Title: ADE Software Corp. v. Hoffman

State: vermont

Issuer: Vermont Supreme Court

Document:

ADE Software Corp. v. Hoffman (99-338); 172 Vt. 259; 775 A.2d 896

[Filed 20-Apr-2001]

[Motion for Reargument Denied 05-May-2001]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.

                                 No. 99-338

ADE Software Corp.	                         Supreme Court

                                                 On Appeal from
     v.	                                         Chittenden Superior Court

Carl Hoffman, et al.	                         September Term, 2000

Matthew I. Katz, J.

Karen McAndrew of Dinse, Knapp & McAndrew, P.C., Burlington, for 
  Plaintiff-Appellee.

Michael B. Clapp, Burlington, for Defendant-Appellant.

PRESENT: Amestoy, C.J., Dooley, Morse and Skoglund, JJ., and Davenport, 
         Supr. J., Specially Assigned

       AMESTOY, C.J.   Defendant-appellant Carl Hoffman appeals a final order
  of the  Chittenden Superior Court denying his motion for a determination of
  injunction damages arising  from a preliminary injunction granted to
  plaintiff-appellee ADE Software Corp.  Defendant (FN1)  asserts that he is
  entitled to a trial on the merits of plaintiff's claim in order to
  establish that the  preliminary injunction was wrongfully issued, and
  further, that he has a right to have a jury  determine damages.  We affirm
  the trial court's judgment that defendant did not meet his burden of 
  establishing that the injunction was wrongfully issued in the first
  instance, and consequently has no  right to a merits hearing.

 

       In March 1997, defendant Carl Hoffman began employment with LPA
  Software, Inc., a New  York corporation, at its office in Williston,
  Vermont.  LPA sold "integrated yield management  solutions," building
  software which could identify problems in the manufacturing process of 
  semiconductor chips.  Hoffman was employed as a sales manager for the
  Eastern United States and  Europe, and was involved in LPA's product
  design. His employment contract contained a covenant not to compete which
  read:

    Employee agrees that during the term of this Agreement and for a 
    period of one (1) year after the expiration of this Agreement or 
    termination of his employment with Employer, without the prior 
    written consent of the Employer (which consent will not be 
    unreasonably withheld), he will not . . . be employed by . . . any 
    enterprise in the United States or Canada engaged in the business
    of  preparing, designing, implementing or marketing computer
    systems  or in research and development . . . where such activity
    competes  directly with the Employer.

  The contract explicitly entitled LPA to injunctive relief "upon an actual
  or threatened breach or  violation of the provisions."

       Hoffman terminated his employment with LPA effective September 8,
  1997, and one week  later, commenced employment with defendant KLA-Tencor
  Corp., LPA's "largest and most direct  competitor."  At approximately the
  same time, ADE Software Corp. (hereinafter "plaintiff" or  "ADE") purchased
  LPA Software, Inc., including the terminated employment contract. 

       Plaintiff filed a complaint on November 3, 1997 to enforce the terms
  of the employment  agreement, and to recover damages sustained as a
  consequence of Hoffman's employment with KLA-Tencor.  After a three-day
  evidentiary hearing, the trial court issued a preliminary injunction on 
  January 16, 1998, barring Hoffman from continued employment with
  KLA-Tencor.  The trial court  found that there was "a likelihood that ADE
  will succeed in proving at trial that Mr. Hoffman's 

 

  employment by KLA-Tencor is in violation of the Employment Agreement."  The
  injunction became  effective upon the posting of a $100,000 bond. 

       Defendant filed a motion for reconsideration and, in the alternative,
  a motion for permission  to file an interlocutory appeal.  The motion for
  reconsideration was denied, but permission to file an  interlocutory appeal
  was granted.  Defendant's appeal was subsequently filed with this Court,
  and  was dismissed on the grounds that permission to appeal was
  "improvidently granted insofar as  resolution of the issues on appeal may
  be dictated by facts developed at trial."

       In September 1998, plaintiff filed a motion to voluntarily dismiss the
  action and to dissolve  the preliminary injunction.  Plaintiff claims to
  have voluntarily dismissed the action due to the fact  that the period of
  time for which it was entitled to enforce the covenant had expired, and 
  that the  pursuit of money damages was not cost effective as "any claim for
  lost profits would be based upon a  very limited period of time." 
  Defendant did not oppose the motion, and the underlying complaint  was
  dismissed.  

       One week later, defendant filed "a motion for determination of
  injunction damages" pursuant  to V.R.C.P. 65(c), 65.1 and 12 V.S.A. § 4447,
  seeking a hearing "to determine defendant Hoffman's  entitlement to
  injunction damages arising from the wrongful issuance of the preliminary
  injunction in  this matter."  The trial court noted that defendant's demand
  for a hearing was subsequent to the  dissolution of the preliminary
  injunction, and ordered defendant to "specify its grounds for damages, 
  both what has been suffered and why the injunction was wrongfully issued." 
  After receiving  defendant's response, the trial court concluded that
  defendant had "shown no new evidence" to meet  his burden of establishing
  his right to injunctive damages, and that he had not made a timely jury 
  request.  The trial court denied defendant's subsequent motion for
  reconsideration.

 

       On appeal, defendant contends that he is entitled to a trial on the
  merits of plaintiff's claim in  order to establish that the preliminary
  injunction was wrongfully issued, and that he has a right to  have a jury
  determine damages.

       The dissolution of the preliminary injunction before a final judgment
  on the merits of  plaintiff's claim distinguishes this case from the more
  usual circumstances in which a defendant  seeks injunctive damages after a
  final judgment.  Sykas v. Alvarez, 126 Vt. 420, 422,