Summary 2009 WY 113

Summary of Decision issued September 14, 2009

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: CBC Geosolutions, Inc. v. Gas Sensing Technology Corp.

Citation: 2009 WY 113

Docket Number: S-08-0214

Appeal from the District Court of Albany County, Honorable Jeffrey A. Donnell, Judge

Representing Appellant (Defendants): Peggy A. Trent of Trent Law Office, Laramie, Wyoming.

Representing Appellee (Plaintiff): Philip A. Nicholas and Jason M. Tangeman of Anthony, Nicholas & Tangeman, Laramie, Wyoming

Issues: Whether the district court applied the correct legal standard in considering the request for a preliminary injunction to enforce non-compete and non-disclosure agreements between the parties. Whether the district court abused its discretion when it issued a preliminary injunction to enforce non-compete and non-disclosure agreements between the parties pending trial on the merits in this action.

Holdings: The purpose of a temporary injunction is to preserve the status quo until the merits of an action can be determined. And a temporary injunction rests upon an alleged existence of an emergency, or a special reason for such an order, before the case can be regularly heard. Also, the award of a temporary injunction is an extraordinary remedy which will not be granted except upon a clear showing of probable success and possible irreparable injury to the plaintiff, lest the proper freedom of action of the defendant be circumscribed when no wrong has been committed. In granting temporary relief by interlocutory injunction courts of equity do not generally anticipate the ultimate determination of the questions of right involved. They merely recognize that a sufficient case has been made out to warrant the preservation of the property or rights in issue in statu quo until a hearing upon the merits, without expressing, and indeed without having the means of forming a final opinion as to such rights.

In the present action, Appellants argue that the district court applied a federal standard not used in Wyoming when it required some showing of likelihood of success on the merits before it granted the preliminary injunction. Although the district court stated that there was a substantial likelihood that Appellee would prevail substantially on the merits it did not mention the federal standard or quote any federal precedent in its Findings of Fact. Further, a review of the correct standard makes it clear that likelihood of success on the merits is actually a factor that a district court must consider before granting a preliminary injunction under Wyoming law.

Appellants also contend that the district court improperly based its decision on the fact that the contracts signed by Appellants provide for injunctive relief. Appellants claim that the court ordered the injunction as a matter of contract, and therefore did not exercise its equitable powers in issuing the injunction. The district court did make a finding of fact that the non-compete agreements specifically authorize injunctive relief, however, it did so in the context of analyzing the facts under the proper standard for injunctive relief. It is proper for a court acting in equity to consider the remedies contemplated by the parties in reaching its conclusion on the equities. Thus, the district court did not erroneously award an injunction pursuant to contract but properly applied the equitable standards for granting an injunction.

Appellants next claim that the district court’s findings of fact are inadequate as a matter of law because the court did not make a finding that there was no adequate remedy available at law. Injunctions should only be issued when the harm is irreparable and no adequate remedy at law exists. Injunctive relief is appropriate when an award of money damages cannot provide adequate compensation. An injury is irreparable where it is of a peculiar nature, so that compensation in money cannot atone for it. The district court found that Appellees would suffer immediate, great, and irreparable harm and damage in the event that Appellants were allowed to compete with them in violation of the covenants-not-to-compete. Irreparable harm is, by definition, harm for which there can be no adequate remedy at law. Thus, the district court’s findings were not insufficient as a matter of law.

Appellants also argued that the district court abused its discretion in issuing the injunction because enforcement of the non-compete agreement was barred by the statute of frauds. However, there was enough evidence of the existence of a written contract to allow the district court to issue an injunction pending discovery and trial. Given the amount of evidence presented at the hearing indicating the existence of a written non-compete agreement, the district court did not abuse its discretion when it ordered an injunction pending further discovery and trial.

Appellants finally argued that a preliminary injunction was not appropriate because the non-compete agreements are unenforceable as a matter of law. However, these determinations will necessarily depend on facts that must be developed in due course at the appropriate stage of litigation. The district court found, based on the limited review required for a preliminary injunction, that the covenants were likely to be enforced. The district court found that there was evidence that a covenant not to compete existed in writing, that the document was signed ancillary to a legitimate employment relationship that constituted reasonable consideration, and that Appellee had presented evidence that could lead the court to conclude that a restriction that was national in nature but narrowly tailored to one aspect of the industry was reasonable under the circumstances. If any part of a covenant not to compete is found unreasonable and therefore unenforceable, the court may decline to enforce the unreasonable provisions. None of the terms of the non-compete agreement in this case were facially unreasonable and the court did not abuse its discretion when it found, based on the evidence before it at the hearing, that Appellee was entitled to an injunction pending full development of the facts and determination on the merits.

Conclusion: The district court correctly applied the law and did not abuse its discretion when it issued a preliminary injunction prohibiting Appellants from competing with their former employer during the pending litigation to enforce a covenant not to compete.

Affirmed.

C.J. Voigt delivered the opinion for the court.

Link: http://tinyurl.com/lqvbwm .

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it was issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. Please note when you look at the opinion that all of the paragraphs are numbered. When you pinpoint cite to a quote, you should cite to this paragraph number rather than to any page number. If you need assistance in putting together a citation using the Universal Citation form, please contact the Wyoming State Law Library.]