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UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

ELWOOD STAFFING SERVICES, INC., No. 3:14-cv-01270-HU

an Indiana Corporation,

 OPINION AND

Plaintiff, ORDER

v.

KGS2 GROUP, LLC, an Oregon

Limited Liability Company, d/b/a

EXPRESS EMPLOYMENT PROFESSIONALS;

THE STOLLER GROUP, INC., an

Oregon Corporation; and SUSAN

KONOPSKI, individually and in her 

capacity as an agent and officer of

EXPRESS EMPLOYMENT PROFESSIONALS, INC.,

Defendants.

COUNSEL

Krishna Balasubramani and Sarah B. Ewing, Sather, Byerly &

Holloway, LLP, Portland, Oregon, for Plaintiff Elwood Staffing

Services, Inc.

Lucas W. Reese, Garrett Hemann Robertson P.C., Salem, Oregon, for

Defendants KGS2 Group, LLC, d/b/a Express Employment Professionals,

and The Stoller Group, Inc.

Zachary J. Dablow, Zachary Dablow, Attorney at Law, Salem, Oregon,

for Defendant Susan Konopski.

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HUBEL, Magistrate Judge:

Plaintiff Elwood Staffing Services, Inc. (“Elwood”) brought

this diversity action against Defendants KGS2 Group, LLC (“KGS2”),

The Stoller Group, Inc. (“Stoller”) and Susan Konopski (“Konopski”)

(collectively, “Defendants”) on August 6, 2014, alleging claims for

injunctive relief, breach of contract, promissory estoppel,

intentional interference with economic relations, breach of

confidential relationship, and misappropriation of trade secrets.

Plaintiff now moves, pursuant to Federal Rule of Civil Procedure

(“Rule”) 65(a) and (b), for a temporary restraining order and an

order to show cause why a preliminary injunction should not issue

in this proceeding. For the reasons explained more fully below,

Elwood’s motion (Docket No. 7) for a temporary restraining order

and order to show cause why a preliminary injunction should not

issue is DENIED.

I. FACTS AND PROCEDURAL HISTORY

Elwood is an Indiana Corporation that provides “temporary and

direct staffing services to a variety of business client

companies . . . , primarily in the industrial, clerical,

professional, and technical industries.” (Compl. ¶ 7.) On

February 15, 2013, Elwood acquired non-party SOS Staffing Services,

Inc. (“SOS Staffing”) through a stock purchase. (Compl. ¶ 9;

Basile Decl. ¶ 1.) SOS Staffing purportedly assigned its

employees’ non-competition and non-solicitations agreements to

Elwood as part of the acquisition, including the agreement Konopski

signed on May 24, 2006, at the inception of her employment with SOS

Staffing. (Compl. ¶¶ 8-9; Basile Decl. ¶ 1.)

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The agreement signed by Konopski on May 24, 2006, provides in

relevant part:

[T]o protect our proprietary, confidential and/or trade

secret information, for the one-year period following the

termination of your employment with us, for any reason or

for cause, whether voluntary or involuntary, you agree:

a. either directly or indirectly, in person or

through a third party or associate, not to call on,

solicit or otherwise deal with any of our customers

located within 60 miles of your territory, branch, or

specific location at which you worked for us, or any

other of our customers if you dealt with such customer

while employed by us;

b. either directly or indirectly, in person or

through a third party or associate, not to either solicit

for employment, employ in anyway or cause any employee to

be hired at your subsequent competing employer any of our

employees (including, without limitation, temporary

employees and/or staff employees) who were employed by us

during the period of time you were employed by us; and 

c. in order to further protect our confidential,

proprietary and/or trade secret information, and as a

condition of employment, continued employment with us and

access to our proprietary and/or confidential information

and trade secrets, not to work for, consult with or be

employed by, directly or indirectly, any of our

competitors at any location within 60 miles of your

territory, branch, or specific location at which you

worked while employed by us.

You agree that the term of this non-competition provision

is reasonable and that the limited geographic scope of

this non-competition provision does not preclude you from

working in your given field, and you represent that you

can seek employment with our competitors at a location

outside of the limited geographic limitations of this

non-competition provision. You agree that each of the

foregoing restrictive covenants are reasonable and will

not result in any undue hardship to you. You also agree

that the confidential, proprietary and/or trade secret

information obtained while working for us or our

affiliated companies will not be used in any way to the

detriment of our business, reputation or good standing at

any time in the future.

(Basile Decl. Ex. A at 1-2.) Notably, the agreement purports to be

legally binding on the employee, SOS Staffing, and SOS Staffing’s

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“subsidiaries or affiliates,” but it is silent with respect to

assignees. (Basile Decl. Ex. A at 1.)

When Elwood acquired SOS Staffing in February 2013, Konopski

“received no pay increase, increase of duties, changes to [her]

supervisors, or other changes or interruptions in [her]

employment[.]” (Konopski Decl. ¶ 2.) Nor did Konopski complete

any new hire paperwork. (Basile Decl. ¶ 1.) At some unspecified

time in March of 2013, Konopski was instructed to place a signature

block in all outgoing emails that referred to her as an employee of

“SOS Employment Group[,] An Elwood Staffing Company.” (Konopski

Decl. ¶ 4) (emphasis added). Though “SOS Staffing was and

continues, to date, to be a wholly owned subsidiary of Elwood with

continued operations,” Elwood did not receive a certificate of

authority to conduct business in Oregon until December 18, 2013.1

(Kasten Decl. ¶¶ 4, 9.) 

Five days later, on December 23, 2013, Konopski received an

email from Elwood’s employee relations manager, Fran Matragos

(“Matragos”), that stated:

As you are aware, the employment of all SOS Staffing

Services, Inc. staff employees will be transferred to

Elwood Staffing Services, Inc. effective January 1, 2014.

In order to accomplish this transition all current SOS

staff employees are required to sign the attached form,

entitled: Employees Acknowledgment of Employee Handbook;

Acknowledgment and Consent of Change of Employer; and

Assignment of Confidentiality and Non-Solicitation and/or

Non-Competition Agreement.

. . . .

1

 The parties do not dispute that, at all material times,

Konopski was an Oregon resident whose “[c]ustomers covered

territory from Downtown Portland, to Forest Grove, to Wilsonville,

Oregon.” (Compl. ¶¶ 2, 11.)

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The agreement must be signed and returned by email . . .

or fax . . . no later than Thursday, December 26, 2013.

Failure to submit this promptly may interfere with the

transfer of your employment from SOS to Elwood. If you

have questions please contact Human Resources.

(Matragos Decl. Ex. A at 1-2; Konopski Decl. ¶ 5.)

The form attached to Matragos’ email, which was ultimately

signed by Konopski on January 2, 2014, stated:

I . . . hereby acknowledge that effective January 1,

2014, I will be an employee of Elwood Staffing Services,

Inc. . . . I hereby consent to the assignment of my

employment from SOS Staffing Services, Inc. . . . to

Elwood Staffing. I understand and agree all compensation

paid to me after January 1, 2014, even if earned while

employed by SOS, will be paid by Elwood Staffing.

I hereby consent to the assignment from SOS to Elwood

Staffing of the following agreement: Agreement Regarding

Non-Competition & Non-Solicitation of Customers and

Employees entered into between me and SOS at the time I

was employed by SOS or during the course of my employment

with SOS.

(Basile Decl. Ex. B at 1.) Konopski maintains that she was “not

provided any type of job offer, written or otherwise, prior to

being presented” with the assignment quoted above. (Konopski Decl.

¶ 5.)

Also in early January 2014, “all former SOS Staffing employees

were directed to use a signature block that referred only to

Elwood.” (Kasten Decl. ¶ 7.) A little over six months later, on

June 18, 2014, Konopski sent an email to her regional manager at

Elwood, Tracie Basile (“Basile”), indicating that she was “ready to

take that next step into management and . . . didn’t see any

opportunities here in the Portland area with Elwood,” that she had

been presented “a management offer” that would increase her base

salary by $20,000, and that she was giving her two weeks notice. 

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(Basile Decl. ¶ 6, Ex. C at 1.) Basile then called Konopski, who

explained that she was taking the branch manager position with

Express Employment Professionals (“Express”).2 (Basile Decl. ¶ 6.)

Later that same day, June 18, 2014, Konopski sent Elwood’s

human resources department an email attaching a letter of

resignation and a proposed waiver of “the non-competition portion

of our now-terminated employment agreement,” in exchange for

Konopski agreeing to adhere to the non-solicitation and

confidentially provisions. (Compl. ¶ 16, Ex. D at 1.) Konopski

began working for Express on or about July 1, 2014, even though

Elwood never signed or agreed to Konopski’s proposed waiver of the

non-competition provision. (Compl. ¶ 18; Basile Decl. ¶ 18.) On

the basis of the foregoing, Elwood filed the present action against

Defendants on August 6, 2014. Elwood’s motion for a temporary

restraining order and order to show cause why a preliminary

injunction should not issue followed on September 16, 2014.

II. LEGAL STANDARD

“A party seeking a temporary restraining order must make the

fourfold showing necessary for the issuance of a preliminary

injunction.” Williamson v. Oregon, No. 3:14–cv–00591–PK, 2014 WL

2803017, at *1 (D. Or. June 19, 2014) (citing Stuhlbarg Int’l Sales

Co. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001));

see also Alexander v. Williams, No. 6:11–cv–06215–PK, 2012 WL

3527042, at *1 n.1 (D. Or. Aug. 14, 2012) (“[T]he standards for

2

 Express is an assumed business name for KGS2, an Oregon

limited liability company. (Compl. ¶ 3.) Stoller, a closely held

corporation with its principal place of business located in

Tualatin, Oregon, is a managing member of KGS2. (Compl. ¶ 4.)

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issuance of a temporary restraining order are at least as exacting

as those for a preliminary injunction.”) (citation omitted).

Specifically, the plaintiff “must show ‘that he is likely to

succeed on the merits, that he is likely to suffer irreparable harm

in the absence of preliminary relief, that the balance of equities

tips in his favor, and that an injunction is in the public

interest.’” Williamson, 2014 WL 2803017, at *1 (quoting Am.

Trucking Ass’ns, Inc. v. City of L.A., 559 F.3d 1046, 1052 (9th

Cir. 2009)).

III. DISCUSSION

For the purposes of the pending motion, the parties have

agreed to limit the scope of their dispute to the enforceability of

Konopski’s non-competition agreement. Resolution of the parties’

dispute requires this Court to address the legal ramifications of

Elwood’s acquisition of SOS Staffing, as well as the potential

validity or invalidity of any purported assignments of Konopski’s

non-competition agreement.

A. The Stock Purchase Agreement

To invoke the requirements of the post-January 1, 2008 version

of Oregon Revised Statute (“ORS”) 653.295, the statute that

establishes the requirements for a valid non-competition agreement

in Oregon, Konopski argues that her initial employment with Elwood

began on February 15, 2013, when the stock purchase agreement

between Elwood and SOS Staffing officially closed.3

 According to

3

 “The Oregon legislature amended the [ORS 653.295] in 2007 to

expressly exclude from the statute’s scope a ‘covenant not

to . . . solicit or transact business with customers of the

employer.’” Moreland v. World Commc’n Ctr., Inc., No. Civ.

09–913–AC, 2010 WL 4237302, at *2 (D. Or. Sept. 17, 2010) (citation

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Konopski, “[p]articularly dispositive of this argument is that on

or about March 1, 2013, [she] was made to alter her public

signatures on all outgoing emails to reference that she now worked

for Elwood.” (Def. Konopski’s Opp’n at 7.)

The Court is not convinced that Konopski’s employment with

Elwood began on February 15, 2013. “[T]here is a strong

presumption that a parent company is not the employer of its

subsidiary’s employees.” City of Los Angeles v. Sand Pedro Boat

Works, 635 F.3d 440, 453 (9th Cir. 2011) (citation omitted); Frank

v. U.S. West, Inc., 3 F.3d 1357, 1362 (10th Cir. 1993) (stating

that there is “a strong presumption that a parent company is not

the employer of its subsidiary’s employees, and the courts have

found otherwise only in extraordinary circumstances.”).

The record in this case indicates that, as of February 15,

2013, “SOS Staffing was and continues, to date, to be a wholly

owned subsidiary of Elwood with continued operations.” (Kasten

Decl. ¶ 4.) Having Konopski alter her electronic signature in

March 2013 to state that she was an employee of “SOS Employment

Group[,] An Elwood Staffing Company,” reflects nothing more than a

parent-subsidiary relationship between SOS Staffing and Elwood, not

an employee-employer relationship between Konopski and Elwood. The

Court therefore declines to conclude that Konopski’s initial

employment with Elwood began on February 15, 2013.

///

///

omitted). This exclusion applies “only to agreements ‘entered into

on or after’ January 1, 2008, the effective date of the 2007 Act.”

Id.

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B. Assignability

Next, the parties dispute whether the non-competition

agreement executed by Konopski on May 24, 2006, was even

assignable. Citing Perthou v. Stewart, 243 F. Supp. 655, 659 (D.

Or. 1965), Konopski maintains that, “[a]bsent a clause indicating

that the parties to an original non-compete agreement intended the

terms to inure to the benefit of their successors, such agreements

are not assignable under Oregon law.” (Def. Konopski’s Opp’n at

4.) Konopski thus argues that the lack of an assignment clause in

the non-competition agreement renders it unenforceable by Elwood.

In Perthou, the federal district court addressed, among other

things, whether non-competition covenants were assignable. Perthou,

243 F. Supp. at 658. The district court essentially adopted the

view that personal service contracts cannot be assigned, regardless

of whether “the assignment be to a corporation or partnership with

a changed membership which carries on a business substantially in

the same way in which it was previously operated.” Id. at 659. As

the district court went on to explain, “[t]he fact that a person

may have confidence in the character and personality of one

employer does not mean that the employee would be willing to suffer

a restraint on his freedom for the benefit of a stranger to the

original undertaking.” Id.

Seven years later, in Mail-Well Envelope Co. v. Saley, 262 Or.

143 (1972), the Oregon Supreme Court was presented with the

question of whether an employment agreement, including its noncompetition provisions, was assignable. Id. at 149. The Oregon

Supreme Court began by noting that there were two competing rules:

the first being that “‘[r]ights which would not otherwise be

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capable of assignment . . . [m]ay be assigned or delegated [i]f the

contract so provides, or if in the absence of such a provision the

other party consents,’” id. at 149-50 (quoting 3 Williston,

Contracts § 423 3d ed. 1960)), and the second being that

“noncompetition provisions in employment contracts which are

otherwise valid are assignable even in the absence of provisions

permitting the assignment of such contracts,” id. at 150 (citing 4

Corbin, Contracts § 885 (1951)). The Oregon Supreme Court then

held that, “[r]egardless of whether the proper rule should be as

stated by Williston or by Corbin, the employment contract in this

case, included a provision permitting assignment and was thus

assignable under either version of that rule.” Id.

The rule stated by Williston seems to be the more employeefriendly of the two rules discussed by the Oregon Supreme Court in

Mail-Well, as it essentially requires the employee to assent to the

written terms of an express assignment provision, or,

alternatively, to provide his consent in the absence of such a

provision.4 Although the Oregon Supreme Court declined to

expressly adopt the rule stated by Williston or by Corbin, the

Court will apply the Williston rule here because it was clearly one

4

 In Epiq Class Action & Claims Solutions, Inc. v. Prutsman, No. CV 09–1185–MO, 2009 WL 3923413 (D. Or. Nov. 13, 2009), Judge

Mosman stated: “When read together, Perthou and Mail–Well suggest

that a personal service contract prohibiting competition against a

specific employer is only assignable if the employee is on notice,

at the time the employee signs the agreement, that he or she would

also be prohibited from competing with a subsequent assignee.” Id.

at *3 n.2. This Court’s combined reading of Perthou and Mail-Well

is not as restrictive as that announced in Epiq Class. This Court

also places more emphasis on Mail Well than on the federal district

court’s decision in Perthou, because the Oregon Supreme Court

ultimately determines Oregon state law.

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of two options entertained by the Oregon Supreme Court, and because

it more adequately protects employees from surprise and oppressive

tactics. See generally Epiq Class, 2009 WL 3923423, at *3

(discussing the public policy considerations behind Oregon’s

treatment of noncompetition agreements).

The first purported assignment of Konopski’s non-competition

agreement, according to the complaint filed by Elwood, occurred on

or about February 15, 2013, when the Stock Purchase Agreement

officially closed: “On or about February 15, 2013, Elwood, through

a stock purchase, acquired SOS Staffing stock. SOS Staffing

assigned its employees’ Non-Competition and Non-Solicitation

Agreements to Elwood. No new hire paperwork was completed.” (Compl.

¶ 9.) Konopski’s non-competition agreement did not include a

provision permitting assignment and SOS Staffing had not yet

attempted to obtain Konopski’s consent. Any unilateral assignment

by SOS Staffing to Elwood in February 2013 was thus invalid. The

Court is satisfied that this invalid assignment had no legal effect

on Konopski’s obligations to SOS Staffing who, as discussed above,

remained Konopski’s employer post-closure of the Stock Purchase

Agreement. See, e.g., Williams v. One West Bank, FSB, No.

12–01695, 2013 WL 1390038, at *5 (C.D. Cal. Apr. 4, 2013) (holding,

in a different context, that an invalid assignment of a trust deed

had no effect on the borrower’s responsibilities).

The second attempt to assign Konopski’s non-competition

agreement began with an email on December 23, 2013——five days after

Elwood received a certificate of authority to conduct business in

Oregon. That email informed Konopski that she had until the day

after Christmas to execute a form consenting to the assignment of

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her non-competition agreement to Elwood, and that the failure to

promptly do so “may interfere with the transfer of [her]

employment.” (Matragos Decl. Ex. A at 1-2; Konopski Decl. ¶ 5.)

After “express[ing] [her] reservations at signing the document,”

Konopski ultimately signed the consent form on January 2, 2014,

which purported to assign her non-competition agreement to Elwood.

(Konopski Decl. ¶ 6; Basile Decl. Ex. B at 1; Matragos Decl. Ex. A

at 1-3.)

It’s clear to the Court that Konopski was under no legal

obligation to consent to the assignment of her non-competition

agreement to Elwood and, as previously discussed, SOS Staffing had

no right to unilaterally assign the non-competition agreement in

the absence of a provision expressly permitting it to do so. Faced

with the reality that it needed to obtain Konopski’s consent, it

appears that Elwood essentially presented Konopski with the option

of consenting to the assignment of her non-competition agreement,

or potentially risk being fired.

“Used in a purely legal context, ‘consent’ is defined as

‘capable, deliberate, and voluntary assent or agreement to, or

concurrence in, some act or purpose, implying physical and mental

power and free action.’” State v. Harrell, 353 Or. 247, 256 (2013)

(citation omitted). Based on the circumstances described above,

the Court is compelled to conclude that Elwood failed to obtain

adequate consent from Konopski in this case. Had Elwood requested

that Konopski execute an assignment without suggesting that her job

could be impacted by the decision and not demanded a decision very

quickly over Christmas, perhaps this case would be different.

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Accordingly, the Court concludes any purported noncompetition

agreement between Elwood and Konopski is unenforceable.5

IV. CONCLUSION

For the reasons stated, Elwood’s motion (Docket No. 7) for a

temporary restraining order and order to show cause why a

preliminary injunction should not issue is DENIED.

IT IS SO ORDERED.

Dated this 15th day of December, 2014.

/s/ Dennis J. Hubel _________________________________ DENNIS J. HUBEL

 United States Magistrate Judge

5 The Court’s central holding has been fashioned in a way to

accommodate Elwood and Konopski’s joint request for the Court to

determine whether the noncompetition agreement is valid and

enforceable. Setting that request aside for a moment, the facts of

this case fall well short of the showing necessary to grant a

temporary restraining order which is an “extraordinary and drastic

remed[y] that may only be awarded upon a clear showing that the

moving party is entitled to relief.” Velasco v. Homewide Lending

Corp., No. 13-cv-698, 2013 WL 3188854, at *6 n.2 (C.D. Cal. June

21, 2013). Indeed, the circumstances surrounding Elwood’s attempt

to obtain Konopski’s consent (a necessary prerequisite to

enforceability given the absence of an assignment clause in the

underlying noncompetition agreement) negates the possibility that

Elwood has made “a clear showing” that it is entitled to relief.

They would similarly preclude the grant of a motion for summary

judgment in Elwood’s favor on the issue of enforceability.

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