United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 01-2055

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IKON Office Solutions, Inc., *

*

Plaintiff-Appellant, *

*

v. *

*

Robert J. Dale; William J. Dale; *

Terry R. Nissen; Computer Business *

Solutions, Inc., *

*

Defendants-Appellees. *

Appeals from the United States

__________ District Court for the District of

Minnesota.

No. 01-2667

__________ [UNPUBLISHED]

IKON Office Solutions, Inc., *

*

Plaintiff-Appellee, *

*

v. *

*

Robert J. Dale; *

*

Defendant-Appellant, *

*

William J. Dale; Terry R. Nissen; *

*

Defendants, *

*
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Computer Business Solutions, Inc., *

*

Defendant-Appellant. *

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Submitted: October 17, 2001

Filed: October 24, 2001

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Before McMcMILLIAN, FAGG, and BEAM, Circuit Judges.

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PER CURIAM.

IKON Office Solutions, Inc. sold part of its business involving the sales and

service of computer equipment and directly related business products and supplies to

employee Robert J. Dale and his new company, Computer Business Solutions, Inc.

(CBS). In the sale and purchase agreement, Dale and CBS expressly agreed not to

compete with IKON’s business “relating to copiers, facsimiles, typewriters and all

other activities and products which are not exclusively and directly related to

computer equipment, and service of the same.” In the employment separation

agreement incorporated by reference, Dale agreed not to compete with IKON’s

business for “a period of five (5) years from June 1, 1998" except for the purchased

business.

Following a dispute about CBS’s sale of digital copiers, which serve as both

computer printers and traditional copiers, IKON brought this diversity action in

Minnesota claiming breach of contract, misappropriation of trade secrets, interference

with actual and prospective business relations, breach of fiduciary duty, interference

with IKON employee relations, and unfair competition. IKON sought injunctive

relief and damages. After balancing the preliminary injunction factors set forth in
*

The Honorable David S. Doty, United States District Judge for the District of

Minnesota.

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Dataphase Sys., Inc., v. CL Sys., Inc., 640 F.2d 109, 112-14 (8th Cir. 1981), the

district court*

 granted IKON’s motion for a temporary injunction against Dale and

CBS on the breach of contract claim relating to the noncompete agreement, but

denied IKON’s motion on all other claims and against all other parties. Applying

Minnesota law, the district court concluded IKON would likely succeed on its breach

of contract claim related to the noncompete agreement, but the agreement is

unreasonable as written. Using Minnesota’s “blue pencil doctrine” allowing a court

to modify an unreasonable noncompete agreement, the district court changed the time

period from five years to three years, and enjoined Dale and CBS from competing

with IKON with respect to the sale or servicing of office equipment “not exclusively

and directly related to computer equipment” for the remaining term. The district

court later denied IKON’s motion for reconsideration or modification challenging the

reduced length of the noncompete provisions of the injunction. The district court also

denied a request by Dale and CBS for permission to bring a motion for

reconsideration.

On appeal, IKON contends the district court applied the wrong legal standard

for evaluating the reasonableness of the five-year restriction because the court used

the stricter test applicable in the employment contract context rather than the more

lenient test applicable in the business transfer context. Compare Bennett v. Storz

Broadcasting Co., 134 N.W.2d 892, 899-900 (Minn. 1965) (involving employment

agreement) and Dynamic Air, Inc., v. Bloch, 502 N.W.2d 796, 799 (Minn. 1993)

(same) with Bess v. Bothman, 257 N.W.2d 791, 795 (Minn. 1977) (involving sale of

business). The district court applied the test used in the sale of business context

when denying IKON’s motion for reconsideration, however. Citing Bess, 257

N.W.2d at 795, the district court found the five-year restriction was unreasonable

because it exceeds the protection necessary to secure any goodwill purchased, places
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an undue hardship on Dale and CBS, and has a deleterious effect on the interests of

the general public. Thus, the district court applied the legal standard advocated by

IKON for evaluating the reasonableness of the noncompete agreement. IKON also

argues the district court abused its discretion in modifying the length of the injunction

from five years to three years. Having carefully reviewed the issue, we conclude the

district court made an acceptable discretionary call. See id. (time limitation should

represent a reasonable balance between protection of plaintiff’s goodwill and

avoidance of undue hardship to defendant).

In a cross-appeal, Dale and CBS contend the district abused its discretion in

refusing to hear its motion for reconsideration contesting the injunction’s scope.

Because we affirm the district court’s reduction of the noncompete period to three

years and that period has already expired, the injunction is no longer in effect and the

contention is moot. Dale and CBS also assert the $1000 bond posted by IKON under

Federal Rule of Civil Procedure 65(c) is inadequate. Rule 65(c) provides financial

security for those who are enjoined in the event the injunction is later deemed wrong.

The district court properly enjoined Dale and CBS, so the amount of IKON’s bond

is likewise moot. 

We thus affirm the district court. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.