#25393-a-DG 

2010 SD 49

IN THE SUPREME COURT 

OF THE 

STATE OF SOUTH DAKOTA 

* * * * 

RAVEN INDUSTRIES, INC., Plaintiff and Appellee, 

 v. 

CLARK LEE and INTEGRA 

PLASTICS, INC., Defendants and Appellants. 

* * * * 

APPEAL FROM THE CIRCUIT COURT 

OF THE SECOND JUDICIAL CIRCUIT 

MINNEHAHA COUNTY, SOUTH DAKOTA 

* * * * 

HONORABLE KATHLEEN K. CALDWELL 

Judge 

* * * * 

THOMAS J. WELK 

JASON R. SUTTON of 

Boyce, Greenfield, Pashby & Welk, LLP 

Sioux Falls, South Dakota Attorneys for plaintiff 

and appellee. 

LEE A. MAGNUSON 

AMY L. ARNDT 

DANA VAN BEEK PALMER of 

Lynn, Jackson, Shultz & Lebrun, PC 

Sioux Falls, South Dakota Attorneys for defendants 

and appellants. 

* * * * 

 CONSIDERED ON BRIEFS 

ON MAY 24, 2010 

 OPINION FILED 06/16/10 
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GILBERTSON, Chief Justice

[¶1.] Raven Industries (Raven) sued Integra Plastics, Inc. (Integra), a 

business competitor, and Clark Lee (Lee), a former employee of Raven, by complaint 

for injunctive relief, tortious interference with contract, and unfair competition. 

Raven alleged that Lee unfairly competed with Raven by using alleged secret, 

confidential, or proprietary information that he was contractually obligated not to 

disclose. Raven’s complaint sought only injunctive relief. A bench trial was held 

and the circuit court entered findings of fact, conclusions of law, and a permanent 

injunction in Raven’s favor. Integra and Lee appeal. 

FACTS 

[¶2.] Raven is a string-reinforced plastic film manufacturer in Sioux Falls, 

South Dakota. Integra is a manufacturing company in Madison, South Dakota. 

Lee was an engineer at Raven from 1991 until February 2006 when he was fired. 

In 1991, Lee signed an “Agreement for Execution by Employees of Raven Industries, 

Inc. Relating to Inventions, Secret Processes, Trademarks, Trade Names, Character 

Names and Other Similar Matters” (Proprietary Rights Agreement).1 After being 

 (continued . . .) 

1. The Proprietary Rights Agreement Lee signed stated: 

Employee shall not directly or indirectly disclose or use at any time, 

either during or subsequent to the said employment, any secret or 

confidential information, knowledge, or data of Employer (whether or 

not obtained, acquired or developed by Employee) unless he shall first 

secure the written consent of Employer. Upon termination of his 

employment Employee shall turn over to Employer all notes, 

memoranda, notebooks, drawings or other documents made, compiled 

by or delivered to him concerning any product, apparatus or process 

manufactured, used or developed or investigated by Employer during 

the period of his employment; it being agreed that the same and all 
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________________________ 

(. . . continued) 

fired, Lee signed a “Severance Package/Agreement” (Severance Agreement). The 

Proprietary Rights Agreement and Severance Agreement will now collectively be 

referred to as the “non-disclosure agreements.” In the Severance Agreement, Lee 

agreed not to “[u]se or disclose to any third party any confidential or proprietary 

Company information or any confidential or proprietary knowledge about the 

Company obtained by [Lee] during the course of [Lee’s] employment, including 

without limitation the terms and conditions of this Agreement.” Lee commenced 

employment with Integra in February 2006 after he was fired by Raven. 

[¶3.] At Raven, Lee was on the engineering team that originally built 

Raven’s string-reinforced plastic line (Line) in 1993.2 Lee was initially responsible 

for operating the Line and modifying it to improve product quality. Raven 

experienced many problems with the Line after production began. Lee, as the lead 

engineer, worked to develop solutions to these problems. As a result, Lee was 

intimately familiar with the assembly and operation of Raven’s Line. In sum, it 

took over thirteen years to perfect Raven’s Line. 

[¶4.] At Integra, Lee was the director of business development and worked 

to develop a manufacturing line to produce string-reinforced plastic film almost 

information contained therein are at all times the property of the 

Employer. 

2. The Line is comprised of several integrated pieces of equipment that perform 

a process that produces string-reinforced plastic film. Specific details about 

the Line and the product it produces are not relevant to this appeal. 

Therefore, the specific details will not be disclosed or discussed because of the 

sensitive nature of this information. 
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identical to Raven’s. Although Integra considered building a production line for this 

product before Lee was hired, it did not. Once Integra employed Lee, Lee contacted 

an equipment manufacturer that built a component of Raven’s Line to have the 

same modified component made for Integra. The modifications Lee requested were 

unique to Raven’s Line and were not used by any other manufacturer in the 

industry. Within one month of receiving the necessary equipment, Integra was able 

to produce a product that was commercially comparable to Raven’s. 

[¶5.] Raven filed suit against Integra and Lee for injunctive relief, tortious 

interference with contract, and unfair competition. Raven alleged that Integra and 

Lee unfairly competed against Raven by using secret, confidential, or proprietary 

information – that Lee was contractually obligated not to disclose – to produce a 

product for Integra commercially comparable to Raven’s. Raven’s complaint sought 

only injunctive relief. A nine-day bench trial was held, and the circuit court found 

for Raven on all three claims. The circuit court subsequently entered findings of 

fact, conclusions of law, and a permanent injunction prohibiting Integra from 

operating its line for two years. 

[¶6.] Integra and Lee appeal, raising the following issues:3

 (continued . . .) 

3. Raven argues “an issue exists about whether th[is] Court has jurisdiction to 

hear the appeal because [Integra] fail[ed] to appeal [a] modified permanent 

injunction” that was entered after the circuit court entered the original 

permanent injunction enjoining Integra’s operation of its line. Raven asserts 

that even if this Court reverses the original permanent injunction, the 

modified permanent injunction will remain as a final judgment. On this 

basis, Raven contends that this appeal is moot. However, after a thorough 

review of the record, Raven, Integra, and Lee were aware that the appeal 

from the original permanent injunction included the related modified 

permanent injunction. See SEC v. Van Waeyenberghe, 990 F2d 845, 847 n3 
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________________________ 

(. . . continued) 

 (continued . . .) 

1. Whether the circuit court erred in concluding that the Uniform 

Trade Secrets Act did not preempt Raven’s tort claims. 

2. Whether the circuit court erred in concluding that Raven and 

Lee’s non-disclosure agreements were enforceable. 

3. Whether the circuit court erred in concluding that Integra 

engaged in unfair competition. 

4. Whether the circuit court erred in granting the permanent 

injunction. 

ANALYSIS AND DECISION 

[¶7.] 1. Whether the circuit court erred in concluding that the 

Uniform Trade Secrets Act did not preempt Raven’s tort 

claims.4

(5thCir 1993) (citations omitted) (holding that court had jurisdiction even 

though SEC filed notice of appeal from a modified order, but not the original 

order, because “notices of appeal are liberally construed where ‘the intent to 

appeal an unmentioned or mislabeled ruling is apparent and there is no 

prejudice to the adverse party’” and where “claims or issues are inextricably 

entwined”); Walker v. Los Angeles County Metro. Transp. Auth., 104 P3d 

844, 847 (Cal 2005) (quoting Vibert v. Berger, 410 P2d 390, 392 (Cal 1966) 

(citing Cal. Rules of Court, Rule 1)) (recognizing and applying maxim that 

“notice of appeal must be liberally construed in favor of its sufficiency”). 

Raven had sufficient notice of the issues appealed and was able to submit a 

brief in response. Therefore, Raven’s contention that this Court lacks 

jurisdiction is rejected. 

4. Raven argues Integra and Lee failed to preserve this issue for appeal because 

they did not raise it to the circuit court after their motion for summary 

judgment was denied. Raven suggests that “[b]y failing to raise preemption 

after the summary judgment hearing, [Integra and Lee] did not provide the 

[c]ircuit [c]ourt the opportunity to correct any mistake made in denying 

summary judgment[.]” No prior South Dakota case has addressed this issue 

directly. Turning to other jurisdictions, it appears that after a circuit court 

denies a motion for summary judgment, there is no need to raise the same 

issue at trial to preserve it for appeal. See Kahn v. CVS Pharmacy, Inc., 846 

NE2d 904, 907-08 (OhioCtApp 2006) (“Once the court had ruled on the 

motion for summary judgment, [the plaintiff] was under no obligation to 

again raise the issue with the trial court in order to preserve it for appeal.”); 

Carrico v. Kondos, 111 SW3d 582, 585 (TexCtApp 2003) (citing Cincinnati 
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________________________ 

(. . . continued) 

[¶8.] Integra and Lee initially argued that the circuit court erred in 

concluding that the Uniform Trade Secrets Act (UTSA) did not preempt Raven’s 

claims for injunctive relief,5 tortious interference with contract, and unfair 

competition. Integra and Lee concede in their reply brief, however, that a breach of 

contract claim would not be preempted by the UTSA. See SDCL 37-29-7(b)(1) 

(specifically excluding from the UTSA “contractual remedies, whether or not based 

upon misappropriation of a trade secret”). Integra and Lee instead maintain that 

the non-disclosure agreements (or contracts) entered into by Lee were 

unenforceable. Integra and Lee therefore argue that the allegedly invalid and 

unenforceable non-disclosure agreements could neither support a contract claim nor 

provide a contractual basis to support the tortious interference with contract claim. 

As Integra and Lee have presented this issue, their appeal hinges on whether 

Life Ins. Co. v. Cates, 927 SW2d 623, 626 (Tex 1996)) (“To preserve [the 

issues for appeal], the party must raise them in the summary judgment 

proceeding and present them in an issue or cross-point on appeal.”); 

Normandeau v. Hanson Equip., Inc., 215 P3d 152, 159 (Utah 2009) 

(“[R]aising a legal issue during a summary judgment motion based on the 

undisputed facts properly provides the court with an opportunity to rule on 

the issue” and the court “will not require parties to reraise the same issue in 

order to preserve it for appeal.”). Cf. SDCL 19-9-3 (“Once the court makes a 

definitive ruling on the record admitting or excluding evidence, either at or 

before trial, a party need not renew an objection or offer of proof to preserve a 

claim of error for appeal.”). Therefore, this issue was preserved for appeal. 

 

5. Raven asserts in its brief that “[a]lthough labeled as ‘injunctive relief,’ the 

allegations in Count I sound in breach of contract.” 
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Integra and Lee can demonstrate that the circuit court erred in ruling that the nondisclosure agreements were enforceable. This issue is addressed below.6

[¶9.] 2. Whether the circuit court erred in concluding that Raven 

and Lee’s non-disclosure agreements were enforceable. 

[¶10.] Integra and Lee argue the circuit court erred in holding that Raven 

and Lee’s non-disclosure agreements were valid and enforceable. As noted above, if 

the non-disclosure agreements are unenforceable, Raven’s tortious interference with 

contract claim must also fail because that claim was premised on a valid and 

enforceable contract. 

[¶11.] Non-disclosure agreements are unenforceable if: “(1) a trade secret or 

confidential relationship does not exist; (2) the employer discloses the information 

to others not in a confidential relationship; or, (3) it is legitimately discovered and 

openly used by others.” 1st Am. Sys., Inc. v. Rezatto, 311 NW2d 51, 57 (SD 1981). 

Integra and Lee argue the non-disclosure agreements in this case were 

6. If the contract claim survives, the tortious interference with contract claim 

must also survive. Although a separate cause of action, this tort is a 

protection of contractual rights, which this Court has long recognized. See 

Hayes v. N. Hills Gen. Hosp., 1999 SD 28, ¶17, 590 NW2d 243, 248 (citing 

Commc’n Tech. Sys., Inc. v. Densmore, 1998 SD 87, 583 NW2d 125; 

Landstrom v. Shaver, 1997 SD 25, ¶73, 561 NW2d 1, 16; Tibke v. McDougall, 

479 NW2d 898 (SD 1992)); Case v. Murdock, 1999 SD 22, ¶11, 589 NW2d 

917, 919. Furthermore, in this case, Raven’s tortious interference with 

contract claim was not based on the misappropriation of a trade secret, but 

rather the breach of the non-disclosure agreements. As a result, Raven’s 

tortious interference claim was not preempted by the UTSA. See IDX Sys. 

Corp. v. Epic Sys. Corp., 285 F3d 581, 586-87 (7thCir 2002) (“‘The tort of 

inducing breach of a non-disclosure contract (the sort of contract 

independently protected by [a statute similar to SDCL 37-29-7(b)(1)])’ ‘is not 

based upon misappropriation of a trade secret.’ ‘It is based on interference 

with the contract.’”). 
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unenforceable because “Lee was not informed about what information Raven 

considered secret, confidential, or proprietary”; “Raven disclosed the alleged secret, 

confidential, [or] proprietary information to others not in a confidential 

relationship”; and, the “alleged secret, confidential, [or] proprietary information was 

legitimately discovered and openly used by others.” 

Confidential Relationship 

[¶12.] Integra and Lee contend that while “Raven and Lee may have been in 

a confidential relationship as employer and employee, Raven’s claimed secret 

process does not constitute a trade secret[.]” The first requirement in assessing 

whether a non-disclosure agreement is enforceable is whether a trade secret or

confidential relationship exists. Id. In this case, the circuit court found that Raven 

and Lee had a confidential relationship. See Walling Chemical Co. v. Bigner, 349 

NW2d 647, 650 (SD 1984) (recognizing that an employer-employee relationship was 

a confidential relationship). Integra does not assert that this finding was clearly 

erroneous. Instead, Integra and Lee argue that because Lee was never informed 

about what information Raven considered secret, confidential, or proprietary, “Lee 

could not have known that he was violating the non-disclosure agreements.” 

Integra and Lee argue that the circuit court erred by ignoring this fact in its 

findings of fact and conclusions of law. Raven, however, was not required to inform 

Lee of this information under Rezatto. 311 NW2d at 57. Furthermore, the circuit 

court was free to disregard testimony it found to lack credibility. See Osman v. 

Karlen & Assocs., 2008 SD 16, ¶30, 746 NW2d 437, 446. Therefore, the circuit court 

did not err in determining that the first Rezatto factor was not satisfied. 
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Disclosure of Information 

[¶13.] Integra and Lee next argue that the circuit court erred in concluding 

that Raven did not disclose secret, confidential, or proprietary information to others 

not in a confidential relationship. Integra and Lee cite Rezatto for the proposition 

that the test for whether secret, confidential, or proprietary information was 

disclosed, which would render the non-disclosure agreements unenforceable, 

requires determining if this information was disclosed to others “at all.” See 311 

NW2d at 57. Integra and Lee point out that Raven often had people, other than 

those in a confidential relationship with Raven, observe the process that Raven 

asserts was secret, confidential, or proprietary. These instances, among many 

others, included Raven permitting one of its competitors to tour its facilities, 

allowing consultants who were not required to sign confidentiality agreements to 

observe the Line, and not requiring contractors who assisted in the Line’s 

installation to sign confidentiality agreements. 

[¶14.] In response, Raven argues Rezatto does not stand for the proposition 

that any dissemination of information invalidates a non-disclosure agreement. 

Raven asserts that only reasonable efforts to maintain secrecy are required. See 

Centrol, Inc. v. Morrow, 489 NW2d 890 (SD 1992). In Morrow, this Court, relying 

on Rezatto, concluded that general dissemination would invalidate trade secret 

protections, but that dissemination of confidential or proprietary information to 

other members of a cooperative would not. See id. Moreover, Morrow stated that 

the Rezatto decision was “consistent with the [UTSA].” Id. at 894-95. Under the 

UTSA, absolute secrecy, as advanced by Integra and Lee, is not required. The 
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UTSA only requires reasonable efforts to keep secret, confidential, or proprietary 

information from general dissemination. SDCL 37-29-1(4)(ii). 

[¶15.] Here, the circuit court found that Raven “engaged in reasonable efforts 

to maintain the secrecy of its process for manufacturing string-reinforced plastic 

film” and that “Raven did not disclose its process for manufacturing stringreinforced plastic to persons outside a confidential relationship.” These findings 

were based on extensive testimony given at trial that Raven had policies that 

protected its Line from anyone not in a confidential relationship with Raven. 

Because the circuit court’s findings were supported by the record, they are not 

clearly erroneous. Therefore, the circuit court did not err in determining that the 

second Rezatto factor was not satisfied. 

Legitimately Discovered and Openly Used

[¶16.] Integra and Lee finally contend that the circuit court erred in 

concluding that Raven’s Line was not legitimately discovered and openly used by 

others in the industry. The circuit court concluded that “Raven developed a unique 

process for manufacturing string-reinforced plastic film that has only been 

replicated by Integra with the assistance of Lee.” Integra and Lee take issue with 

this conclusion, asserting that “the circuit court ignored [ ] evidence to the 

contrary.” However, testimony at trial established that Raven’s Line was so unique 

that no other manufacturer, other than Integra with Lee’s assistance, could 

replicate it. Lee had even told his manager at Raven that the Line could not be 

replicated without his knowledge. Therefore, the record supports the circuit court’s 

conclusion that Raven’s Line had not been legitimately discovered and openly used 
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by others. Whether the circuit court “ignored” Integra and Lee’s “evidence to the 

contrary” is not reversible error, as such determinations are left to the sound 

discretion of the circuit court. See Osman, 2008 SD 16, ¶30, 746 NW2d at 446. 

[¶17.] Integra and Lee have failed to satisfy any of the Rezatto factors. As a 

result, Integra and Lee have failed to demonstrate that the circuit court erred in 

ruling that the non-disclosure agreements were enforceable. Thus, Raven’s contract 

claim based on these enforceable non-disclosure agreements survives, as well as the 

circuit court’s grant of injunctive relief as a remedy. 

[¶18.] 3. Whether the circuit court erred in concluding that 

Integra engaged in unfair competition. 

[¶19.] Integra and Lee argue that the circuit court’s conclusion that Integra 

engaged in unfair competition “was unfair” and “erroneous.” The circuit court found 

that Raven proved each element for tortious interference with contract. The circuit 

court then concluded that Integra’s tortious interference also constituted unfair 

competition. This conclusion was premised on Integra receiving a thirteen-year 

head start in manufacturing string-reinforced plastic film after it induced Lee to 

disclose Raven’s secret, confidential, or proprietary information. 

[¶20.] The crux of Integra and Lee’s argument is that Raven’s unfair 

competition claim should have been rejected by the circuit court because Lee did not 

have a non-competition agreement with Raven. Thus, Integra and Lee conclude 

that not allowing Lee to work for Integra was anti-competitive. However, in 

Rezatto, this Court recognized that non-disclosure agreements are not anticompetitive. 311 NW2d at 57 (citing 2 R. Callmann, The Law of Unfair 

Competition, Trademarks and Monopolies, 51.2(c) at 363 (3d ed. 1968) (additional 
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citations omitted)) (“[a]n agreement not to disclose information or solicit, unlike a 

covenant not to compete, is free from challenge as a general restraint on trade”). 

Furthermore, as Raven points out, Lee was not restricted by his non-disclosure 

agreements from working at Integra; instead, Lee was only prohibited from using 

Raven’s secret, confidential, or proprietary information while working at Integra. 

This distinction was properly recognized by the circuit court, was not unfair or 

erroneous, and does not require reversal. 

[¶21.] 4. Whether the circuit court erred in granting the 

permanent injunction.

[¶22.] Integra and Lee contend that the circuit court erred in “granting an 

overly broad injunction that was not specifically tailored to redress the harm 

alleged.” The circuit court granted Raven an injunction that prohibited Integra and 

Lee from “operating Integra’s [line], or any portion thereof, for a period of two years” 

and from “working on any project containing [a component of the Line] to 

manufacture string-reinforced plastic film for two years.” This Court reviews a 

circuit court’s decision to grant a permanent injunction under the abuse of 

discretion standard. Halls v. White, 2006 SD 47, ¶4, 715 NW2d 577, 579 (citation 

omitted) (stating that such a decision is left to the “sound discretion of the [circuit] 

court”). 

[¶23.] Permanent injunctions are authorized by SDCL 21-8-14, which 

provides: 

Except where otherwise provided by this chapter, a permanent 

injunction may be granted to prevent the breach of an obligation 

existing in favor of the applicant: 
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(1) Where pecuniary compensation would not afford 

adequate relief; 

(2) Where it would be extremely difficult to ascertain 

the amount of compensation which would afford 

adequate relief; 

(3) Where the restraint is necessary to prevent a 

multiplicity of judicial proceedings; or 

(4) Where the obligation arises from a trust. 

Four additional factors are considered in determining whether to award injunctive 

relief. These factors include: (1) whether the party to be enjoined caused the harm; 

(2) whether irreparable harm would be suffered if the injunction were not granted; 

(3) whether the party to be enjoined acted in bad faith or if the injury-causing 

behavior was an innocent mistake; and, (4) in balancing the equities, whether the 

hardship to be suffered by the enjoined party would be disproportionate to the 

benefit to be gained by the injured party. Prairie Hills Water and Dev. Co. v. Gross, 

2002 SD 133, ¶¶36-37, 653 NW2d 745, 753-54 (citations omitted). 

[¶24.] The circuit court considered these factors and concluded that each had 

been met. The circuit court determined that: “Both Lee and Integra have caused 

and continue to cause harm to Raven by using Raven’s secret, confidential, or 

proprietary information”; Raven has experienced and will continue to experience 

irreparable harm as long as Lee and Integra use Raven’s secret, confidential, or 

proprietary information; Integra and Lee’s use of Raven’s secret, confidential, or 

proprietary information was not an innocent mistake; and, “the harm experienced 

by Lee and Integra if the permanent injunction [was] issued [wa]s not 

disproportionate to the harm incurred by Raven without the injunction.” Thus, the 

circuit court concluded that “it [wa]s appropriate to exercise its discretion and enter 

a permanent injunction in favor of Raven.” While Integra and Lee may disagree 
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with the circuit court’s findings and conclusions on this issue, on this record, they 

cannot demonstrate that the issuance of the injunction was an abuse of discretion.7

[¶25.] The circuit court is affirmed. 

[¶26.] KONENKAMP, ZINTER, and SEVERSON, Justices and WILBUR, 

Circuit Court Judge, concur. 

[¶27.] WILBUR, Circuit Court Judge, sitting for MEIERHENRY, Justice, 

disqualified. 

 

7. Integra and Lee’s assertion that the injunction was overly broad rings hollow. 

Raven requested an injunction that was indefinite in duration, one which 

would last until another competitor discovered the specific process it used in 

its Line. The circuit court exercised its discretion, however, and issued an 

injunction that was for a period of two years, which was the amount of time 

Integra’s president testified would have been required to build its line 

without Lee. The circuit court’s decision demonstrates that it tailored the 

injunction to the evidence and testimony presented at trial.