Court Opinion

ID: 9593610
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:23:32.946257+00
Date Added: 2024-06-11T09:05:58.788693
License: Public Domain

Utter, J.
(dissenting) — I agree with the majority to the extent that it remands the case for determination of what liquidated damages are reasonable. However, I cannot agree that this court should resolve all of the remaining issues and dispose of the case. The unique procedural posture of the case precludes such action. We are not reviewing a completed trial; the trial court dismissed the case after plaintiff rested. Although the plaintiff spent 4 days presenting its case at trial, the defendant has never had the opportunity to present her evidence or to present any defense she may have. The trial court specifically reserved ruling on defendant's breach of contract defense. Finding of fact 28. The majority's revised opinion would remand only for determination of the reasonableness of damages, not Ms. Moran's defenses. This violates our own rules and the defendant's constitutional rights to due process of law. Const. art. 1, § 3; U.S. Const. amend. 14.
On appeal from a judgment granting dismissal made at the close of plaintiff's case, our review is limited to determining whether there was sufficient evidence to establish a prima facie case for the plaintiff. See Spring v. Department of Labor & Indus., 96 Wn.2d 914, 918, 640 P.2d 1 (1982); Schmidt v. Pioneer United Dairies, 60 Wn.2d 271, 272, 373 P.2d 764 (1962); Richards v. Kuppinger, 46 Wn.2d 62, 278 P.2d 395 (1955). In our review of a judgment of dismissal made before the defendant has presented any evidence, we cannot summarily dispose of the entire case. Court rules specifically provide that a defendant's motion to dismiss *889after plaintiff rests may be made "without waiving his right to offer evidence in the event the motion is not granted . . CR 41(b)(3); see 4 L. Orland, Wash. Prac., Rules Practice § 5502 (3d ed. 1983 & Supp. 1988). The majority's action is contrary to our established law and procedures.
Aside from the question of possible defenses, the reasonableness of a covenant not to compete can be determined as a matter of law only if there are no disputed facts. See Knight, Vale & Gregory v. McDaniel, 37 Wn. App. 366, 368, 680 P.2d 448, review denied, 101 Wn.2d 1025 (1984) (hereafter KVG). Factual analysis is critical. General rules are not possible because each case "must be decided on its own particular set of facts. All of the circumstances must be taken into account ..." (Footnote omitted.) 11 S. Willi-ston, Contracts § 1447, at 1024 (3d ed. 1968); Wood v. May, 73 Wn.2d 307, 312, 438 P.2d 587 (1968). Therefore we must determine which facts are critical and whether we have all the critical facts before this court.
Professor Williston provides guidance in the process of discussing one court's thorough and "outstanding" inquiry into the reasonableness of a covenant not to compete. 11 S. Williston, at §§ 1447, 1643A (discussing Arthur Murray Dance Studios of Cleveland, Inc. v. Witter, 105 N.E.2d 685 (Ohio C.C.P. 1952) (where the plaintiff sought an injunction)). In determining whether the restraint was greater than reasonably necessary to protect the employer, the Witter court posed 41 "trenchant" questions, among them:
"12. Did employee's work give him opportunity to become acquainted with employer's customers?
"13. How many of employer's customers did employee come to know?
"14. Was this particular employee practically the employer's sole and exclusive contact with the customer?
"15. Was employee's contact with employer's custo-. mers a regular, re-occurring contact?
"16. Was employee's contact with employer's customers a close, personal, direct and ingratiating contact that gave employee such a hold on customers that they would follow him to the rival?
*890(Footnotes omitted.) 11 S. Williston § 1447, at 1028-29 (noting that the court buttressed each question with ample citations). Although no one question is conclusive on the issue of reasonableness, each highlights a circumstance or fact of the case that should be considered.
The emphasis on confidentiality is also consistent with the general principal/agent axioms. The Restatement holds an agent accountable for "profits made by the sale or use of trade secrets and other confidential information . . ." Restatement (Second) of Agency § 396(c) (1958).1 Some commentators would restructure judicial analysis of covenants not to compete by eliminating reference to contract law and focusing entirely on agency principles. See Closius & Schaffer, Involuntary Nonservitude: The Current Judicial Enforcement of Employee Covenants Not To Compete — A Proposal for Reform, 57 S. Cal. L. Rev. 531 (1984). Under such analysis, the only supportable inquiry involves the extent to which the employee has gained and is using confidential information. See generally Closius & Schaffer, 57 S. Cal. L. Rev. 531.
Consistent with both the traditional contract approach and the proposed agency approach, our own cases suggest that confidentiality factors must be considered. See Racine v. Bender, 141 Wash. 606, 252 P. 115 (1927); KVG. The courts in both Racine and KVG stressed the importance of the accountant's "confidential knowledge ... of all the important and vital matters concerning the [client's] business". Racine, at 608.
[T]he evidence showed that the business of a certified public accountant is such that the person who actually performs the labor incident thereto acquires an intimate knowledge of the business of the client, preparing audits of the business, income tax returns, and other matters very confidential in their nature, and vital to the business itself.
*891(Italics mine.) Racine, at 608. The language in KVG is similar:
This [business] interest is enhanced in the sphere of public accounting because the nature of the accountant-client relationship is such that employees of such a firm gain extensive, valuable knowledge of the clients' business and internal operations and develop a close, familiar working relationship with the client.
37 Wn. App. at 370. The confidentiality element would give a terminating accountant a distinct competitive advantage against her former firm.
The covenants in both Racine and KVG restricted the accountant from performing services for persons with whom the accountant came into contact while an employee of the firm. Racine, at 607, 610; KVG, at 369. The latter court stressed the proviso:
In this case, KVG has sought enforcement of the covenant only as it pertains to performing accounting services during the 3-year period for only those former clients of KVG with whom defendants came into contact as a direct result of their employment. To this extent, we find that the covenant is reasonable and lawful.
KVG, at 370.2
In contrast, the covenant in the present case prevents Moran from servicing any former PWT client, whether or not she had any contact with that account while an employee of PWT. The covenant is broader than those recognized as reasonable in our previous decisions. The majority offers no justification for departing from previous analysis, but rather calls the cases "consistent." Perhaps the majority finds consistency by assuming that, as head of the retirement department, Ms. Moran must have had confidential information about every client that might seek her services after she left PWT. We cannot assume these facts *892as she has not yet presented her defense. Moran claims she neither met nor serviced the accounts of some of the PWT clients while she was employed there. Report of Proceedings, at 381. She also claims that the evidence will show that although she was the manager of the retirement department, her authority and treatment were not commensurate with her title. Report of Proceedings, at 404. Because Ms. Moran has had no opportunity to present evidence regarding these facts, which should be part of the reasonableness analysis, we must remand this issue to the trial court. Failure to do so would be a direct denial of due process.
Brachtenbach and Pearson, JJ., concur with Utter, J.

 The Restatement imposes the duty whether or not the agent competes with the principal.

 The court specifically disclaimed approving the entire covenant, citing possible problems with overbreadth. The questionable provisions prohibited performing work for "(1) 'any person, firm or corporation with whom I come in contact . . .', and (2) 'members of the staffs of your clients as well as occupants of their offices. . . .'" 37 Wn. App. at 370 n.1.