MEMORANDUM ORDER AND OPINION REGARDING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT AND MOTION TO DISSOLVE PRELIMINARY INJUNCTION
TABLE OF CONTENTS
I.INTRODUCTION..........................................................1067
A. Procedural Bаckground...............................................1067
B. Factual Background.......................... 1070
1. Undisputed facts .................................................1070
2. Disputed facts................................... 1075
II. LEGAL ANALYSIS.......................................................1076
A. Standards For Summary Judgment....................................1076
B. Arguments Of The Parties ............................................1077
1. The defendant’s arguments for dismissal ...........................1077
2. The plaintiffs’ arguments in resistance.............................1079
3. The defendant’s reply........................... 1080
C. Is The 1996 Employment Agreement Properly Held By A Plaintiff In This Matter?.......................................................1081
2. Did the transfer of Pro-Edge, Ltd.’s assets to Pro-Edge L.P. work an “assignment”? ........................................... 1082
3. Did Pro-Edge, Ltd. obtain prior written consent from Dr. Gue?____ 1085
4. Was the assignment ratified by Dr. Gue? ........................ 1087
D. Dissolution Of The Preliminary Injunction.......................... 1088
III. CONCLUSION..................... 1089
One of the important the purposes of commemorating an agreement in writing is to avoid potential lawsuits by clearly defining the rights and obligations of the parties. Thus, a delicately crafted contract is priceless in the sense that it has the ability to prevent costly litigation. This recognition, however, has created somewhat of a paradox. In an attempt to account for every conceivable possibility and to encompass and include every contingency, contracts often become increasingly complex and convoluted. The paradox then, is that contracts, originally designed to prevent lawsuits, are increasingly becoming the source of litigation. This paradox is aptly demonstrated by this controversy arising out of an alleged violation of a covenant not to compete contained in an employment agreement executed between the parties. As this court once again attempts to describe and interpret the intricate and complex nuances of this lawsuit, this time as a result of the defendant’s Motion For Partial Summary Judgment and the plaintiffs’ opposition thereto, the pricelessness of a precisely drafted, yet simplistic, contract becomes rapidly apparent.
I. INTRODUCTION
A. Procedural Background
On April 29, 2005, the plaintiffs in this action, Pro Edge, L.P. (“Pro Edge”), an Iowa limited partnership,
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and Trans Ova Genetics, L.C.,
2
an Iowa limited liability company, filed a petition in the Iowa District Court for Sioux County, Iowa, against defendants Charles S. Gue, III, DVM (“Dr.Gue”), a former employee of Trans Ova Genetics, L.C., and Progenesis Embryo Transfer, Ltd. (“Progenesis”), a wholly-owned Montana corporation created by Dr. Gue. The plaintiffs’ business includes embryo transfer services for cattle producers in several states, including Illinois, Iowa, Missouri, Montana and Oklahoma. The complaint was in five counts, but its chief concerns involved fears of disclosure of trade secrets and violation of a non-competition agreement supposedly signed by Dr. Gue. Specifically, in Count I of the complaint, the plaintiffs seek injunctive relief enjoining the defendant from violating the non-competition provisions of Dr. Gue’s employment contract; in Count II, the plaintiffs seek damages and injunctive relief for retention, use, and disclosure by the defendants of the plaintiffs’ trade secrets; in Count III, the plaintiffs seek injunctive relief and damages for the defendants’ intentional interference with contracts between the plaintiffs and their customers; in Count IV, the plaintiffs seek injunctive relief and damages for the defendants’ intentional interference with prospective contracts; and in Count V, the plaintiffs seek injunctive relief and damages for the defendants’ breach of the
On May 16, 2005, the defendants removed this action to this federal court. (Doc. No. 2). On May 18, 2005, the plaintiffs filed a Motion To Extend Temporary Restraining Order and Request For Hearing On Preliminary Injunction in which the plaintiffs sought both an extension of the ex parte temporary restraining order issued by the Iowa District Court for Sioux County, as well as a hearing on the accompanying motion for a preliminary injunction. (Doc. No. 3). On May 19, 2005, this court entered an order extending the temporary restraining order to and including May 24, 2005, and setting a hearing on the plaintiffs’ Motion For Preliminary Injunction for May 24, 2005. (Doc. No. 4). On May 20, the defendants filed a Motion To Dismiss and Request For Hearing, in which the defendants alleged, among other arguments, that the court lacked personal jurisdiction over all of the named defendants.
Following the May 24, 2005, preliminary injunction evidentiary hearing, a number of troublesome legal questions remained outstanding. Accordingly, the court allowed the parties to submit, by letter brief, case law addressing the more complex legal questions before the court. Following the receipt of the parties’ briefs, the court entertained oral argument on the plaintiffs’ Motion For Preliminary Injunction and the defendants’ Motion To Dismiss on May 26, 2005. On June 1, 2005, this court issued its Memorandum Opinion and Order Regarding Plaintiffs’ Motion For Preliminary Injunction; Defendants’ Motion To Dismiss; and Preliminary Injunction. Essentially, with respect to the Defendants’ Motion To Dismiss, the court’s June 1, 2005, order granted the motion with respect to defendant Progenesis for lack of personal jurisdiction, thus leaving Dr. Gue as the sole remaining defendant in the controversy. The remaining arguments raised by Dr. Gue were denied. With respect to the plaintiffs’ Motion To Extend Temporary Restraining Order and Request For Hearing on Preliminary Injunction, the court granted the plaintiffs’ motion. Accordingly, the court entered a preliminary injunction, which enjoined the defendant, Dr. Gue, from performing any services similar to those he provided while employed at Trans Ova Genetics, L.C. (Doc. No. 18).
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On July 10, 2005, Dr. Gue
On November 4, 2005, Dr. Gue moved to modify the preliminary injunction by fixing a specific date, prior to the anticipated trial date, for the dissolution of the preliminary injunction (Doc. No. 42). The plaintiffs resisted Dr. Gue’s motion by filing a Resistance To Motion To Modify Preliminary Injunction on November 10, 2005 (Doc. No. 43). A hearing on Dr. Gue’s Motion To Modify Preliminary Injunction was scheduled for January 25, 2006. Prior to the hearing, however, on December 30, 2005, Dr. Gue further filed a Motion For Partial Summary Judgment And Motion To Dissolve Preliminary Injunction (hereinafter Motion For Partial Summary Judgment) (Doc. No. 45), seeking summary judgment with respect to only Count I of the plaintiffs’ complaint — the count seeking injunctive relief enjoining the defendant from violating the non-competition provisions of Dr. Gue’s employment contract. On January 23, 2006, the plaintiffs filed their resistance to Dr. Gue’s Motion For Partial Summary Judgment. Due to the overlapping issues presented in both Dr. Gue’s Motion To Modify Preliminary Injunction and his Motion For Partial Summary Judgment the court heard oral argument on both motions simultaneously on January 25, 2006. At the January 25, 2006, hearing, Trans Ova was represented by Charles T. Patterson, Margaret Prahl and Joel Vos, of Heidman Redmond Fre-dregUl Patterson Plaza Dykstra & Prahl in Sioux City, Iowa. Dr. Gue was represented by Richard H. Moeller of Berenstein Moore Berenstein Heffernan & Moeller, L.L.P., in Sioux City, Iowa.
Following the hearing, on January 27, 2006, Dr. Gue submitted his Reply Brief To Plaintiffs’ Resistance To Motion For
B. Factual Background
The core undisputed facts and sufficient detail of the disputed facts are set forth below to put in context the parties’ arguments for and against summary judgment.
1. Undisputed facts
Many of the core facts surrounding this controversy are largely undisputed. Charles S. Gue, III, DVM, (hereinafter Dr. Gue) first became associated with the entity known as Pro-Edge, Ltd. d/b/a Trans Ova Gеnetics, Inc. in 1990. Dr. Gue worked as an embryo transplant specialist at Trans Ova Genetics’s Sioux Center, Iowa facility. What is clear, however, is that in March of 1996, Dr. Gue entered into an Employment Agreement (hereinafter 1996 Employment Agreement) with Trans Ova Genetics, Inc. At the time the 1996 Employment Agreement was executed, Trans Ova Genetics, Inc. was not itself the legal entity under the 1996 Employment Agreement. Rather, “Trans Ova Genetics, Inc.” was a fictitious name that was reserved and registered by Pro-Edge, Ltd., a corporation organized under the laws of the State of Iowa. Pro-Edge, Ltd. commonly used the name “Trans Ova Genetics, Inc.” in the conduct of its business, but a separate legal entity was never actually incorporated under the exact name “Trans Ova Genetics, Inc.” Thus, the 1996 Employment Agreement was entered into between Dr. Gue and essentially, Pro-Edge, Ltd. The 1996 Employment Agreement contained a non-compete clause, which essentially prohibited him from performing similar services within a 250-mile radius of any Trans Ova Genetics facility for one year following his separation from employment. Specifically, the agreement provided, in pertinent part, as follows:
5. Non-Compete. Dr. Gue agrees that he will not compete for a period of one year following the termination of his employment within a 250 mile radius of any Trans Ova facility or satellite office that is in existence at the time he terminates his employment with Trans Ova. Dr. Gue further acknowledges good and valuable consideration for this non-compete agreement. He furthеr acknowledges that good and valuable consideration is included in his annual compensation. Dr. Gue further acknowledges and agrees that a one year limitation and a 250 mile radius restriction is a reasonable period of time and a reasonable restriction. This limitation [sic] but not limited to activities that he may perform as an employee, partner,veterinarian, or consultant for services similar to those performed for Trans Ova.
Employment Agreement, Joint Appx., at 33. Further, the 1996 Employment Agreement contained a choice of law provision that indicated the agreement was to be construed pursuant to the laws of the state of Iowa. 4 The 1996 Employment Agreement also contained a provision governing its assignability by the parties. Specifically, that provision provided: “This Agreement may not be assigned by either party without the prior tvritten consent of the other party.” Id. (emphasis added). Shortly after the 1996 Employment Agreement was executed, Pro-Edge, Ltd. entered into a series of complex corporate transactions that essentially operated to completely revamp its corporate structure. In 1996, prior to any shift in its business form, Pro-Edge, Ltd., wholly-owned Pro Pork Associates, Inc., Trans Ova Genetics, Bio Edge and NOBL Laboratories, Inc. (hereinafter “NOBL I”), as well as a 13% interest in Vet Pharm, Inc. and a 4% interest in Metabolic Technologies, Inc. 5 At the November 11, 1996, Annual Stockholders’ Meeting of Pro-Edge, Ltd., the shareholders — including Dr. Gue — unanimously approved the Board of Directors’ comprehensive proposal to sell NOBL I to Boeh-ringer Ingelheim Corporation (hereinafter “BIC”), and the formation of a limited partnership to serve as the new entity for the continued operations of all Pro-Edge, Ltd.’s other holdings. This proposal was subject to the successful conclusion of negotiations with BIC. Apparently, in order to avoid adverse tax consequences, the proposed transaction became increasingly more complex. First, NOBL I merged with Pro-Edge, Ltd. Pro-Edge, Ltd. was the surviving entity of the merger, and it promptly renamed itself NOBL Laboratories, Inc (NOBL II). Thus, essentially Pro-Edge, Ltd. was converted into NOBL II. The articles of merger commemorating this transaction were filed on January 2, 1997.
With respect to the non-NOBL I operations of Pro-Edge, Ltd., (essentially the Trans Ova Genetics, Inc. operations), the Stock Purchase Agreement provided that immediately after the merger between NOBL I and Pro-Edge, Ltd., all of the non-NOBL I assets, liabilities and personnel of all entities would be contributed to capitalize a new limited partnership named Pro-Edge, L.P. The contribution of these assets was to occur after the date of merger, but prior to the Closing Date of the stock purchase.
Stock Purchase Agreement,
Joint Appx., at 82. The contribution of assets took place on December 31, 1996, commensurate with the filing of Pro-Edge, L.P.’s Certificate of Limited Partnership. Essentially, the Stock Purchase Agreement provided that Pro-Edge, Ltd., along with all of its shareholders, intended to spin-off its Trans Ova Genetics, Inc. assets and liabilities to Pro-Edge, L.P., leaving the corporation with only its swine health business assets (the NOBL-related opеrations), so that the swine health business would be owned by BIC. Subsequent to the formation of the limited partnership, NOBL II, left with only the swine health business assets was sold to BIC in accordance with the terms of the Stock Purchase Agreement executed between NOBL II and BIC on January 24, 1997. The
Thus, Pro-Edge, Ltd. (minus its NOBL assets) became the limited partner in a recently-formed limited partnership named Pro-Edge, L.P. 6 Pro Management, L.C. served as the general partner for Pro-Edge, L.P. The Certificate of Limited Partnership of Pro-Edge, L.P. indicated that Pro-Edge, Ltd. II, as the limited partner, contributed at least $3,626,689.00 worth of property to Pro-Edge, L.P. The Stock Purchase Agreement further provided, that as part of the spin-off detailed above, Pro-Edge, L.P. “shall employ all of the Employees which will not be employed by the Surviving Corporation [NOBL II] from and after the Closing Date.” Id. at 118. With respect to Employee Relations, section 3.28 states:
(a) Except as set forth in Schedule 3.28, neither Pro-Edge nor NOBL is a party to any written, oral, or implied contract or agreement with any employee or director of Pro-Edge or NOBL relating to the employment of any such employee or director, including, but not limited to, any contract or agreement that governs or is related to the terms and conditions of employment or the termination of such employment.
Id. at 108. The 1996 Agreement is not one of the contracts listed in Schedule 3.28. Id. at 136. The Stock Purchase Agreement also represented that there were no third-party consents required prior to the sale of the stock, except as specifically identified. Dr. Gue’s consent is not among the third-party consents identified therein. In addition, the Stock Purchase Agreement contains the following appointment, by its Selling Shareholders, so defined as to include Dr. Gue:
2.7 Appointment of Representative. By executing this Agreement, each Selling Shareholder hereby appoints Everett Hoekstra as his, her or its agent and attorney-in-fact (“the Shareholders’ Representative”), with full power and authority (including power of substitution), except as otherwise expressly provided in this Agreement, in the name of and for and on behalf of the Selling Shareholder, or in his, her or its own name as Shareholders’ Representative, to take all actions required or permitted under this Agreement (including giving and receiving all accountings, reports, notices and consents), the Related Agreements and the signing of such Related Agreements....
Id. at 91. No written document signed by Everett Hoekstra on behalf of Dr. Gue exists which specifically identifies the 1996 Agreement and represents Dr. Gue’s consent to the assignment of the 1996 Agreement from Pro-Edge, Ltd. to Pro-Edge, L.P.
As part of previously described spin-off and stock purchase transaction, those individuals holding shares in Pro-Edge, Ltd. II — again, including Dr. Gue- — were given the option of cashing out their remaining shares or converting those shares into partnership units with Pro-Edge, L.P. Dr. Gue elected to retain his full investment in Pro-Edge, L.P. Adding further to what had already proved to be a difficult and complex transaction, Pro-Edge, L.P., sub
THEREFORE BE IT RESOLVED, that the Selling Shareholders hereby vote all of their respective shares of common stock of Pro-Edge[, Ltd.] in favor of (a) the acceptance, ratification and approval of (i) all the Transactions which have occurred prior to, or as of, the date hereof, and (ii) all of the acts of the Shareholders’ Representative and all directors and officers of Pro-Edge previously done which relate thereto, and (b) the conclusion of the Transactions which have not occurred prior to, or as of, the date hereof;
FURTHER RESOLVED, that the Shareholders’ Representative, the President and Secretary of Pro-Edge[, Ltd.] and such agents and officers as they may designate, respectively, are hereby authorized and directed to do or cause to be done, on behalf of the Selling Shareholders and Pro-Edge[, Ltd.], respectively, all such further acts and things, and to execute and deliver, and to cause to be executed and delivered, any and all such documents, as the President shall deem necessary or advisable for the purpose of carrying out the intent of the foregoing resolutions and effecting the Transactions and other transactions contemplated by the Stock Purchase Agreement. ...
Id.
Following its extensive restructuring, in 1997, Trans Ova Genetics, Inc. determined that it would offer Dr. Gue the opportunity to start up a satellite office in Belgrade, Montana with the goals of generating a customer base in that area and solidifying Trans Ova Genetics, Inc.’s presence in that area. In anticipation of Dr. Gue’s imminent relocation to the Belgrade, Montana area, Trans Ova Genetics, Inc. made significant imрrovements to the property they leased for the Belgrade, Montana office— including the addition of a cattle-housing barn and additional equipment. Prior to his actual relocation, Dr. Gue traveled back and forth between Sioux Center and Belgrade to facilitate this transition. In August 1997, Dr. Gue officially relocated to Belgrade, Montana and become the only resident veterinarian on staff at that location.
Following Dr. Gue’s relocation to the Belgrade, Montana area, Pro-Edge, L.P. d/b/a Trans Ova Genetics, Inc. again underwent substantial alterations to its eor-
“RESOLVED, FURTHER, that Pro Edge[, L.P.] assign its leases, contracts and agreements relаted to its Trans Ova operating division to Trans Ova [Genetics, L.C.], including without limitation those leases, contracts and agreements listed on Exhibit ‘C’ to these minutes, upon such terms and conditions and with securing such consents as may be required by the counterparties to such leases, contracts and agreements.... ”
Meeting Minutes of the Special Meeting of the Board of Supervisors of Pro Management, L.C., Joint Appx., Plaintiffs’ Exhibit W, at 57. Although Exhibit “C” to the meeting minutes does not explicitly mention the 1996 Employment Agreement, it makes clear that the enumerated contracts were not intended to be an all-encompassing exclusive list. Rather, the contract states that “[a]ll contracts and agreements in the name of Pro-Edge, L.P. or Trans Ova Genetics which relate to the business of the Trans Ova division of Pro-Edge, L.P., including, without limitation, the [specifically enumerated] contracts and agreements.” With respect to the assignment of these agreements, at the end of the list the following “savings clause” appears:
Should assignment of any of the leases, contracts or agreements on this Exhibit “C” require the consent of the counter-party, and should such consent not be granted, then such lease, contract or agreement shall remain with Pro-Edge, L.P. but Trans Ova Genetics, L.C. shall perform all functions and have all responsibilities under such lease, contract or agreement.
Id.
Following this second bout of corporate restructuring, Dr. Gue remained a dutiful employee of Trans Ova Genetics, L.C. until early in 2005, at which time he began contemplating resigning his veterinаry position with the company. In late February, Dr. Gue approached an embryologist at the Belgrade, Montana, facility, and discussed whether she would leave Trans Ova Genetics, L.C. to work with him should his plans to terminate his employment with Trans Ova Genetics, L.C. and branch out on his own come to fruition. In March 2005, Dr. Gue incorporated defendant Progenesis in Montana as a close corporation in which he is 75% owner, and his wife is 25% owner. Thereafter, sometime in early March 2005, Dr. Gue contacted Korey Krull, Dr. Gue’s direct supervisor at the time, as well as Chief Operations Officer of Trans Ova Genetics, L.C., and provided notice of his intent to terminate his employment with Trans Ova Genetics, L.C. Dr. Gue solidified his resignation by following this conversation with a letter, dated March 16, 2005, which clearly articulated his present intent to
Dr. Gue’s March 16, 2005, letter immediately precipitated discussions among Trans Ova Genetics, L.C., and Dr. Gue regarding the possibility of Dr. Gue staying on as an independent contractor. On Trans Ova Genetics, L.C.’s part, the retention of Dr. Gue on any basis — independent contractor or otherwise — was contingent on Dr. Gue’s execution of another employment agreemеnt containing a covenant not to compete. As Dr. Gue was not willing to enter into any agreement containing such a restrictive covenant, the negotiations subsided. On April 8, 2005, Dr. Gue resigned his employment with Trans Ova Genetics, L.C. The Trans Ova Genetics, L.C., embryologist whom Dr. Gue initially had approached about leaving the company also resigned her employment and went to work for Dr. Gue at Progenesis.
Following his resignation, Dr. Gue immediately began providing embryo transfer services to Trans Ova Genetics, L.C.’s customers — -including some of Trans Ova Genetics, L.C.’s largest and most lucrative customers. Following his separation from Trans Ova Genetics, L.C., Dr. Gue picked up embryos from Trans Ova Genetics, L.C., for Stevenson’s Diamond Dot on April 12, 2005, and Riverbend on April 14, 2005 — two of Trans Ova Genetics, L.C.’s former clients. Additionally, on April 11, 2005, Dr. Gue took out an internet ad which advertised Progenesis as offering services identical to those offered by Trans Ova Genetics, L.C. On April 20, 2005, counsel for the plaintiffs sent Dr. Gue a letter indicating that his current activities were in violation of the non-compete clause of the 1996 Agreement, and requested that he cease and desist providing competing services to Trans Ova Genetics, L.C.’s customers. Dr. Gue, via his Montana counsel, responded by letter dated April 22, 2005, indicating that the 1996 Agreement was unenforceable under Montana law, and that Dr. Gue’s activities were not violative of any enforceable contracts or agreements. Dr. Gue and Progenesis continued providing competing services — to Trans Ova Genetics, L.C.’s customers and рossibly others within the 250-mile radius of the Belgrade, Montana area- — through May 18, 2005. 8
2. Disputed facts
The parties dispute only two facts that are pertinent to the resolution of the current motion pending before this court. First, the parties dispute whether Dr. Gue consented, in writing, to the assignment of the 1996 Employment Agreement to Pro-Edge, L.P. from Pro-Edge, Ltd. Not surprisingly, the plaintiffs contend Dr. Gue consented to the assignment, and Dr. Gue contends he did not. Dr. Gue contends there is no written consent to the assignment of the 1996 Employment Agreement from Pro-Edge, Ltd. to Pro-Edge, L.P. The plaintiffs contend Dr. Gue’s written consent was obtained by virtue of his assent to the terms of the Stock Purchase
The applicable facts and nuances to the parties’ arguments will be discussed more in detail, if warranted, in the legal analysis of the plaintiffs’ claims below. Suffice it to say, the defendant asserts the plaintiffs never obtained prior written consent from him, and that, therefore, assignment of the 1996 Employment Agreement was never completed. Because proper assignment of the 1996 Employment Agreement never came to fruition, Dr. Gue contends the plaintiffs are improper parties to enforce the terms of the сovenant not to compete and that summary judgment should be granted with respect to this claim and that the preliminary injunction issued by this court should be dissolved.
II. LEGAL ANALYSIS
The court will now turn its attention to a brief survey of the standards applicable to Dr. Gue’s motion for summary judgment, then to the application of those standards to the critical issues involved in this case.
A. Standards For Summary Judgment
The parties here agree generally on the standards applicable to a motion for summary judgment. Rule 56 of the Federal Rules of Civil Procedure provides that a defending party may move, at any time, for summary judgment in that party’s favor “as to all or any part” of the claims against that party.
Fed.R.Civ.P.
56(b). “The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). As this court has explained on a number of occasions, applying the standards of Rule 56, the judge’s function at the summary judgment stage of the proceedings is not to weigh the evidence and determine the truth of the matter, but to determine whether there are genuine issues for trial.
Bunda v. Potter,
Finally, this court notes that summary judgment is particularly appropriate, in a case such as the one currently before the court, “ ‘[w]here the unresolved issues are primarily legal rather than factual....’”
Aucutt v. Six Flags Over Mid-America, Inc.,
B. Arguments Of The Parties
1. The defendant’s arguments for dismissal
Dr. Gue’s primary contention in his Motion For Partial Summary Judgment is essentially that a contract does not exist between Dr. Gue and the plaintiffs to this lawsuit, Pro-Edge, L.P. d/b/a Trans Ova Genetics, Inc. and Trans Ova Genetics, L.C. f/k/a Trans Ova Genetics, Inс. Dr. Gue points out the fact that neither of the plaintiffs was in existence at the time the 1996 Employment Agreement was entered into. Thus, he argues the only way either of the plaintiffs could have acquired rights to enforce the 1996 Employment Agreement was via a valid assignment — which, pursuant to the express terms of the 1996 Employment Agreement, requires prior written consent by Dr. Gue. Dr. Gue, not surprisingly, contends such prior written
To this end, Dr. Gue argues there is not a single document which by its terms specifically assigns the 1996 Employment Agreement to Pro-Edge, L.P. from Pro-Edge, Ltd. With respect to the Stock Purchase Agreement, the defendant argues this document neither mentions Dr. Gue as an employee, nor mentions the assignment of any employment agreement. Dr. Gue contends the Stock Purchase Agreement is limited in its scope to simply a sale of all the shares of Pro-Edge, Ltd. stock from their individual owners to BIC. It does not go so far, contends Dr. Gue, as to assign any assets. Thus, Dr. Gue argues summary judgment should be granted with respect to Count I because the 1996 Employment Agreement was never assigned, and therefore, remained with Pro-Edge, Ltd., an entity who is not a party to this lawsuit.
In the alternative, even if it can be shown or presumed that the 1996 Employment Agreement was assigned, Dr. Gue contends there is no evidence that he provided his prior written consent to such an assignment. Dr. Gue focuses this court’s attention on the fact that, for the purposes of the preliminary injunction, only
circumstantial
evidence existed sufficient to infer Gue’s consent by virtue of the appointment of Everett Hoekstra as an attorney-in-fact on behalf of all the Selling Shareholders, including Dr. Gue. Thus, at the preliminary injunction stage, the evidence suggested that Dr. Gue’s consent could have been obtained via his attorney-in-fact, Everett Hoеkstra. Now, however, Dr. Gue contends evidence exists that sufficiently rebuts the court’s initial inference. Specifically, in responding to a re
2. The plaintiffs’ arguments in resistance
The plaintiffs first argue that Dr. Gue’s assertion thаt a specific written assignment of the 1996 Employment Agreement must exist is not supported by the terms of the 1996 Employment Agreement. The plaintiffs contend the 1996 Employment Agreement does not require that the assignment itself be in writing; rather, all that is required pursuant to the explicit terms of the 1996 Employment Agreement is that the written consent of Dr. Gue be obtained prior to the assignment of the 1996 Employment Agreement to another entity. Hence, the plaintiffs contend the lack of an express written assignment of the 1996 Employment Agreement is of no import. Accordingly, because a formal assignment need not be shown, it is sufficient to demonstrate the 1996 Employment Agreement was assigned by virtue of the broad language contained in the documents spinning off Trans Ova Genetics, Inc. into Pro-Edge, L.P. The plaintiffs contend such a demonstration has been adequately made because the record in this case clearly documents the global contribution of all Trans Ova Genetics, Inc.’s assets to Pro-Edge, L.P. by virtue of the Stock Purchase Agreement and the Certificate of Limited Partnership. Thus, the plaintiffs argue that this “global contribution” of assets, which included all of Trans Ova Genetics, Inc.’s “personal property,” and “intangible assets” and “assets reflected in the books and records,” was broad enough to encompass and convey the 1996 Employment Agreement. Certificate of Limited Partnership, Joint Appx., at 142. Thus, the plaintiffs aver summary judgment is not appropriate on this particular ground because there is ample evidence that employment agreements, contracts and relationships wоuld be transferred as part of the spin-off of all of Trans Ova Genetics, Inc.’s assets to Pro-Edge, L.P.
With respect to Dr. Gue’s second contention — that the agreement cannot be enforced by Pro-Edge, L.P. because his pri- or written consent to the assignment was never obtained — the plaintiffs argue the evidence shows otherwise. Relying on the
Finally, the plaintiffs assert that, even if Dr. Gue’s after-procured consent is insufficient to satisfy the terms of the 1996 Employment Agreement, the reorganization of Trans Ova Genetics, Inc. did not constitute an “assignment.” Consequently, the plaintiffs aver that it was not necessary to obtain Dr. Gue’s prior written consent. The plaintiffs contend Dr. Gue seeks to obtain refuge in a “mere technicality,” and that he should not be permitted to avoid the terms of the 1996 Employment Agreement by exalting form over substance. The plaintiffs contend such an argument has been rejected in myriad other jurisdictions and that it is was not necessary to “assign” the rights held by Pro-Edge, Ltd. to Pro-Edge, L.P. under the 1996 Employment Agreement because there was no material change in Dr. Gue’s contractual obligations and duties. Accordingly, the plaintiffs contend summary judgment is not warranted with respect to Count I.
3. The defendant’s reply
In reply to the plaintiffs’ resistance to the defendant’s Motion For Partial Summary Judgment, Dr. Gue focuses on the plaintiffs’ contention that Stock Purchase Agreement and Statement of Unanimous
Not surprisingly, Dr. Gue contends further that the plaintiffs’ argument with respect to his ratification of the assignment is without merit. Although Dr. ’ Gue agrees that an assignment can generally be ratified in typical cases involving the general rule against the assignability of personal service contracts, Dr. Gue argues this is not a case involving the general rule because the 1996 Employment Agreement specifically defined under what conditions the agreement could be assigned. To all low an after-the-fact ratification, Dr. Gue argues, would be to disregard the explicit and unambiguous terms of the 1996 Employment Agreement, which Dr. Gue points out, the plaintiffs and/or their predecessors orchestrated and drafted. Second, Dr. Gue argues that the plaintiffs’ interpretation of the Statement of Unanimous Consent is illogical and without basis. Although the Statement of Unanimous Consent states that the shareholders ratified the “transactions” identified in the Stock Purchase Agreement, Dr. Gue argues there is no evidence supporting the conclusion that the assignment of the 1996 Employment Agreement was one of the identified “transactions.” Accordingly, Dr. Gue contends the plaintiffs are still unable to produce sufficient evidence of Dr. Gue’s prior written consent to the 1996 Employment Agreement. Consequently, he urges this court to grant partial summary judgment and dissolve the preliminary injunction because neither plaintiff is a proper party to enforce the terms of the 1996 Employment Agreement. • • '
C. Is The 1996 Employment Agreement Properly Held By A Plaintiff In This Matter?
1. Was the 1996 Employment Agreement included in the transfer of Pro-Edge, Ltd.’s assets to Pro-Edge, L.P.?
As a general rule, an executory contract for personal services is not assignable by either party. ,
See Orkin Exterminating Co. (Arwell Div.) v. Burnett,
2. Did the transfer of Pro-Edge, Ltd.’s assets to Pro-Edge L.P. work an “assignment”?
The more difficult question, however, is whether the rights transferred under the 1996 Employment Agreement can be properly enforced by Pro-Edge, L.P. As indicated in the factual background of this case, the 1996 Employment Agreement contemplates assignment, but only after securing the prior written consent оf the other party. In their briefs and during the hearing, the parties focused in great detail on whether Dr. Gue’s written consent was obtained prior to the assignment of assets from Pro-Edge, Ltd. to Pro-Edge, L.P.
The question of whether a merger'or other change of corporate form constitutes an “assignment” has never been affirmatively decided under Iowa law. However, there is a dearth of relevant case law from other jurisdictions, and as there is no Iowa law on point, this court will turn to such authority for guidance. A review of the applicable persuasive authority reveals that two distinct lines of thought have emerged with respect to this issue. First, there is the line of .thought exemplified by the Sixth Circuit’s decision in
PPG Industries, Inc. v. Guardian Industries Corp.,
The second line of thought can be gleaned by myriad decisions in various state courts who have chosen to follow the principles initially set forth in
Trubowitch v. Riverbank-Canning Co.,
This court recognizes that both lines of thought exude certain appeal. For example, the line of thought evinced in
PPG
emphasizes the importance of drafting accurate contracts and places the burden on the drafters to provide an exception in the case of a merger or change of business structure. However, on the other hand, the line of state court decisions recognizes the fluidity of business entities and appear to temper the harsh consequences that potentially can ensue as a result of the formality of shifting the legal form of a business endeavor. For the reasons discussed below, however, this court finds that, on the facts of this case, the
PPG
approach controls. First, it must be noted that Pro-Edge, Ltd. drafted the 1996 Employment Agreement. Pro-Edge, Ltd. is an extremely experienced business entity and should have been savvy to the importance of drafting an explicit and accurate contract. Dr. Gue, although highly educated in the field of veterinary medicine, cannot be held to such a high standard as an individual employee. As the 1996 Employment Agreement clearly contemplated and provided for its assignment and provided the conditions which must be met prior to such an assignment, Pro-Edge Ltd. could have easily gone one step further and defined “assignment” or provided for an exception in the event of a change in corporate structure. Pro-Edge, Ltd. failed to do so and should not be allowed to seek refuge by asserting the transactions that followed were a simple “transfer” and insufficient to constitute an “assignment” within thе meaning of the parties’ agreement. While it is true the basic rule in interpreting written contracts is that the intent of the parties controls, this intent is determined by the language of the contract unless it is ambiguous.
Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of Regents,
3. Did Pro-Edge, Ltd. obtain prior written consent from Dr. Gue?
Because the court has concluded an “assignment” occurred, thereby requiring Dr. Gue’s prior written consent, the next question is whether the plaintiffs obtained such consent, taking the facts in a light most favorable to' them. The plaintiffs fully concede that Hoekstra, as Dr. Gue’s attorney-in-fact, did not provide the consent' required. Instead, the plaintiffs rely on Dr. Gue’s own actions — namely, his signature and consent to the Stock Purchase Agreement and the Statement of Unanimous Consent. Unfortunately for the plaintiffs, no reasonable jurist could conclude that the Stock Purchase Agreement and the Statement of Unanimous Consent signed by Dr. Gue constitute his consent to the assignment of the 1996 Employment Agreement. In order to understand the court’s conclusion, it is necessary to understand why these documents were executed.
Under the Iowa Business Corporation Act, Iowa Code Annotated §§ 490.101
et seq.,
shareholder — not employee — approval, is required before a corporation may sell its assets other than in the regular course of business,
of
which the transactions contemplated by Pro-Edge, Ltd. would qualify.
See Iowa Code Ann.
§ 490.1202 (West 2005).
14
Accordingly, the purpose of the Stock Purchase Agreement and the Statement of Unanimous Consent was to elicit such consent from the sharеholders as was required under Iowa law. Without the consent of the shareholders, the Board of Directors could not authorize such an extraordinary transaction. Although the shareholders approved the proposed transaction at their Annual Meeting, the proposal was not complete and dependent upon the comple
Further, even if the court were persuaded by the plaintiffs’ strained interpretation
4. Was the assignment ratifted by Dr. Gue?
Because the plaintiffs have produced no evidence suggesting they secured Dr. Gue’s prior written consent to the assignment of the 1996 Employment Agreement, they attempt to rely on a theory of ratification in order to survive Dr. Gue’s Motion For Partial Summary Judgment. Essentially, the plaintiffs contend Dr. Gue ratified the assignment of the 1996 Employment Agreement to Pro-Edge, L.P. because he was aware of the transaction, continued his employment with the Trans Ova Genetics, Inc. division and subsequently consented (by virtue of the Stock Purchase Agreement and Statement of Unanimous Consent) to the assignment. The plaintiffs’ argument fails for primarily two reasons. First, most of the cases providing for ratification do so in the context of contracts and agreement that are silent with respect to assignability.
See, e.g., Norlund v. Faust,
Second, as this court has already concluded, the Stock Purchase Agreement and Statement of Unanimous Consent are not susceptible to the interpretation urged by plaintiffs. Thus, the plaintiffs’ ratification argument can only be premised on Dr. Gue’s knowledge of the asset transfer and his continued employment. Unfortunately for the plaintiffs, this is not enough. Although Iowa case law has recognized the concept of ratification,
see, e.g., Orkin Exterminating Co.,
D. Dissolution Of The Preliminary Injunction
When addressing the plaintiffs’ initial motion for a Preliminary Injunction on June 1, 2005, the Court addressed and outlined Rule 65 of the Federal Rules of Civil Procedure and applicable case law relating to the issuance of preliminary injunctions in the Eighth Circuit.
See Gue,
It is well-settled in this circuit that applications for preliminary injunctions are generally measured against the standards enunciated in
Dataphase Systems, Inc. v. CL Systems, Inc.,
III. CONCLUSION
This controversy embodies what has become the paradox of contract law: A document designed to prevent litigation, actually produces the very litigation it was designed to prevent. It is in- this unfortunate scenario that the value of a contract that can mesh simplicity with conscientiousness becomes painfully all too clear. Given the lengthy litigation that has-been involved in this case, it is clear that both parties, to. some dеgree, have suffered losses. However, at. least for today, Dr. Gue emerges as the victor. Accordingly, Dr. Gue’s Motion For Partial Summary Judgment and Motion To Dissolve Preliminary Injunction is hereby granted with respect to Count I, and accordingly, the preliminary injunction issued by this court on June 1, 2005 and modified on January 31, 2006, is hereby dissolved.
In closing, as it did in its June 1, 2005 order, this court notes that orders with respect,to injunctions are appealable as a matter of right. See 28 U.S.C. § 1292(a)(1) (stating the courts of appeals shall have jurisdiction of appeals from “[ijnterlocutory. orders of the district courts of the United States ... granting, continuing, modifying, refusing or dissolving injunctions”). As the issues presented in this controversy .are exceedingly close questions, the court encourages the plaintiffs to seek review of this order by the United States Court of Appeals for the Eighth Circuit.
IT IS SO ORDERED.
Notes
. The case caption specifically lists Pro Edge, L.P., as doing business as Trans Ova Genetics, Inc.
. The case caption specifically lists Trans Ova Genetics, L.C., as formerly known as Trans Ova Genetics, Inc.
. The terms of the preliminary injunction were as follows:
WHEREAS, this matter came before the court pursuant to the May 19, 2005, request of the plaintiffs for a preliminary injunction,
AND WHEREAS, pursuant to Rule 65 of the Federal Rules of Civil Procedure, the court finds that defendant Charles S. Gue, III, DVM, has been and will continue to violate the non-competition provisions of an employment contract between the plaintiffs and Dr. Gue, and that failure to enjoin such conduct would impose irreparable harm or injury or the threat of such irreparable harm or injury upon the plaintiffs, and upon further сonsideration of all other relevant factors,
DEFENDANT CHARLES S. GUE, III, DVM, is hereby preliminarily enjoined from performing any services similar to those he provided while employed at Trans Ova Genetics, L.C. — including, but not limited to, embryo transfer services and in vitro fertilization — within a 250-mile radius of any Trans Ova Genetics, L.C., facility or satellite office that was in existence as of April 8, 2005.
This preliminary injunction shall be binding upon the parties to this action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of this order.
This preliminary injunction shall issue upon the posting by the plaintiffs herein of a bond, in compliance with Rule 65(c) of the Federal Rules of Civil Procedure in the sum of thirty thousand dollars ($30,000.00).
This preliminary injunction shall remain in full force and effect until the trial of this matter or until this order is modified or dissolved by this or a reviewing court.
Preliminary Injunction, June 1, 2005 (Doc. No. 18).
. In its June 1, 2005, order, this court previously determined that Iowa’s choice of law rules required application of Iowa law to the merits of this case.
See Pro Edge, L.P. v. Gue,
. Pro-Edge, Ltd.’s interest in Metabolic Technologies, Inc. was divested and dividends paid to the shareholders prior to the end of the 1996 calendar year — hence, prior to the alteration of the corporate structure.
. Specifically, the limited partnership came to fruition on December 31, 1996, with the filing of Pro-Edge, L.P.'s Certificate of Limited Partnership.
. This entity is no longer associated with the plaintiffs or this lawsuit.
. Dr. Gue testified at the preliminary injunction hearing that the reason he continued to provide similar services even after he was served with the Iowa District Court for Sioux County's temporary restraining order on May 11, 2005, was because he could not, professionally or ethically, discontinue certain work that was pending at that time until he was able to find others to provide “cover.''
. This court notes that it has jurisdiction to rule on the defendant’s Motion For Partial Summary Judgment even though the appeal of this court's issuance of the preliminary injunction is pending before the Court of Appeals for the Eighth Circuit. It is settled that the pendency of such an appeal does not divest a district court of jurisdiction to proceed with other aspects of the case.
See Fed.R.Civ.P.
62;
see also Janousek v. Doyle,
. In his brief, Dr. Gue actually states as follows: "Whether there was a consented-to assignment from Pro-Edge, L.P. to Trans Ova Genetics, L.P., is the easier of the two [assignments] to assess": plaintiffs have never argued that there was a prior written consent to that assignment from Gue. Defendant’s Brief In Support Of His Motion For Partial Summary Judgment And Motion To Dissolve Preliminary Injunction (Doc. No. 45-4), at 8 (emphasis added). Based on the context of these assertions and Dr. Gue’s remaining argument on this issue, it is clear he meant to reference Trans Ova Genetics, L.C., not Trans Ova Genetics, L.P. This unfortunate typographical error reflects the rather confounding nature of the factual background of this cаse.
. In a prior decision in this controversy, this court determined Iowa law applied to the case.
See Gue,
. However, as will be detailed below, the lack of any mention of the 1996 Employment Agreement may be indicative of Dr. Gue’s knowledge, or rather, his lack thereof, with respect to the alleged assignment.
. The court, however, does note that such a conclusion has become increasingly unpalatable based on Paragraph 3.28 of the Stock Purchase Agreement, which essentially represents that Pro-Edge is not a party to any employee agreements, except those as set forth in Schedule 3.28. This paragraph, although not entirely clear, appears to suggest the 1996 Employment Agreement was terminated. However, it is also possible that this paragraph intended to only inform BIC of Employment Agreements it would be inheriting, and therefore, since Dr. Gue would not be an employee of BIC or NOBL, his agreement was not mentioned. Because this is a motion for summary judgment, the plaintiffs are entitled to the benefit of all reasonable inferences that can be drawn from the record.
. The Iowa Business Corporation Act also requires shareholder approval in the case of a merger, but specifically exempts a merger between a parent and subsidiary. See Iowa Code Ann. §§ 490.1104 (stating the plan of merger must be submitted to shareholders for approval) & 490.1105 (exempting merger of subsidiary with parent). Therefore, the only transaction not requiring shareholder approval was the merger of NOBL I with Pro-Edge, Ltd.
. For these same reasons, even if the plaintiffs were able to produce evidence that Everett Hoekstra consented on behalf of Dr. Gue, which they concede they cannot, such a consent would more than likely exceed what Hoekstra was authorized to do, since the appointment clearly was limited to transactions on behalf of the Selling Shareholders. Thus, the consents referred to in paragraph 2.7 are clearly limited to shareholder consents required for certain transactions. The purpose of this appointment was to streamline and facilitate the stock purchase by centralizing the shareholders’ authority in one individual. It was not so broad as to allow Hoekstra untrammeled authority to sign employee-related consents. Although the appointment does indicate Hoekstra may sign the "Related Agreements," which encompasses the "Confidentiality Agreements,” the ."Deferred Payment Agreement,” certain "Employment Agreements,” (not including Dr. Gue’s) the "Escrow Agreement,” and the "Noncompetition and Indemnity Agreement,” it is clear that the reason the Related Agreements were included in the authority was to effectuate the setting up and funding of the Escrow Agreement and the Deferred Payment Agreement, the two agreements that affected the selling shareholders. Although this conclusion may appear to conflict with the court's previous opinion, the court has before it now the benefit of a more complete record and, therefore, a more accurate picture of what transpired during the transition of Pro-Edge, Ltd. to Pro-Edge, L.P.