Daniel B. Buffkin v. Glacier Group

Oct 07 2013, 6:12 am
FOR PUBLICATION
ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE:
SARA R. BLEVINS GREGG S. THEOBALD
JAMES E. ZOCCOLA Lafayette, Indiana
Lewis & Kappes, P.C.
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
DANIEL B. BUFFKIN, )
)
Appellant-Defendant, )
)
vs. ) No. 79A02-1302-PL-141
)
GLACIER GROUP, )
)
Appellee-Plaintiff. )
APPEAL FROM THE TIPPECANOE CIRCUIT COURT
The Honorable Donald L. Daniel, Judge
Cause No. 79C01-1211-PL-41
October 7, 2013
OPINION - FOR PUBLICATION
BROWN, Judge
Daniel B. Buffkin appeals from the trial court’s Findings of Fact and Conclusions
of Law Granting Preliminary Injunction, and raises one issue, which we revise and restate
as whether the court’s ruling is clearly erroneous. We reverse and remand.
FACTS AND PROCEDURAL HISTORY
As an independent contractor, Buffkin began working as a “sales recruiter” for
Glacier Group (“Glacier”) in August 2008. Transcript at 6. Glacier provides executive
or employee recruiting and placement services in the field of information technology
(“IT”). Buffkin and Glacier, by its President Eric Hilleboe, signed an Independent
Contractor Agreement dated August 12, 2008 (the “Agreement”). The Agreement
provided in part:
1. Description of Work. The work provided by Contractor [Buffkin] is
employee recruitment and performance placement for customers and clients
of [Glacier]. During the term of this agreement and for the period of time
set forth herein, [Buffkin] agrees to perform employee recruitment and
performance placement services for only [Glacier] and agrees not to
provide such services to any third party without the prior written consent of
the [Glacier].
2. Independent Contractor Relationship. [Buffkin] is an independent
contractor and is not an employee of [Glacier]. [Glacier] shall determine
the work to be done by [Buffkin], but the manner in which he renders such
services to [Glacier] shall be within the sole control and discretion of
[Buffkin], . . . . [Buffkin] shall be responsible for all taxes as mandated by
law. Since [Buffkin] is not an employee, [he] is not eligible for nor shall he
be entitled to receive, any benefits which employees of [Glacier] are
entitled to receive and shall not be entitled to workers’ compensation,
unemployment compensation, medical insurance, life insurance, paid
vacations, paid holidays, pension, profit sharing, or Social Security on
account of the work performed by [Buffkin] under this agreement.
3. Duration of Agreement. This agreement is effective as of the date it
is signed by both parties (“effective date”) and shall continue in effect until
cancelled by either party upon thirty (30) days’ written notice to the other
party.
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4. Terms of Payment. During the term of this agreement, in full
compensation for his services, [Buffkin] shall be paid by [Glacier] an
amount equal to __20__ percent (__20__%) of any fees collected by or paid
to [Glacier] resulting from placements originated by [Buffkin]. [Buffkin]
has been advised that fees paid to [Glacier] by its customers and clients are
not the same and that, as a result, the payments to [Buffkin] will differ.
[Buffkin] shall not be entitled to payment for any fees collected by or paid
to [Glacier] resulting from placements originated by Eric Hilleboe or from
any other placements not originated by [Buffkin]. . . .
5. Trade Secrets and Confidentiality. While during the term of this
agreement or at any time thereafter, regardless of expiration or termination
of this agreement, [Buffkin] agrees not to disclose, directly or indirectly, to
any person or entity any trade secrets or protected information of [Glacier].
. . . Upon termination or expiration of this agreement, [Buffkin] agrees not
to solicit, entice away or divert any current or past customers of [Glacier]
nor any persons or entities contacted by [Buffkin] while performing
services for [Glacier] during the term of this agreement. . . .
6. Covenant not to Compete. Throughout the term of this agreement
and for a period of three (3) years immediately following the expiration or
termination of this agreement, [Buffkin] shall not, directly or indirectly,
whether for compensation or otherwise, either individually, or as an
employee, employer, consultant, agent, principal, partner, corporate officer,
director, stockholder or in any other individual or representative capacity,
enter into, own, manage, engage in, be employed by, operate, participate in,
control, aid, assist, or be connected in any way with any business that
competes with [Glacier] in employee recruitment or performance placement
with employers with offices in the continental United States. [Buffkin]
acknowledges and agrees that [Glacier’s] client base is drawn from
throughout the country in which competition is restricted by this provision
and that such restricted area and the length of such restriction on
competition is reasonable. This restriction on competition shall be
construed as an agreement independent of any other provision of this
agreement and the existence of any claim or cause of action by [Buffkin]
against [Glacier], whether based on this agreement or otherwise, shall not
constitute a defense to the enforcement of this covenant by [Glacier]. In the
event of a breach of this paragraph by [Buffkin], [Glacier] shall be entitled
to injunctive relief as well as all other remedies available under this
agreement and the law. In addition to any other remedies available under
the law to [Glacier] for a breach by [Buffkin], as liquidated damages, and
not as a penalty, [Buffkin] shall pay to [Glacier], sixty percent (60%) of the
gross fees or payments made to [Buffkin] for employee recruitment or
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performance placement services. In addition, the period of non-competition
by [Buffkin] shall be extended by the length of the period of any such
breach.
*****
9. Attorney Fees, Costs. In the event either party shall reasonably be
compelled to employ an attorney to enforce the provisions of this
agreement, the non-defaulting party shall be entitled to reasonable attorney
fees and all costs and expenses thereby incurred, including trial and appeal.
Appellant’s Appendix at 85-87.
On June 2, 2011, Eric Hilleboe, the President/CEO of Glacier, sent an e-mail
message to Buffkin stating that Glacier was terminating the Agreement effective as of
that date.
On November 16, 2012, Glacier filed a complaint against Buffkin alleging that he
was in breach of Paragraph 6 of the Agreement and requesting damages and injunctive
relief. On December 6, 2012, Buffkin filed an answer and a counterclaim alleging that
Glacier failed to comply with the termination provision of the Agreement. Glacier filed
an answer on December 13, 2012, and on December 26, 2012, filed a motion to amend
the complaint to correctly reflect its name as a partnership, and the court granted the
motion.
On January 8, 2013, the court held a hearing at which the parties presented
evidence and arguments, and then took the matter under advisement and directed counsel
to submit proposed findings within two weeks. At the hearing, Hilleboe testified that
Glacier “do[es] executive recruiting in the IT . . . Sector for companies related to Data
Storage, hosting, location, virtualization, manage services,” that its office is located in
West Lafayette, Tippecanoe County, Indiana, and that it does “executive recruiting in
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[the IT] field for primarily sales people, pre-sales engineers, systems engineers, inside
sales, leadership positions being directors VP’s, CFO’s, CEO’s those types of positions.”
Transcript at 4. When asked if he was essentially a “head hunter in the IT field,”
Hilleboe testified “Yeah so basically we have a probably forty-five active clients that
request our services in providing sales people or pre-sales engineers to those companies
so what we do is we go out to competitors of those companies and we try and find
individual sales people that might be a fit based on having . . . skills that qualification
matches.” Id. at 4-5. Hilleboe testified that Buffkin was hired to be a sales recruiter, that
Glacier would provide him with job openings for its particular clients, and that Buffkin
would then look for individuals with the skill requirements to be candidates to fill the
clients’ positions.
Hilleboe further testified that he had numerous conversations with Buffkin about
Buffkin’s performance, that his performance “from January of 2011 to June of 2011
when he was let go was basically non-existent,” and that “he had assisted in placing one
individual candidate in that six month time frame.” Id. at 8. Hilleboe stated that when
Buffkin began to work for Glacier, he had no recruiting or IT experience and that Glacier
“taught him everything that he knows about how to recruit, who to recruit, when to
recruit them, what language to use, how the contracts were written and not only that he
was privy and had access to what is called proprietary information from our clients that
basically relate to things such as commissions, commissions structures, payouts, products
and services of those organizations that we recruit for.” Id. at 11. Glacier presented a
client list identifying its clients during Buffkin’s tenure of 2008 to 2011 and identifying
5
additional clients Glacier acquired after the termination of the Agreement.1 In addition,
Hilleboe testified that, on November 15, 2011, he went to a website which advertised for
job openings and discovered that Buffkin was advertising for jobs in the IT field,
including for “data storage, hosting virtualization.” Id. at 14. Hilleboe testified that
Glacier did recruiting nationwide and primarily in metropolitan cities. When asked if he
was requesting “a preliminary injunction to prevent [] Buffkin from engaging in IT
recruiting during the pendency of this litigation,” Hilleboe stated “IT recruiting as it
relates to data storage, virtualization, hosting, co-location, data analytics, big storage.”
Id. at 19.
Buffkin testified that he placed candidates for Glacier in the areas of sales
representatives and sales engineers and to his knowledge did not place any other types of
individuals in the IT industry. Buffkin indicated that Glacier had other independent
contractors like him that did work in other parts of the country. He stated that he did not
have any contact with any of Glacier’s clients or their representatives and that Glacier did
not provide him with a client list or any contact information for the clients. Buffkin
testified: “my role with Glacier Group was simply [to] provide them candidates. I have
no knowledge of, no communication with any companies, was not allowed to have
communication with any companies so my simple role was to find candidates with the
specific skill set and get them over to Eric [Hilleboe] and his partner.” Id. at 42. He
1
Under the heading “Storage / Cloud / Big Data / Virtualization Companies – During [Buffkin’s]
Tenure,” the list identified the names of thirty-seven companies. Exhibit B. Under the heading “Storage /
Cloud / Big Data / Virtualization Companies – Acquired after [Buffkin’s] Tenure,” the list identified the
names of eleven companies. Id. Under the heading “HOSTING / VIRTUALIZATION / DATA
CENTER / CLOUD COMPUTING / COLOCATION / IT / Network Services Telecom COMPANIES
During [Buffkin’s] Tenure,” the list identified the names of thirty-three companies. Id.
6
stated that there was not any sort of formal training and that he never visited the Glacier
office. Buffkin testified that “Glacier Group would have a skills set that they were
looking for with respect to the companies” and that “[t]he only information would be you
would share a job description with me. A comp range of what the job might pay but that
is it. And I would find a person with that specific skill set related job description and get
them over to the Glacier Group.” Id. at 43. When asked, “[d]uring the period of August
12 of 08 through June 2nd of 2011 how many deals . . . prospects did you bring to the
Glacier Group that actually closed,” Buffkin stated “[i]t wasn’t really a whole lot but I
guess fifteen.” Id. at 43-44.
When asked if he recalled any of the clients that he may have been aware of
during his time at Glacier, Buffkin replied “[y]eah when he would provide me with a job
description and a role and then he would mention the company so yeah I knew the
companies or at least a general idea of the companies that he was recruiting for.” Id. at
44. Buffkin further testified that he never made any contact with any of Glacier’s
customers at any time after the Agreement was terminated. When asked if he had “done
some executive placement” since his dismissal in June 2011, Buffkin responded
affirmatively, and when asked “about how many deals [had he] done,” Buffkin stated
“[n]ineteen or so.” Id. at 45. Buffkin indicated that to his knowledge not one of the
placements was with a client of Glacier. He stated that he never discussed any
confidential information of Glacier with anyone, that there were “no trade secrets or
proprietary information exchanged with my relationship with Glacier Group,” and that
“[i]t was a recruiting form and we didn’t have any customer list, client list, there was no
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information that was ever exchanged that I would consider to be proprietary.” Id. at 46.
Buffkin stated he was asking the court to find the non-compete clause of the Agreement
to be unenforceable as overly broad because it did not have any parameters of industry
whatsoever, and it sought to prohibit him from doing any executive recruiting in any
industry. He further indicated that the highest number of deals he may have done with
Glacier was fifteen and potentially in fifteen different states but that was unlikely as he
may have done multiple deals in the same state. When asked, of the prospects or
candidates he communicated with while working for Glacier, how many he had contact
with after June 2011, Buffkin responded: “No idea. I couldn’t put a number on those
people. I have done everything in my capacity to not contact anybody that I ever had any
contact with while at Glacier Group.” Id. at 49. He indicated that a majority of the
nineteen transactions he did since he left Glacier dealt with IT or data storage. When
asked, “[a]s you sit here today are you recruiting in the IT industry,” Buffkin responded
affirmatively, and he indicated that he also recruited in the “data storage virtualization
and data center and hosting industry.” Id. at 51. When asked about the companies he
was recruiting for, Buffkin named four companies, and when asked if any of those
companies were competitors of Glacier, Buffkin stated “they are not.” Id. at 52. When
asked “[a]ny of the prospects that you contacted to fill positions of Glacier Group did that
have anything to do with any of that information that Eric or anybody at Glacier Group
provided you,” Buffkin answered “No,” and when asked whether any prospects he had
contacted since his termination by Glacier had anything to do with any information
provided by Glacier, Buffkin answered “No.” Id. at 52. When asked “[s]o the[y] are just
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individuals that are out there in the tech sector in in the business sector,” Buffkin
responded affirmatively. Id.
On March 7, 2013, the court issued Findings of Fact and Conclusions of Law
Granting Preliminary Injunction. In the order, the court found in part that “Glacier Group
is in the business of recruiting in the field of information technology, data storage, cloud,
virtualization, big data and managed hosting, managed services, data communication, and
telecommunication” and that its “clients and candidate base are located throughout the
United States.” Appellant’s Appendix at 5. The court found that “under [Buffkin’s] own
admission, after being terminated by [Glacier] on June 2, 2011, [he] has engaged in and
continues to engage in recruitment and/or advertisement for and/or performance
placement of candidates for placement in the industry in which [Glacier] operates –
recruiting and performance placement of prospective employees in the areas of data
storage, cloud, virtualization, big data, managed hosting, managed services, data
communication and/or telecommunication.” Id. at 7. In its conclusions of law, the court
stated the goodwill generated between Glacier and its customers, together with names,
addresses, and requirements of customers as well as the business advantage of personal
contacts with customers is recognized in Indiana as a protectable interest and that, in
addition, referral sources are recognized as protectable interests. The court concluded
“[h]ere, during the almost three (3) year business relationship between [Glacier] and
[Buffkin], [Buffkin] came into contact with a vast number of prospects and candidates, as
well as clients of [Glacier], including their names and at the very least, their e-mail
addresses, together with the requirements of [Glacier’s] customers for prospects and
9
candidates to fill employment positions” and that “[t]his therefore created a legitimate
protectable business interest by [Glacier].” Id. at 10.
The court further concluded:
11. [Buffkin] has admitted to directly competing against [Glacier] after
being terminated from working for [Glacier] on June 2, 2011.
[Buffkin] has either refused to, or was unable to supply a list of or
otherwise explain to the Court in the hearing on [Glacier’s] Request
for Preliminary Injunction who his clients currently are in the IT and
Data Storage industries, together with how many placements he has
made in this industry, how much money he has made since June 2,
2011 from those placements, and where and when [he] has obtained
the contacts he has made that he has used to make placements in the
field in which [Glacier] works and operates.
12. Further, [Buffkin] either was unable to or chose not to disclose the
prospects he has had contact with since leaving his work for
[Glacier] in June of 2011, and whether or not any of those leads
and/or contacts were generated as a result of his work for [Glacier]
from August 12, 2008 to June 2, 2011. For these reasons,
[Glacier’s] remedies at law during the pendency of this litigation are
inadequate.
13. That [Buffkin’s] admitted conduct through his testimony at the
January 8, 2013 hearing demonstrates at least a reasonable
likelihood of success by [Glacier] on the merits of its lawsuit herein
against [Buffkin].
*****
29. The Court now ORDERS as follows: That until further Order of his
Court [] Buffkin shall not, directly or indirectly, whether for
compensation or otherwise, either individually, or as an employee,
employer, consultant, agent, principal, partner, corporate officer,
director, stockholder or in any other individual or representative
capacity, enter into, own, manage, engage in, be employed by,
operate, participate in, control, aid, assist, or be connected in any
way with any business that competes with Glacier Group (in the
areas of data storage, cloud, virtualization, big data, managed
hosting, managed services, data communication, and
telecommunication) in employee recruitment, advertisement of, or
10
performance placement with employers with offices in the
continental United States.
Id. at 11, 14. The court concluded that, while Buffkin alleged that Paragraph 6 does not
specifically define the industry in which Glacier operates, Paragraph 1 makes it clear that
Buffkin was required to perform employee recruitment and performance placement
services. The court also concluded that “the evidence and testimony are such that the
geographic scope of the covenant . . . is not unreasonable,” and granted Glacier’s request
for a preliminary injunction. Id. at 13. Buffkin now brings an interlocutory appeal from
the trial court’s ruling.
ISSUE AND ARGUMENTS OF THE PARTIES
The issue is whether the trial court’s grant of a preliminary injunction is clearly
erroneous. Buffkin maintains that the non-competition provision of the Agreement is
unenforceable because it is unreasonable, that the Agreement does not protect a
legitimate interest of Glacier, that the restrictions on activity and geographic scope are
overly broad under the circumstances, and that thus the trial court abused its discretion by
issuing a preliminary injunction enforcing the provision. Specifically, Buffkin argues
that Paragraph 6 of the Agreement has several deficiencies, namely, that under the
circumstances of his engagement with Glacier he did not gain a competitive advantage
through his relationship with Glacier and thus it would not be unfair for him to compete,
that the restriction simply seeks to quash honest competition which is not a legitimate use
of a non-competition provision, that the scope of the restricted activity is overly broad in
that it improperly seeks to prohibit him from working for a competitor in any capacity
and restricts harmless activity, and that the geographic scope of the restriction is overly
11
broad in that it prohibits activity in areas where Buffkin did not have transactions.
Buffkin also asserts that the court abused its discretion when it improperly employed the
blue pencil doctrine to alter the non-competition provision.
Glacier asserts that it has legitimate, protectable business interests that are
protected by the Agreement and that it provided Buffkin with insider knowledge, training
in the field of IT employment recruiting and placement, goodwill including the names
and business requirements of its customers, and proprietary information including
commission structures, payouts, and products and services of its clients. Glacier argues
that Buffkin had no experience working in recruiting in the IT field, that Buffkin was
given proprietary and confidential information, and that Buffkin “acquired knowledge of
the industry in which Glacier operates that was much more in depth than general skills or
general knowledge.” Appellee’s Brief at 14-15. Glacier states that, during the almost
three years Buffkin worked for the company, it had seventy clients for whom it provided
recruitment placement, that, after ceasing to work for Glacier, Buffkin placed nineteen
candidates through his work as a recruiter, and that it would “not have been possible for
Buffkin to place those candidates without learning and being given proprietary
information by Glacier Group about how to write a contract in this field, how
commissions and commission structures work, what clients look for, what products and
services customers / clients have and provides, the names of Glacier Group’s clients, and
candidate lists that Glacier Group provided to Buffkin.” Id. at 15. It maintains that
“[c]ontrary to the assertion of Buffkin, the covenant not to compete set forth in Paragraph
six (6) of [the Agreement] does not prevent Buffkin from recruiting or working in any
12
employee recruiting or performance placement business, regardless of area of
concentration” and that Buffkin is not prohibited from working in recruiting in fields or
industries “that Glacier Group does not recruit candidates in.” Id. at 16-17. Glacier
acknowledges that the language added by the trial court should be stricken because the
court is not permitted to add language to the covenant not to compete.
In his reply brief, Buffkin argues that he has had no contact with any client of
Glacier after the termination of the Agreement and that any assertion to the contrary is
pure speculation, and that there was no goodwill generated between he and Glacier
clients that warrants protection. Buffkin also notes that he was an independent contractor
and that, as such, any contact he had with potential job candidates was entirely his own
and therefore that the kind of goodwill that is protectable by non-competition agreements
is not present in this case. He maintains that there is no evidence that he received any
proprietary information and that any information was available to the general public and
readily ascertainable.
STANDARD OF REVIEW
The grant or denial of a request for a preliminary injunction rests within the sound
discretion of the trial court, and our review is limited to whether there was a clear abuse
of that discretion. Gleeson v. Preferred Sourcing, LLC, 883 N.E.2d 164, 171-172 (Ind.
Ct. App. 2008) (citing Ind. Family & Soc. Servs. Admin. v. Walgreen Co., 769 N.E.2d
158, 161 (Ind. 2002)). When determining whether to grant a preliminary injunction, the
trial court is required to make special findings of fact and state its conclusions thereon.
Id. at 172. When findings and conclusions thereon are made, we must determine if the
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trial court’s findings support the judgment. Id. We will reverse the trial court’s judgment
only when it is clearly erroneous. Id. Findings of fact are clearly erroneous when the
record lacks evidence or reasonable inferences from the evidence to support them. Id. A
judgment is clearly erroneous when a review of the record leaves us with a firm
conviction that a mistake has been made. Id. We consider the evidence only in the light
most favorable to the judgment and construe findings together liberally in favor of the
judgment. Id. Also, 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. Id.
To obtain a preliminary injunction, the moving party has the burden of showing by
a preponderance of the evidence the following: (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.
Id. If the movant fails to prove any of these requirements, the trial court’s grant of an
injunction is an abuse of discretion. Id.
DISCUSSION
Buffkin maintains that there is no reasonable likelihood of success in this case
because Paragraph 6 of the Agreement is unreasonable and unenforceable. He argues
that the provision does not protect a legitimate interest of Glacier, that the scope of the
restricted activity is unreasonable and overly broad, and that the geographic scope of the
restriction is unreasonable. We thus address whether the conclusion that Glacier has
14
shown by a preponderance of the evidence a reasonable likelihood of success at trial is
clearly erroneous.
We first observe that Indiana courts have long stated that covenants which restrict
a person’s employment opportunities are strongly disfavored. See Cent. Ind. Podiatry,
P.C. v. Krueger, 882 N.E.2d 723, 728-729 (Ind. 2008) (“This Court has long held that
noncompetition covenants in employment contracts are in restraint of trade and
disfavored by the law.”) (citing Dicen v. New Sesco, Inc., 839 N.E.2d 684, 687 (Ind.
2005); Harvest Ins. Agency, Inc. v. Inter-Ocean Ins. Co., 492 N.E.2d 686, 688 (Ind.
1986); Licocci v. Cardinal Assocs., Inc., 445 N.E.2d 556, 561 (Ind. 1983); Donahue v.
Permacel Tape Corp., 234 Ind. 398, 404, 127 N.E.2d 235, 237 (1955); RESTATEMENT
(SECOND) OF CONTRACTS, § 188 cmt. g (1981) (“Post-employment restraints are
scrutinized with particular care because they are often the product of unequal bargaining
power and because the employee is likely to give scant attention to the hardship he may
later suffer through loss of his livelihood.”)); Coates v. Heat Wagons, Inc., 942 N.E.2d
905, 913 (Ind. Ct. App. 2011) (finding that “Indiana courts strongly disfavor as restraints
of trade covenants not to compete in employment contracts”). We also note that the fact
that Buffkin was identified as an independent contractor in the Agreement does not alter
our review of the covenant not to compete. See Harvest, 492 N.E.2d at 688 (“As the
parties were engaged in a principal-agent relationship, we will employ the stricter
scrutiny utilized in reviewing employer-employee covenants.”); see also Paragon Tech.,
Inc. v. Infosmart Tech., Inc., 718 S.E.2d 357, 358 (Ga. Ct. App. 2011) (“[R]estrictive
covenants in contracts for services by independent contractors [are] . . . treated like
15
employee covenants ancillary to employment contracts.”) (citation and internal quotation
marks omitted); Eichmann v. Nat’l Hosp. and Health Care Servs., Inc., 719 N.E.2d 1141,
1146 (Ill. Ct. App. 1999) (“Plaintiff’s status as an independent contractor does not change
the nature of defendant’s interest. Illinois law does not hold restrictive covenants
contained in an independent contractor agreement to a less strict standard than those in
employment contracts.”); Zellner v. Stephen D. Conrad, M.D., P.C., 589 N.Y.S.2d 903,
906 (N.Y. App. Div. 1992) (holding in part that an at-will employee or independent
contractor can be bound by a restrictive covenant and noting that, “for purposes of our
analysis” related to whether an agreement to refrain from competition was unreasonable
and unenforceable, “no distinction need be drawn between the independent contractor,
the position of the plaintiff here, and the at-will employee . . . .”).
The Indiana Supreme Court has held that “[t]o be enforceable, a noncompetition
agreement must be reasonable” and that “[u]nlike reasonableness in many other contexts,
the reasonableness of a noncompetition agreement is a question of law.” Krueger, 882
N.E.2d at 729 (citation omitted). In arguing the reasonableness of a non-competition
agreement, the employer must first show that it has a legitimate interest to be protected
by the agreement. Id. (citations omitted). The employer also bears the burden of
establishing that the agreement is reasonable in scope as to the time, activity, and
geographic area restricted. Id. Non-competition agreements are strictly construed
against the employer. Krueger, 882 N.E.2d at 729; Press-A-Dent, Inc. v. Weigel, 849
N.E.2d 661, 668-669 (Ind. Ct. App. 2006), trans. denied.
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In Coates, we stated that “[a] legitimate protectable interest is an advantage
possessed by an employer, the use of which by the employee after the end of the
employment relationship would make it unfair to allow the employee to compete with the
former employer.” 942 N.E.2d at 913 (citations and internal quotation marks omitted).
We held that goodwill, including secret or confidential information such as the names and
addresses of customers and the advantage acquired through representative contact, is a
legitimate protectable interest. Id. Also subject to protection as goodwill is the
competitive advantage gained for an employer through personal contacts between
employee and customer when the products offered by competitors are similar. Id.
However, we also observe that the “general skills” acquired in working for an
employer may be transferred unless this occurs under circumstances where their use is
adverse to his employer and would result in irreparable injury. Id. Indeed, “[a]lthough
an employer has a protectible property interest in the good will of his business (including
secret or confidential information), the same is not true regarding the general knowledge,
information or skills gained by the employee in the course of his employment.” Brunner
v. Hand Indus., Inc., 603 N.E.2d 157, 160 (Ind. Ct. App. 1992); see also Donahue, 234
Ind. at 411, 127 N.E.2d at 241 (“[W]hile an employer, under a proper restrictive
agreement, can prevent a former employee from using his trade or business secrets, and
other confidential knowledge gained in the course of the employment, and from enticing
away old customers, he has no right to unnecessarily interfere with the employee’s
following any trade or calling for which he is fitted and from which he may earn his
livelihood and he cannot preclude him from exercising the skill and general knowledge
17
he has acquired or increased through experience or even instructions while in the
employment.”) (citation omitted); Wagler Excavating Corp. v. McKibben Const., Inc.,
679 N.E.2d 155, 157-158 (Ind. Ct. App. 1997) (stating that “[p]ublic policy prohibits any
unnecessary interference with a person’s calling for which he is fitted and from which he
may earn a livelihood,” that “[t]hus, Indiana courts disfavor covenants which restrict a
person’s liberty of action in his business or trade,” that “[a]ccordingly, Indiana courts will
not hesitate to strike down any such restrictive covenants which are the least bit overly
broad with respect to the ‘protectible interest’ at stake,” that “[w]here the underlying
protectible interest is minimal, courts will closely scrutinize the terms of the restraint,”
and that “[t]he burden is on the party seeking to enforce the covenant to demonstrate that
the injunction is necessary to protect a legitimate business interest”), trans. denied;
Captain and Co. v. Towne, 404 N.E.2d 1159, 1162 (Ind. Ct. App. 1980) (“[The
employer], however, is not entitled to protection from an employee’s use of his
knowledge, skill or general information acquired or increased through experience or even
instructions while in the employment.”).
A. INTEREST TO BE PROTECTED
We first address whether Glacier has demonstrated that it has a legitimate interest
to be protected by the Agreement. This court has stated:
An employer may not simply forbid his employee from subsequently
operating a similar business. The employer must have an interest which he
is trying to legitimately protect. There must be some reason why it would
be unfair to allow the employee to compete with the former employer. The
employee should only be enjoined if he has gained some advantage at the
employer’s expense which would not be available to the general public.
Norlund v. Faust, 675 N.E.2d 1142, 1154 (Ind. Ct. App. 1997), trans. denied.
18
Although Hilleboe testified that, when Buffkin began to work for Glacier, he had
no recruiting or IT experience, that Glacier “taught him everything that he knows about
how to recruit, who to recruit, when to recruit them, what language to use, how the
contracts were written,” and that Buffkin learned about “commissions, commissions
structures, payouts, products and services of those organizations that we recruit for” from
Glacier, see Transcript at 11, the accumulated training, knowledge, and skills acquired by
Buffkin are not, in themselves, legitimate interests to be protected, even where the
training and knowledge were acquired or increased through experience while working for
Glacier. See Brunner, 603 N.E.2d at 160; Donahue, 234 Ind. at 411, 127 N.E.2d at 241.
Moreover, Glacier has not met its burden of producing evidence that Buffkin had
access to proprietary information which gave him some advantage at Glacier’s expense.
Buffkin indicated that he did not have any contact with Glacier’s clients or their
representatives. He testified that he had “no communication with any companies” and
“was not allowed to have communication with any companies,” and that his role was to
simply find candidates with the specific skill sets necessary for their hire. Transcript at
42. Buffkin testified that, with respect to positions to be filled for Glacier’s clients, he
would be provided with a job description, the company seeking the candidate, a set of
skills the company was looking for, and a compensation range related to the position.
Buffkin stated that he never made any contact with any of Glacier’s customers after the
Agreement was terminated. Buffkin also testified that there were no trade secrets or
proprietary information gained as a result of his relationship with Glacier and that “[i]t
was a recruiting form and we didn’t have any customer list, client list . . . .” Id. at 46.
19
Glacier did not present evidence that Buffkin used or was able to use its personal contacts
or the relationships it had developed with its clients or its representatives to “entic[e]
away old customers” of Glacier. See Donahue, 234 Ind. at 411, 127 N.E.2d at 241.
While the advantage of Glacier “acquired through representative contact” would be a
legitimate protectable interest and “the competitive advantage gained for an employer
through personal contacts between employee and customer” would be subject to
protection, see Coates, 842 N.E.2d at 913, the record reveals that, although Buffkin was
informed of the client seeking to fill a position, Glacier did not present evidence that it
obtained a competitive advantage through Buffkin’s personal contacts or relationships
with clients, and in fact Buffkin testified that the personal contacts of and relationship
developed by Glacier were not shared with him. The information provided to Buffkin
which related to specific recruiting assignments and activities was not of the nature or
sort of information “the use of which by the employee after the end of the employment
relationship would make it unfair to allow the employee to compete with the former
employer.” See id. If there is an underlying interest to be protected by a non-competition
provision of the Agreement, the interest is minimal.
B. REASONABLENESS OF RESTRICTIONS
We next turn to whether the terms of the Agreement are reasonable. “Where the
underlying protectible interest is minimal, courts will closely scrutinize the terms of the
restraint.” Wagler, 679 N.E.2d at 158. To the extent that Paragraph 6 of the Agreement
protects a legitimate and protectable interest, even if minimal, the non-competition
provision of the Agreement must also be reasonable in terms of the time, activities, and
20
geographic area restricted. See Krueger, 882 N.E.2d at 729. In examining whether the
Agreement is reasonable, we also note that “the validity of a non-competition clause is
dependent not merely upon the covenant itself but upon the entire contract and the
situation to which it is related.” Licocci, 445 N.E.2d at 563. Buffkin maintains that the
Agreement is unreasonable in terms of the geographic restriction and the activities
restricted.
1. Geographic Restrictions
The Agreement restricts Buffkin from performing recruiting or placement services
for employers “with offices in the continental United States.” Appellant’s Appendix at
87. “Whether a geographic scope is reasonable depends on the interest of the employer
that the restriction serves.” Krueger, 882 N.E.2d at 730 (citing Slisz v. Munzenreider
Corp., 411 N.E.2d 700, 707-709 (Ind. Ct. App. 1980) (know-how or “unique skills”
derived from the employer may justify a wider scope)). We have already determined that
the legitimate interest Glacier seeks to protect is minimal. The basis justifying restriction
is Glacier’s investment or interest in developing its customer base across the United
States. See id. Hilleboe testified that Glacier engaged in recruiting nationwide and
primarily in metropolitan cities and had “probably forty-five active clients that request
[its] services . . . .” Transcript at 4. Although Glacier may have current client contacts in
a number of metropolitan cities and may desire to provide recruitment and placement
services for additional companies nationwide, and indeed it included language in the
Agreement that its “client base is drawn from throughout the country,” see Appellant’s
Appendix at 87, Glacier does not point to evidence regarding the operations or locations
21
of its approximately forty-five active customers. When Buffkin was asked, “[d]uring the
period of August 12 of 08 through June 2nd of 2011 how many deals . . . prospects [he
brought] to the Glacier Group that actually closed,” he stated “[i]t wasn’t really a whole
lot but I guess fifteen.” Transcript at 43-44. The Agreement contemplates a restriction
prohibiting Buffkin from providing recruiting and placement services in a very large
geographic area, which essentially precludes him from working in the field. See Harvest,
492 N.E.2d at 688 (noting the established rule that in most instances a spatial restraint
upon a former employee must be limited to the area of the employee’s sales territory)
(citing Licocci, 445 N.E.2d at 562-563). We also note that an employer does not
necessarily currently possess a legitimate protectable interest in each region in a
geographic area (such as the continental United States) or each relevant market for its
products or services by mere virtue of the fact that the employer may wish or has a vision
to expand its business into every such region or relevant market. It was incumbent upon
Glacier to present evidence demonstrating it had a legitimate interest to be protected in
the relevant markets in which it sought to prohibit Buffkin’s activity and that any
competition presented by Buffkin’s activities in those markets would be unfair. We
conclude that the restriction prohibiting Buffkin from providing or performing any
recruitment or placement services anywhere in the continental United States exceeds the
bounds of reasonableness. See Krueger, 882 N.E.2d at 730 (holding that the geographic
restriction was unreasonable under the facts of the case); Dicen, 839 N.E.2d at
689 (“Restricting Dicen from working in the land remediation business anywhere in the
22
United States for two years after he left New Sesco exceeds the bounds of
reasonableness, especially when Dicen’s contacts were in a limited number of states.”).
2. Restriction Regarding Scope of Activities
Next, we turn to whether the Agreement is reasonable in scope as to the activity
restricted, specifically whether the Agreement lacks a reasonable customer- or
competitor-specific restriction. Paragraph 1 of the Agreement stated in part that “[t]he
work provided by [Buffkin] is employee recruitment and performance placement for
customers and clients of [Glacier].” Appellant’s Appendix at 85. Paragraph 6 of the
Agreement stated in part that Buffkin “shall not . . . either individually, or as an
employee, . . . consultant, agent, . . . or in any other individual or representative capacity .
. . engage in, be employed by, operate, participate in, control, aid, assist, or be connected
in any way with any business that competes with [Glacier] in employee recruitment or
performance placement with employers . . . .” Id. at 87. By its terms, the Agreement
prohibits Buffkin from being connected “in any way with any business that competes with
[Glacier] in employee recruitment or performance placement . . . .” Id. (emphasis added).
At the hearing, Hilleboe testified that Glacier engages in “executive recruiting in the IT . .
. Sector for companies related to Data Storage, hosting, location, virtualization, manage
services” and that its services were “for primarily sales people, pre-sales engineers,
systems engineers, inside sales, leadership positions being directors VP’s, CFO’s, CEO’s
those types of positions.” Transcript at 4. Hilleboe also testified Glacier had “probably
forty-five active clients.” Id. Buffkin testified that he placed candidates for Glacier in
the areas of sales representatives and sales engineers, and when asked if he placed
23
“anyone other than individuals in the field of information technology,” he answered
“No.” Id. at 41.
While the testimony at the hearing indicates that Glacier’s recruitment and
placement services appear to be limited to or focused primarily in the IT field, the
language of the Agreement does not specifically refer to recruitment and placement for
customers in the IT field. Buffkin takes issue, essentially, with the lack of a customer- or
competitor-specific restriction. The employee recruitment and placement field is very
large and consists of many in-house employees, human resource personnel, and
independent agents. This is also true, though less so, where recruitment and placement is
limited to employers and employees in the IT field. Glacier’s clients or customers could
conceivably include every company in the continental United States providing or
requiring IT or related services, or at least those providing or requiring those specific IT
services to which Hilleboe testified. The broadly-worded restriction, namely, that
Buffkin may not be “connected in any way with any business that competes” with
Glacier, see Appellant’s Appendix at 87, makes no distinction between past, current, or
future customers or clients of Glacier. Nor does the broad language make any distinction
between, on the one hand, a contractor who later works as a recruiting agent or for
another recruiting firm and, on the other hand, a contractor who later becomes employed
or connected with an IT or other company (whether in a recruiting or placement capacity
or another role) which is a current, or could be a future, customer or client of Glacier. It
appears that the Agreement by its terms was intended, and nothing inconsistent was
presented at the hearing, to apply to or encompass all of these scenarios. It appears that
24
the Agreement prevents Buffkin from working both for any direct competitor such as a
recruiting company or a competitor of a customer (or potential customer) in any capacity,
and many companies in the United States are at least potential customers of Glacier, and
this interpretation of the Agreement is shared by Glacier. At the hearing, Hilleboe
indicated that Buffkin had been working for Digital Fortress and that Digital Fortress is a
direct competitor of Glacier. When asked “[s]o [D]igital [F]ortress isn’t a competitor for
the Glacier Group it’s a data location entity it’s not a competitor,” Hilleboe responded
“No you’re wrong it is a competitor because Digital Fortress is a (inaudible) client that
competes with the clients that we recruit for.” Transcript at 32. When asked “So is
[D]igital [F]ortress that’s not an executive placement firm,” Hilleboe stated “No.” Id.
Buffkin indicated that Digital Fortress was not in existence prior to his departure from
Glacier and that it was not a competitor of Glacier. The restriction here, which prohibits
Buffkin from working for any of those customers or potential customers across the
United States, is certainly excessive to protect Glacier’s legitimate interests.
We conclude that the scope or breadth of the Agreement’s non-competition
provision as it relates to the activities which it prohibits is unreasonable. See Vukovich
v. Coleman, 789 N.E.2d 520, 526 (Ind. Ct. App. 2003) (noting that the covenant at issue
purported to prohibit competition with IMI and to prohibit Vukovich from owning,
managing, operating, or consulting with “a business substantially similar to or
competitive with” IMI’s business and holding that “[b]ecause the covenant before us as
written ‘could apply to the entire world,’ and includes no provision otherwise limiting its
scope, the covenant is invalid and the injunction enforcing it was improperly granted”)
25
(citing Struever v. Monitor Coach Co., Inc., 156 Ind. App. 6, 7-10, 294 N.E.2d 654, 655-
656 (1973) (noting that Struever agreed that, for a period of three years, he would not “in
any manner whatsoever, directly or indirectly, compete or engage in a business which is
in competition with the business of Action,” that Action’s products were sold through
129 dealers in twenty-nine states, and that Monitor contended that “confining the
operation of the covenant to their list of 129 dealers in 29 states[] is reasonable,” holding
there was no evidence defining the specific territories of the dealers and that the covenant
is not enforceable since “[a]s written it could apply to the entire world,” and reversing the
preliminary injunction based upon the covenant), reh’g denied. Such an expansive scope
severely restricts Buffkin’s ability to use the experience he has acquired during his career.
See Brunner, 603 N.E.2d at 160; Donahue, 234 Ind. at 411, 127 N.E.2d at 241.
Based upon the language of the Agreement and the record, and keeping in mind
that non-competition agreements are strictly construed against the employer, see Press-A-
Dent, 849 N.E.2d at 668-669, we conclude that Paragraph 6 of the Agreement, to the
extent that it protects a legitimate interest of Glacier, is unreasonable in terms of the
activities it prohibits and its geographic restraints. Accordingly, the non-competition
covenant in the Agreement was unenforceable. See Dicen, 839 N.E.2d at 689 (finding
that the covenant not to compete exceeded the bounds of reasonableness and holding that
thus the covenant was unenforceable). Glacier failed to meet its burden of showing a
reasonable likelihood of success at trial. As a result, the court erred in granting its
request for a preliminary injunction.2
2
Because we find the Agreement unenforceable, we need not address whether the court
26
CONCLUSION
For the foregoing reasons, we reverse the trial court’s order and remand for further
proceedings consistent with this opinion.
Reversed and remanded.
NAJAM, J., and MATHIAS, J., concur.
improperly employed the blue pencil doctrine.
27