Court Opinion

ID: 9687732
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:44:55.043627+00
Date Added: 2024-06-11T18:18:30.765142
License: Public Domain

ANN WALSH BRADLEY, J.
¶ 84. {concurring in part and dissenting in part). The majority aptly explains that restrictive employment covenants are prima facie suspect and are permitted only to the extent absolutely necessary to protect an employer's legitimate interests. Thus, the employer bears the burden of demonstrating that a covenant is reasonable and necessary for its protection. Following these principles, I *314agree with the majority that Star Direct failed to meet its burden. The business clause is overly broad and therefore unenforceable.
¶ 85. I write separately, however, for two reasons: (1) contrary to the majority, I conclude that Star Direct has not met its burden to demonstrate that the customer clause is reasonably necessary to protect its legitimate interests in past customers, including past customers that Dal Pra never developed a relationship with or serviced; and (2) I find that the new interpretive tool created today by the majority — that silence on an issue signals approval — is contrary to precedent, principles of judicial restraint, and makes no sense.
I
¶ 86. The circuit court focused on the restriction regarding past customers when it determined that the customer clause was unenforceable. In rendering a determination, it stated that "clearly" the customer clause was "overbroad to me, without any question, as far as it prohibits Dal Pra from contacting people who had been customers of [Star Direct] within the time period of one year prior to the termination of his employment." The court clarified that the covenant "involves not just ongoing customers — I can see the need to protect your current customers, but these are customers who have already said, we don't want to deal with you anymore."
¶ 87. Contrary to the circuit court, the majority concludes that Star Direct not only has an interest in its current customers, but that its protectable interest also extends to those past customers who were customers within one year of Dal Pra's termination. Majority op., ¶ 38. It explains that Dal Pra would have knowledge *315about the customer's needs and product desires or Star Direct's business model, and that he "would have a relationship history with many of them." Majority op., ¶ 39, see also id., ¶¶ 31, 42 n.8. The majority concludes that "Star Direct does have an interest in prohibiting the solicitation" of these past customers because it has "a general interest in winning back the business of its recent past customers." Majority op., ¶¶ 38, 40.
¶ 88. Acknowledging that no Wisconsin case has addressed an employer's interest in recent past customers, the majority cites as support several cases that did not address the question and indicates that silence on the issue signals approval. It concludes that Wisconsin courts have been "untroubled" by an employer's asserted interest in past customers. See majority op., ¶¶ 31-37.
II
¶ 89. In addition to preventing Dal Pra from soliciting Star Direct's current customers, the customer clause unequivocally restricts Dal Pra from contacting past customers of Star Direct. The clause extends to "any person, firm, corporation, partnership, or entity .. . which is a customer of [Star Direct] or which was a customer ... within a period of time of one year prior to [Dal Pra's] termination." Dal Pra may not "approach any such customer or past customer" for the purpose of interfering with or endeavoring to entice away that customer.
¶ 90. The customer clause encompasses customers "for which [Dal Pra] performed services or otherwise dealt with on behalf of [Star Direct] or relative to which [Dal Pra] obtained special knowledge as a result of his position with [Star Direct.]" The majority defines *316special knowledge as knowledge regarding the needs and wants of the customers and Star Direct's pricing, costs, and profit margins. Majority op., ¶ 31. Because Dal Pra is knowledgeable about Star Direct's pricing, costs, and profit margins, I conclude that he has "special knowledge" about all of Star Direct's past customers. Therefore, all past customers within one year of Dal Pra's termination are within the restrictive covenant, including customers with whom Dal Pra never developed a relationship on behalf of Star Direct.
¶ 91. "Where a restraint of trade is tolerated, it is permitted only to the extent absolutely necessary to afford reasonable protection." Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 218, 267 N.W.2d 242 (1978). The employer bears the burden of demonstrating that the covenant is reasonable. NBZ, Inc. v. Pilarski, 185 Wis. 2d 827, 840, 520 N.W.2d 93 (Ct. App. 1994). Because restraints of trade are presumptively invalid, the employer must place facts in the record that could demonstrate that it has a protectable interest in the customers covered by the covenant. It is therefore incumbent upon Star Direct to justify the restraint prohibiting Star Direct from contacting past customers.
¶ 92. On review, the court looks to the evidence submitted by the parties. The president of Star Direct, Bradley Son, submitted three affidavits to demonstrate the reasonableness of the restraints.
¶ 93. In his first affidavit, Son explained: "The covenant not to compete is necessary to protect Star Distributing because, given the frequency with which Dal Pra came into contact with Star Distributing's customers and potential customers in the territory for which he was responsible, .. . upon termination of Dal Pra's employment with Star Distributing, Dal Pra might be capable of taking or otherwise appropriating *317Star Distributing's business and relationships." He further stated: "The purpose of the [customer clause], of course, is to prevent Dal Pra from unfairly competing with Star Distributing by taking advantage of the relationship, rapport, and knowledge he developed by serving particular customers of Star Distributing."
¶ 94. These statements address those current and potential customers with whom Dal Pra developed a relationship and served on behalf of Star Direct, and they justify Star Direct's protectable interest in those customers. However, absent from this discussion is any justification of Star Direct's protectable interest in customers whom he did not serve, especially those past customers who have taken their business elsewhere.
¶ 95. In his supplemented affidavit, Son explained that Dal Pra's knowledge of Star Direct's pricing and profit margins would allow Dal Pra to unfairly compete: "Dal Pra has special knowledge about the prices at which Star Distributing sold various products to certain customers, including the customers he called on." Further, "If a competitor knew the prices that Star Distributing paid for its products, especially a competitor who was trying to 'get its foot in the door' with a customer, the competitor could quote a price to the customer which was very close to or even below Star Distributing's costs." "[T]he competitor would have a 'road map' as to how to price its various products to compete with Star Distributing."
¶ 96. Again, the supplemental affidavit explains why Star Direct has a protectable interest in preventing Del Pra from soliciting its current customers. Yet, there is no reference to Star Direct's past customers and no justification for prohibiting Dal Pra from contacting those customers who no longer purchase products from Star Direct.
*318¶ 97. In his second supplemental affidavit, Son asserted that restricting Dal Pra from enticing away current customers was necessary to protect Star Direct's legitimate business purposes:
Precluding Mr. Dal Pra from attempting to entice away current customers of Star Distributing with whom he previously dealt with on behalf of Star Distributing... or about whom he acquired special knowledge is not unreasonable even if Mr. Dal Pra did not have recent contract with the customer.
(Emphasis added.) This statement expressly addresses Star Direct's protectable interest in current customers. There is no mention whatsoever of past customers.
¶ 98. Taken together, Son's affidavits provide facts that justify Star Direct's legitimate protectable interest in prohibiting Dal Pra from attempting to entice away Star Direct's current customers. Absent from these affidavits, however, is any fact or rationale for restricting Dal Pra's contact with past customers. Dal Pra cannot "take or otherwise appropriate" a business relationship if it no longer exists, and he cannot "interfere with, or endeavor to entice away" a customer that has already stopped purchasing from Star Direct on its own accord.
¶ 99. Star Direct argues, and the majority agrees, that Dal Pra would be in a unique position to recruit customers who had recently stopped purchasing from Star Direct. See majority op., ¶ 38. The majority contends that Dal Pra "would have all the information a competitor would want and need to know how to effectively undercut Star Direct." Id. Even so, this does not mean that Star Direct retains a protectable interest in these customers, justifying the restraint. Although the majority asserts that Star Direct has a "general" *319interest in winning back recent past customers, Star Direct has failed to place into the record any evidence justifying this conclusion.
¶ 100. Furthermore, the court of appeals has previously concluded that a covenant prohibiting contact with former customers was unenforceable. In Equity Enterprises, Inc. v. Milosch, 2001 WI App 186, 247 Wis. 2d 172, 633 N.W.2d 662, the court considered a non-compete agreement that prevented an employee from "interfer[ing] in any way with the relationship between the Customers and [the employer, Equable]." Id., ¶ 2. The agreement defined "Customer" as "any customer of Equable or any Related Party with whom Employee transacted business or whom Employee serviced on behalf of Equable during any part of Employee's employment." Id.
¶ 101. The court called the restriction "unreasonable" because it prohibited contact with former customers:
This restriction is unreasonable because it would prohibit Milosch from doing business with a customer he serviced during his first weeks of employment in 1982 who subsequently transferred his or her business to a competitor of Equable. Such an overbroad restriction is invalid because preventing Milosch from contacting former Equable customers is not reasonably necessary to protect Equable's legitimate business interests.
Id., ¶ 15 n.4 (emphasis added).
¶ 102. The Equity Enterprises court did not establish a per se rule against covenants restricting contact with former customers. Nonetheless, the court again reaffirmed the principle that such covenants are suspect, and that the employer must have a legitimate protectable interest justifying the restriction imposed on the activity of the employee.
*320¶ 103. The majority distinguishes Equity Enterprises by pointing out that the covenant in that case looked back 15 years, whereas the covenant at issue here looks back only one year. Majority op., ¶ 46. Yet, the holding in Equity Enterprises was not limited to a specific number of years. The employer has to burden to demonstrate that any restrictive provision is justified, and here, neither Star Direct nor the majority has demonstrated that it has a protectable interest in past customers at all.
¶ 104. At a minimum, the court should remand for factfinding on the issue of past customers. Based on the record provided by the parties, however, I conclude that no such protectable interest in past customers exists justifying the restraint.1
Ill
¶ 105. In addition to the majority's conclusion, I disagree with the new interpretive tool of appellate analysis created today by the majority. To conclude that silence on an issue somehow suggests approval is not supported by precedent, principles of judicial restraint, or common sense.
¶ 106. The majority cites as supportive a number of cases that did not address the question of past customers. It asserts that "Wisconsin courts, including this court, have reviewed provisions that clearly apply to past customers, and have been untroubled by this asserted interest." Majority op., ¶ 32. Although the majority acknowledges that the silence is not dispositive, it nevertheless cites to the silence as persuasive. *321(See ¶¶ 32-37, discussion of the silence in Rollins Burdick Hunter of Wis., Inc. v. Hamilton, 101 Wis. 2d 460, 304 N.W.2d 752 (1981) and Farm Credit Servs. of N. Cent. Wis., ACA v. Wysocki, 2001 WI 51, 243 Wis. 2d 305, 627 N.W.2d 444.)
¶ 107. The problem with the majority's approach is that it assumes that silence on an issue signals the court's approval. This assumption does not square with our case law. I need go no further than to cite an opinion that is being released today, Horst v. Deere & Co., 2009 WI 75, 319 Wis. 2d 147, 769 N.W.2d 536.
¶ 108. One of the issues in Horst was the correctness of the standard special verdict question in a strict products liability case involving an injured bystander.2 The standard verdict question asks: "... was the product in a defective condition so as to be unreasonably dangerous to a prospective user/consumer?" Wis JI — Civil 3260. Given that the injured party was a bystander rather than a user or consumer, the plaintiffs requested that the special verdict be modified to ask whether the product was "in a defective condition so as to be unreasonably dangerous to a prospective user/consumer or bystander." Horst, 319 Wis. 2d 147, *322¶ 13. The plaintiffs pointed to a previous case, Howes II,3 in which a nearly identical proposed special verdict question was used.
¶ 109. We affirmatively rejected their suggestion that our silence regarding the special verdict question signaled approval. Instead, we stated the general rule that opinions of the court do not "purport to address a proposition greater than the legal question before the court." Horst, 319 Wis. 2d 147, ¶ 45. We stated:
In Howes II, the special verdict question was admittedly almost identical to the Horsts' proposed special verdict question. But the special verdict question was not affirmed or intentionally addressed by the court.
Id., ¶ 49 (emphasis added).
¶ 110. The assumption that silence signals support also does not square with fundamental principles of judicial restraint. A court generally relies on the parties to frame the issues on review. When the parties do not raise an issue, we do not decide it. Accordingly, the stated propositions in a court's opinion were considered and decided by the court and therefore have precedential value. Propositions that are unstated, and perhaps unconsidered, do not.
¶ 111. To interpret the court's silence on an issue that could have been implicated in a dispute as a tacit decision on it merits unsettles these principles. Such a framework would force the court to reach out and decide issues not presented by the parties and without full briefing and arguments on the merits.
*323¶ 112. Finally, to assume that silence signals support is contrary to common sense. Every case involves a complicated set of facts and potential legal issues. When rendering a decision on the issue presented, the court must describe the facts of the case in order to give context to the legal principles it sets forth. Potential issues may lurk, undiscovered, among the facts of the case.
¶ 113. For the reasons discussed above, I respectfully concur in part and dissent in part.
¶ 114. I am authorized to state that Chief Justice SHIRLEY S. ABRAHAMSON joins this concurrence/ dissent.

 Because I conclude that the business clause and the customer clause are both unenforceable, I need not determine whether the covenants are divisible.

 The petitioners in Horst set forth two issues for review in their brief. The first issue is stated as follows:
ISSUES PRESENTED FOR REVIEW
1. Did the trial court err when, over objection, it worded the § 402A special verdict question to ask the jury whether the Deere & Company mower "was in a defective condition so as to be unreasonably dangerous to a prospective user/consumer," rejecting plaintiff-appellants proposed special verdict question asking whether the mower was in a defective condition so as to be unreasonably dangerous to bystanders?
Brief of Plaintiff-Appellant-Petitioners at vi, Horst v. Deere & Co., 2009 WI 75, 319 Wis. 2d 147, 769 N.W.2d 536.

 See Howes v. Deere & Co. (Howes II), 71 Wis. 2d 268, 271, 238 N.W.2d 76 (1976) (mentioning that the following special verdict question was given: "Was the John Deere mower in question... defective in design so as to be unreasonably dangerous to a bystander?").