Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-91-03109/USCOURTS-ca10-91-03109-0/pdf.json

Parties Involved:
Equifax Services, Inc.
Appellee
Steven A. Hitz
Appellant

Document Text:

UNITED STATES COURT OF 

TENTH CIRCUIT 

EQUIFAX SERVICES, INC., doing business ) 

as Equifax Commercial Specialists, ) 

formerly known as White & White ) 

Inspection & Audit Service, Inc., ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

STEVEN A. HITZ, ) 

) 

Defendant-Appellant. ) 

APPEALS 

FIL_cjD ~,, Univ- Sta.tmi. Coμrt~! AP1 .. 1;-i 'fra1t·1. C1.rcu1 , 

JUL O 9 1992 

ROBERT L. HOECKE ., Clerl: 

No. 91-3109 

(D.C. No. 89-CV-2047) 

(Dist. of Kansas) 

ORDER AND JUDGMENT* 

Before BALDOCK and BARRETT, Circuit Judges, and PARKER**, District 

Judge . 

**The Honorable James A. Parker, United States District Judge for 

the District of New Mexico, sitting by designation. 

Steven A. Hitz (Hitz), appeals from the order and judgment of 

$605,000 entered in favor of Equifax Services, Inc., d/b/a Equifax 

Commercial Specialists f/k/a White & White Inspection and Audit 

Service, Inc. (Equifax) 1 after trial to the district court. 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

1 In early 1988, Equifax merged with White & White. While the 

parties dispute whether Equifax purchased White & White or whether 

the two merged, the district court determined that it was a 

corporate merger. See Eguifax Services. Inc. v. Hitz, 1991 WL 

17651, at *2 (Appellant's Appendix Tab 62, p . 3) . 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 1
Hitz was employed as a branch manager for White & White 

Inspection and Audit Service, Inc., a Missouri corporation. 

(White & White). As branch manager, Hitz was involved with White 

& White's customers in such a manner as to allow him access to the 

clients and to confidential information about the different client 

accounts. During this employment, Hitz signed two employment 

agreements, one in 1982 and one in 1986. The 1986 employment 

agreement contained the following covenant not to compete clause: 

9. Covenant Not To Compete. 

(a) The Branch Manager agrees that for a 

period of two (2) years following the 

termination of his employment with White & 

White for any reason whatsoever, whether such 

termination is with or without cause, he will 

not engage, directly or indirectly, in 

competition with White & White in furnishing 

Investigations to the Customers on a fee basis 

in any State(s) in which he as operated as a 

branch manager within the past two (2) years, 

either as a principal, agent, partner, 

officer, director, stockholder, advisor, 

consultant, employee, contractor, or in any 

other form, method or capacity. For the same 

period, the Branch Manager further agrees that 

he will not in any manner persuade or attempt 

to persuade any employee or field 

representative of White & White to discontinue 

his relationship with White & White or engage 

in concert with any employee or field 

representative of White & White in competition 

with White & White. It is agreed that any 

breach of this Agreement by the Branch Manager 

shall entitle White & White, in addition to 

any other legal remedies available to it, to 

apply to any court of competent jurisdiction 

to enjoin any violation of this Agreement. 

(Appellee's Appendix, Vol. 2, Tab 119, pp. 3-4). The agreement 

also contained a paragraph which stated that the agreement would 

be governed by the laws of the State of Kansas. Id. at 4. 

-2-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 2
On February 24, 1988, prior to the 2 

merger, Hitz informed 

White & White that he intended to resign his position, which he 

did vacate on March 31, 1988. On April 1, 1988, Hitz went to work 

for a competing company, Golden Coast Survey and Audit Services, 

Inc. (Golden Coast). 

On April 28, 1988, White & White, through its attorney, 

notified Hitz that it believed he was in violation of his 

employment agreement. Specifically, White & White alleged that 

Hitz was violating the covenant not to compete clause of the 

agreement. White & White also notified Hitz that it intended to 

enforce the restrictive covenant. (Appellant's Appendix, Vol. 

III, Tab 45). 

Equifax brought suit in Kansas state court against Hitz on 

December 19, 1988, for both damages and injunctive relief. Hitz 

removed the case to the United States District Court for the 

District of Kansas on diversity grounds. On February 21, 1989, 

the district court entered a temporary restraining order (TRO) 

against Hitz. (Appellant's Appendix, Vol. I, Tab 1). The TRO 

enjoined him from violating the covenants contained in the 

employment agreement he had with White & White. Thereafter, Hitz 

moved to dismiss the complaint alleging lack of personal 

jurisdiction. Alternatively, he sought a change of venue to the 

United States District Court for the Central District 

2The date of the merger is disputed. Hitz states that the 

"purchase of White & White was consummated" on April 27, 1988 

(Appellant's Brief p. 1), and Equifax states that the merger 

occurred on February 29, 1988. (Appellee's Brief p. 11). The 

Agreement and Plan of Merger is dated February 29, 1988 (See, 

Appellee's Appendix Tab 133). 

-3-

of 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 3
California. (Appellant's Appendix, Vol. I, Tab 2). 

On March 8, 1989, the district court entered a preliminary 

injunction against Hitz, and denied his motion for a change of 

venue. (Appellant's Appendix, Vol. I, Tab 3). We affirmed the 

district court's preliminary injunction and determined that the 

motion for a change of venue was an interlocutory order and not 

immediately appealable. See, Equifax Services, Inc., v. Hitz, 905 

F.2d 1355 (10th Cir. 1990). 

While Ritz's first appeal to our court was pending, Equifax 

filed an amended complaint against Hitz, which alleged: breach of 

agreement; interference with prospective business or economic 

advantage; breach of the fiduciary duty of good faith and fair 

dealing; unfair competition; and misrepresentation. 

Appendix, Vol. I, Tab 5). 

(Appellant's 

On August 20, 1990, the district court commenced a two day 

bench trial. At the trial, Equifax alleged that Hitz and his wife 

formed Golden Coast during March, 1988, prior to his resignation 

from White & White; that Hitz actively participated in the 

formation of Golden Coast; that Ritz's wife owned 95% of the 

shares of stock in Golden Coast3; that before and after Ritz's 

resignation from White & White, he solicited business on behalf of 

Golden Coast from clients of White & White; and that Hitz 

contacted other employees of White & White regarding possible 

employment with Golden Coast. 

3Equifax contended that prior to the formation of Golden Coast, 

Ritz's wife had no experience or training in the survey and audit 

business. 

-4-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 4
On January 24, 1991, the district court entered judgment in 

favor of Equifax, awarding Equifax $605,000 in damages. In its 

detailed judgment, the district court found, inter alia, that: it 

had personal jurisdiction over Hitz; pursuant to Kansas choice of 

law principles, Kansas law governed the dispute; the restrictive 

covenant should be reformed to cover only the Los Angeles branch 

area, rather than all of California; Hitz had entered an 

employment agreement with White & White, in which he agreed to the 

covenant not to compete clause; Hitz had violated the covenant; 

the transaction between White & White and Equifax was a merger and 

not a sale; and, Equifax suffered damages as a result of Ritz's 

breach of the employment agreement. The court determined that the 

damages suffered by Equifax included lost profits, costs incurred 

to replace and train employees hired away by Hitz, and the loss of 

goodwill among many of White & White's former clients. 

(Appellant's Appendix, Vol. IV, Tab 62). Following the judgment, 

Hitz filed a motion for a new trial, which was denied by the 

district court. (Appellant's Appendix, Vol. IV, Tabs 68 and 

70) • 

On appeal, in a lengthy listing of issues, Hitz contends that 

the district court erred in what basically amounts to all of its 

findings of facts and conclusions of law. Questions of law are 

reviewed de novo, while factual findings of the district court are 

reviewed under the clearly erroneous standard. American Council 

for the Blind of Colorado, Inc. v. Romer, 1992 WL 90490 * 1 (10th 

Cir., May 5, 1992). 

-5-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 5
in 

I. 

Hitz here argues many of the same legal issues we dealt with 

Equifax Servs .• Inc. v. Hitz, 905 F.2d 1355 (10th Cir. 1990). 

We there held in favor of Equifax on the issues regarding personal 

jurisdiction, standing, and choice of law in the preliminary 

injunctive stage of the lawsuit. We hold in favor of Equifax on 

the same issues here. 

that, 

a. 

Regarding the issue of personal jurisdiction, we have held 

"'A federal court sitting in diversity "may 

exercise personal jurisdiction over a 

nonresident defendant only so long as there 

exist '"minimum contacts"' between the 

defendant and the forum state." "The 

defendant's contacts with the forum state must 

be such that maintenance of the suit 'does not 

offend "traditional notions of fair play and 

substantial justice."'"'" 

Kennedy v. Freeman, 919 F.2d 126, 128 (10th Cir. 1990) (citations 

omitted) . We further held that to establish specific 

jurisdiction, a party must do some act that represents an effort 

by him to "purposefully avail[] [himself] of the privilege of 

conducting activities within the forum State." Id. (citations 

omitted) . 

In Equifax, we held that "the nature of defendant's 

relationship with his Kansas employer supports the district 

court's exercise of personal jurisdiction over defendant in Kansas 

in this dispute arising out of that relationship." Equifax at 

1357. Hitz purposefully availed himself of the privilege of 

-6-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 6
conducting activities within Kansas when he agreed to employment 

with a corporation whose home office and all administrative 

activities relating to the employment were in Kansas. 4 

Furthermore, Hitz agreed to an employment agreement which 

contained a clause providing that the agreement would be governed 

by the law of the State of Kansas. 

Tab 119, p. 4). 

(Appellee's Appendix, Vol. 2, 

Hitz argued in Eguifax, as he does here, that the district 

court erred in finding that he was not fraudulently induced to 

sign the 1986 agreement with White & White. In Eguifax, we found 

nothing in the record to support the claim, nor do we find 

anything in the present record which would support such a claim. 

Thus, we hold that the district court properly exercised personal 

jurisdiction over Hitz. 

4Although Ritz's physical presence in Kansas was not significant, 

and he worked solely in southern California, 

... as a branch manager in charge of White & 

White offices there, his only direct 

supervision came from White & White employees 

in Kansas. [Hitz] had regular contact with 

White & White employees in Kansas, both by 

telephone, mail, and through electronic data 

communications. [Ritz's] customers were 

invoiced from and made payment directly to 

White & White in Kansas. [Hitz] and his 

personnel were paid directly by White & White 

from Kansas, and that company's Kansas office 

reimbursed expenses for [Ritz's] offices and 

provided those offices with necessary 

materials and supplies. [Hitz] also 

negotiated the terms of his employment 

contract directly with White & White's 

president, a contract which paid him $120,000 

to $140,000 per year over his last two years 

of employment. 

Eguifax at 1358. 

-7-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 7
b. 

The 1986 employment agreement signed by Hitz, contained a 

paragraph which read as follows: 

10. Miscellaneous. 

* * * 

(f) Inurement and Modification. The 

duties and obligations of the Branch Manager 

under this agreement shall inure the benefit 

of the successors and assigns of White & 

White. 

* * * 

(Appellee's Appendix, Vol. 2, Tab 119, p. 4). 

We held in Eguifax, that, "[i]n the case of a merger, as 

here, the surviving corporation automatically succeeds to the 

rights of the merged corporations to enforce employees' covenants 

not to compete." Eguifax at 1361 (citations omitted). Our 

holding that the surviving corporation automatically succeeds to 

the rights of the merged corporation and the clause stated in the 

employment agreement that Hitz signed, clearly indicates that 

Equifax had standing to enforce the agreement and the covenants 

contained therein. 

C. 

The federal district court for the District of Kansas has 

held that "when [a] court exercises diversity jurisdiction, it 

must apply the substantive law of the forum state," Commercial 

Union Ins. v. John Massman Contracting, 713 F.Supp. 1403, 1404-5 

(D.Kan. 1989) (citation omitted), and that "in contract actions, 

-8-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 8
Kansas courts follow the general rule that the place where the 

contract is made controls its interpretation. [and that] the 

contract is 'made' where the last act necessary for its formation 

is performed." Id. at 1405 (citation omitted). We agree. See 

also, Frasher v. Life Investors Ins. Co., 796 P.2d 1069, 1071 

(Kan.App. 1990) (when the underlying issue involves construction 

of a contract, the choice of law rule applied by Kansas is lex 

loci contractus); State Farm Mut. Auto. Ins. Co. v. Baker, 797 

P.2d 168, 171 (Kan.App. 1990) (which state's substantive law is 

applicable to construction of contract issues is determined by 

where the contract is made). 

In the instant case, after Hitz had signed the contract, the 

last act necessary for the formation of the employment agreement 

between Equifax and Hitz was the signature of the president of 

Equifax at the home office of the corporation in Kansas. This was 

the final step in solidifying the employment agreement between 

Hitz and Equifax. The contract specifically stated that Kansas 

law would govern the contract. 

In Equifax, we held that Kansas law would govern the contract 

as specifically provided in the employment agreement. We also 

held that under Kansas law, when there is no contractual choiceof-law provision, the Kansas Supreme Court has chosen to adhere to 

the lex loci contractus rule. Eguifax at 1360 (citing St. Paul 

Surplus Lines Ins. Co. v. International Playtex, Inc., 777 P.2d 

1259, 1267-70 (Kan. 1989)). Thus, we hold that based upon our 

review of the facts and our holdings in Eguifax, the place of 

contract is Kansas and Kansas substantive law is applicable. 

-9-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 9
II. 

Hitz contends that the district court erred in concluding 

that the "customer contacts" covenants in the employment agreement 

did not seek to prevent ordinary competition and could be enforced 

against him under Kansas law. 

In Uarco Inc. v. Eastland, 584 F.Supp . 1259, 1261 (D.Kan. 

1984), the court determined that a clause not to compete was 

valid if ancillary to a lawful contract, but that it was subject 

to reasonableness. The court further found that "only legitimate 

interests may be protected by such a covenant, and it is 

unreasonable if its real object is merely to avoid ordinary 

competition." (citations omitted). See also Eastern Distributing 

Co. 1 Inc. v. Flynn, 567 P.2d 1371, 1376-1377 (Kan. 1977). 

The Uarco case involved facts similar to those in the instant 

case. In Uarco, the "plaintiff's business '[was] one in which the 

employee [was] the sole or primary contact with the customers and 

in which a close personal relationship with them is fostered, 

enabling the employee to control such business as a personal 

asset.'" Uarco at 1262 (citation omitted). In our case the 

evidence established that a similar relationship existed between 

Hitz and the clients he dealt with while employed by White & 

White. 

The nature of Ritz's employment indicates that the covenant 

not to compete set forth in the employment agreement served a 

legitimate purpose in protecting White & White from that which 

ultimately happened, i.e., Ritz's use of his relationship with the 

-10-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 10
clients to lure them away from White & White to Golden Coast. The 

covenant was also reasonable once the district court restricted 

its coverage to the Los Angeles branch area only. 

Therefore, based upon the restriction placed upon the 

covenant by the district court, and the evidence presented 

regarding the nature of Hitz's employment, we hold that the 

district court did not err in concluding that the covenant did not 

seek to prevent ordinary competition and could be enforced against 

Hitz. 

III. 

Hitz contends that the district court erred as a matter of 

law in enforcing the successors and assigns clause in the 

agreement when there was a lack of consideration to support it. 

In order to be enforceable, a contract must be supported by 

consideration. Puritan-Bennett Corp. v. Richter, 657 P.2d 589, 

591 (Kan.App. 1983). The record reflects that Hitz's compensation 

increased by $10,000 from approximately $130,000 in 1986 to 

approximately $140,000 in 1987. (Appellant's Appendix, Vol. II, 

Tab 22, p. 100). The employment agreement was signed December 24, 

1986. (Appellee's Appendix, Vol. 2, Tab 119). Therefore, we hold 

that the district court correctly determined that Hitz received 

adequate consideration to support the successors and assigns 

clause in the employment agreement. 

-11-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 11
IV . 

Hitz contends that the district court erred in awarding 

damages to Equifax after granting it injunctive relief. 

The employment agreement signed by Hitz states in pertinent 

part, that "[i]t is agreed that any breach of this Agreement by 

the Branch Manager shall entitle White & White, in addition to any 

other legal remedies available to it, to apply to any court of 

competent jurisdiction to enjoin any violation of this Agreement." 

(Appellee's Appendix, Vol. 2, Tab 119, p. 4). The agreement 

further stated that in the event of a breach, the duration of the 

covenant not to compete would be extended beyond the stated two 

year period for a time period equal to the duration of the breach. 

The parties have not addressed the standard of review we 

should pursue regarding the district court's authority to award 

both damages and injunctive relief. In E.E.O.C. v. Ackerman, Hood 

& McOueen, Inc., 956 F.2d 944, 946-47 (10th Cir. 1992), we held: 

Our review of the district court's 

factual findings is limited to determining 

whether they are clearly erroneous. See Fed. 

R. Civ. P. 52(a); Beck v. Ouiktrip Corp., 708 

F.2d 532, 535 (10th Cir. 1983). In contrast, 

we review legal issues de novo. Northern 

Natural Gas Co. v. Grounds, 931 F.2d 678, 681 

(10th Cir. 1991); Cumpiano v. Banco Santander 

Puerto Rico, 902 F.2d 148, 152 (1st Cir. 

19 9 0) . 

Hitz- argues t-hat -the award- of injunctive relief and damages 

is duplicative. We disagree. The district court did not award 

both injunctive relief and damages. The court refused to extend 

the previously imposed injunctive relief, in accordance with the 

employment agreement, because it did award damages. 

-12-

(Appellant's 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 12
Appendix, Vol. IV, Tab 62, p. 14-15). The district court ruled 

that the damages awarded to Equifax were "for the period during 

which defendant was in breach of contract, " No error 

was committed. The purpose of injunctive relief is to prevent 

future violations. United States v. W.T. Grant Co., 345 U.S. 629 

(1953). 

Hitz argues in a footnote to his brief that, "[i]f Equifax 

can recover damages, it is not entitled to the damages it 

sustained prior to trial during a period of time the covenants 

were overly broad and not reasonably restricted geographically." 

Again, we disagree. There is nothing in the record indicating 

that any objection was made by Hitz in the district court to the 

damages based upon the argument that the covenant was overly broad 

and not geographically reasonably restricted. Absent such 

objection by Hitz, we defer to the district court's judgment in 

it's calculation of the damages based upon the evidence presented. 

This court will generally not address issues which were not 

raised, considered and ruled upon by the district court. Farmers 

Ins. Co. 1 Inc. v. Hubbard, 869 F.2d 565, 570 (10th Cir. 1989); 

Burnette v. Dresser Industries, Inc., 849 F.2d 1277 (10th Cir. 

1988). In Farmers we observed that the narrow exceptions to the 

general rule relate to issues of jurisdiction in the "case or 

controversy" limitation of Article 3, Section 2 of the United 

States Constitution and questions of sovereign immunity. 869 F.2d 

at 570. Those exceptions do not apply here. 

-13-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 13
V. 

In a detailed Memorandum And Order, the district court set 

forth its findings of facts and conclusions of law. (See attached 

Memorandum and Order). The court found, inter alia, that: Hitz 

had breached his employment agreement by hiring White & White 

employees away from them; such actions directly resulted in 

damages to Equifax; and the damages amounted to lost profits, the 

cost of retraining and relocating employees, and loss of 

reputation and goodwill. We hold that the factual findings of the 

district court are substantiated by the record, and are not 

clearly erroneous. 

Based upon a careful review of the record, the arguments and 

legal authority, we hold that the district court did not err in 

finding that Hitz signed an employment agreement with White & 

White which contained a binding covenant not to compete clause, 

that Hitz breached the agreement, and that Equifax suffered 

damages because of the breach. 

We affirm for substantially the reasons set forth in the 

district court's Memorandum And Order of January 24, 1991, a copy 

of which is attached hereto and by reference made a part hereof. 

AFFIRMED. 

-14-

Entered for the Court: 

James E. Barrett, 

Senior United States 

Circuit Judge 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 14
~·-I . 

I ~ < ( - · .. -· ·-- ........ ' . ',_ ..., ..__ 

DA TE · ..), • 1 • -i " 

- . ... ... -· -. --- ; i ._ : . ) · ···• .. ···---- - -- U.S. f.· . . : . : f ~::'..!RT - . ,; - . . . : . . . : . ; : .! 5 IN THE UNITED STATES DISTRICT COURT'~ 

FOR THE DISTRICT OF KANSAS 

EQUIFAX SERVICES, INC., d/b/a 

Equifax Commericial Specialists, 

t/k/a White & White Inspection and 

Audit Service, Inc., 

·7 t:" ,r\ J::, 2~ 1_ ra ,n : 

::_,,;:( - .. • • )) I •. . • _! . : • t . ! T '( ~"! ~ :!.' . • . _, "" - .• 

Plaintiff, 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

·CIVIL ACTION 

v. Case No. 89-2047-S 

STEVEN A. HITZ, 

______________________ Defendant. ) 

MEMORANDUM AND ORDER 

This matter was tried to the court on August 20 and 21, 1990. 

This is an action for injunctive relief and damages. 

Plaintiff Equifax Services, Inc., d/b/a Equifax Commercial 

Specialists, f/k/a White & White Inspection and Audit Service, Inc. 

(hereafter "Equifax" or "plaintiff") brings this action alleging 

numerous claims against defendant Steven A. Hitz (hereafter "Hitz" 

or "defendant"). All of plaintiff's claims center ar~und 

defendant's alleged wrongful conduct whereby he ignored a ccve~3nt 

not to compete which he had entered into with his forrner emplcyer, 

White & White. 

plaintiff pecitions the court for the award of attorneys• fees. 

In addition to injunctive relief and danages, 

Also before the court is plaintiff's motion for a citaticn c: 

conte~pt for defendant's alleged violation of this ccurt's 

preliminary injunction entered on March 8, 1989. 

51 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 15
M 

·, 

l 

:I 

ra:e rr:srar·c rn v1·1rcrrwrzw1·ann:e .. ,1,eJSa»vn11amer1wa:1-mcrmnmar1snz:mrr· n::rs rs CZ E l 

< ( 

- • I • -- • - • - • , .• 

Based on the evidence- before- -the -court, •· the court nakes the 

following findings of fact . 

. . 

- l. ~.μefe~dant- ~y~n Hitz began working tor White & White - ... . 

Inspectio~ and"A\lQit-·s-ervice, Inc. in 1980. White & White was 

engaged in the business of furnishing insurance inspections, 

premium audits, surveys, investigations and related work for 

insurance companies on a fee basis. Defendant was branch manager 

of White & White's southern California branch and serviced clients 

mainly in the -~os Angeles area. 

2. The defendant executed an employment contract with Hhite 

& White in 1982. Later, a new employment contract was entered into 

in 1986. Each contract contained a covenant not to compete clause. 

The December 24, 1986, contract stated: 

The Branch Manager agrees that for a period of 

t\.Jo (2) years following the ternination of his 

employment with White & White for any reason 

whatsoever, whether such termination is with 

or without cause, he will not engage, direccly 

or indirectly, in compet:ition with \-Jhite & 

White in furnishing Invescigations to the 

Customers on a fee bas is in any state ( s) in 

which he has operated as a branch manager 

within the past two (2) years, either as a 

principal, agent, partner, officer, director, 

stockholder, advisor, consultanc, employee, 

concr3ctor, or in other form, method or 

capacity for the same period, the Branch 

Manager further agrees that he will not in any 

manner persuade or atter:ipc to persuade any 

employee or field represencative of Hhite & 

\-Jhi te -to discontinue his relationship with 

Whita & 0hite or engage in compecition with 

White & Whita. It is agreed thac any breach 

of this Agreement by the Branch Manager shall 

enc it 1 e ~~ h it e ~ H h it e , in add it ion to any 

other legal remedies available to it, to apply 

2 

5 ') 

I'-

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 16
 • 

< ( 

to any court _ qf ., cpmpetent jurisdiction to 

enjoin any violation of this Agreement • . ! ... . - •, -, ••:--· · • ··: •--~=• ••r --- ~; M • • o --· • - -

Plaintiff's exhibit 2, paragraph 9(a). 

J. The contract contained a clause providing that the rights 

- . 

and obligations created by the contract would inure to the benefit . - --· -· - -- . .. - of White & White's successors. The contract stated: 

The duties and obligations 

Manager under this agreement 

the benefit of the successors 

White & White. 

Plaintiff's exhibit 2, paragraph l0(f). 

of the Branch 

. sha 11 inure to 

and assigns of 

4. Also, the contract provided that the employment agreenent. 

would be construed and governed in accordance with the laws of 

Kansas. Plaintiff's exhibit 2, paragraph l0(d). 

5. Defendant was not fraudulently induced to sign his 1986 

contract of employment with White & White. 

6. In early 19 B 8, White & Hhi te entered into a cor-Fora t.e 

merger with ~quifax Services, Inc. White & White Inspect.ion and 

Audit Service, Inc. merged into Hhite & White Acquisitions, which 

later merged into Equifax. Plaintiff's exhibit 24. Equi::ax 

Commercial Specialists, a division of Equifax Services, Inc., 

prinarily handles the business developed and previously operatej by 

White & White. Also, Equifax Commercial Specialists i:laintains i.~s 

home office in Overland Park, Kansas. 

7. Plaintiff'::;; December 2 4, 19 8 6, cont:-:ict of e~ployne~t 

-

with White & Hhite Inspection and Audit Service, I:-:.c. (herearter 

"Hhite & White") contained a clause which states, "(t)he Agr2e!"'.'.er.-:: 

shall beco:-:ie effective when signed for \-lhite & White at. its H::: :-:-.e 

] 

r:- ') dd 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 17
2A 

0,021 

( ( 

Ott ice (located . in overland _Park; . Kansas). II .Plaintiff's exhibit 2, .. - -.. - -·· 

paragraph l0(g). 

; . .. . , - ·-• - --- -- - .... -'-" . --.. 

. - . -.. - . . -

.. :- .,.. _ ~ - . ': [ · . 

a. At the time this lawsuit was commenced, defendant Hitz 

was the President of Golden Coast Insurance Services, Inc. 

(hereafter "Golden Coast"). Golden Coast engages in the same type . . . 

of business as defendant's forner employer. ·- Defendant's wife, 

Ginger Hit::, currently owns 95\ of its stock. 

currently employed by Golden Coast as a consultant. 

Defendant is 

9. Golden Coast actively solicits business from many for.:-.er 

clients of White & White's California branch. Many of Hhita .!i 

White's former clients began and have continued to utilize Goldan 

Coast instead of Equifax. Other former clients of Hhite & Whita 

have continued to utilize Equifax while also sending work to Golden 

Coast. 

10. Based upon evidence presented at t::-i::11, the insurance 

i:1 estigat:.i :e industry is a highly 

numerous companies offering such 

industry. Indeed, many insurance 

cor.ipetitive 

services to 

companies 

investigative companies at the same time. 

11. Defendant Hitz was inforned by letter, 

industry, with 

the insurance 

employ sever-al 

dated Apri~ ::a , 

1988, that the covenant not to ccmpete contained in Hitz ' s ccnt~~c~ 

or employr.:ent, would be enfo~ced against hin. on July 2o, :933, 

defendant signed ~n agreement with plaintiff in whic~ he r-atif:ad 

his 1986 employment agreement containing the covenant not ::J 

compete. 

4 

54 

I 

I 

I 

I 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 18
·( ( 

12. ·on Oecember:1:9, 1.98B ,- .plaintiff filed . a petitlon in state 

courr. ·· "This action was later removed to this court. 

lJ. On March - B, 19B9, : this court .. . entered ~- preliminary 

injunction ~restraining defendant. · from:. :-. competing - ~irectly :Qr 

indirectly with :plaintiff in furnishing · investigations, on a fee 

basis in any county in which Hitz has operated .as .a . branch .manager 

within the last .two years; Defendant was further enjoined from 

directly or indirectly attempting in any manner to persuade any 

employee or field representative of plaintiff to discontinue his 

relationship with plaintiff. 

14. Defendant Hitz was further enjoined fror:\ direct:l'j' or 

indirectly engaging in concert with any employee or field 

representat:ve in corr.petition with plaintiff. Finally, plain~iff 

was enjoined f ram directly or indireccl y using, disseminating, 

disclosing, lecturing upon or publishing ar~icles cc~cerning the 

cont~dential inforr::ation disclosed to defendanc as a consequence of 

his er:1ploymenc ·.-1ith plaintiff. 

15. Defendant appealed this courc.'s March 8, 1989, crder 

which enjoined defendant from corr.peeing with Equifax. This ccur~•s 

decision was affirned by the Tenth Circ~it Court of Appeals on June 

4, 1990. =E~g,.~1~1-· ~f_a_x_S_e_r_.'_.~_I_~_._c_._,_,_.~l~~=i~t~z, 905 F.2d 1355, 1362 (lDth 

Cir. 1990). · 

16. Golden Ccas1: · . .; as for::1cd during March of 1988, deren:i:!r.t. • s 

last. r.1onth oi: employmem: · . .;itt: \·jhit.! & \~hite. on March 2~, 1588, 

Hit~ solicited business on behulf of Golden Coast:. fro~ pl3in~:::'s 

tor.::er cuscor:1er, Far.:iers Insurance Group, through Joan Din:1 r:::o. 

5 

55 

I 

I 

I 

I 

i 

I 

I 

I 

I 

I 

\ 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 19
~ 

,1821 

( ( 

Spec~fically. :Uitz _J'!lail~d_ a let:t:er .. of .solicitation to Ms. Dinardo. 

FJ~intiff' s E~ibit ~:J •.Encl-o:sed ·:·in,thi.-s ·l·etter \.las a Golden Co.:1st 

business card ~i th Hitz Is name. -.:Defendant .followed up t~is 

.. c;orre~..P.onden_c_e: -w~1;h .. a - le.t._t;~r -dated : March : 30,. l.988, in which he 

enclosed a br9chure . dE;tailing the organization; . the Hplayers, 11 and 

.tne type of services .'-'.-'hich could be· provided by Golden Coast. Hitz 

was portray~d as ·one of the key "players." Plaintiff's exhibit a. 

-·17. Other former clients :of plaintiff· which Hitz or Golden 

Coast has solicited from the Los Angeles area or Simi Valley area 

include more than 40 insurance companies. Plaintiff's exhibits J 

and 6. 

18. Additionally, defendant Hitz, as President of Golden 

Coast, sent letters of solicitation direct:ly to: American Harc:!·,.;are 

Insurance Group, Fireman's Fund, c & F Surplus, and Crudader 

Insurance Coillpany. Plaintiff's exhibits 11, 14, 15 and 16. 

19. After Hitz notified plaintiff of his resignation in March 

of 1988, Hitz sent a rnemorandu.n to all 11 :ield staff." In t~is 

memorandum, Hitz invited the field staff to inquire why he had 

decided to leave. Also, Hitz suggested that "perhaps [his ar:d 

members' of the field staff] paths may cross again." Plaint:::• s 

exhibit 4. 

20. Subsequent to the for::iacion of Gr'..ien Coast:., !-fit:: a:-:d 

Golden Coast:. employed app::::-~xi:::c1cely 17 for.ner err:ployees and :.:.eld 

agents of plaintiff.·- Plaintiff's exhibit~ 40 - 5). One of t~ese 

employees perfo~ed field audi"=::; for Golden Coast while S - • , , '- -...... employed with plaintiff. Deposition of Jon Kovach, at 1~, :1 -

6 

l:.XHJl3J T 1. 5G 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 20
!A 

di821 

. jl 

( 

27. · -Defendant even suggested to: one untrained job applicant t~at 

he · should get• trained br·i:-:quitax· and·:then apply ··for a -job with 

Golden Coast at a later date. Deposition of Bruce . Moffit, at 7-3 . 

. c ·. ··: . 21.· .. Gblden - Coast- =requires : .i ts:.::-elilployees : and .. managenen-c 

personnel to sign employment contracts .which . contain covenants not 

to compete. · Deposition .of Ray Rasori,· at 66. 

22. The agreement fon:i which Golden Coast used to hire field 

agents was closely modeled after the agreement fern utilized · by 

plaintiff. 

23. Defendant Hitz breached his contrac-c of employment ·.-1ith 

plaintiff, by directly and indirectly competing with plainti::: in 

furnishing investigations to custcrners of plaintiff in southern 

California within two years after the ten:iination of his 

employment. 

24. Defendant further breached his ccn-c:::-.:lc:: of employment 

wit~ plaintiff by persuading tonier employees and field agencs of 

plaintiff to discon-cinue their relationship with Equi:ax. 

Defendant breached his contract of employment by engaging in 

concert with forr.ier employees and field agents of plainti:: in 

competition with plaintiff. 

25. Plaintiff has suf:ered damages as a result of defend~nt 

Hit::• s breach of contract. The damages suffered include l.~s~ 

profits and costs incur:::-ed by pLdnt i:::: to replace and t:-::! in 

employees ~ho were hired by Gcldcn Coast. 

Additionally, 

plaintiff's reputution has been durnaged and plaintiff has 

experienced a conconitnnt loss of goad~ill among many of Whit~ & 

7 

57 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 21
. I 

2A 

o,a21 

\ 

I 

I 

i 

I 

I 

I 

( ( 

·W.hi te • s . farmer · ·elients ~ .· · !J'lhis loss ·of -goodwill is pt-ioaril y the 

result. of ..,tlefendant's-.. breatfi-~a.rid--the -resu-lting-·disr~ptio~ -·of 

plaintiff's ability-to provide quality· service to· its clients~ 

26 • .-:. Based upon -the· eviaence- irefo-re ·the court,· identi:iible 

· loss profits may :be calculateff.- by the amount of net ·profit ·.-1hich 

Golden Coast has received· from · custo!:lers who fornerly ·cteal t ·.-1i th 

plaintiff f/k/a White & "White. The cour~ finds this anount to be 

6300,000.00. ~laintiff's exhibit 28. 

27. Based upon the evidence before the court, the t:::t:::il 

amount of costs incurred in training and relocatir.g enployees as a 

result of defendant's enticing away plainti::•s enployees is 

$55,000.00. 1 Plaintiff's exhibits J0-32. 

28. Based upon the evidence before . the ccur~, ~laint::: h::is 

suffered $250,000.00 in the loss of reputation and gcod:iill a~or.g 

its custc..iers. 2 

To the extent: that any conclusicns of law ccn~ain :i~di~gs cf 

fact, they are incorporated by reference herein as f :.:1dir.:;s of 

fact. 

1The court will not award olaint:ff the costs of reol~c:.~~ 

defendan-c Hit::. The costs inct:.rred in replac:.:.g def2!;c::i~::. :::.t:: 

were not the result of his breach cf co:.~r::ict; t~ese costs were ::.~e 

result of his resignat:.on. 

2Althouah the ccur~ is able to reasonablv c::ilcul3te the a~ct!~::. 

of loss profits pLiintiff has incur:-ed due to· fcr::1er clients 9!.·::r::::i 

their business to Gold2n Coas~, the amount oi lost prorit:s sur:2~ed 

as a result of present and for.::er custo~ers taking their busi~ess 

to competitors, other than Golden Coast, ~ust be esti~::iccd. 

8 

-

;;.A,.-tbbkl 1 

58 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 22
!~ 

d:821 

·( ( 

. -

Oklahoma v. Hough. 643 F.-2d ·705,---706 - (10th Cir. 1981) (Kansas 

courts "hold th-at-.... a Ct)ntract ts :·considered . I made I "\Jhen and where 

the last act necessary· for its :formation is. done.").· 

·6. Pursuant to the very terms of the disputed contract, the 

place of the making is Kansas. 

provides: 

The relevant contractual clause 

The Agreement shall become effective when signed for 

White & White at its Home Office (located in overland 

Park, Kansas]. 

Plaintiff's exhibit 2, paragraph lO(g). Thus, pursuant to Kar.sas 

choice of law principles, Kansas law governs disputes concer~ing 

defendant's contract of employment. Moreover, the par-;::es 

specifically agreed that Kansas law would govern issues involving 

defenjant:•s contract of employment:. 

paragraph lO(d). 

Plaintiff's exhibit 2, 

7. Although Kansas has not specificjl~y addr~ssed the 

validity of choi2e of law clauses, this court believes, as does che 

Tench Circuit Court of Appeals, that such a clause would be upheld 

by Kansas courts. See Equifa x Ser: . Inc. V . Hit~, 905 F.2d at 

1)60. 

8. T!:e c::-::lnsac--:::.. ::.:-i wht:reby ~~hi te; & White was cc::.b ined • · 'I --

. , ,6. -·· 

Equif.i:x: Services, Inc. was, under Missouri law, a merger and nc-;: .J. 

sale. Plaintiff's e xhibit 2-1, at Jl. 3 There were no ~ac2r:.J.l 

3The courc rejeccs defendant I s argument t~at because t~.e 

transaction is- treaced· as a s~le fer federal taxacian pur~oses, 

the tr~nsacc::..cn was nae a nergar. For purposes of decar~1ni~g ~~a 

charact:eri;:acion of the tr;insaction, the merger agreer:ien~ .:ind 

Missouri la·..1 is com:rolling. The t::-;insaction was cert:ified t:y 

Missouri law as a cerger. Plaintiff's e x hibit 24, at Jl. Fur~~e~. 

in this cour't: 1 s review or the r.1erger agreement, it fir.js r.o 

10 

GO 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 23
' 11121 

( 

~h_ange~ _l!'\ J:_h~ ~_ontractua.l .. obl.igations and duties o ·f the br;:i:-ich 

managers · as·· -a ~result - -of- ""'.the merger.- · · ·Thus, · Equifax, as the 

surviving corporation, succeeds to the rights of White & White to 

enforce Hitz~s covenant not to campete~ ~ Alexander & Atexande~'. 

Inc. V. · Koelz, · 722 S.W.2d_)ll.,. JlJ (Mo. :Ct. App. "1986"). Furtt:er, 

the parties have agreed that the duties and oblJgations of the 

defendant shall inure to the benefit . of the successors and assigns 

of White & · White • Plaintiff's exhibit 2, paragraph l0(f). 

Accordingly, Equifax has standing to enforce the covenant not to 

compete. 

9. Under Kansas law, the noncompetition and nonsolici~aticn 

clause contained in the contr~ct, ~hile overly broad geographically 

(covering all of California), may be refor.:ied and thereby enforced 

"to an extent necessary to carrJ out the protecti· e intent of the 

agreement. II Foltz •r. St~xn°ss, 168 Kan. 71~, 215 P.2d 133, 

lJS (1950). Furt~er, the parties huve agreed by ccnt:r~ct: ~hat tte 

rest:r ic~i ve covenant r.iay be ref or.:ied "as is reasonably necessary to 

protect the interests of White & White." Plaintiff's exhibit 2, 

paragraph 10(1). The court: •..,rill refer.:: t:!":e restric~ive covenant:. 

covar ~~e Los Angeles cr~~ch area. 

covenant shall cover all counties inclt!ded in the Los Anc; 2 2.. 2 s 

agreenent: to be bound by the feder~l t~x c=de in nontax rnat:~ers, 

nor does the defendant:. point out any such. ~ro~1sicn i:-i t~e mercer 

agreement. The cour"'= notes th:it 3 di:: 2rent result: ·.:as r23ched · i~ 

Eaui: 3 x Se~, . 1 Tnc. ·1. C~lvsr.2":, ::o. 39-2068-u (D. ~an. :i!.ed ;..pri::.. 

J 1989) (1989 \-lL ..;:)]~5). The c=ur-:: ::urt:.her notes -ch3t .:.n , l . d ti-- .... . Chlyst:-;k, :the court ~onc ... u.:1e_ . .. ar. ~ .. e t:;-:insact:!.on \.Jas a sale ar':e:-

a hearing tor a prel1n1nary l~Junc~!.cn 7 Thus, the fi~di~~s of f3c~ 

~ade at tt3t:. heari~g were not c=nclus1ve findings o: f~ct:. 

... ,.,,,~r,-- ·- ~ '1 ,.... .. - .., I I -j_ 

11 

61 

I 

I 

I 

I 

I 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 24
21 

( 

branch area ~f -~i~~ : !-_ .:.Wh~t': ~ d~rinc:, the period defendant. •.;as 

employed a~White-~ -~ite•s~Los ADgeles Branch Manager. 

10. _ _. The court further finds that the interests which Equi::3.X 

se~~;;-~ to p;-9tec~~y ~nfru;_cemen1:- o.f the covenant ~ot . to conpece a re 

legiti:nate _business interests wh_ich, under Kansas law,. may be 

protected through the enforcement of a covenant not to co~pet.e. 

See Easte"!'"n Distributing c~. , _ Inc. v. Flynn, 222 Kan. 666, 567 P.2d 

1371, 1376-77 (1977) ( 111 custorae.r contacts' is a legitir.iate interest 

to be protected by an employee. 11 The most important factor is II the 

nature of the funct.ions perforned by the employee. 11 ) • The 

insurance investigation business is based upon personal c=nt.ac~s 

and knowledge of the special needs of customers. As test.i~ony by 

deposition revealed, when c~sto::lers have complaints with work which 

has been done by field agents, their complaints are directed to the 

branch nanager who in turn attenpt.s to redress their co:plair.t.s. 

Fur~!:er, as s~uted in defend~nt.'s ccnt=::.c~ of employ..-.enc, 

... defendant's prir.iary function as branch nanager was to "develc? 

valuable business relationships with the Customers on behalf of 

White & White." Plaint.if f's exhibit 2, paragraph 5. '!'!-. ·..1 s , 

custo-::ier ccntc:c-:.:3 were cenc::-:::.1 t:) d2fendant:' s er..ployner.t. ·..;i th ~:h:. -:.: 

& White, and defendant would be closely identified with the ser~:.=e 

being sold. This conclusion is further supported by evidence ~~ac 

some clients of Uhite & \:hite decided to give Golden C::3.sc 

invescigat.i·:e wad~ -bec::iuse of their f.::i::lili.:iri~y •.-1ith the qu3.l.:..~·.:' o:: 

defendant Hit='s work at Hhita & Whi~e. 

12 

i 

I 

I 

\ 

I 

l 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 25
'2~ 

01cn1 

( ( 

· · · 11. ·· Defendant has breached -the -· covenant not to compeca by 

engaging in competition.:.with , Equifax - in furnishing investfgac:ons 

to customers ot Whita .. , White -in -the Los Angeles branch area cf 

&outhern California.-~Further~ defendant has breached his cont=ac~ 

of employment by persuading employees of White & White to terninate 

their employment with Equifax. 

12. Under Kansas contr~ct law, plaintiff may recover dacages 

which may "fairly be considered as arising, in the usual course of 

things, from the breach itself, or as may reasonably be assuned to 

have been within the contemplation of both parcies as the protable 

result of t~e breach." Hoch~an v. t11:1.er~c3n Family Ins. Co., 9 Kan. 

App. 2d 151, 673 P.2d 1200, 1203 (1984). The court finds the 

~ I 

damages which plaintiff alleges(~, loss profits, costs incurred 

in replacing employees who were enticed away fr~::i Equifax, and 

da~ages to plaincif~•s reputation and goodwill) to be within the 

contenplution of the parties at the ti~e of ccntracti~g. Inceed, 

avoicance of these losses were the actual purposes of entering ir.to 

a covenant not to compete. Thus, these damages are recovarable 

under plaintiff's breach of ccncrac~ clain~. 

13. Fur~~er, under Kansas law, danages resultir.g frcw ha-:.-:7. t= 

a business' goodwill are recoverable. See Ave-..:'.'''· C i ~·: of T,:o::s, 

183 Kan. 611, 621, 331 P.2d 906 , 914 (1958). 

~Alttough defendant's conduc~ also satisfies t~e elenencs r~~ 

tor~: :;us in-cert ere nee wit~ ccnc =:!c.:, ~he cour.: : inc~ -:~a-;: -: :-:2 

wrcncrul conduct:. of deiendan.: ·.-1 hich \,ould amount:. t:J c:::::n:.:.:::us 

ince~terence is also the same conduc~ ~hich consci~u~as a breac~ ct 

ccnc:.--:ict cl.:iirn. Accordingly, plaint:.if! 1 5 clain for d:1::1ages :::-a 

saci~:ied by one recovery under i~s breac~ or c:::::ntr:!c~ :::lJi~ . 

1) 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 26
I 

821 

( 

12. The ·elements -of ·goodwill ·are: continuity of place and 

coirt:inti-H::.y 'of· t71me·~: ta: ·•:11 Good '\Jiil ·means .. an establishecf ·business 

at a given place with the .patronage that attaches to the name and 

th·e loc·a-tio·n . .- it is the "probability that old customers wi l l rescrtto the ( former · business}. 11 · lg. 

lJ. In order to recover, plaintiff. must make it "reasor.ably 

cert3in by ccmpetent proof what the amount of his loss act~ally 

I 

was . 11 ·Id • , 3 3 1 P . 2 d · at 91 3 • However , the II fact that c!a-::iages 

cannot be calculated with absolute exactness will not render t~2n 

so uncert::i.in as to preclude an assessr.ient::.. 11 Id., 331 P.2d at 914. 

The court finds plaintiff's assessr.ient::. that it has suf:2red 

$250,000.00 damages to its goodwill to be a fair assessr.ient::.. 5 

12. The court finds that pursuant::. to t~e tar::-.s of the 

parties' contract::., the t~o year restriction agai~st::. co~pet::.ition 

i~pcsed by ccnt::.rac~ i s to be e xtended in the event of a breach, for 

a period e91al to the duration oi the breacn . ?lainti~f•s exhibit 

2, par.:1grc1ph 9(b). However, because plainti~~ is reccveri~g 

damages for the period during which defendant ~as in breach of 

contr:,,ct::., the court: will decline to e x ercise its equitable pc·.:ers 

5The court:. notes that ~hile plaintiff is recovering for lose 

profits f:::-o;;i f or.:-.er c 1 ient::.s of •,~hi ".:e & Hh i te who h:,,ve e~pl c·_:eci 

Golden Ccast::., some for.:.er cliem::.s of \lhite & Hhite have t::.aken c~.air 

business t::.c ocher ccnpet::.i~g co~panies so t::.h~t::. d:,,;;i.:1aes suffered tv 

plaint::.iff as a result of derenc:in-c.'3 ".Jro;.gru:!. behavior are :-.oc 

sinply those net:. ?rorits which Golden Ccast. rece~ved frc::i : :::-::-.er 

clients of \ihite S. Whita. · Because detendant::.'s breacn c:,,useci 

plaint if: to lose nunerous enployees. plaint:i::f ·.;as unable 1::i 

sac is f act::. c :::- 1 l y F e r i c rn ·.rn r k : c r a 11 o f i ~ s c l i en t::. s ~ n t::. i l p l a 1 ;; :: : :: : 

had successfully replaced ".:~e e~ployees ~ho went: to work for Golden 

cease. Thus, plaint::.iff lost n3ny cusco;;iers to co~oet::.i~c~s ot::.~2r 

than Golden Coast:.. 

14 

I 

I 

\ 

I 

' I 

I 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 27
• .. 

,21 

( ( 

to extend the . injl;lnction . for . . a period . equal to the breach. 

· -· ··- . . . 1) .. . . -The--court will· not · grant plaintiff's request: for 

continuing ~njunc~ive relief~~ the two year restriction con.:~ined 

.. in the cov.enant not -to compete has run. 

14 • ... Because this is a diversity case, whether to award 

attorneys' fees to the prevailing party is a matter of · Kansas law. 

Alyeska Pine Line Ser.'. Co. v. Wilderness Soc''' · , 421 U.S. 240, 259 

n. 31 (1975). Under Kansas law, the awarding of attorneys • fees is 

"not allowed unless authorized by statute or agreement of the 

pa:-ties." Schuh v. Educational Reading Ser, . of ¥~nsas, !~= -, 6 

Kan. App. 2d 100, 101, 626 P.2d 1219, 1220 (1981). 

has been entered into regarding attorneys' fees, r.or does plaint:iff 

ci ta any statutory authority pu:::-suant to which it could reco•,er 

at.:orneys' fees. 

to plaintiff. 

Thus, this court:. will not award atto=neys' fees 

Plainti:::: has noved the court for a citation of canter:-,;:.:. 

Plaintiff alleges that defendant has been violating this ccu=~•s 

prelir:iinary injunction granted on March 8, 1989. Specifically, 

plaintiff contends that derer.dant: has been indirect~y ccn~et:~~ 

with plaintiff in the area covered by the preli~ina=y injun=~:=~-

Plaintiff argues that while the defendant: has resig:1ed as -:::2 

President o: Golden Coas.:, ha has c=ntin~ed to assist Golden c=as.: 

1

. n 0 per • -g "l. th Equifax in the Los ' ngeles area. C r:l ---•• .., '"' 

plainti:f assert3 that defendan~ has continued to ir.duce emplcyees 

. - . 

of ~quif~x·co ccne to work for Golden Coast:.. 

15 

EX.Hllif.n 1- G5 

I 

I 

I 

\ 

I 

! 

I 

I 

\ 

I 

I 

\ 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 28
( ( 

In a civil contempt· case, the party se-eking a citation of 

contempt bears-:- a hea-vy burden:- -~ civil contempt must be proven by 

clear and convincing evidence. - H·einold Hog Mkt·:·; Inc. •,. !-!cc::•,, 

100 -~F'.·2d · 6i1; 614.:...15 · (10th ·cir~ -- 1983) · (citations omitted). The 

court finds that plaintiff has failed to present clear and 

convincing evidence that defendant is in violation of thi-s court• s 

preliminary injunction.·· Although defendant conti::-mes to caintain 

an office in the Los Angeles area, he is no longer ~anaging the Los 

Angeles branch of Golden Coast. Instead, he is involved in 

providing services in the Seattle and San Francisco areas which are 

beyond the geographic area in which defendant is pr::hibited fro~ 

working. Moreover, while two additional employees of Equifax have 

becc~e employed by Golden Coast, these employees are not working in 

the restricted area. Further, the court is not ccnvinced that 

defendant enticed these two employees f=c~ Equifax's enploynent. 

~cc=rdi:-igly, the ccurt will deny plaintif:'s ~otion fer a ci~aticn 

of ccntempt. 

IT IS BY THE COURT TSEREFORE ORDERED that j~dq:::ent is ent~red 

in favor of the plaintiff and against defendant in the a~ount =f 

$605,000.00. 

IT IS FURTHER ORDERED t~at ?laint.iff's .:icti::::-i 

relief denied. 

16 

.=--

6G 

I 

I 

I 

I 

I 

I 

I 

I 

I 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 29
.ti 

: rnh 

( , 

( 

IT IS FURTBER _o~-~~_;p ~?~f plaintiff's motion for a citation 

of .cont~mpt is denied ... · ··-- _ . - .... - ·-

PATEp: This~'-/ day _ ~f January, 1~91, at Topeka, Kansas. 

·.--- --~ .. ~~ .. --:- --. ~ .. ~ .. - .. 

17 

. 

-~~ DALE E. SAFFE1,.~"\, 

United StatesLoistrict Judge 

C7 

Appellate Case: 91-3109 Document: 010110270378 Date Filed: 07/09/1992 Page: 30