DA 07-0115

IN THE SUPREME COURT OF THE STATE OF MONTANA

2008 MT 4

ACCESS ORGANICS, INC.,

 Plaintiff and Appellee,

 v.

ANDY HERNANDEZ,

 Defendant and Appellant, 

and

MIKE VANDERBEEK,

Defendant. 

APPEAL FROM: District Court of the Eleventh Judicial District,

In and For the County of Flathead, Cause No. DV 06-836-B

Honorable Katherine R. Curtis, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

David H. Bjornson, Bjornson Law Offices, P.C., Missoula, Montana

For Appellee:

Chad M. Wold and Meghan M. McKeon, Wold Law Firm, P.C.,

Whitefish, Montana 

Submitted on Briefs: December 6, 2007

 Decided: January 3, 2008

Filed:

__________________________________________

Clerk

January 3 2008
2

Justice W. William Leaphart delivered the Opinion of the Court. 

¶1 Access Organics, Inc., sued two of its former employees, Andy Hernandez and 

Mike Vanderbeek, to enforce non-compete and non-disclosure agreements. The District 

Court issued a temporary restraining order prohibiting Hernandez or Vanderbeek from

competing with Access Organics and from disclosing any trade secrets. The court also 

issued a preliminary injunction, restraining Hernandez and Vanderbeek from contacting 

any of Access Organics’s customers. Hernandez appeals, arguing the District Court erred 

in issuing the preliminary injunction because the non-compete agreement is 

unenforceable as a matter of law. We reverse and remand.

¶2 We restate the issue as follows:

¶3 Did the District Court err in concluding that the non-compete agreement was 

enforceable as a matter of law, and thus in granting preliminary injunctive relief to 

Access Organics? 

BACKGROUND

¶4 On April 25, 2005, Bonnie Poux hired Andy Hernandez (“Hernandez”) to sell 

organic produce for her sole proprietorship, Access Organics Sales (“Access Organics”). 

In July 2005, Hernandez was promoted to sales manager. On August 29, 2005, four 

months after his employment began, Hernandez signed a non-compete agreement and a 

non-disclosure agreement. The non-compete agreement provided in relevant part:

For good consideration and as an inducement for Access Organics (the 

Company) to employ Andy Hernandez, the undersigned Employee hereby 

agrees not to directly or indirectly compete with the business of the 

Company and it successors and assigns during the period of employment 

and for a period of two years following termination of employment . . . . 
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¶5 Shortly after Access Organics began experiencing financial difficulties and laid off 

Hernandez and several other employees. Hernandez voluntarily returned to the company 

on a part-time basis but resigned a short time later. Hernandez then entered into business

with another former Access Organics employee, Mike Vanderbeek (“Vanderbeek”). Full 

Circle Sales, Hernandez’s new company, was located in the Kalispell area and dealt in 

both organic and conventional produce. 

¶6 Access Organics brought suit to enforce the non-compete and non-disclosure 

agreements signed by Hernandez and Vanderbeek. Access Organics applied for 

injunctive relief, including a temporary restraining order, and filed a complaint against 

Hernandez and Vanderbeek. The complaint alleged that Hernandez and Vanderbeek 

violated their non-compete and non-disclosure agreements, breached their respective 

contracts, and intentionally sought to interfere with Access Organics’s prospective 

economic advantage by operating Full Circle Sales.

¶7 The District Court granted the temporary restraining order, which stated: 

“Defendants are restrained from owning, operating, and managing any business engaged 

in the same business as Access Organics, Inc., within Flathead County, MT, [and] 

consulting with, or being employed in any capacity, by any company engaged in the same 

business as Access Organics and using, disclosing, or divulging to others, trade secrets, 

confidential information, or proprietary data of Access Organics.” 

¶8 The District Court held a hearing to determine whether Access Organics was 

entitled to further injunctive relief. Access Organics presented affidavits from several of 

their customers which testified that they had been contacted by Hernandez or Vanderbeek 
4

on behalf of Full Circle Sales, in an attempt to solicit their business. The District Court 

found that Hernandez and Vanderbeek used contacts acquired prior to their employment 

with Access Organics, as well as contacts gained while employed with Access Organics.

¶9 The District Court held that Hernandez and Vanderbeek violated their noncompete agreements by owning, operating, and managing Full Circle Sales. The District 

Court found that the non-compete agreements were enforceable, because they were 

restricted in length to two years, were based on good consideration (“continuation of 

Defendants’ employment, and therefore, income”), and did not interfere with the public 

interest. Thus, the District Court granted a preliminary injunction in favor of Access 

Organics, enjoining Hernandez and Vanderbeek “from contacting any current or former 

client of Access Organics . . . with regard only to any aspect of the business of organic 

produce and from using, disclosing, or divulging to others the list of Access Organics’ 

[sic] customers . . . .” Only Hernandez appeals.

STANDARD OF REVIEW

¶10 Where the district court grants or denies injunctive relief based upon conclusions 

of law, we review the conclusions of law to determine whether they are correct. Benefis 

Healthcare v. Great Falls Clinic, 2006 MT 254, ¶ 11, 334 Mont. 86, ¶ 11, 146 P.3d 714, 

¶ 11.

DISCUSSION

¶11 Did the District Court err in concluding that the non-compete agreement was 

enforceable as a matter of law, and thus in granting preliminary injunctive relief to 

Access Organics? 
5

¶12 Normally, we review a district court’s order granting or denying preliminary 

injunctive relief for abuse of discretion only. Knudson v. McDunn, 271 Mont. 61, 64, 

894 P.2d 295, 297 (1995) (citation omitted). However, where the district court’s decision 

to grant injunctive relief is premised on conclusions of law, there is no discretion 

involved. Knudson, 271 Mont. at 64, 894 P.2d at 297. In such cases, we review the 

district court’s conclusions of law for correctness. Knudson, 271 Mont. at 64, 894 P.2d at 

297.

¶13 Here, the District Court concluded as a matter of law that the agreement was 

enforceable and did not constitute an unreasonable restraint of trade under § 28-2-703, 

MCA. Thus, the court enjoined Hernandez from contacting any current or former 

customer of Access Organics, and from using or disclosing Access Organics’s customer 

list. Because the District Court granted the injunctive relief based solely on a conclusion 

of law, we will review the court’s conclusions of law for correctness.

¶14 Is the non-compete agreement an unreasonable restraint of trade in violation of § 

28-2-703, MCA?

¶15 Contracts in restraint of trade are disfavored: “Any contract by which anyone is 

restrained from exercising a lawful profession, trade, or business of any kind, otherwise 

than is provided for by 28-2-704 or 28-2-705, is to that extent void.” Section 28-2-703, 

MCA. 

¶16 However, we have upheld agreements which impose reasonable restrictions on 

trade. To be upheld as reasonable, a covenant not to compete must meet three 

requirements:
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(1) [I]t must be partial or restricted in its operation in respect either to time 

or place;

(2) it must be on some good consideration; and

(3) it must be reasonable, that is, it should afford only a fair protection to 

the interests of the party in whose favor it is made, and must not be so large 

in its operation as to interfere with the interests of the public.

Montana Mountain Products v. Curl, 2005 MT 102, ¶ 11, 327 Mont. 7, ¶ 11, 112 P.3d 

979, ¶ 11 (citing O’Neill v. Ferraro, 182 Mont. 214, 218-19, 596 P.2d 197, 199 (1979)). 

As the party seeking to enforce the non-compete agreement, Access Organics bears the 

burden of proving that the agreement does not violate § 28-2-703, MCA. Daniels v. 

Thomas, Dean & Hoskins, Inc., 246 Mont. 125, 144, 804 P.2d 359, 370 (1990); State 

Med. Oxygen v. Amer. Med. Oxygen, 240 Mont. 70, 74, 782 P.2d 1272, 1275 (1989); 

First American Ins. Agency v. Gould, 203 Mont. 217, 223, 661 P.2d 451, 454 (1983).

¶17 Since Montana’s public policy strongly disfavors agreements in restraint of trade, 

as discussed above, we construe non-compete agreements strictly:

Contracts not to compete are by their nature in restraint of trade and are not 

favorably regarded by the courts. In interpreting or construing contracts 

which impose restrictions on the right of a party to engage in a business or 

occupation, the court is governed by a strict rule of construction. The 

agreement will not be extended by implication, and it will be construed in 

favor of rather than against the interest of the covenantor.

Dumont v. Tucker, 250 Mont. 417, 421, 822 P.2d 96, 98 (1991) (citing 54 Am. Jur. 2d 

Monopolies Etc. § 521).

¶18 Is the agreement supported by the necessary “good consideration”?

¶19 Hernandez argues that the non-compete agreement is invalid and unenforceable, 

because it is not supported by good consideration. Access Organics contends that 
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Hernandez’s salary and continued employment supplied sufficient consideration. Section 

28-2-801, MCA, provides that “[a]ny benefit conferred or agreed to be conferred upon 

the promisor by any other person, to which the promisor is not lawfully entitled, or any 

prejudice suffered or agreed to be suffered by such person, other than such as he is at the 

time of consent lawfully bound to suffer, as an inducement to the promisor is a good 

consideration for a promise.” 

¶20 Consideration exists if the employee enters into the non-compete agreement at the 

time of hiring. During pre-employment negotiations, the employee and the employer 

engage in a bargained-for exchange: the employer obtains the desired non-compete 

agreement, and in return, the employee receives employment. The non-compete 

agreement is simply a condition of employment which the employee takes into account 

when accepting or rejecting the employment offer. Here, the agreement purports to offer 

employment in exchange for Hernandez’s promise not to compete: “as an inducement for 

Access Organics . . . to employ Andy Hernandez, [he] . . . hereby agrees not to . . . 

compete . . . .” 

¶21 However, Hernandez signed the agreement more than four months after accepting 

his initial employment offer from Access Organics. The record clearly shows that the 

agreement was not signed as part of Access Organics’s pre-employment negotiations 

with Hernandez. The basic precepts of black letter contract law teach us that “past 

consideration is not sufficient to support a promise.” See e.g. Public Employees Ass’n v. 

Office of Gov., 271 Mont. 450, 455, 898 P.2d 675, 678 (1995) (citation omitted). Thus, 

prior work may not serve as consideration. Public Employees Ass’n, 271 Mont. at 450, 
8

898 P.2d at 678. Access Organics’s initial offer of employment to Hernandez is past 

consideration and may not serve as consideration for the non-compete agreement signed 

four months later.

¶22 However, “afterthought agreements”—non-compete agreements signed by 

employees after the date of hire—are not automatically invalid. Jordan Leibman &

Richard Nathan, The Enforceability of Post-Employment Noncompetition Agreements 

Formed After At-Will Employment Has Commenced: The “Afterthought” Agreement, 60 

S. Cal. L. Rev. 1465 (1987) (coining the term “afterthought agreements”). Non-compete 

agreements entered into by existing employees may be supported by independent 

consideration. For example, an employer may provide an employee with a raise or 

promotion in exchange for signing a non-compete agreement. In such instances, the 

salary increase or promotion serves as good consideration. Access to trade secrets or 

other confidential information may also suffice as a form of good consideration. Daniels,

246 Mont. at 145, 804 P.2d at 371. In each of these examples, the employee receives a 

benefit which constitutes good consideration in exchange for his or her promise not to 

compete. 

¶23 Hernandez did earn a promotion and a raise during his time with Access Organics, 

but he was not asked to sign the non-compete agreement until a month after he was 

promoted. As discussed above, past consideration cannot serve as good consideration for 

a present agreement. Public Employees Ass’n, 271 Mont. at 450, 898 P.2d at 678. 

Hernandez testified that he did not receive any independent consideration, such as access 
9

to trade secrets, in exchange for signing the agreement. Access Organics failed to present 

any evidence to the contrary.

¶24 Access Organics argues that the continued employment and salary that Hernandez 

received sufficed as good and independent consideration, citing Langager v. Crazy Creek 

Products, Inc., 1998 MT 44, 287 Mont. 445, 954 P.2d 1169. In Langager, we upheld an 

employer’s revisions to the employee handbook, because “Langager continued to work 

for Crazy Creek, thereby supplying the necessary consideration” for the changes in the 

terms of her employment. Langager, ¶ 20.

¶25 However, Langager is distinguishable on several grounds. First, in Langager, we 

found that the employees had ample opportunity to sufficiently bargain for the manual’s 

terms. Langager, ¶ 20. By contrast, Hernandez had no input as to the terms of the 

boilerplate non-compete agreement drafted by Access Organics and its lawyers. Second, 

non-compete agreements are disfavored and will be interpreted strictly and to the 

advantage of the employee. Dumont, 250 Mont. at 421, 822 P.2d at 98. When a current 

employee is required to sign a non-compete agreement, the employer and employee are 

not on equal bargaining ground: the employee is vulnerable to heavy economic pressure 

to sign the agreement in order to keep his job. See e.g. Leibman & Nathan, 60 S. Cal. L.

Rev. at 1491. Thus, in the context of non-compete agreements, we require clear evidence 

that the employee received good consideration in exchange for bargaining away some of 

his post-employment freedom to practice the profession or trade of his choice.

¶26 Some states have held that continued employment, absent other independent 

consideration, fails to suffice as good consideration. See e.g. Labriola v. Pollard Group, 
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Inc., 100 P.3d 791, 794 (Wash. 2004) (“A noncompete agreement entered into after 

employment will be enforced if it is supported by independent consideration . . . . 

Independent, additional, consideration is required for the valid formation of a 

modification or subsequent agreement. There is no consideration when one party is to 

perform some additional obligation while the other party is simply to perform that which 

he promised in the original contract.”) (citations and internal quotation marks omitted). 

We decline to broadly hold that continued employment may never serve as sufficient 

consideration. For example, where an at-will employee is specifically guaranteed a 

definite period of continued employment, the employee receives consideration in the 

form of contracted-for job security. However, here, no such promise of continued 

employment was made. Hernandez was an at-will employee. He did not receive any 

additional job security or extended term of employment in exchange for signing the 

agreement. Access Organics could have terminated his employment at any point. In 

such circumstances, the simple fact of the employee’s continued employment may not 

serve as sufficient consideration. 

¶27 In sum, the agreement between Hernandez and Access Organics is not supported 

by any of the above-mentioned forms of consideration. The agreement provides “[f]or 

good consideration and as an inducement for Access Organics (the Company) to employ 

Andy Hernandez, the undersigned Employee hereby agrees not to directly or indirectly 

compete . . . .” Yet, it was signed more than four months after Hernandez was hired. 

Hernandez did not receive a promotion, a raise, or access to confidential information in 

exchange for signing this agreement. Nor did Hernandez receive any additional training 
11

or any promise of continued employment for a specified period of time. In short, 

Hernandez did not receive any benefit, and Access Organics did not incur any obligation 

or detriment that would serve as consideration to support this non-compete agreement. 

¶28 We conclude that the District Court erred by finding that the “continuation of 

Defendants’ employment, and therefore, income” sufficed as consideration. We hold that 

Access Organics failed to meet its burden of proof by showing that the agreement was 

supported by good consideration. An agreement not to compete must satisfy all three 

prongs of the reasonableness test in order to be upheld. State Med. Oxygen, 240 Mont. at 

74, 782 P.2d at 1275. Since the agreement between Hernandez and Access Organics 

lacks consideration, we need not reach the other two prongs. The agreement violates 

§ 28-2-703, MCA, and is unenforceable.

CONCLUSION

¶29 We conclude that the covenant not to compete between Andy Hernandez and 

Access Organics is unenforceable for lack of consideration. Thus, the District Court 

erred in determining that the agreement was enforceable as a matter of law. Since the 

agreement is unenforceable as a matter of law, the District Court also erred in granting 

the preliminary injunction against Hernandez. Thus, we reverse and remand for further 

proceedings consistent with this opinion.

/S/ W. WILLIAM LEAPHART
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We concur: 

/S/ KARLA M. GRAY

/S/ JOHN WARNER

/S/ PATRICIA COTTER

/S/ BRIAN MORRIS