Wrigg v. Junkermier, Clark, Campanella, Stevens, P.C.
2011 MT 290
Mont.2011Background
- Wrigg, a certified public accountant, joined JCCS in 1987 and became a shareholder in 2003; she signed multiple shareholder covenants in 2004, 2005, and 2007, all containing the same post-employment noncompete provision.
- The covenants impose a windfall-style liability: if Wrigg competes within a year after termination, she must pay JCCS 100% of gross fees billed to a client in the prior 12 months.
- JCCS terminated or chose not to renew Wrigg’s Agreement in May 2009, effective June 30, 2009, and reminded her of the covenant.
- Wrigg began seeking other employment and ultimately joined Rudd, accepting a substantial salary reduction due to concerns about the covenant.
- Wrigg admitted she worked for and solicited business from JCCS’s clients within a year of termination; JCCS sought declaratory judgment that it could enforce the covenant; the district court applied Dobbins and found enforceability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can an employer enforce a covenant not to compete when it ends the employment relationship? | Wrigg argues termination by employer negates enforceability. | JCCS asserts the covenant remains enforceable as a reasonable restraint. | No; termination by employer defeats enforcement; court remands to vacate and grant Wrigg judgment. |
| Must an employer show a legitimate business interest to enforce a post-employment covenant after termination? | JCCS must prove a legitimate business interest supports enforcement. | The covenant language alone demonstrates reasonableness; no additional interest shown. | Employer must establish a legitimate business interest; here, JCCS failed to show one. |
| Does termination or expiration of a contract affect enforceability of the covenant? | Enforcement should depend on ongoing obligations; termination triggers disfavor. | Covenant enforcement considerations apply regardless of renewal status. | Enforceability analyzed under legitimate interest framework regardless of whether contract ended or expired. |
Key Cases Cited
- Access Organics, Inc. v. Hernandez, 2008 MT 4 (Mont. 2008) (covenants disfavored; analyze for reasonableness and business interest)
- Dobbins, De Guire & Tucker, P.C. v. Rutherford, MacDonald & Olson, 218 Mont. 392 (Mont. 1985) (partial restraint; reasonableness testing; legitimate business interest guidance)
- Montana Mt. Prods. v. Curl, 327 Mont. 7 (Mont. 2005) (three-part reasonableness test for partial restraints)
- Rao v. Rao, 718 F.2d 219 (7th Cir. 1983) (enforceability when employer terminates; legitimate business interest disputed)
- Guardian Fiberglass, Inc. v. Whit Davis Lumber Co., 509 F.3d 512 (8th Cir. 2007) (legitimate interests; protect customer relationships and goodwill)