416 P.3d 1061
Okla.2018Background
- In December 2010 Insight Equity (Texas) formed BFN and bought Berry Family Nurseries from Bob and Burl Berry for $160M; the Purchase Agreement contained a Texas choice-of-law clause and five‑year non‑compete/non‑solicit covenants (through Dec. 7, 2015). Park Hill Nursery (owned by the Berrys) was excluded from the sale but could operate so long as it did not compete with BFN.
- Burl and Bob remained employed with BFN for a time; Burl resigned effective Jan. 31, 2014. Days after exiting, Burl/Park Hill began selling nursery products to BFN’s largest customers (Wal‑Mart, Home Depot), including inventory that had been planned for BFN.
- BFN sued to enjoin breaches and recover damages; the Berrys/Park Hill sought a declaration that the restrictive covenants were unenforceable under Oklahoma law. Trial court found the Texas choice‑of‑law clause valid, the covenants enforceable under Texas law, the Berrys breached, and Park Hill tortiously interfered; it awarded injunctive relief and reserved attorney’s fees; it denied monetary damages.
- On appeal the Oklahoma Supreme Court (affirming in part, reversing in part) upheld the Texas choice‑of‑law clause and that the covenants were enforceable; it affirmed the finding of breach and tortious interference; it reversed the trial court’s extension of the covenants beyond Dec. 7, 2015 and reversed the denial of monetary damages (remanding to determine lost profits); the attorney‑fees ruling was interlocutory.
Issues
| Issue | Plaintiff's Argument (Berrys / Park Hill) | Defendant's Argument (BFN) | Held |
|---|---|---|---|
| Validity/enforceability of Texas choice‑of‑law clause | Clause should not govern; Oklahoma law voids such restrictive covenants | Parties freely bargained; nexus to Texas supports clause; Texas law allows non‑competes protecting goodwill | Enforceable; Texas choice‑of‑law upheld because adequate nexus and not contrary to Oklahoma public policy |
| Enforceability of non‑compete/non‑solicit | Covenants void under Oklahoma §217 except narrow territorial limits of §218; nationwide restraint invalid | Covenants protect goodwill and were negotiated; §218 allows restraint tied to sale of goodwill; Texas law permits ancillary restraints | Covenants enforceable under Texas law and not against Oklahoma public policy here; non‑compete covers Park Hill activity and non‑solicit ancillary |
| Breach and tortious interference | Berrys/Park Hill contended BFN lost customers or ceased relationships independently; disputed causation | Burl/ParK Hill sold to BFN’s key national accounts shortly after exit; Park Hill knowingly participated | Trial court’s factual findings (breach and tortious interference) supported by competent evidence; affirmed |
| Remedies: injunctive relief, extension, monetary damages, fees | Plaintiffs sought declaratory relief; opposed expansion of injunction and monetary liability beyond proof | BFN sought injunction, lost profits (expert $8.2M for Wal‑Mart/Home Depot), and fees under Texas law | Injunction appropriate but court cannot extend covenants past contractual term (Dec. 7, 2015); denial of damages reversed and remanded to quantify lost profits; attorney‑fees ruling interlocutory |
Key Cases Cited
- Krug v. Helmerich & Payne, Inc., 320 P.3d 1012 (Okla. 2013) (principle that contracted choice‑of‑law provisions should be respected absent strong public‑policy reasons)
- Florafax Int'l, Inc. v. GTE Market Res. Inc., 933 P.2d 282 (Okla. 1997) (standards for proving lost profits: contemplation, causation, and reasonable certainty)
- Farren v. Autoviable Servs. Inc., 508 P.2d 646 (Okla. 1973) (Oklahoma §218 permits restraints ancillary to sale of goodwill)
- Brown v. Stough, 292 P.2d 176 (Okla. 1956) (court will not extend restrictive covenant beyond contractually agreed duration)
- Wilspec Techs., Inc. v. DunAn Holding Grp., Co., 204 P.3d 69 (Okla. 2009) (elements for tortious interference with contractual/business relations)
- In re Kaufman, 37 P.3d 845 (Okla. 2001) (courts should not rewrite bargained‑for contractual terms)