Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-02915/USCOURTS-ca8-03-02915-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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1

The Honorable Paul A. Magnuson, United States District Judge for the District

of Minnesota, sitting by designation.

2

The Honorable Jimm Larry Hendren, United States District Judge for the

Western District of Arkansas.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2915 

___________

The Hardesty Company, Inc., *

an Oklahoma Corporation, *

 *

Appellant, *

* Appeal from the United States

v. * District Court for the

* Western District of Arkansas.

Perry E. Williams; Norma J. Williams, *

 *

Appellees. *

___________

Submitted: April 16, 2004

Filed: May 25, 2004

___________

Before LOKEN, Chief Judge, BYE, Circuit Judge, and MAGNUSON,1

 District

Judge.

___________

BYE, Circuit Judge.

This appeal involves The Hardesty Company's (Hardesty) challenge to the

district court's2

 grant of summary judgment in favor of Arkansas residents Perry and

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Norma Williams. Hardesty contends it has established a breach-of-contract action

based on the Williamses' breach of a noncompete agreement. We affirm.

I

The parties do not dispute the relevant facts. On May 28, 1996, the Williamses

sold their ready-mix concrete business to Hardesty, which also operated another

similar facility. In connection with the parties' Asset Purchase Agreement, on July

19, 1996, the Williamses signed a seven-year agreement not to compete in the

concrete business within a certain geographic area (the agreement).

The agreement, which expired by its own terms on July 19, 2003, provided in

pertinent part:

Covenant Not to Compete. The Covenantors . . . hereby covenant and

agree, jointly and severally, that they or any of them, either directly or

indirectly, and whether as owner, shareholder, director, officer, agent or

employee, or in any other capacity whatsoever, will not during the term

hereof compete with the Covenantee, or the Covenantee's successors or

assigns, in the business of manufacturing, selling, distributing,

transporting or otherwise dealing in concrete or operating ready-mix

concrete plants within the Territories . . . . 

Noncompetition Agreement at ¶ 3.

Beginning in approximately March 2002, the Williamses leased Oklahoma real

estate located within the geographic area described in the noncompete agreement to

Tune Concrete (Tune), a competitor of Hardesty which operated a concrete ready-mix

plant on said real estate. This rental arrangement was on a month-to-month basis

from March 2002 until approximately April 2003, at which point Tune and the

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Williamses entered into a written lease. The lease payments are not contingent upon

or related to the income generated by Tune.

Hardesty filed a breach-of-contract action against the Williamses, alleging a

breach. The district court granted summary judgment in favor of the Williamses, and

this appeal followed.

II

We review the district court's grant of summary judgment de novo, applying

the same standards as the district court. Dulaney v. Carnahan, 132 F.3d 1234, 1237

(8th Cir. 1997). Summary judgment is properly granted when the record, viewed in

the light most favorable to the nonmoving party, shows that there is no genuine issue

of material fact, and the moving party is entitled to judgment as a matter of law. Fed.

R. Civ. P. 56(c); Walsh v. United States, 31 F.3d 696, 698 (8th Cir. 1994). 

This is a diversity case, and therefore this court must apply the appropriate state

law. The agreement provides disputes shall be governed and enforced by the laws of

the states of Oklahoma, Missouri, and Arkansas. Given the straightforward nature

of this case and the fact it can be resolved based on the plain language of the

agreement, it would be academic to engage in a discussion of conflicts in the specific

choice-of-law among these three states, and we decline to do so.

Under Arkansas, Oklahoma, and Missouri law, covenants not to compete are

"not looked upon with favor by the law." Federated Mut. Ins. Co. v. Bennett, 818

S.W.2d 596, 597 (Ark. Ct. App. 1991). See also Armstrong v. Cape Girardeau

Physician Assocs., 49 S.W.3d 821, 825 (Mo. Ct. App. 2001) ("Generally because

covenants not to compete are considered restraints on trade, they are presumptively

void and are enforceable only to the extent that they are demonstratively

reasonable."); Bayly, Martin & Fay, Inc. v. Pickard, 780 P.2d 1168, 1170 (Okla.

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1989) (stating restraints on trade not favored; only statutory exceptions recognized

under Oklahoma law). However, some courts have concluded, when a covenant not

to compete is given in connection with a sale of a business, "'a large scope for

freedom of contract and a correspondingly large restraint of trade' is allowable."

Samuel Stores, Inc. v. Abrams, 108 A. 541, 543 (Conn. 1919); see also CentorrVacuum Indus., Inc. v. Lavoie, 609 A.2d 1213, 1215 (N.H. 1992).

As to enforceability, the restraint must be reasonable in geographical limitation

and duration, must protect a legitimate interest, must be no greater than reasonably

necessary to protect the legitimate interest, and should not injure the public's interest.

Dawson v. Temps Plus, Inc., 987 S.W.2d 722, 727 (Ark. 1999). Also, a noncompetition agreement is a contract, and as such, general principles of contract

interpretation apply.

Both parties acknowledge there is in the agreement no express restriction

impinging upon the Williamses' ability to lease real property to a competitor of

Hardesty. Hardesty argues the general language of the agreement providing that the

Williamses will not "either directly or indirectly . . . compete . . . in the business of

manufacturing, selling, distributing, transporting or otherwise dealing in concrete or

operating ready-mix concrete plants within the Territories" restricts the Williamses

from leasing property to a third-party competitor of Hardesty. Hardesty, however,

fails to identify any precedent within Arkansas, Missouri, or Oklahoma jurisdictions

which would support this reading of the agreement.

 Because, on its face, the agreement does not contractually prohibit the

Williamses from simply leasing real property to a third-party who is also a competitor

of Hardesty, we decline to invoke nonbinding precedent so as to write into the

agreement a term which is not there. See Wineteer v. Kite, 397 S.W.2d 752, 759

(Mo. Ct. App. 1965) (holding the act of leasing a building to a person who will

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compete with buyers of a business does not amount to a violation of a covenant not

to compete).

In reaching this result, we observe no indication the parties to the agreement

were unsophisticated. They were free to bargain and contract as they determined to

be in their respective best interests, and Hardesty could have contracted to acquire

the Williamses' leasing rights in the tract in question had it desired to do so.

III

We affirm the district court's grant of summary judgment.

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