OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR TEMPORARY RESTRAINING ORDER
Plaintiff Konecranes, Inc., dba Crane Pro Services, Inc. (“Konecranes”) brings this diversity action against defendants Scott Sinclair and Service Crane, LLC. On December 30, 2003, following a hearing, I denied Plaintiffs motion for a temporary restraining order. This opinion explains that ruling.
Background
Plaintiff manufactures and services construction cranes, and supplies spare parts. Konecranes has “over 65 locations across the United States,” plus Canada, Mexico, Europe, and Asia. See http://www.kciamer-icas.com (listing locations).
Defendant Sinclair managed Plaintiffs Portland branch. The Complaint alleges that Sinclair commenced his employment on or about February 7, 2001, and resigned on or about September 6, 2003. The parties offer very different accounts of the circumstances surrounding his departure.
Two weeks after he resigned, Sinclair reportedly incorporated defendant Service Crane, LLC, and is now competing with his former employer. Plaintiff contends that Sinclair is violating a non-compete agreement, using Plaintiffs trade secrets and materials, confusing customers, and otherwise competing unfairly and unlawfully. Plaintiff seeks a temporary restraining order (“TRO”), • permanent in-junctive relief, plus compensatory and punitive damages,
Legal Standards
A TRO is intended to preserve the status quo until the court can rule upon the application for preliminary in
Discussion
A. Likelihood of Success
1. Validity of the Non-Compete Agreement
ORS 653.295 provides that:
(1) A noncompetition agreement entered into between an employer and employee is void and shall not be enforced by any court in this state unless the agreement is entered into upon the:
(a) Initial employment of the employee with the employer; or
(b) Subsequent bona fide advancement of the employee with the employer.
“Initial employment” has been strictly construed. Any non-de
minimis
delay, between the commencement of employment and when the agreement was signed, is fatal.
See IKON Office Solutions, Inc. v. American Office Products, Inc.,
Sinclair signed the non-compete agreement 16 days after his employment commenced. 1 Sinclair claims he did so under duress, but the point is academic, as the agreement was not signed at the “initial employment of the employee with the employer.” No meaningful distinction can be drawn between the 16 day interval in this case, and the 17 day interval that was too long in IKON. The plain language of the statute also refutes any attempt to circumvent this restriction by arguing that a new term of employment begins each day that an at-will employee comes to work.
Plaintiff contends Ohio law applies because Plaintiff inserted a choice-of-law clause in the non-compete agreement. Plaintiff also reasons that, because this is a diversity action, the court should decide this case as if it were an Ohio court. That’s not entirely correct.
A federal court sitting in diversity applies the substantive law of the
forum
state, including the forum state’s choice of law rules,
Klaxon Co. v. Stentor Elec. Mfg. Co.,
How the' Oregon Supreme Court would decide this case seems clear from the language of the statute: “A noncom-petition agreement entered into between an employer and employee is void and shall not be enforced by any court in this state ” unless it meets the listed requirements. ORS 653.295(1) (emphasis added). That is an unequivocal statement of public policy.
Oregon has a sufficient interest in this matter to justify applying its own law. Sinclair is a resident of Oregon. At all relevant times, he worked in Plaintiffs Portland branch. He is attempting to compete within Oregon, and Plaintiff is seeking to enjoin competition within Oregon. An Oregon employer cannot circumvent Oregon laws designed to protect Oregon workers simply by decreeing that the laws of another state will apply. 2 This was not a contract negotiated between two businesses,’ or an independent contractor, who may have greater leeway to establish their own terms.
Sinclair’s non-compete agreement may have a second fatal defect. A noncompetition provision in an employment contract is a covenant in restraint of trade.
North Pac. Lumber Co. v. Moore,
The non-compete agreement purports to prevent Defendant Sinclair from competing for a period of 18 months in “[a]ny area in which KCI Konecranes, Inc. is engaged in business.” Plaintiff claims to conduct business within a 150 mile radius of Portland. That would effectively bar Sinclair from working in the same industry in the principal industrial areas of Oregon and Washington. In addition, Konecranes has at least 65 locations in the United
In deciding whether a non-compete agreement is reasonable, an important consideration is whether it merely restricts the former employee from luring away specific accounts (ie., those he serviced while employed) or whether it restricts the employee from competing at all. In the former instance, the employee might gain an unfair advantage, such as goodwill and inside information, derived from his prior contacts with the client. It is much harder to justify barring a former employee from competing altogether. The latter also is contrary to the public interest, and makes it difficult for the employee to pursue his livelihood. Thus, a restriction that says a stock broker can’t solicit his former clients for one year might be upheld, but a restriction that says he can’t work in the industry altogether might be unreasonable.
The Complaint here seeks to bar Sinclair from contacting any “current or potential customer of [Plaintiff] in any area in which [Plaintiff] does business ...”
A further concern is the size of the-potential client universe. Unlike automobiles, there are a limited number of customers who need their construction crane serviced. If Sinclair is barred from contacting them, he probably is out of business.
My preliminary conclusion
3
is that these restrictions are excessive, at least for a mere branch manager such as Sinclair. Courts ordinarily do not re-write the contract for the parties. Employers drafting non-compete agreements might also be encouraged to overreach, if they know the worst that could happen is the court will strike the most egregious provisions. The better approach is to void unreasonable agreements.
See Lelouis v. Western Directory Co.,
In summary, the non-compete provisions in this contract probably are not enforceable in Oregon. The likelihood of Plaintiff prevailing on this claim is low.
2. Trade Secrets
Plaintiff also contends Sinclair is violating the Ohio Trade Secrets Act. However, all relevant acts occurred in Oregon, so the Oregon Trade Secrets Act probably applies.
The “quote” letters sent by Sinclair do not appear to be confidential trade secrets. Those form letters reportedly are sent to anyone requesting a quote. Using similar letters might lead to some confusion, but that is a different issue.
Plaintiff also contends its customer list is a trade secret, and suspects Sinclair copied that list. He denies this. Regardless, the issue is more complex than Plaintiffs brief suggests.
See IKON,
Ip
IKON,
the defendant did not steal a customer list, but he did call on customers he knew from years of working in the industry, some of whom he met while employed by the plaintiff. However, anyone with a basic knowledge of the industry could quickly identify the major customers for that product in the region. Further
The trade secrets claim here appears to suffer from the same defects. The mar--ket for construction cranes in Portland is fairly limited. Plaintiff refers to just 201 accounts in the Portland office (which allegedly covers a 150 mile radius from Portland). If someone with a general knowledge of the industry could quickly identify the likely candidates using basic tools such as the Yellow Pages, a Chamber of Commerce Directory, or construction industry publications, then those names probably do not qualify for protection as a trade secret.
As in IKON, no time limit is placed on the trade secret provisions in the non-compete agreement. The 18-month limit applies only to the non-compete clause itself. If Sinclair is forbidden to contact anyone whose name he learned while employed by Plaintiff, this may amount to a lifetime ban on working in that industry in Oregon and Washington. If the knowledge Sinclair gained while employed by Plaintiff is considered confidential, he might also be barred from working in the industry entirely, since Plaintiff has offices all over the United States and in other nations as well.
Plaintiff concedes it has no proof, at this point, that Sinclair actually took a customer list or other confidential information with him. It just suspects he did. Plaintiff also provides almost no information regarding this customer list, how it was compiled, or whether the same information could easily be acquired from other sources, such as public records or a list of local subscribers to Crane World magazine.
Plaintiff contends the list is entitled to protection because access to the list is restricted by Plaintiff. That is one factor, but not the only factor.
As yet, Plaintiff has not made a sufficient showing to warrant injunctive relief.
3. Conversion
Plaintiff contends Sinclair must have either “copied or memorized [Plaintiffs] customer account information,” which it construes as a conversion. Plaintiff cites no authority for the proposition that memorizing is a “conversion.” Plaintiff also contends Defendant “converted” accounts by persuading customers to do business with him. However, conversion is a tort against possession. One cannot possess (or convert) an “account,” any more than one could possess (or convert) someone’s affections. Rather, it is a relationship.
Again, Plaintiff has not made a sufficient showing to warrant injunctive relief.
4. Duty of Loyalty
Plaintiff contends an employee has a duty of loyalty to his employer that continues even after termination of the employment. Sinclair was not a director who owed a duty to the shareholders, or an officer of the corporation. He was a local branch manager of a multi-national corporation. Ordinarily, absent a valid non-compete agreement, an employee can resign in the morning and be working for a competitor the same afternoon. Unless Plaintiff can point to some Oregon authority supporting its position, this claim may not go far. 4
Plaintiff contends that Sinclair is violating an Ohio statute governing deceptive trade practices, by causing likelihood of confusion or misunderstanding as to the source of goods. However, Plaintiff offers no evidence that Sinclair is doing business in Ohio.
Oregon’s Unlawful Trade Practices Act applies only to goods or services “which are or may be obtained primarily for personal, family or household purposes.” ORS 646.605(6). Few families keep a construction crane in their backyard.
6. Intentional Interference With Business Relations
Plaintiff again attempts to plead an Ohio tort and cites only Ohio law. However, this claim is not for breach of contract, the choice of law provision is inapplicable, and Oregon law governs.
The elements of a claim for intentional interference with economic relations are: (1) intentional interference with a proposed or existing economic relationship; (2) with an improper motive or by use of improper means; and (3) damage beyond the fact of interference itself.
Willamette Dental Group v. Oregon Dental Service,
Plaintiff cites no authority that merely competing for customers constitutes “intentional interference with business relations.” Oregon recognizes the “business competitor’s privilege”:
One is privileged purposely to cause a third person not to enter into or continue a business relation with a competitor of the actor if
(a) the relation concerns a matter involved in the competition between the actor and the competitor, and
(b) the actor does not employ improper means, and
(c) the actor does not intend' thereby to create or continue an illegal restraint of competition, and
(d) the actor’s purpose is at least in part to advance his interest in his competition with the other.
North Pacific Lumber,
Plaintiff has not alleged that Sinclair tortiously induced anyone to breach a contract with Plaintiff. Rather, Plaintiff asf serts that Sinclair should not be competing for business at all, because of the non-compete agreement. Even assuming that agreement were valid (and I doubt it is), it is questionable whether the breach of a non-compete agreement is itself a tort.
Cf. Georgetown Realty v. Home Ins. Co.,
Plaintiffs best argument may be that Sinclair allegedly caused likelihood of confusion, or used confidential information, and thus employed “improper means.” At the moment, however, here is insufficient evidence of that in the record. Ironically, the proposed TRO would prohibit Sinclair
B. Balance of Hardships and Other Relevant Factors
To date, Plaintiff has not shown a probability of success on the merits. Nor has Plaintiff shown that failure to grant the injunction will cause Plaintiff irreparable injury that cannot be redressed by damages. The balance of hardships also tips in favor of Defendants. If I grant the proposed injunction, Defendants will be out of business. Plaintiff points to a general public interest in the enforcement of contracts, but there is countervailing public interest in promoting competition and free enterprise. Plaintiff also contends that no third party will be harmed by the injunction, but that ignores the interests of companies who want Defendants to service their cranes.
Even if I were inclined to grant preliminary injunctive relief to Plaintiff, the amount of the bond would be far greater than the $5,000 suggested by Plaintiff. Liability for a wrongful injunction is generally limited to the amount of the injunction bond, even if actual damages are greater.
See Buddy Systems, Inc. v. Exer-Genie, Inc.,
Under the circumstances, an expedited court trial on the merits seems the best way to resolve this matter, assuming the parties cannot resolve it among themselves.
Conclusion
Plaintiffs motion (# 3) for a temporary restraining order is denied. A court trial is set for January 29, 2004, at 1:30 p.m. Discovery, if any, may begin immediately.
IT IS SO ORDERED.
Notes
. The date alleged in the Complaint (February 23, 2003) is two years and 16 days after his employment commenced, but that appears to be a clerical error.
.
Machado-Miller v. Mersereau & Shannon, LLP,
The panel did state, in dictum, that ORS 653.295 articulates the fundamental interest of “protecting the rights of Oregon citizens to choose the terms of their own employment relations free from government interference,” "promotes stable employment relations,” and “protects Oregon employers from loss of employees in whose training they have invested considerable resources.”
Id.
'at 596-97,
. I emphasize that, at this early stage of the case, all conclusions stated are tentative and subject to revision after the matter has been more fully briefed.
. Indeed, employees have often sought to establish a fiduciary relationship with their em
.
Volt Services Group v. Adecco Employment Services, Inc.,