Court Opinion

ID: 3027649
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:38:45.288377+00
Date Added: 2024-06-11T07:25:57.568395
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
            ___________

            No. 01-2055
            ___________

IKON Office Solutions, Inc.,         *
                                     *
            Plaintiff-Appellant,     *
                                     *
      v.                             *
                                     *
Robert J. Dale; William J. Dale;     *
Terry R. Nissen; Computer Business   *
Solutions, Inc.,                     *
                                     *
            Defendants-Appellees.    *
                                         Appeals from the United States
            __________                   District Court for the District of
                                         Minnesota.
            No. 01-2667
            __________                           [UNPUBLISHED]

IKON Office Solutions, Inc.,         *
                                     *
            Plaintiff-Appellee,      *
                                     *
      v.                             *
                                     *
Robert J. Dale;                      *
                                     *
            Defendant-Appellant,     *
                                     *
William J. Dale; Terry R. Nissen;    *
                                     *
            Defendants,              *
                                     *
Computer Business Solutions, Inc.,     *
                                       *
             Defendant-Appellant.      *
                                  ___________

                             Submitted: October 17, 2001

                                  Filed: October 24, 2001
                                   ___________

Before McMcMILLIAN, FAGG, and BEAM, Circuit Judges.
                           ___________

PER CURIAM.

      IKON Office Solutions, Inc. sold part of its business involving the sales and
service of computer equipment and directly related business products and supplies to
employee Robert J. Dale and his new company, Computer Business Solutions, Inc.
(CBS). In the sale and purchase agreement, Dale and CBS expressly agreed not to
compete with IKON’s business “relating to copiers, facsimiles, typewriters and all
other activities and products which are not exclusively and directly related to
computer equipment, and service of the same.” In the employment separation
agreement incorporated by reference, Dale agreed not to compete with IKON’s
business for “a period of five (5) years from June 1, 1998" except for the purchased
business.

       Following a dispute about CBS’s sale of digital copiers, which serve as both
computer printers and traditional copiers, IKON brought this diversity action in
Minnesota claiming breach of contract, misappropriation of trade secrets, interference
with actual and prospective business relations, breach of fiduciary duty, interference
with IKON employee relations, and unfair competition. IKON sought injunctive
relief and damages. After balancing the preliminary injunction factors set forth in

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Dataphase Sys., Inc., v. CL Sys., Inc., 640 F.2d 109, 112-14 (8th Cir. 1981), the
district court* granted IKON’s motion for a temporary injunction against Dale and
CBS on the breach of contract claim relating to the noncompete agreement, but
denied IKON’s motion on all other claims and against all other parties. Applying
Minnesota law, the district court concluded IKON would likely succeed on its breach
of contract claim related to the noncompete agreement, but the agreement is
unreasonable as written. Using Minnesota’s “blue pencil doctrine” allowing a court
to modify an unreasonable noncompete agreement, the district court changed the time
period from five years to three years, and enjoined Dale and CBS from competing
with IKON with respect to the sale or servicing of office equipment “not exclusively
and directly related to computer equipment” for the remaining term. The district
court later denied IKON’s motion for reconsideration or modification challenging the
reduced length of the noncompete provisions of the injunction. The district court also
denied a request by Dale and CBS for permission to bring a motion for
reconsideration.

       On appeal, IKON contends the district court applied the wrong legal standard
for evaluating the reasonableness of the five-year restriction because the court used
the stricter test applicable in the employment contract context rather than the more
lenient test applicable in the business transfer context. Compare Bennett v. Storz
Broadcasting Co., 134 N.W.2d 892, 899-900 (Minn. 1965) (involving employment
agreement) and Dynamic Air, Inc., v. Bloch, 502 N.W.2d 796, 799 (Minn. 1993)
(same) with Bess v. Bothman, 257 N.W.2d 791, 795 (Minn. 1977) (involving sale of
business). The district court applied the test used in the sale of business context
when denying IKON’s motion for reconsideration, however. Citing Bess, 257
N.W.2d at 795, the district court found the five-year restriction was unreasonable
because it exceeds the protection necessary to secure any goodwill purchased, places

      *
      The Honorable David S. Doty, United States District Judge for the District of
Minnesota.

                                         -3-
an undue hardship on Dale and CBS, and has a deleterious effect on the interests of
the general public. Thus, the district court applied the legal standard advocated by
IKON for evaluating the reasonableness of the noncompete agreement. IKON also
argues the district court abused its discretion in modifying the length of the injunction
from five years to three years. Having carefully reviewed the issue, we conclude the
district court made an acceptable discretionary call. See id. (time limitation should
represent a reasonable balance between protection of plaintiff’s goodwill and
avoidance of undue hardship to defendant).

       In a cross-appeal, Dale and CBS contend the district abused its discretion in
refusing to hear its motion for reconsideration contesting the injunction’s scope.
Because we affirm the district court’s reduction of the noncompete period to three
years and that period has already expired, the injunction is no longer in effect and the
contention is moot. Dale and CBS also assert the $1000 bond posted by IKON under
Federal Rule of Civil Procedure 65(c) is inadequate. Rule 65(c) provides financial
security for those who are enjoined in the event the injunction is later deemed wrong.
The district court properly enjoined Dale and CBS, so the amount of IKON’s bond
is likewise moot.

      We thus affirm the district court.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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