Title: CBM GEOSOLUTIONS, INC., a Wyoming corporation; BRET NOECKER; and BRIAN LAREAU v. GAS SENSING TECHNOLOGY CORP., a Wyoming corporation

State: wyoming

Issuer: Wyoming Supreme Court

Document:

CBM GEOSOLUTIONS, INC., a Wyoming corporation; BRET NOECKER; and BRIAN LAREAU v. GAS SENSING TECHNOLOGY CORP., a Wyoming corporation2009 WY 113215 P.3d 1054Case Number: No. S-08-0214Decided: 09/14/2009
APRIL 
TERM, A.D. 2009

 
 
CBM 
GEOSOLUTIONS, INC., a Wyoming corporation; BRET NOECKER; and BRIAN 
LAREAU,

 
 
Appellants

(Defendants),

 
 
v.

 
 
GAS 
SENSING TECHNOLOGY CORP., a Wyoming corporation,

 
 
Appellee

(Plaintiff).

 
 
Appeal 
from the District Court of Albany County

The 
Honorable Jeffrey A. Donnell, Judge

 
 

Representing 
Appellants:

Peggy 
A. Trent of Trent Law Office, LLC, Laramie, Wyoming.

 
 

Representing 
Appellee:

Philip 
A. Nicholas and Jason M. Tangeman of Anthony, Nicholas & Tangeman, LLC, 
Laramie, Wyoming.  Argument by Mr. 
Tangeman.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 
VOIGT, 
Chief Justice.

 
 
[¶1]      Appellants, CBM 
Geosolutions, Inc. (CBM), Bret Noecker, and Brian LaReau, request relief from a 
preliminary injunction granted by the district court to Appellee, Gas Sensing 
Technology Corp. (GST), during an underlying lawsuit to enforce non-compete and 
non-disclosure agreements between the parties.  Finding correct application of the law, 
and no abuse of discretion, we affirm.

 
 
ISSUES

 
 
[¶2]     1.   Did the district court apply the 
correct legal standard in considering the request for a preliminary 
injunction?  

 
 
2.   Did the district court abuse its 
discretion when it issued a preliminary injunction pending trial on the merits 
in this action?

 
 
FACTS

 
 
[¶3]      Appellants Bret 
Noecker and Brian LaReau were employed by WellDog Inc., a company engaged in the 
business of measuring coal bed methane gas.  Noecker began his employment with 
WellDog on or about January 9, 2003, at which time he signed a document entitled 
Employee Non-Compete Agreement.  
LaReau began his employment on or about August 31, 2004, and also signed 
an Employee Non-Compete Agreement.  
The wording of the non-compete agreements is identical and reads as 
follows:

 
 
            
For good consideration and as an inducement for WellDog Inc. (Company) to 
employ [Appellant] (Employee), the undersigned Employee hereby agrees not to 
directly or indirectly compete with the business of the Company and its 
successors and assigns during the period of employment and for a period of three 
(3) years following termination of employment and notwithstanding the cause or 
reason for termination.

 
 
            
The term "not compete" as used herein shall mean that the Employee shall 
not own, manage, operate, consult or to be employed in a business substantially 
similar to, or competitive with, the present business of the Company or such 
other business activity in which the Company may substantially engage during the 
term of employment.

 
 
            
The Employee acknowledges that the Company shall or may in reliance of 
this agreement provide Employee access to trade secrets, customers and other 
confidential data and good will.  
Employee agrees to retain said information as confidential and not to use 
said information on his or her own behalf or disclose same to any third 
party.  

 
 
            
This non-compete agreement shall be in full force and effect for three 
(3) years, commencing with the date of employment 
termination.

 
 
            
This agreement shall be binding upon and inure to the benefit of the 
parties, their successors, assigns, and personal representatives. 

 
 
[¶4]      Appellant Noecker 
left WellDog in March of 2004, but returned to work for the company in August of 
that same year.  Noecker testified 
that he did not believe he signed another non-compete when he returned, however, 
he testified that he understood at the time of his reemployment that he was 
still bound by the non-compete agreement.  
John Pope, who supervised Appellants at WellDog, testified that it was 
standard procedure for every employee to sign a non-compete agreement.  Noecker left WellDog in February of 
2007.  LaReau also left WellDog in 
2007.  Appellee GST purchased all 
WellDog's principal operating assets, including employee non-compete agreements, 
in November of 2007.  The list of 
assets sold to GST included both of the original non-compete agreements as well 
as a non-compete agreement signed by Noecker on August 16, 2004.  However, at the hearing, GST was unable 
to produce any non-compete agreement signed by Noecker during his second term of 
employment.

 
 
[¶5]      In August of 
2007, Noecker and LaReau formed CBM, which is also in the business of measuring 
coal bed methane levels.  GST sued 
Noecker, LaReau, and CBM on May 7, 2008, and requested, inter alia, enforcement of the 
non-compete and other agreements regarding proprietary information, 
technologies, and customer lists that GST purchased from WellDog.  On June 9, 2008, GST filed an 
Application for Temporary Restraining Order and requested that Appellants be 
enjoined from violating the terms of the non-compete and other agreements during 
the pending litigation.  The 
district court set a date for a hearing on GST's request for a preliminary 
injunction and granted GST a temporary restraining order until that date.  On July 8, 2008, after a hearing, the 
district court entered its Findings of Fact, Conclusions of Law and Order on 
Plaintiffs' Application for Temporary Restraining Order and Preliminary 
Injunction (Findings of Fact), granting GST's motion for a preliminary 
injunction against Appellants, pending a trial on the merits to resolve the 
question of a permanent injunction.  
This appeal followed.  

 
 
DISCUSSION

 
 

1.    
Did 
the district court apply the correct legal standard in considering the request 
for a preliminary injunction?

 
 
[¶6]      We review the 
question of whether the district court applied the proper legal standard de novo.  Hopper v. All Pet Animal Clinic, Inc., 
861 P.2d 531, 538 (Wyo. 1993).  Wyo. 
Stat. Ann. § 1-28-102 (LexisNexis 2009) states:

 
 
            
When it appears by the petition that the plaintiff is entitled to relief 
consisting of restraining the commission or continuance of some act the 
commission or continuance of which during the litigation would produce great or 
irreparable injury to the plaintiff, or when during the litigation it appears 
that the defendant is doing, threatens to do, or is procuring to be done some 
act in violation of the plaintiff's rights respecting the subject of the action 
and tending to render the judgment ineffectual, a temporary order may be granted 
restraining the act.  The order may 
also be granted in any case where it is specially authorized by statute and by 
municipal ordinance adopted pursuant to W.S. 15-1-103(a)(xlvi).  

 
 
[¶7]      With respect to 
temporary injunctions granted during the pendency of a litigation, we have 
said:

 
 
            
The purpose of a temporary injunction is to preserve the status quo until 
the merits of an action can be determined.  
And a temporary injunction rests upon an alleged existence of an 
emergency, or a special reason for such an order, before the case can be 
regularly heard.

            
Also, the award of a temporary injunction is an extraordinary remedy 
which will not be granted except upon a clear showing of probable success and 
possible irreparable injury to the plaintiff, lest the proper freedom of action 
of the defendant be circumscribed when no wrong has been committed.  

 
 

Weiss 
v. State ex rel. Danigan, 
434 P.2d 761, 762 (Wyo. 1967) (citations omitted).

 
 
In 
granting temporary relief by interlocutory injunction courts of equity do not 
generally anticipate the ultimate determination of the questions of right 
involved.  They merely recognize 
that a sufficient case has been made out to warrant the preservation of the 
property or rights in issue in statu 
quo until a hearing upon the merits, without expressing, and indeed without 
having the means of forming a final opinion as to such 
rights.

 
 

Stowe 
v. Powers, 
19 Wyo. 291, 116 P. 576, 581 (1911) (citation and quotation marks omitted). 

 

[¶8]      Appellants argue 
that the district court applied a federal standard not used in Wyoming when it 
required some showing of likelihood of success on the merits before it granted 
the preliminary injunction.  The 
Tenth Circuit in Greater Yellowstone 
Coalition v. Flowers, 321 F.3d 1250, 1255 (10th Cir. 2003) stated that 

 
 
[a] 
party seeking a preliminary injunction bears the burden of showing: (1) a 
substantial likelihood of prevailing on the merits; (2) irreparable harm unless 
the injunction is issued; (3) [that] the threatened injury outweighs the harm 
that the preliminary injunction may cause the opposing party; and (4) [that] the 
injunction, if issued, will not adversely affect the public interest. 

 
 
(Citation 
and quotation marks omitted.)

 
 
Appellants 
contend that the district court used this standard, instead of Wyoming law, in 
reaching its conclusion.  This is 
simply incorrect.  The district 
court found that "there is a substantial likelihood that GST will prevail 
substantially on the merits[.]"  
However, the district court did not mention the federal standard or quote 
any federal precedent in its Findings of Fact.  In addition, a review of the standard 
set forth above as described in Weiss v. 
State ex rel. Danigan makes it clear that likelihood of success on the 
merits is a factor that a district court must consider before granting a 
preliminary injunction under Wyoming law.  
Weiss, 434 P.2d  at 762.  The district court properly applied 
Wyoming law.  

 
 
[¶9]      Appellants also 
contend that the district court improperly based its decision on the fact that 
the contracts signed by Appellants provide for injunctive relief.  Appellants claim that the court ordered 
the injunction as a matter of contract, and therefore did not exercise its 
equitable powers in issuing the injunction.  The district court did make a finding of 
fact that the non-compete agreements specifically authorize injunctive relief, 
however, it did so in the context of analyzing the facts under the proper 
standard for injunctive relief.  It 
is proper for a court acting in equity to consider the remedies contemplated by 
the parties in reaching its conclusion on the equities.  See, e.g., Dewey v. Wentland, 2002 WY 2, ¶¶ 35-42, 
38 P.3d 402, 416-17 (Wyo. 2002).  
The district court did not erroneously award an injunction pursuant to 
contract but properly applied the equitable standards for granting an 
injunction.  

 
 
[¶10]    Appellants next claim that 
the district court's findings of fact are inadequate as a matter of law because 
the court did not make a finding that there was no adequate remedy available at 
law. 

 
 
Although 
actions for injunctive relief are authorized by statute, Wyo. Stat. §§ 1-28-101 
to -111 (1988 & Supp. 1996), they are, by nature, requests for equitable 
relief which are not granted as a matter of right but are within the lower 
court's discretion.  Rialto Theatre, Inc. v. Commonwealth 
Theatres, Inc., 714 P.2d 328, 332 (Wyo. 1986).  Injunctions are issued when the harm is 
irreparable and no adequate remedy at law exists.  Id.; Gregory v. Sanders, 635 P.2d 795, 801 
(Wyo. 1981).  Injunctive relief is 
appropriate when an award of money damages cannot provide adequate 
compensation.  Rialto Theatre, Inc., 714 P.2d  at 
332.  An injury is irreparable where 
it is of a peculiar nature, so that compensation in money cannot atone for 
it.  Gause v. Perkins, 56 N.C. 177 (1857).

 
 

Weiss 
v. Pedersen, 
933 P.2d 495, 498-99 (Wyo. 1997) (quotation marks omitted), overruled in part on other grounds by White 
v. Allen, 2003 WY 39, 65 P.3d 395, 399 (Wyo. 2003).

 
 
The 
district court found, "GST will suffer immediate, great, and irreparable harm 
and damage in the event that Defendants Noecker and LaReau and their company, 
CBM GeoSolutions, are allowed to compete with GST in violation of the 
covenants-not-to-compete between Noecker and LaReau and WellDog that were 
purchased by GST."  Underlying that 
conclusion were findings that Appellants had been trained by WellDog in the 
innovative technology now used by GST to provide services to its customers.  GST's representative testified that the 
innovative technology used by the company is essential to its competitive edge 
in the marketplace and that only a few companies provide similar services in the 
market.  He further testified that 
some of the services offered by Appellants involved disclosing information on 
the process to customers, which would cause permanent loss of those customers 
because they would no longer require the services of a company like GST.  The district court found that this would 
constitute irreparable harm.  
Irreparable harm is, by definition, harm for which there can be no 
adequate remedy at law.  The 
district court's findings were not insufficient as a matter of law.  

 
 
Did 
the district court abuse its discretion when it issued a preliminary injunction 
pending trial on the merits in this action?

 
 
[¶11]                           
The granting or refusing of an injunction pendente lite is a matter resting 
largely in the discretion of the court, to be exercised so as to prevent injury, 
considering the situation of the parties.  
And the Appellate Court will not interfere with or control the action of 
the court below in such case, unless it has been guilty of a clear abuse of 
discretion.

 
 

Weaver 
v. Richardson, 
21 Wyo. 343, 132 P. 1148, 1151 (1913).  

 
 
[¶12]    Appellants argued that the 
district court abused its discretion in issuing the injunction because 
enforcement of the non-compete agreement was barred by the statute of 
frauds.  The district court found 
that because Noecker admitted that he believed he was bound by the first 
non-compete when he returned to WellDog, he was estopped from invoking the 
statute of frauds as a defense.  
This idea has support in Wyoming law.  In Kincheloe v. Milatzo, 678 P.2d 855, 860 
(Wyo. 1984), we said that equitable doctrines could be used to prevent a party 
from invoking the statute of frauds to perpetuate a fraud.   It is not necessary for us to 
decide whether such a concept could be relevant here because there was enough 
evidence of the existence of a written contract to allow the district court to 
issue an injunction pending discovery and trial.  Noecker testified that he did not 
remember signing a new non-compete when he returned to the company in 2004.  However, GST's representative testified 
that the company was very careful about observing its standard operating 
procedure of having all employees sign non-compete agreements.  A written covenant not to compete dated 
August 16, 2004, is listed on the asset purchase agreement between WellDog and 
GST.  Other documents that would 
have been signed in conjunction with the non-compete were produced at the 
hearing.  Given the amount of 
evidence presented at the hearing indicating the existence of a written 
non-compete agreement, we cannot say that the district court abused its 
discretion when it ordered an injunction pending further discovery and 
trial.  

 
 
[¶13]    Appellants finally argue that 
a preliminary injunction was not appropriate because the non-compete agreements 
are unenforceable as a matter of law.  
Appellants point out that the reasonableness of a covenant not to compete 
is a question of law to be determined by the court and reviewed de novo.  Hopper, 861 P.2d  at 542-43.  However, that determination will 
necessarily depend on facts that must be developed in due course at the 
appropriate stage of litigation.  
The district court found, based on the limited review required for a 
preliminary injunction, that the covenants were likely to be enforced.  The district court 
stated

 
 
6.     A valid and enforceable 
covenant not to compete requires a showing that the covenant is:  (1) in writing; (2) part of a contract 
of employment; (3) based on reasonable consideration; (4) reasonable in 
durational and geographical limitations; and (5) not against public policy.  See, e.g., Tench v. Weaver, 374 P.2d 27, 
29 (Wyo. 1962); Ridley v. Krout, 180 P.2d 124, 128 (Wyo. 1947); Dutch Maid 
Bakeries v. Schleicher, 131 P.2d 630, 634 (Wyo. 1942); Wyo. Stat. Ann. § 
1-23-105 (1988).  Further, the 
Wyoming Supreme Court has recognized the rule that a covenant not to compete 
entered into contemporaneously with the employment itself is enforceable and is 
supported by sufficient consideration.  
Hopper v. All Pet Animal Clinic, 
Inc., 861 P.2d 531, 540 (Wyo. 1993).

7.     The reasonableness of a 
covenant not to compete is assessed upon the facts of the particular case and a 
review of all of the circumstances.  
See, e.g., Hopper, 861 P.2d  at 540.  In evaluating reasonableness, a court 
may consider the degree of inequality in bargaining power; the risk of the 
covenantee losing customers; the extent of respective participation by the 
parties in securing and retaining customers; the good faith of the covenantee; 
the existence of sources or general knowledge pertaining to the identity of 
customers; the nature and extent of the business position held by the 
covenantor; the covenantor's training, health, education, and needs of his 
family; the current conditions of employment; the necessity of the covenantor 
changing his calling or residence; and the correspondence of the restraint with 
the need for protecting the legitimate interests of the covenantee.  See, e.g., Hopper, 861 P.2d  at 540.  

 
 
The 
district court found that there was evidence that a covenant not to compete 
existed in writing, that the document was signed ancillary to a legitimate 
employment relationship that constituted reasonable consideration, and that GST 
had presented evidence that could lead the court to conclude that a restriction 
that was national in nature but narrowly tailored to one aspect of the industry 
was reasonable under the circumstances.  
If any part of a covenant not to compete is found unreasonable and 
therefore unenforceable, the court may decline to enforce the unreasonable 
provisions.  Hopper, 861 P.2d  at 545-47.  None of the terms of the non-compete 
agreement in this case were facially unreasonable and the court did not abuse 
its discretion when it found, based on the evidence before it at the hearing, 
that Appellee was entitled to an injunction pending full development of the 
facts and determination on the merits.  
We note that these findings do not constitute a determination on the 
merits, but are preliminary findings in the context of the limited evidence 
presented at the hearing for a preliminary injunction. 

 
 
CONCLUSION

 
 
[¶14]   We find that the district court 
correctly applied the law and did not abuse its discretion when it issued a 
preliminary injunction prohibiting Appellants from competing with their former 
employer during the pending litigation to enforce a covenant not to 
compete.