2019 COA 113
Colo. Ct. App.2019Background
- Herman signed an Account Executive Employment Agreement with Bradsby (2009) containing noncompete (12 months, within 30 miles) and nonsolicitation (12 months, within Restricted Area, bars contacting anyone Bradsby had contacted in prior 12 months) provisions and confidentiality covenants.
- Bradsby terminated Herman (2014); Herman formed Touchstone outside the Restricted Area and later assisted in placing a candidate at a former Bradsby client (Vranesh), receiving $12,000.
- Bradsby sued for breach of the noncompete and nonsolicitation provisions claiming trade-secret protection justified restrictions. The district court initially held the nonsolicitation clause void as overbroad and declined to blue pencil it.
- On remand, a jury found Bradsby had trade secrets, found no breach of the noncompete, found a technical breach of the nonsolicitation provision (awarding $1), but the court set that verdict aside and entered judgment for Herman because the nonsolicitation provision was unenforceable and refused to modify it.
- The district court denied Herman attorney fees, citing an unpleaded finding that she violated the confidentiality provision; both parties appealed.
Issues
| Issue | Bradsby (Plaintiff) Argument | Herman (Defendant) Argument | Held |
|---|---|---|---|
| Whether contract/severability clause or prior mandate required the court to blue pencil an overbroad nonsolicitation clause | The severability clause and remand mandate required the court to reform the clause to make it enforceable | Parties cannot force a court to rewrite an unlawful contract; the severability clause does not authorize broad judicial reformation here | Court: Parties cannot contractually obligate a court to blue pencil; severability language does not compel reform; no mandate to require blue penciling |
| Whether the district court abused its discretion by declining to blue pencil the nonsolicitation clause | Court should have narrowed the clause (offering alternative narrowed versions) | Court properly exercised discretion not to rewrite the clause; significant modification would be required and public policy disfavors courts writing contracts | Court: No abuse of discretion; district court gave sound reasons for declining to blue pencil |
| Whether jury verdict that Herman did not form a competing company is supported by the record | Bradsby: evidence supports a finding of competition/violation | Herman: evidence supports her testimony that Touchstone was not competing and operated outside Restricted Area | Court: Affirmed jury verdict; any conflicts were for the jury to resolve |
| Whether Herman is entitled to attorney fees under the contract's fee-shifting clause | Bradsby: Not prevailing because it proved trade-secret status and obtained some benefit; also argued judicial estoppel | Herman: She prevailed on both breach claims and is the prevailing party under contract law | Court: Herman is prevailing party; district court erred in denying fees based on an unpled/untried confidentiality finding; award of fees reversed and remanded for entry of fees |
Key Cases Cited
- National Graphics Co. v. Dilley, 681 P.2d 546 (Colo. App. 1984) (trial court has discretion to reform territorial restrictions but is not obliged to rewrite parties’ agreements)
- Ferrofluidics Corp. v. Advanced Vacuum Components, Inc., 968 F.2d 1463 (1st Cir. 1992) (describes all-or-nothing, blue-pencil, and partial-enforcement approaches to overbroad covenants)
- Bayly, Martin & Fay, Inc. v. Pickard, 780 P.2d 1168 (Okla. 1989) (courts should not be compelled to rewrite unlawful noncompetition contracts)
- Rector-Phillips-Morse, Inc. v. Vroman, 489 S.W.2d 1 (Ark. 1973) (parties may not delegate to courts the power to craft enforceable agreements for them)
- Management Recruiters of Boulder, Inc. v. Miller, 762 P.2d 763 (Colo. App. 1988) (upholding narrow construction of a nonsolicitation clause to bar only actual contact)
- Saturn Sys., Inc. v. Militare, 252 P.3d 516 (Colo. App. 2011) (nonsolicitation agreements are a form of noncompete and generally disfavored under Colorado public policy)