Perry v. Moran , 111 Wash. 2d 885 ( 1989 )

Callow, C.J. —

Upon reconsideration of Perry v. Moran, 109 Wn.2d 691, 748 P.2d 224 (1987), we affirm our earlier holding with one modification. We delete the last four paragraphs of the opinion as reflected in the earlier report and substitute therefor the following:

The defendant contends that even if the covenant not to serve Perry, Whittemore and Tanner (PWT) clients is enforceable, the amount of liquidated damages for violation of the covenant is excessive. The liquidated damages clause calls for Moran to pay PWT for a 3-year period 50 percent of the amount she bills former clients to whom she has provided services in violation of the covenant not to compete.

Washington law favors the enforcement of a liquidated damages clause. As stated in Management, Inc. v. Schassberger, 39 Wn.2d 321, 326, 235 P.2d 293 (1951):

We are loathe to interfere with the rights of parties to contract as they please between themselves, and the fact that the parties to a contract call a sum stipulated to be paid in case of breach of the contract liquidated damages is a circumstance to be given serious consideration in determining whether it is in fact liquidated damages.

A liquidated damages clause will be enforced if the amount fixed is a reasonable forecast of just compensation for the harm caused by the breach and the harm is such that it is incapable or very difficult of ascertainment. Walter Implement, Inc. v. Focht, 107 Wn.2d 553, 559, 730 P.2d 1340 (1987). The harm caused by the breach of a covenant not to compete is very difficult to accurately quantify. Walter Implement, 107 Wn.2d at 559; Knight, Vale & Gregory v. McDaniel, 37 Wn. App. 366, 371, 680 P.2d 448, review denied, 101 Wn.2d 1025 (1984); Mead v. Anton, 33 Wn.2d 741, 756, 207 P.2d 227, 10 A.L.R.2d 588 (1949). Here, the trial court heard sufficient evidence to support the conclusion that the liquidated damages amount was a reasonable forecast of just compensation for the harm. We would have no difficulty affirming its decision had the trial court held the clause enforceable.

However, because of its determination that Moran had not violated the terms of the covenant as erroneously modified, the trial court made no determination as to the reasonableness of the liquidated damages clause. Moreover, the defendant has not been permitted to introduce evidence on this issue. Therefore, it would be premature for this court to determine the enforceability of the liquidated damages clause.

The dismissal and the trial court's award of attorney's fees to the defendant are reversed. Judith Moran's covenant not to perform accounting services for PWT client accounts is valid and enforceable. The cause is remanded to the trial court for further proceedings to establish whether the sum set by the liquidated damages provision is reasonable and, if not, what sum is justified. See Alexander & Alexander, Inc. v. Wohlman, 19 Wn. App. 670, 578 P.2d 530 (1978). The award of attorney's fees for both trial and appellate representation shall abide the final disposition of the cause. RAP 18.1(e).

Dolliver, Dore, Andersen, Durham, and Smith, JJ., concur.