No. 89-236 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

STATE MEDICAL OXYGEN AND 

SUPPLY, INC., a Montana corporation, 

Plaintiff and Appellant, 

AMERICAN MEDICAT, OXYGEN CO., a Montana 

corporation, J.C. LYNDES, GARY GOMEZ, 

and RONALD WRIGHT, 

Defendants and Respondents. 

9 APPEAL FROM: District Court of the Eighth Judicial Distrlct 

In and for the County of Cascade 

The Honorable John M. McCarvel, Judqe presidinq. 

COUNSEL OF RECORD: 

For Appellant: 

P. Mars Scott, Mulroney, Delaney and Scott 

Missoula, Montana 

For Respondent : 

Michael G. Moses, Moses Law Firm, Billings, Montana. 

Philip P. McGimpsey, Billings, Montana 

Submitted on Briefs: October 13, 1989 

Decided: November 30, 1989 

Filed. : 
Justice Diane G. Barz delivered the Opinion of the Court. 

Plaintiff, State Medical Oxygen and Supply, Inc. (State 

Med.), appeals the January 19, 1989 decision of the District 

Court of the Eighth Judicial ~istrict, Cascade County, 

finding that plaintiff's nondisclosure agreement violated S 

28-2-703, MCA, and granting summary judgment in favor of 

defendants--~merican Medical Oxygen Co. (~merican Med.), J.C. 

Lyndes, Gary Gomez and Ronald Wright. We affirm. 

The issues raised on appeal are: 

1. Whether plaintiff's "Agreement of Employee not to 

Disclose Trade Secrets or Customer Lists of State Medical 

Supply, Inc." violates S 28-2-703, MCA, as being a contract 

that restrains the exercise of a lawful profession, trade or 

business of any kind; and 

2. Whether the District Court erred by granting 

defendants' motion for summary judgment. 

Plaintiff, State Med., is a Montana corporation engaged 

in the business of supplying oxygen and allied health care to 

patients in their homes and in hospitals. Upon State Med.'s 

formation in the early part of 1984, the directors of State 

Med. had its employees sign an agreement entitled, "Agreement 

of Employee not to Disclose Trade Secrets or Customer Lists 

of State Medical Supply, Inc." This Agreement provides that: 

The undersigned, an employee of 

State Medical Supply, Lnc., in 

consideration of his employment, hereby 

agrees not, at any time or in any manner, 

either directly or indirectly, to 

divulge, disclose or communicate to any 

person, firm, or corporation, in any 

manner whatsoever, any information 

concerning any matters affecting or 

relating to the business of State Medical 

Supply, Inc.'s trade secrets and/or 

customer lists. Including without 

limitinq the above, the employee agrees 
not to divulge any of State Medical 

Supply, Inc.'s customers, the prices it 

obtains or has obtained from the sale of, 

or at which it sells or has sold, its 

products, or any other information 

concerning the business of State Medical 

Supply, Inc., its manner of operation, 

its plans, processes, or other data 

without regard to whether all of the 

foregoing matters will be deemed 

confidential, material, or important, the 

parties hereby stipulating that as 

between them, the same are important, 

material and confidential and gravely 

affect the effective and successive 

conduct of the business of State Medical 

Supply, Inc., and State Medical Supply, 

Inc. 's good will, and that any breach of 

the terms of this agreement shall be 

termed and considered a material breach. 

This agreement shall remain in full 

force and effect during the undersigned 

employment and contin-uing for all time 

thereafter . 

A violation of this agreement will 

entitle State Medical Supply, Inc., to 

seek damages and/or injunctive relief or 

any other remedy at law against the 

undersigned and the undersigned agrees to 

pay State Medical Supply, Inc. 's 

attorney's fees in prosecuting any breach 

of this agreement. 

Several, if not all, of the employees of State Med. signed 

this Agreement. 

Three State Med. employees--Link, Fatz and Tope--became 

unhappy with their jobs at State Med. and began to seek 

employment elsewhere. On August 9, 1985, these employees 

quit their jobs at State Med. and immediately began working 

for American Med., a Montana corporation also engaged in the 

business of supplying oxygen and allied health care to 

patients in their homes and in hospitals. When Link left 
State Med.'s employ, he memorized his customer route and 

offered his customers an opportunity to switch from State 

Med. to American Med. Most of Link's regular customers made 

the switch. 

On March 1, 1988, this Court decided State Medical 

Oxygen & Supply, Inc. v. American Medical Oxygen Co. (Mont. 

1988), 750 P.2d 1085, 45 St.Rep. 349, which addressed issues 

initially raised by State Med. This Court affirmed in part, 

reversed in part and remanded for further proceedings, but 

did not address the issue of the nondisclosure agreement 

because the District Court had not yet ruled on it. -- State 

Medical Oxygen Supply, Inc., 750 P.2d at 1089, 45 St.Rep. at 

355. On October 18, 1988, the parties stipulated to the 

dismissal with prejudice of defendant Link from this action. 

On November 30, 1988, the remaining defendants--American 

Med., Lyndes, Gomez and Wright--renewed their motion for 

summary judgment, asserting again that the nondisclosure 

agreement was void pursuant to 5 28-2-703, MCA. 

On January 19, 1989, the District Court granted 

defendants' motion for summary judgment, and stated that the 

nondisclosure agreement between State Med. and its employees 

not to divulge trade secrets or customer lists violated 

S 28-2-703, MCA, and therefore the court found it against 

public policy and unenforceable as a matter of law. The 

District Court certified this January 19, 1989 order as a 

final judgment under Rule 54 (b) , M. R.Civ.P. State Med. 

appeals. 

The first issue that will be addressed by this Court is 

whether plaintiff's "Agreement of Employee not to Disclose 

Trade Secrets or Customer Lists of State Medical Supply, 

Inc." violates 5 28-2-703, MCA. 

Section 28-2-703, MCA, codifies Montana's public policy 

regarding contracts that restrains the exercise of a lawful 
profession, trade or business of any kind. This statute 

provides that " [alny 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." The two exceptions allow 

parties to agree that upon either the sale of goodwill of a 

business or the dissolution of a partnership, one or more of 

the parties will refrain from carrying on a similar business 

within a narrow designated area. Sections 28-2-704 and -705, 

MCA . Prior to Dobbins, DeGuire & Tucker v. Rutherford, 

MacDonald & Olson (1985), 218 Mont. 392, 708 P.2d 577, this 

Court recognized a difference between covenants incident to 

an employment contract and those regarding the trade of a 

business or property. J.T. Miller Co. v. Made1 (1978), 176 

Mont. 49, 52-53, 575 P.2d 1321, 1323. When presented with a 

covenant not to compete that involved trade, this Court 

applied a three part test by which to discern reasonable 

covenants from unreasonable restraints. IJnder this test, a 

covenant not to compete is reasonable if it is (1) limited in 

operation either as to time or place; (2) based upon some 

good consideration; and (3) affords reasonable protection for 

and not impose an unreasonable burden upon the employer, the 

employee, or the public. OINeill v. Ferraro (1979), 182 

Mont. 214, 218-19, 596 P.2d 197, 199. In Dobbins, this Court 

determined that this test should also be applied to 

restrictive covenants that are found within employment 

contracts. Dobbins, 218 Mont. at 396-97, 708 P.2d at 580. 

In the present case, State Med. has the burden of 

showing that its agreement does not violate 5 28-2-703, MCA. 

First American Ins. Agency 17. Gould (1983), 203 Mont. 217, 

223, 661 P.2d 451, 454. State Med. did not assert nor prove 

that the sale of goodwill of a business or the dissolution of 
a partnership occurred. Therefore, neither of the statutory 

exceptions--§§ 28-2-704 or -705, MCA--applies. State Med.'s 

agreement also does not pass the test of reasonableness. As 

stated in Dobbins and OINeill, three essential things are 

required for an agreement to be considered reasonable. State 

Med.'s agreement, however, did not limit the restrictions as 

to either time or place and therefore did not meet the first 

essential criterion. We therefore do not find a need to 

proceed any further to determine whether the covenant meets 

the remaining two criteria. Although State Med. cites 

Dobbins, it does not argue that its agreement meets the three 

criteria. Instead, State Med. merely argues that the 

District Court erred because it did not make findings of fact 

or conclusions of law. However, Rule 52 (a), M.R.Civ.P. and 

previous decisions do not require a district court to set 

forth findings of fact or conclusions of law when ruling on a 

summary judgment motion. Lewis v. State Dept. of Revenue 

(1984), 207 Mont. 361, 375, 675 P.2d 107, 114; Downs v. Smyk 

(1979), 185 Mont. 16, 19, 604 P.2d 307, 309. 

State Med. also argues that the District Court confuses 

its contract, which they assert is a contract not to disclose 

trade secrets and/or customer lists with a contract that 

restrains the exercise of a lawful profession. State Med. 

then apparently attempts to persuade this Court that its 

agreement is not an employment contract and therefore it is 

not in violation of S 28-2-703, MCA. We disagree. Section 

28-2-703, MCA, states that any contracts that restrain anyone 

from exercising a lawful profession, trade, or business is 

void. The statute does not limit the prohibition to 

employment contracts. In Dobbins, this Court erased any 

previously recognized differences between the treatment of 

trade and employment contracts which contain restrictive 

covenants. Therefore, State Med.'s attempts at 
distinguishing its agreement as something other than an 

employment contract is not relevant to the issue presented on 

appeal. In light of the above, the District Court did not 

err in finding that State Med.'s agreement violated 

§ 28-2-703, MCA, and thus finding the agreement void as 

against public policy and unenforceable as a matter of law. 

The second issue raised on appeal is whether the 

District Court erred by granting defendants' motion for 

summary judgment. 

The party seeking summary judgment is entitled to 

judgment only when no qenuine issue exist as to any material 

facts and the moving party is entitled to judgment as a 

matter of law. Rule 56(c), M.R.Civ.P. The party moving for 

summary judgment has the initial burden of establishing that 

a genuine issue of material fact does not exist. Once this 

is established, the burden shifts to the party opposing the 

motion to demonstrate otherwise. Rumph 17. Dale Edwards, Inc. 

(1979), 183 Mont. 359, 365-66, 600 P.2d 163, 167. 

In the present case, the District Court ruled that 

State Med.'s agreement was in violation of § 28-2-703, MCA. 

The record demonstrates that defendants established that no 

genuine issue of material facts existed. The agreement on 

its face violates the statute and the law regarding 

restrictive covenants. The burden then shifted to State Med. 

State Med. attempted to rebut this evidence by bringing in 

extraneous information regarding tortious interference, which 

is the underlying basis for their amended complaint. The 

facts surrounding tortious interference are irrelevant to the 

sole issue on appeal of whether the nondisclosure agreement 

was in violation of 5 28-2-703, MCA. 

State Med. also argues that affidavits submitted by 

their employees puts into question whether or not their 

agreement was an employment contract. As we stated 
previously, - any contracts, not just employment contracts, are 

in violation of g 28-2-703, MCA, if they restrain anyone from 

exercising a lawful profession, trade or business. In 

addition, the same standard of reasonableness applies to a 

restrictive covenant regardless of whether it is found within 

a trade contract or an employment contract. Therefore, 

evidence regarding whether the agreement was an employment 

contract is irrelevant to the question of whether it violated 

5 28-2-703, MCA. The District Court therefore did not err in 

grantinq defendants' motion for summary judgment. 

A£ f irmed. 

We concur: