Whelan Security Co. v. Kennebrew
379 S.W.3d 835
| Mo. | 2012Background
- Whelan Security Company appeals a trial court ruling granting summary judgment for Kennebrew and Morgan on their non-compete and non-solicitation agreements.
- The court held the agreements were overbroad as written, and it modified terms to carry out the parties’ intent, remanding for factual issues.
- Kennebrew and Morgan resigned in late 2008/2009; Morgan joined Elite Protective Services and Kennebrew formed Elite, which later contracted for Park Square Condominiums in Houston.
- Whelan asserted breach of contract, unjust enrichment, and civil conspiracy related to their post-employment activities.
- The key dispute concerns the reasonableness of the covenants in time and geographic scope and whether the modification should have been allowed to enforce the agreements.
- The Missouri Supreme Court reversed and remanded to decide genuine issues of material fact that affect enforceability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the customer non-solicitation clauses overbroad in time or geographic scope? | Whelan argues two-year scope and nationwide reach are limited by dealing with customers | Kennebrew and Morgan contend the clauses are reasonable or should be enforced as modified | Overbroad as written; modified to limit to customers actually dealt with and to exclude prospective customers |
| Is the employee non-solicitation clause enforceable under section 431.202? | Kennebrew and Morgan’s two-year clause protects customer relations and goodwill | Morgan’s one-year clause is per se reasonable; Kennebrew’s is ambiguous in purpose | Morgan’s one-year clause enforceable; Kennebrew’s two-year clause unresolved due to lack of proven purpose; genuine issue of fact on purpose of the clause |
| Is the non-competition clause restricting Kennebrew enforceable within 50 miles for two years? | Enforceable as reasonable restraint to protect Whelan’s interests | Dispute whether Kennebrew worked in Houston; issue of fact | Non-competition clause enforceable against Kennebrew, with factual issues remanded for determination of violation |
| Should the court have modified the covenants instead of invalidating them entirely? | Modification aligns with protecting legitimate interests | Court may refuse to enforce wholly unreasonable covenants | Court modified covenants where feasible and remanded remaining factual questions |
| Are there genuine issues of material fact about the purpose of the employee non-solicitation clause? | Purpose is to protect customer and confidential information interests | Clause’s specific purpose unclear; parol evidence needed | Yes; ambiguity requires factual determination; summary judgment improper on purpose issue |
Key Cases Cited
- Copeland v. Healthcare Servs. of the Ozarks, Inc., 198 S.W.3d 604 (Mo. banc 2006) (employer interests and reasonableness in covenants; trade secrets and customer contacts)
- Mills v. Murray, 472 S.W.2d 6 (Mo.App.1971) (customer non-solicitation without geographic limit in certain contexts)
- Schott v. Beussink, 950 S.W.2d 621 (Mo.App.1997) (enforcement of customer non-solicitation with no geographic restriction in small local employer)
- Systematic Bus. Servs., Inc. v. Bratten, 162 S.W.3d 41 (Mo.App.2005) (enforcement of customer non-solicitation with extensive contact; no geographic limit warranted)
- Gelco Exp. Corp. v. Ashby, 689 S.W.2d 790 (Mo.App.1985) (injunction against soliciting employer’s customers and those solicited within six months)
- Kessler-Heasley Artificial Limb Co. v. Kenney, 90 S.W.3d 181 (Mo.App.2002) (limits on solicitation of customers; consideration of relationships)
- Osage Glass, Inc. v. Donovan, 693 S.W.2d 71 (Mo. banc 1985) (enforcing two- to three-year covenants with geographic limits)
- Orchard Container Corp. v. Orchard, 601 S.W.2d 299 (Mo.App.1980) (125-mile, three-year non-compete in certain roles)
- Payroll Advance, Inc. v. Yates, 270 S.W.3d 428 (Mo.App.2008) (modifying unenforceable covenants rather than voiding entirely)
- ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993) (summary judgment standard; record-based decision)