Reynolds & Reynolds v. Eaves

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
JUN 10 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
THE REYNOLDS AND REYNOLDS
COMPANY, an Ohio corporation,
Plaintiff-Appellant,
No. 98-6026
v.
(D.C. No. CIV-97-1857-A)
(Western District of Oklahoma)
JAMES EAVES, an individual; and
AMERICAN BUSINESS FORMS, INC.,
a Minnesota corporation,
Defendants-Appellees,
ORDER AND JUDGMENT*
Before PORFILIO, MAGILL,** and LUCERO, Circuit Judges.
Reynolds and Reynolds Co. (Reynolds) appeals a district court order denying
Reynolds’ motion for injunctive relief against James Eaves and American Business Forms,
Inc. (ABF). Reynolds claims the district court failed to make the findings of fact and
conclusions of law required by Fed. R. Civ. P. 52(a) and abused its discretion by failing to
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
The Honorable Frank J. Magill, Senior Circuit Judge for the United States Court
**
of Appeals for the Eighth Circuit, sitting by designation.
hold an evidentiary hearing before denying Reynolds’ motion. We conclude the district
court’s order does not satisfy Rule 52(a), VACATE the order, and REMAND for further
findings of fact and conclusions of law.1
Background
Because we dispose of this case on Rule 52(a) grounds, we will outline the facts
only briefly for the purpose of focusing the district court’s attention on remand. Reynolds
develops, sells and distributes electronic and printed business forms. Mr. Eaves worked
for Reynolds as a sales representative for one and a half years. Shortly after Mr. Eaves
resigned his position at Reynolds and took a position as a sales representative with ABF (a
Reynolds competitor), Reynolds filed a complaint and a motion for a preliminary
injunction against both ABF and Mr. Eaves, alleging breach of contract and various
violations of state and federal law.
In its motion for injunctive relief, Reynolds cited the following claims as grounds
upon which Mr. Eaves and ABF may be enjoined:
(1) Mr. Eaves has breached and continues to breach non-compete and non-
solicitation clauses contained in his Employment Agreement with Reynolds.
(2) Mr. Eaves has breached and continues to breach both his Confidentiality
Agreement with Reynolds and a confidentiality clause contained in his
Employment Agreement with Reynolds.
In disposing of this case, we express no opinion on the sufficiency or merit of
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Reynolds’ claims or the likelihood of Reynolds’ success in the preliminary injunction
context.
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(3) Mr. Eaves and ABF have misappropriated Reynolds’ trade secrets in
violation of the Eaves-Reynolds Confidentiality Agreement and Okla. Stat.
tit. 78, § 86(4) (1996).
(4) Mr. Eaves and ABF have engaged in unfair competition in violation of state
common law and § 43(a)(1)(A) of the Lanham Act, 15 U.S.C.
§ 1125(a)(1)(A).
(5) Mr. Eaves and ABF have tortiously interfered with Reynolds’ contractual
relations and business expectancies in violation of Oklahoma law.
(6) ABF has engaged in false advertising in violation of § 43(a)(1)(B) of the
Lanham Act, 15 U.S.C. § 1125(a)(1)(B).
(7) Mr. Eaves and ABF have engaged in conduct which violates the Oklahoma
Deceptive Trade Practices Act, Okla. Stat. tit. 78, § 53(a) (1996).
(8) Mr. Eaves and ABF have wrongfully converted Reynolds’ confidential and
proprietary information in violation of Oklahoma law.
In its motion, Reynolds also requested an evidentiary hearing of three to four days. Mr.
Eaves and ABF filed a brief in opposition to the Reynolds motion, and urged the court to
forego an evidentiary hearing and deny the motion as a matter of law.
The district court, without holding an evidentiary hearing, filed the following order:
Before the Court is plaintiff’s Motion for Preliminary Injunction and
defendants’ response. Attached as Exhibit A to defendants’ response is a
prior ruling from this Court, holding a similar non-competition and non-
solicitation agreement overly broad and void. See Robert Half
International, Inc. v. Oklahoma Personnel Service, Inc., CIV-95-1431-A.
Because plaintiff is unable to prove a substantial likelihood of success on the
merits, its motion for preliminary injunction is DENIED. Although both
parties seek various other relief, the Court declines to rule on these issues as
they are irrelevant to the determination of the motion for preliminary
injunction.
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Reynolds subsequently filed a Motion for Reconsideration of the Denial of the Motion for
Preliminary Injunction and a Renewed Request for an Evidentiary Hearing. The district
court summarily denied both motions. Reynolds brought this appeal.
Discussion
Under Rule 52(a), a district court must “find the facts specially and state separately
its conclusions of law . . . in granting or refusing interlocutory injunctions.” Fed. R. Civ.
P. 52(a). The Rule seeks “to (1) engender care on the part of trial judges in ascertaining
the facts; and (2) make possible meaningful appellate review.” Wolfe v. New Mexico
Dept. of Human Services, 69 F.3d 1081, 1087 (10th Cir. 1995). “Findings of fact by a
trial court should be sufficient to indicate the factual basis for the court's general
conclusion as to ultimate facts, . . . should indicate the legal standards against which the
evidence was measured[, a]nd . . . should be broad enough to cover all material issues.”
Otero v. Mesa County Valley Sch. Dist. No. 51, 568 F.2d 1312, 1316 (10th Cir. 1977).
Reynolds contends the district court’s order failed to provide the findings of fact
and legal conclusions required by Rule 52(a) and our case law. We agree. By its express
terms, the order disposes only of those claims that are based on the non-compete and non-
solicitation clauses of the Reynolds-Eaves employment contract. The district court’s order
does not address at all Reynolds’ remaining claims summarized in grounds (2)-(8) above.
Because the order provides no indication of the court’s disposition of these claims, much
less the reasoning employed, Rule 52(a) has not been satisfied. Under these
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circumstances, we must remand the matter for appropriate findings of fact and legal
conclusions on grounds (2)-(8).2 Colorado Coal Furnace Distribs., Inc. v. Prill Mfg. Co.,
605 F.2d 499, 507 (10th Cir. 1979) (“We can speculate on the various possible reasons the
trial court denied injunctive relief . . . . But the basis of the denial is not evident from the
record.”).
The appellees argue, even if the order is deficient on grounds (2)-(8), it is
nonetheless amenable to meaningful appellate review on its disposition of Reynolds’ non-
compete and non-solicitation claims. According to the appellees, the district court’s
reasoning is rendered clear by reference to Robert Half Int’l, Inc. v. Oklahoma Personnel
Serv., Inc., CIV-95-1431-A, which found non-compete and non-solicitation clauses
containing similar language to those involved in this case unenforceable. Because the
language of the Eaves-Reynolds agreements are before us in the record, appellees argue,
we may review Robert Half Int’l and determine whether the district court reached a
correct legal conclusion.
We recognize the district court’s treatment of the non-compete and non-solicitation
clauses, cursory as it is, presents a close question under Rule 52(a). The appellees’
argument, however, would nonetheless require us to infer the district court’s reasoning
We note, however, that Rule 52(a) only requires such findings and conclusions as
2
are necessary to enable meaningful review; a district court may summarily reject a
frivolous or patently flawed claim, but the court must, at a minimum, explain its reasons
for doing so.
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under Robert Half Int’l. Given that the language in the instant non-compete and non-
solicitation clauses is merely similar, and not identical, to the language found in Robert
Half Int’l, we believe we must remand these claims for further factual findings and legal
conclusions. See Wolfe, 69 F.3d at 1087 (“‘[In order to satisfy Rule 52(a)] the trial court
must include as many of the subsidiary facts as necessary to permit us to determine the
steps by which [it] reached its ultimate conclusion . . . .’” (citation omitted) (alterations in
original)).
Reynolds also claims the district court abused its discretion by failing to hold an
evidentiary hearing before denying Reynolds’ motion and urges us to remand with
instructions to conduct an evidentiary hearing prior to resolving the motion. We reject this
argument. Reynolds has failed to cite any Tenth Circuit authority that requires a district
court to hold an evidentiary hearing prior to granting or denying a preliminary injunction
motion. Battle v. Fields, 59 F.3d 178, 1995 WL 378436 (10th Cir. 1995) (unpublished
opinion), cited by Reynolds, is neither binding nor relevant. In Battle, the district court
dissolved an existing injunction without affording the plaintiffs notice or a hearing;
dissolution of an existing injunction, which directly affects the court-created rights of the
parties, clearly requires more notice and process than the mere denial of an injunction
request. Even if Battle were binding authority, it would not compel the result urged on us
here. Accordingly, we do not instruct the district court to hold an evidentiary hearing prior
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to disposition of Reynolds’ motion, although the district court is free to do so within its
own discretion.
For these reasons, we VACATE the district court’s order and REMAND the
matter with instructions for the district court to conduct further proceedings, if necessary;
to make findings of fact and conclusions of law sufficient to enable meaningful appellate
review; and to enter judgment in accordance with those findings and conclusions.
ENTERED FOR THE COURT
John C. Porfilio
Circuit Judge
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