Opinion ID: 1443319
Heading Depth: 2
Heading Rank: 1

Heading: The order dismissing M & F.

Text: The district court did not set forth the reasons for its order dismissing LVN's action against M & F. However, there appear four grounds upon which the order may have been based. We conclude that none of these grounds supports the order and accordingly reverse the order. The court might first have dismissed the complaint against M & F pursuant to M & F's principal argument that, as a matter of law, it could not be subject to the covenant contained in Alfred's employment agreement, because M & F did not sign the agreement. We reject this argument for two reasons. First, the better and, apparently, majority view allows a party not privy to a covenant not to compete to be enjoined, if that party breaches the covenant in active concert with the principal party enjoined and with knowledge of the covenant. See, e.g., McCart v. H & R Block, Inc., 470 N.E.2d 756 (Ind. Ct. App. 1984) (summarizing the cases espousing this view). These cases correctly reason that allowing a third party knowingly to aid and abet violations of a covenant not to compete entirely emasculates the covenant. Second, this view finds further support in the language of NRCP 65(d). NRCP 65(d) provides in part: (d) Form and Scope of Injunction or Restraining Order. Every order granting an injunction ... is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert with them who receive actual notice of the order by personal service or otherwise. (Emphasis added). NRCP 65(d) is not precisely on point, because it addresses the scope of enforcement of an injunction after the injunction has been properly issued. Nevertheless, this section makes no mention of a privity requirement and provides significant support for the majority view. Operating under the federal analogue rule to NRCP 65(d), which is identical to NRCP 65(d), federal courts have applied the majority rule that we adopt. See Day Cos. v. Patat, 440 F.2d 1343 (5th Cir.1971), cert. den., 404 U.S. 830, 92 S.Ct. 71, 30 L.Ed.2d 59 (1971). In summary, M & F was properly subject to an injunction even though M & F was not privy to the contract containing the duty to be enforced, provided that M & F breached the covenant in active concert with Alfred and with knowledge of the covenant. M & F was not exempt from injunctive relief as a matter of law. The second ground upon which the court might have granted M & F relief relates to the exception to the covenant contained in Alfred's employment contract. M & F argues that the exception allowing Alfred to pursue his interest in the joint venture M & F Enterprise also includes M & F in its current corporate form. We disagree. The record does not contain substantial evidence to support the conclusion that the parties intended this exception to include M & F in its current form. All the evidence in the record indicates that at the time the employment contract was executed, M & F Enterprise was solely a retail business. It was only later that M & F incorporated and began to sell souvenirs on a wholesale basis in direct competition with LVN. We cannot conclude that LVN wished to prohibit Alfred individually from selling souvenirs on a wholesale basis, but allow him to do the same thing through M & F. The third ground upon which the court may have based its order is an evidentiary one. Because the court considered evidence beyond the pleadings in issuing this order, we shall treat the court's order of dismissal as a grant of summary judgment, not as a grant of a motion to dismiss. See Paso Builders, Inc. v. Hebard, 83 Nev. 165, 426 P.2d 731 (1967). Given that the court considered affidavits beyond the pleadings, the court may have dismissed LVN's action against M & F on the ground that LVN failed to raise a genuine issue of fact indicating that M & F was breaching the covenant in active concert with Alfred and with knowledge of the covenant. We hold that LVN's affidavits sufficed to raise a genuine question of fact on this issue. LVN's affidavits alleged that Alfred had been seen soliciting LVN clients on behalf of M & F, and that M & F was supplying merchandise to these former LVN clients. Additionally, LVN's affidavits and exhibits indicate that M & F was a small corporation in which Alfred was one of the three incorporators, one of whom had been associated with Alfred's retail store. Under these circumstances, we cannot conclude that there was no genuine question of fact regarding whether the other principals of M & F were aware of the covenant binding Alfred. The fourth and final possible explanation for the court's order could be pleading defects in LVN's complaint. Upon review of LVN's complaint, however, we conclude that the complaint adequately alleges that M & F knowingly and actively assisted Alfred in violating the covenant.