9 F.4th 1011
8th Cir.2021Background
- Miller began working for Honkamp Krueger Financial Services, Inc. (HKFS) under a 2006 Employment Agreement containing non-compete and non-solicitation covenants.
- In 2016 Miller and HKFS executed an Ancillary Agreement that revised the non-solicitation covenant but did not include a non-compete.
- Miller resigned and started work for competitor Mariner Wealth Advisors on September 4, 2020, and filed suit seeking a declaration that the Ancillary Agreement’s restrictive covenants are unenforceable.
- Miller sent written notice on September 7, 2020 terminating the Employment Agreement to the extent it survived the Ancillary Agreement.
- The district court granted preliminary injunctions enforcing both the Employment Agreement’s non-compete and the Ancillary Agreement’s non-solicitation provisions; Miller and Mariner appealed.
- The Eighth Circuit reviewed the preliminary injunctions and vacated them in full.
Issues
| Issue | Plaintiff's Argument (HKFS) | Defendant's Argument (Miller/Mariner) | Held |
|---|---|---|---|
| Enforceability of non-compete | Non-compete in the Employment Agreement survives termination of employment and should bar Miller’s work at Mariner | Ancillary Agreement superseded limits, and Miller’s written termination of the Employment Agreement (Sept. 7) ended any surviving non-compete | Court: Non-compete unenforceable — termination of the Employment Agreement on Sept. 7 rendered the non-compete inoperable; HKFS not likely to prevail |
| Enforceability of non-solicitation (acceptance of unsolicited business) | Ancillary Agreement’s 2‑year non-solicitation (including “solicit, accept or divert”) is valid and supports injunction | Provision impermissibly bars acceptance of unsolicited business and thus violates South Dakota public policy/statutory limits | Court: Provision, as applied to acceptance of unsolicited business, is void under South Dakota law; injunction cannot rest on that prohibition |
Key Cases Cited
- Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109 (8th Cir. 1981) (en banc) (four-factor preliminary injunction framework)
- PCTV Gold, Inc. v. SpeedNet, LLC, 508 F.3d 1137 (8th Cir. 2007) (standard of review for preliminary injunction)
- Craig v. Simon, 980 F.3d 614 (8th Cir. 2020) (likelihood of success is most important Dataphase factor)
- Kroupa v. Nielsen, 731 F.3d 813 (8th Cir. 2013) (movant must show a fair chance of prevailing)
- Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415 (1996) (choice-of-law: substantive state law applies in diversity)
- Blackman v. Folsom, 200 N.W.2d 542 (Iowa 1972) (non-competes strictly construed against the party seeking restraint)
- Farm Bureau Life Ins. Co. v. Dolly, 910 N.W.2d 196 (S.D. 2018) (statutory exceptions to prohibition on restraints of trade must be construed narrowly)
- Commc’n Tech. Sys. v. Densmore, 583 N.W.2d 125 (S.D. 1998) (distinguishing non-solicitation from prohibitions on accepting unsolicited business)
- DTC Energy Grp., Inc. v. Hirschfeld, 912 F.3d 1263 (10th Cir. 2018) (preliminary injunctions are prospective; not a remedy for past harms)