Opinion ID: 1654936
Heading Depth: 2
Heading Rank: 3

Heading: Copeland's and Helms' Points of Error

Text: Copeland and Helms challenge in their third point the trial court's decision that the declaratory judgment counts of their counterclaims, which assert that the non-compete agreements were unenforceable as a matter of public policy, were barred by res judicata. This point is addressed as a preliminary matter. Res judicata prevents a party from relitigating facts or questions that have been settled by judgment on the merits in a previous action. Clements v. Pittman, 765 S.W.2d 589, 591 (Mo. banc 1989). In the first count of their federal court action, Copeland and Helms sought a declaratory judgment revoking Oxford's tax exempt status and declaring that the non-compete agreements were unenforceable as a matter of public policy because Oxford is a not-for-profit and tax-exempt corporation. [7] In the second count of their federal court claim, Copeland and Helms sought damages under the Sherman Act. The federal court clearly dismissed both counts for lack of standing. As to the revocation of Oxford's tax exempt status, the federal court order specifically states, Count I of the Amended Complaint will be dismissed on the grounds that plaintiffs lacked standing to challenge the tax exempt status of Oxford. As to the claims under the Sherman Act, the federal court order specifically states, [P]laintiffs do not have standing to assert the Sherman Act claims in Count II. Although the federal court goes on to explain that the Sherman Act claims also could be dismissed for failure to state a claim, this explanation is dicta. The federal court order acknowledges that the analysis of the failure to state a claim argument will be cursory [b]ecause the court [found] dismissal of Count II warranted by reason of the plaintiffs' lack of standing. Standing is a jurisdictional matter antecedent to the right to relief. Farmer v. Kinder, 89 S.W.3d 447, 451 (Mo. banc 2002). If a party lacks standing, the court must dismiss the case because it does not have jurisdiction of the substantive issues presented. Id. Because standing is jurisdictional in nature, a dismissal for lack of standing is not on the merits for res judicata purposes. The trial court erred in finding that the declaratory judgment counts of Copeland's and Helms' counterclaims were barred by res judicata.
Copeland and Helms assert that the trial court erred in finding that the non-compete agreements were enforceable because they are unlawful restraints on trade under section 416.031 and because Oxford had no protectable interest in trade secrets or customer contacts. Non-compete agreements are considered contracts in restraint of trade. Sturgis Equip. Co., Inc. v. Falcon Indust. Sales Co., 930 S.W.2d 14, 16 (Mo.App. 1996); House of Tools & Engineering Inc. v. Price, 504 S.W.2d 157, 159 (Mo.App. 1973). However, as discussed previously, Missouri courts have carved out narrow exceptions for trade secrets and customer contacts. Schmersahl, 28 S.W.3d at 349; West Group, 942 S.W.2d at 937. Although non-compete agreements must be strictly construed, they are valid for limited purposes. At trial, there was some evidence that Copeland and Helms had access to confidential or proprietary information in their capacities as Oxford managers. Oxford's owner, Mr. Goforth, offered testimony that Oxford had a unique system of management and supervision that other businesses in the home health marketplace did not possess. However, Mr. Goforth's testimony did not offer any indication of efforts Oxford had undertaken to keep the information secret, how exactly the information was valuable to Oxford or could be valuable to a competitor, the amount of resources Oxford devoted to developing the system of management and supervision, or anything specific enough to allow the court to determine how easily the information could be properly acquired or duplicated by others. See Continental Research, 595 S.W.2d at 400-01. While this type of information may or may not have been subject to trade secret protection, Mr. Goforth's testimony simply was not sufficient evidence to establish that Oxford had trade secrets entitled to protection under a non-compete agreement. See Mo-Kan Central Recovery, 671 S.W.2d at 400; Carboline Co., 454 S.W.2d at 549. Oxford did, however, establish a protectable interest in its patient base. In a healthcare context, patients are a protectable interest just as customers are protectable in a business context. Sidebottom, 7 S.W.3d at 545. At trial, both Copeland and Helms conceded that in the home health industry a provider has an expectation of continued service to an individual patient until that patient no longer qualifies for services or dies. Copeland and Helms also admitted that in the home health industry, when an individual in-home nurse leaves one employer for another, patients will typically request that their services be transferred to the nurse's new employer. Although Copeland and Helms both held managerial or supervisory positions at Oxford and did not personally have influence over Oxford's patients, they were in the position to exert significant influence over the employees they supervised. Copeland had been employed with Oxford for over twenty years, many of those years in a managerial position. Helms' tenure was shorter, but she was the in-home nurse supervisor. All in-home nurses reported to her. Copeland and Helms also admitted that they had access to the salary information of the employees in the Joplin, Missouri, office. Copeland and Helms had relationships with the employees, knew the salary structure, and were in a position to use this knowledge and influence to recruit Oxford's employees to raid Oxford's patients. There was sufficient evidence for the trial court to find that Oxford had a protectable interest in its patient base. The non-compete agreements signed by Copeland and Helms were valid and enforceable. [8]
Copeland and Helms also argue that the non-compete agreements are not enforceable as a matter of public policy because Oxford is a not-for-profit corporation and is not entitled to restrain trade in the conduct of charitable activities. The corporate powers of not-for-profit corporations and for-profit corporations are identical. City of St. Louis v. Institute of Medical Education and Research, 786 S.W.2d 885, 887 (Mo.App.1990), see chapter 355. Copeland and Helms seem to misperceive the driving principle behind not-for-profit status. The simple fact that a corporation is organized for benevolent purposes does not indicate that such corporation does not have protectable business interests. The distinguishing characteristic between for-profit and not-for-profit corporations is not whether each seeks to operate efficiently, generate revenue, and produce earnings, but rather what each entity does with such earnings. Earnings of not-for-profit corporations are used to support the charitable purpose of the corporation or are reinvested into the company to ensure future operations. In contrast, earnings of for-profit corporations are distributed to owners or shareholders. Not-for-profit corporations are entitled to protect themselves from unfair competition just as for-profit corporations can. Furthermore, Missouri courts have enforced non-compete agreements on behalf of not-for-profit corporations. See Sidebottom, 7 S.W.3d 542. Oxford's not-for-profit status has no effect on its ability to protect itself from unfair competition by way of non-compete agreements.
Finally, Copeland and Helms assert that the trial court erred in denying count I of their counterclaims for tortious interference with a business expectancy. A claim for tortious interference with a contract or business expectancy requires proof of each of the following: (1) a contract or a valid business expectancy; (2) defendant's knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of the contract or relationship; (4) absence of justification; and (5) damages resulting from defendant's conduct. Community Title Co. v. Roosevelt Federal Savings and Loan Association, 796 S.W.2d 369, 372 (Mo. banc 1990). Under Missouri law, no liability arises for interfering with a contract or business expectancy if the action complained of was an act that the defendant had a definite legal right to do without any qualification. Id. A company is justified in attempting to enforce its rights under a non-compete agreement so long as it has a reasonable, good faith belief in the validity of the agreement. Luketich v. Goedecke, Wood & Co. Inc., 835 S.W.2d 504, 508 (Mo.App.1992). Oxford was justified in acting to enforce the terms of the agreements.