanding between and among the parties,” it cannot be enforced, and, as the district
court concluded, JAB’s action for breach cannot be maintained.2
One reason for the statute-of-frauds requirement that consideration be in writing is
to “guard[] against leaving the proof of a contract which is to run beyond a year
dependent on the memory and truthfulness of witnesses and the parties.” Beach v.
Anderson, 417 N.W.2d 709, 713 (Minn. App. 1998) (quotation omitted) (concluding that
covenant not to compete recorded by court reporter was adequately memorialized),
review denied (Minn. Mar. 23, 1988). JAB relies on Beach for the proposition that “[a]
court will not blindly apply technicalities if they lead to a conclusion repugnant to
common sense.” Id. at 714. But it is not “repugnant to common sense” to conclude that
Minn. Stat. § 513.01 (clearly prohibiting actions brought on contracts that cannot be
performed in one year and do not express consideration) would prohibit an action on a
contract that cannot be performed until 24 months after an unspecified future date and
does not express consideration. JAB’s reliance is misplaced.
2
JAB argues that, because it provided consideration to employees who signed the
agreement by giving them access to the new computer system, its failure to express
consideration in writing is irrelevant. This argument fails for two reasons. First, JAB
offers no legal support for the view that providing consideration satisfies or moots the
statute-of-frauds requirement to express consideration in writing. Second, the integration
clause precluded the use of anything other than the agreement’s actual text in its
construction, and the district court properly declined to consider anything outside the four
corners of the agreement.
5
JAB also relies on Olson v. Ronhovde, 446 N.W.2d 690, 692 (Minn. App. 1989)
(concluding that “the doctrines of equitable estoppel and ratification removed [a] claim
from the statute [of frauds]”). But that case is distinguishable: it concerned a three-year
lease of farmland to a lessor who, after farming the land and paying rent under the lease
for two years, was found to be collaterally estopped from invoking the statute of frauds to
invalidate the lease for the third year. Olson, 446 N.W.2d at 691, 693. Here, respondent
never acted as if the agreement were valid: she notified her customers as soon as she left
JAB.
Moreover, in Olson, the lessor’s ground for revoking was the fact that the
landowner’s son-in-law, who had signed the lease for the landowner, lacked her written
authority to do so. Id. But the landowner provided an affidavit ratifying the lease; her
“written ratification of the lease effectively removed the lease from the statute of frauds.”
Id. at 693. Here, the issue is not the procedural matter of providing written authorization
for an agent’s signature; it is the substantive matter of providing consideration, a
requirement for any valid contract. See Restatement (Second) of Contracts § 17 (1981)
(providing that a contract is formed when two or more parties exchange bargained-for
promises, manifest mutual assent to the exchange, and support their promises with
consideration), cited in Med. Staff of Avera Marshall Reg’l Med. Ctr. v. Avera Marshall,
857 N.W.2d 695, 701 (Minn. 2014). Neither the collateral estoppel nor the ratification
that precluded application of the statute of frauds in Olson exists here.
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DECISION
Because the statute of frauds prohibits an action brought to enforce a contract that
cannot be performed within a year of its making when the contract does not express
consideration in writing and includes an integration clause, the district court properly
concluded that JAB has no likelihood of success on the merits of its action to enforce the
agreement and denied the temporary injunction.
Affirmed.
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