# In the Missouri Court of Appeals **Eastern District** DIVISION FOUR WHELAN SECURITY CO., ) ED101847 ) Plaintiff/Respondent/Cross-Appellant, ) Appeal from the Circuit Court ) of St. Louis County v. ) ) CHARLES KENNEBREW, SR., ) Honorable Maura B. McShane ) Defendant/Appellant/Cross-Responde nt. ) Filed: September 29, 2015 Introduction Charles Kennebrew, Sr. (Kennebrew) appe als from the trial court’s October 10, 2013 Summary Judgment in favor of Whelan Security Co. (Whelan) on its claims that Kennebrew breached the customer non-solicitation clause an d the 50-mile non-competition clause in his employment agreement (Agreement). Whelan app eals from the trial court’s June 26, 2014 Order and Judgment awarding it, in part, $165,000 in attorney’s fees. We reverse and remand. Factual and Procedural Background Whelan is a Missouri corporation based in St. Louis County that provides security services in a number of citi es throughout the coun try, including Houston, Texas and Dallas, Texas. In November 2007, Whelan hired Kennebrew, who signed the Agreement, which2 included a covenant not to compete against Whelan. 1 Kennebrew, who had previously worked for a competitor of Whelan, executed the Agreement on November 26, 2007. Its restrictive covenants provided that: During the term of this Agreement, and for a period of two (2) years thereafter, whether the termination of this Agreement is initiated by EMPLOYER or EMPLOYEE, EMPLOYEE shall not, wit hout the prior writ ten consent of EMPLOYER, in any manner, directly or indirectly, either as an employee, employer, lender, owner, technical assistan t, partner, agent, principal, broker, advisor, consultant, manager, shareholder, director, or officer, for himself or in behalf of any person, firm, partnership, ent ity, or corporation, or by any agent or employee: (a) Solicit, take away or attempt to take away any customers of EMPLOYER or the business or patronage of any such customers or prospective customer(s) whose business was being sought during the last twelve (12) months of EMPLOYEE’s employment; or (b) Solicit, interfere with, employ, or endeavor to employ any employees or agents of EMPLOYER, (c) Work for a competing business within a fifty (50) mile radius of any location where EMPLOYEE has provided or a rranged for EMPLOYER to provide services. (d) Work for a customer of EMPLOYER or prospective customer(s) whose business was being sought during the last twelve (12) months of EMPLOYEE’s employment, if the work would include pr oviding, or arranging for, services the same as, or similar to, those provided by EMPLOYER. “Competing business” means any busine ss engaged in providing guard and/or security services the same as, or similar to, those o ffered by EMPLOYER. Whelan hired Kennebrew because of his reput ation in the security guard business, his business contacts, and his ability to attract clients, especiallyin Houston. Kennebrew began working at Whelan as the Director of Quality Assurance and was assigned to Dallas in

1 W. Landon Morgan (Morgan) was also a former empl oyee of Whelan and a defendant in this case, but was eventually dismissed by Whelan after a ppeal and remand. Morgan is not involv ed in this appeal but is occasionally mentioned.3 November 2007, in part to comply with a non-compete agreement 2 Kennebrew had with his previous employer. Kennebrew’s duties includ ed managing “all operati ons, clients, [and] customers” and he had access to employee reco rds, including compensation, and to Whelan’s financial information. Kennebrew contacted Whel an customers in different parts of Texas, including Houston, where he ha d more than ten clients. On March 30, 2009, Kennebrew submitted a letter of resignation to Whelan but continued to work for Whelanuntil August 2009. Kennebrew started his own security guard company, Elite Protective Services, LLC (Elite). Park Square Condominiums (Park Square) was a customer of Whelan in Houston from 2007 until the end of 2009. On December 17, 2009, Park Square signed a contract with Kennebrew on behalf of Elite to provide security services. Park Square terminated its relationship with Whelan effective Ja nuary 2, 2010, and was replaced by Elite, which retained the services of a nu mber of Whelan security personnel who had worked at the Park Square location. On January 4, 2010, Whelan filed a petition se eking injunctive relief against Kennebrew, as well as damages for breach of contract, unju st enrichment, and civil conspiracy. After a hearing over a period of several days, the trial court denied Whel an’s request for a preliminary injunction. Whelan filed a moti on to modify, and the parties f iled cross-motions for summary judgment. On January 7, 2011, the trial court is sued summary judgment in favor of Kennebrew, concluding the employment agreement was overbro ad, not reasonable as to time and space, and

2 The term “non-compete agreement” refers to all restri ctive covenants entered into between the employer and employees that restrict post-employment activities of the employees, including non-competition and non-solicitation clauses. Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 609 n. 2 (Mo.banc 2006).4 therefore invalid as a matter of law. The trial court denied Whelan’s motion for summary judgment and dismissed the case with prejudice. Whelan appealed this judgment, which, afte r being reversed by th is Court based on our finding that the agreement was not per se unreasona ble, was transferred to the Missouri Supreme Court at Kennebrew’s request. The Supreme Cour t vacated this Court’s opinion and issued its own, reversing the trial court’s summary judgm ent based on its finding that the non-compete agreement was unreasonably overbroad as written but could be modified. Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 839 (Mo.banc 2012). The Supreme Court modified the terms of the non-compete agreement by elim inating the provision prohibiti ng Kennebrew from soliciting existing Whelan customers, except those cust omers with whom Kennebrew dealt during his employment, and eliminating the prohibition agains t soliciting Whelan’s prospective customers. Id. at 844-45. The Court held the employee non-solicitation clause and the 50-mile noncompetition clause were enforceable. The Court remanded the case for resolution of whether the employee non-solicitation clause was motivat ed by a valid purpose under Section 431.202(3) 3 and whether Kennebrew’s actions violat ed his covenant not to compete. On remand, the trial court again entertained cross-motions for summary judgment. On October 10, 2013, the trial court granted summary j udgment in Whelan’s favor on its claims that

3 All statutory references are to RSMo 2006. Section 431.202 provides in pertinent part: 1. A reasonable covenant in writing promising not to so licit, recruit, hire or ot herwise interfere with the employment of one or more employees shall be enfo rceable and not a restrain t of trade pursuant to subsection 1 of section 416.031 if:

... (3) Between an employer and one or more employees seeking on the part of the employer to protect: (a) Confidential or trade secret business information; or (b) Customer or supplier relationships, goodwill or loyalty, which shall be deemed to be among the protectable interests of the employer....5 Kennebrew (1) breached the customer non-solicita tion clause, as modified, and (2) breached the 50-mile non-competition clause. The court found no genuinely disputed issues of fact that Kennebrew had breached these two clauses of the agreement. The trial court denied Whelan’s motion fo r summary judgment on its claim Kennebrew breached the employee non-solicitation clause. The trial court found, in accordance with the Supreme Court’s opinion, that ad ditional parol evidence needed to be adduced to determine the purpose of this clause, because such purpose could not be discerned from the four corners of the agreement alone. Whelan, 379 S.W.3d at 846 (l ack of any language regarding purpose of employee non-solicitation clause prevents Court’s determination of clause ’s purpose as matter of law ... intent of parties must in stead be determined by use of parol evidence on remand). The trial court denied Kennebrew’s motion for summary judgment. On November 7, 2013, Whelan filed separa te motions for continuance, summary judgment on its damages, and sanctions. On November 14, 2014, the trial court granted Whelan’s motion for continuance, pursuant to which the case was removed from its jury trial setting of December 2, 2013, and continued to such time as the court could hear and rule on Whelan’s motions for summary judgment and sanc tions. The court also ruled discovery was closed. On January 21, 2014, the trial court heard Wh elan’s motions for summary judgment on damages and for sanctions. On February 11, 2014, the court denied both motions. On February 25, 2014, by consent of the parties and order of th e court, a one-day bench trial on damages was set for April 28, 2014. On April 28, 2014, trial was had, at which th e court heard evidence and argument and took the matter under submission, allowing the partie s to file post-trial briefs. On June 26, 2014,6 the trial court entered its Order and Judgment. The trial court a ssessed Whelan’s damages in lost profits from Kennebrew’s breach of the Agreemen t’s client non-solicitation clause and 50-mile non-competition clause at $69,375.75, entering judgment thereon in Whelan’s favor. The court found insufficient evidence had been adduced to establish the purpos e of the employee nonsolicitation clause, and thus Whel an’s claim it had been breached was denied along with any associated claim for damages or injunctive reli ef. The trial court also awarded Whelan $165,000 in attorney’s fees. The trial court denied Whel an’s claim for unjust enrichment because it invited duplicative damages. The court further held that “all arguments submitted and not addressed have been considered and denie d.” This appeal follows. Points on Appeal In his first point, Kennebrew claims the tr ial court erred in granting Whelan summary judgment that Kennebrew had violated the custom er non-solicitation clause in § 3(a) of the Agreement by soliciting Park Square’s busine ss because Kennebrew presented evidence in response to Whelan’s motion for summary judgmen t that he had not solicited Park Square’s business and, rather, Park Square’s manager had solicited his business. In his second point, Kennebrew maintains the trial court erred in granting Whelan summary judgment that Kennebrew had violated the 50-mile non-co mpetition clause in § 3(c) of the Agreement by operating Elite in Houston beca use Kennebrew raised an affirmative defense that Whelan had waived the Agreement and, in opposition to Whelan’s motion for summary judgment, presented evidence Whelan had waived § 3(c) by his superiors at Whelan knowing about his operation of Elite in Houston, tolerating it, and expre ssly agreeing to allow him to do
so.7 In his third point, Kennebrew contends the tr ial court erred in granting Whelan summary judgment that Kennebrew had violated the 50-m ile non-competition clause in § 3(c) of the Agreement by operating Elite in Houston because Kennebrew presented evidence that he only provided services for Whelan in Dallas, not Ho uston, and merely assisted with some Houston contacts while providing serv ices for Whelan in Dallas. On cross-appeal, Whelan challenges the trial court’s judgment awarding it $165,000 in attorney’s fees as arbitrary, capricious and unreason able and asserts its reasonable attorney’s fees were $707,410. Standard of Review Our review of the trial court’ s grant of summary judgment is de novo . ITT Comm. Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W .2d 371, 376 (Mo.banc 1993). The propriety of summary judgment is purely an issu e of law. Id. We need not defer to the trial court’s order, as its judgment is founded on the record submitted and the law. Id. The criteria on appeal for testing the propriety of summary judgment are no different from those which should be used by the trial court to determine the propriet y of sustaining the motion initially. Id. Summary judgment is proper onl y in those situations in wh ich the movant can establish there is no genuine issue as to any material fact and it is entitled to judgment as a matter of law. Rule 74.04 4 ; ITT, 854 S.W.2d at 377. The movant has th e burden to show a right to judgment flowing from facts about which there is no genuin e dispute. ITT, 854 S.W.2d at 378. A court, in considering a motion for summary judgment, tests simply for the existenc e, not the extent, of these genuine disputes. Id. A genuine disput e exists where the record contains competent materials that evidence two plausible, but contra dictory, accounts of the essential facts. Id. at 382. If a trial court, in order to grant summary judgment, must overlook ma terial in the record

4 All rule references are to Mo. R. Civ. P. 2014.8 that raises a genuine dispute as to the facts underlying the mova nt’s right to judgment, then summary judgment is no t proper. Id. at 378. In determining the propriety of summary judgment, we are guided by three overriding principles. First, we review the record in th e light most favorable to the party against whom judgment was entered. ITT, 854 S.W.2d at 376. Any evidence in the reco rd that presents a genuine dispute as to the materi al facts defeats the movant’s pr ima facie showing. Id. at 382. Second, the facts set forth by affidavit or otherw ise in support of a part y’s motion are taken as true unless contradicted by the non-moving party’s response to the summary judgment motion. Id. at 376. The movant must esta blish that the material facts are not in genuine di spute. Id. at 382. If there is no contradiction and the movant has shown a right to judgment as a matter of law, the non-movant must create a genuine disp ute by supplementing the record with competent materials that establish a plausi ble, but contradictory, version of at least one of the movant’s essential facts. Id. It is not the “truth” of the facts upon which the court focuses, but whether those facts are disputed. Id. Where they are no t, the facts are admitted for purposes of analyzing a summary judgment motion. Id. Finally, we accord the non-movant the benefit of all reasonable inferences from the record. Id. at 376. Discussion Point I – Customer Non-solic itation Clause in § 3(a) Kennebrew maintains the fact of his solicitati on of Park Square ca nnot be established by relying on the Supreme Court’s find ing that he did so under the “l aw of the case” doctrine. In Whelan’s statement of uncontroverted facts in support of its motion for summary judgment on its claim that Kennebrew breached th e customer non-solicitation clause, it cites only to the Whelan opinion as evidence in the record supporti ng its statement of fact that Kennebrew9 solicited Whelan’s customer Park Square. In Whelan, the Court stat ed, “In November and December 2009, Mr. Kennebrew solicited the busine ss of Park Square Condominiums, a client of Whelan in Houston....” Id. at 840. Kennebrew maintains the Supreme Court’s statement that he solicited the business of Park Square while employed by Whelan cannot be given “law of the case” status thus establishing it as beyond di spute for purposes of the summary judgment proceedings after remand. This statement was not part of the holding in Whelan. As such, a citation to Whelan is inadequate evidentiary support for this fact for the purposes of summary judgment. In Whelan, the holding was limited to the enforceability of the contract: This Court holds the customer non-solic itation clauses in Mr. Kennebrew’s and Mr. Morgan’s contracts are ove rbroad. It modifies the contracts to eliminate the provision prohibiting Mr. Kennebrew and Mr. Morgan from soliciting existing Whelan customers, except those customers with whom Mr. Kennebrew and Mr. Morgan dealt, respectively, during th eir employment and to eliminate the prohibition against soliciting Whelan’s prospective customers. The employee non-solicitation clauses in both contract s and the non-competition clause in Mr. Kennebrew’s contract are enforceable. Whelan, 379 S.W.3d at 847. After stating its holdi ng, the Court set out what it deemed to be outstanding disputed issues of f act, precluding su mmary judgment: There remain genuine issues of fact thatmust be resolved by the trier of factnamely, whether the employee non-solic itation clause in Mr. Kennebrew’s contract was motivated by a valid pu rpose under section 403.202(3) and whether Mr. Kennebrew’s actions violated his covenant not to compete. Id. The Court then reversed the judgment of the trial cour t and remanded the case. Id. Kennebrew also claims the trial co urt erred in granting summary judgment to Whelan because he presented evidence that he had not solicited Park Square’s business, but rather Park Square’s manager had solicited his business. We find this issue of fact remains controverted, in that there is evidence in the summary judgment record10 supporting both sides of the controversy. Fo r this additional reas on, summary judgment on the issue was inappropriate. Point I is granted. Point II

− Fifty-Mile Non-Competition Clause in § 3(c) – Waiver Kennebrew maintains the trial court erred in granting Whelan summary judgment that Kennebrew violated the 50-mile non-competition cl ause by operating Elite in Houston because Kennebrew raised an affirmative defense that Wh elan had waived the terms of the Agreement by having knowledge of his operation of Elite in H ouston, tolerating it, and expressly agreeing to allow him to do so. Whether Whelan waived its right to en force the 50-mile non-competition clause by having knowledge of and accepting Kennebrew’s competing business is an issue of fact precluding summary judgment. See, e.g. , JumboSack Corp. v. Buyck, 407 S.W.3d 51, 53 (Mo.App. E.D. 2013) (“whether Employer waived its right to enforce the non-compete agreement against Employee is an issue of fact”). Further, both Kennebrew and Whelan set forth evidentiary support from the summary judgment record for their respective opposing positions on whether Whelan waived said right. This issue also involves determinati ons of credibility that must be made by the trier of fact and are notappropriately decided on summary judgment. Accordingly, summary judgment should not have been granted on this claim. Point II is granted. Point III

− Fifty-Mile Non-Competition Clause in § 3(c) Kennebrew contends the trial court erred in granting Whelan summary judgment that Kennebrew had violated the 50-mile non-competiti on clause by operating Elite in Houston in that Kennebrew presented evidence that he only provided services for Whelan in Dallas, not Houston. The parties do not dispute Kennebrewimmediately began working for a competing business in Houston after leaving Whelan’s em ployment. The issue is whether Kennebrew11 provided services or arranged for Whelan to pr ovide services in Houston while employed with Whelan in the Dallas office. Kennebrew insists he merely assisted Wh elan with some Houston contacts while providing services for Whelan in Dallas. Howeve r, there is also contradictory evidence in the record. For example, in his deposition, Kenne brew testified Whelan used his contacts in Houston to get Whelan new customers and he was successful in moving some Houston customers to Whelan. Kennebrew also testif ied at the preliminary injunction hearing on September 10, 2010, that he had contact with no fewe r than ten customers of Whelan in Houston including, but not limited to, Park Square. After determining the 50-mile non-competition clause in the Agreement was valid and enforceable as written, 5 the Supreme Court in Whelan held: As an enforceable covenant agai nst Mr. Kennebrew, a genuine factual issue exists as to whether Mr. Kennebr ew’s actions violated the covenant. Specifically, the parties dispute whether Mr. Kennebrew provided services in Houston while employed with Whelan in the Dallas office. Resolution of this factual issue is necessary to determ ine if a violation of the non-compete agreement occurred. Entry of summary judgment on this ground, therefore, is improper. Whelan, 379 S.W.3d at 847. The parties espouse and the reco rd supports two plausible bu t contradictory accounts of material facts with regard to this issue. Further, as in Count II, there are credibility issues to be weighed and the issue of waiver as asserted in Count II comes into play as well with regard to

5 Specifically, the Court said: The non-competition clause in Mr. Kennebrew’s employment contract prohibits him, for a period of two years, from working for a competing business within 50 miles of any location where he provided or arranged for Whelan to provide services. Considerable precedent in Missouri su pports the reasonableness of a two-year non-compete agreement for an operations manager that is limited to 50 miles from where services were rendered by the employee. Whelan, 379 S.W.3d at 846-47.Point III , Operatio n while in acts, on t F this issu e

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