Court Opinion

ID: 9897459
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:14:05.60996+00
Date Added: 2024-06-11T09:15:58.120409
License: Public Domain

139 Nev., Advance Opinion LR

                         IN THE SUPREME COURT OF THE STATE OF NEVADA

                TOUGH TURTLE TURF, LLC, A                              No. 85249
                NEVADA LIMITED LIABILITY
                COMPANY,
                Appellant,
                vs.
                BRYAN SCOTT, INDIVIDUALLY AND
                                                                          MED
                AS MANAGER AND/OR OWNER OF                                NOV 02 2023
                FOXTAIL TURF, LLC; BRANDON
                                                                        ELI
                DEGREGORIO; AND VINCENT                               CLE
                                                                     BY
                SAGER,                                                        EF DEPUTY CLERK

                Respondents.

                            Appeal from a district court order denying a preliminary
                injunction. Eighth Judicial District Court, Clark County; Gloria Sturman,
                Judge.
                            Reversed and remanded with instructions.

                Snell & Wilmer, LLP, and Kelly H. Dove, Dawn L. Davis, and Morgan T.
                Petrelli, Las Vegas,
                for Appellant.

                Sylvester & Polednak, Ltd., and Allyson R. Johnson and Kelly L. Schmitt,
                Las Vegas,
                for Respondents.

                BEFORE THE SUPREME COURT, CADISH, PICKERING, AND BELL,
                JJ.

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                                                OPINION

                By the Court, PICKERING, J.:        •

                            Appellant Tough Turtle Turf, Inc., sought a preliminary

                injunction from the district court enforcing a noncompete covenant against
                respondents, three of its former employees. The court denied Tough Turtle's
                request on the basis the covenant was unenforceable due to procedural
                unconscionability. Because we conclude that there was minimal procedural
                unconscionability and that the district court was otherwise obligated to

                determine whether the covenant's remaining flaws could be cured by
                revision under NRS 613.195(6), we reverse the district court's order and
                remand for further consideration.
                                                        I.

                           At the time of each respondent's hiring, Tough Turtle was a
                subsidiary of a California-based company and classified respondents as

                independent contractors. • When Tough Turtle bought out its previous
                owner's stake in the company, respondents were reclassified as employees
                and filled out accompanying paperwork, which did not include a
                noncompete covenant. Several years later, Tough Turtle's human resources
                provider sent another round of paperwork to respondents, including an
                employee handbook, various company policies, and an employment
                agreement. Each paragraph of the agreement was separately numbered
                and began on a new line with a heading in the same typeface, font, and size
                as the text of the paragraph, except for the paragraph labeled "Non-
                Competition."   That paragraph, the source of the disputed noncompete
                covenant, was merged with the preceding paragraph, such that it did not
                start on a new line. It was also numbered "12," even though the following

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                paragraph was also numbered "12."          Respondents each signed the

                agreement.
                             Several months later, respondent Bryan Scott allegedly began
                a new company, Foxtail Turf, for which respondent Brandon DeGregorio
                and respondent Vincent Sager occasionally moonlighted. while inaintaining
                their jobs with Tough Turtle. Tough Turtle began hearing from customers
                that Foxtail salesperson.s were pitching their familiarity with Tough
                Turtle's products and pricing structure and promising a better deal. .Around

                this time, Scott resigned from Tough Turtle. DeGregorio and Sager were
                subsequently fired from Tough Turtle.
                             Tough Turtle sued respondents and others, including Tough
                Turtle's turf supplier, Turf Envy.        Before these complaints were

                consolidated, Tough Turtle filed an. ex parte application , for a temporary
                restraining order against Turf Envy, which the district court treated as a
                motion for a preliminary injunctión..      Because an injunction would

                essentially enforce respondents' noncompete covenants with Tough Turtle,
                respondents filed a supplemental brief arguing against the injunction,
                asserting that the covenant was unconscionable and that Tough Turtle had
                unclean hands.
                             After a seven-day evidentiary hearing, the district court
                concluded that the noncompete coVenant was unenforceable because the
                employment agreeinent merged the noncoMpete provision intò the
                preceding paragraph rather than setting it* out as its own. separate

                paragraph, thereby calling into question whether the employees could
                readily ascertain its terins.   The court also found that the noncompete
                covenant was "overbroad, oppressive, one-sided in favor of [Tough Turtle],
                and exceed[ed] [the] scope of what [was] necessary to protect [Tough

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                Turtlers interests." But the court declined to modify the covenant, stating
                it could not "be redrafted by the court in a manner to allow for injunctive
                relief." Tough Turtle appeals, asking the court to reverse the portion of the
                order denying injunctive relief as to the noncompete provision.
                                                     11.
                                                     A.
                              When considering whether a contract is unconscionable, courts

                generally     require   a   showing of bóth   procedural   and    substantive

                unconscionability. 8 Richard A. Lord, Williston on Contracts § 18:10 (4th
                ed. 2023); Burch u. Second Judicial Dist. Court, 118 Nev. 438, 443; 49 P.3d
                647, 650 (2002). A contract clause "is procedurally unconšcionable when a
                party lacks a meaningful opportunity to agree to the clause terms either
                because of unequal bargaining power, as in an adhesion contract, or because
                the clause and its effects are not readily ascertainable upon a review of the
                contract." D.R. Horton, Inc. v. Green, 120 Nev. 549, 554, 96 P.3d 1159; 1162
                (2004), overruled on other grounds by U.S. Home Corp. v. Michael
                Ballesteros    Tr., 134 Nev. 180, 415 P.3d 32 (2018).             Substantive
                unconscionability concerns the "contract terms themselves a.nd whether
                those terms are unreasonably favorable to the more powerful party, such as
                terms that impair the integrity of the bargaining process or otherwise
                contravene the public interest or public policy." 8 Williston on Contracts,
                supra, at § 18:10. Unconscionability is -evaluated on a sliding scale; if one
                type of unconscionability is greater, the other may be lesser. BurCh, 118
                Nev. at 444, 49 P.3d at 650.
                              Here; the district court invalidated the noncOmpete cOvenant,
                finding that it was a "fatal" error to place the covenant Where It could be
                easily overlooked, which made• it procedurally Unconscionable and therefore

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                unenforceable as a matter of law.    We cannot agree. •The employrnent

                agreement used the same font size throughout. See Ballesteros, 134 Nev. at
                190-91, 415 P.3d at 40-41 (concluding that an arbitration provision was not
                procedurally unconscionable where it was in the same font size as the other
                provisions and not buried in an endnote). And, while respondents complain
                that the agreement was one of several documents attached to a single email,
                they failed to show that they did not have a meaningful opportunity to
                review the agreement or that, when they signed and returned the
                employment agreement, they did not in fact assent to all •of its terms,
                including the restrictive covenant. See 7 Joseph M. •Perillo, Corbin on
                Contracts § 29.9, at     404 (rev. ed. 2002) (noting that procedural

                unconscionability may overcome the duty-to-read rule when the former
                suggests "there was in fact no intentional or apparent manifestation of
                assent to the document or the term or terms in question"); see also FQ Men's
                Club, Inc. v. Doe Dancers I, Case No. 79265, 2020 WL 5587435, at *3 (Nev.
                Sept. 17, 2020) (upholding finding of procedural unconscionability where
                the employer required immediate signatures in hectic circumstances that
                did not give the employees a meaningful opportunity to understand what
                they were signing). Any procedural unconscionability stemming from the
                merger of the noncompete covenant into, the preceding paragraph of the
                employment agreement is not enough to invalidate it without an additional
                showing of substantive unconscionability.
                           In its written order, the district court concluded that not only
                was the covenant procedurally unconscionable but it was also overbroad,
                oppressive, excessive in scope, and one-sided in Tough Turtle's favor. But
                the district court did not analyze the covenant under NRS 613.195(1) and
                (6), which govern the enforceability of and court revision to noncompete

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                covenants, instead simply stating that it was unable to "redraft" the
                covenant. We agree with the district cotirt that the noncompete covenant is
                overbroad in its geographic scope at minimum and, therefore, is
                substantively unconscionable as written. But if the noncornpete covenant
                is modifiable so that it is no longer overbroad, the noncompete covenant
                would not be substantively unconscionable and, thus, would be enforceable.
                                                        B.
                            Whether the noncompete covenant is modifiable turns on the
                interpretation of NRS 613.195(6), a question reviewed de novo. S. Nev.
                Homebuilders Ass'n v. Clark County, 121 Nev. 446, 449; 117 P.3d 171, 173
                (2005). We give a statute's terms their plain meaning. Id.• All provisions
                are considered together so as not to render any part of the statute
                superfluous. Id.    Under the whole-text canon, we "interpret provisions
                within a common statutory scheme harmoniously with one another in
                accordance with the general purpose of [the] statutes."       Id. (internal
                quotation marks omitted); see Antonin Scalia & Bryan A. Garner, Reading
                Law: The Interpretation of Legal Texts 167 (2012) (stating the whole-text
                canon as the rule that "[t]he text must be construed as a whole" and noting
                that "[p]erhaps no interpretive fault is more Common than the failure to
                follow the whole-text canon, which calls on the judicial interpreter to
                consider the entire text, in view of its structure and of the physical and
                logical relation of its many parts").
                            The Legislature added NRS 613.195(6)1 in response to Golden
                Road Motor Inn, Inc. v. Islam, which held that a district court may not

                      'This provision was numbered NRS 613.195(5) when originally
                enacted in 2017. See 2017 Nev. Stat., ch. 324, § 1, at 1861. In 2021, the
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                modify an unreasonable noncornpete covenant. 132 Nev. 476, 483, 376 13.3d
                151, 156 (2016).     NRS 613.195(6) provides that a district "court shall
                revise ... to the extent necessary" a covenant that unreasonably limits
                time, geographical area, or scope of activity; imposes a greater restraint
                than is necessary to protect the empioyer; or imposes undue hardship on
                the employee.     This provision overruled Golden Road's holding that an
                unreasonable noncompete covenant can never be revised.
                              ToUgh Turtle essentially argues that, under the post-Golden

                Road NRS 613.195(6), a district court must alulays modify an overbroad
                noncompete covenant, so long as the covenant is supported by valuable
                consideration. And because the district court rnuSt always rnOdify, Tough
                Turtle continues, it must always enforce a noncompete covenant, regardless
                of any procedural unconscionability. But this does not account for NRS
                613.195(1).    Subsection (1) conflicts with Tough Turtle's reading of
                subsection (6) in that it provides that "[a] noncompetition covenant is void
                and unenforceable" if it imposes a "restraint that is greater than is required
                for the protection of the employer[; i]mpose[s] any undue hardship on the
                employee[; or i]mposes restrictions that are [not] appropriate in relation to
                the valuable cOnsideration supporting the noncompetition covenant." For
                the reasons discussed below, we conclude that NRS 613.195(1) and (6),
                taken together, do not require a district court to always modify an overbroad
                noncompete covenant; however, the district court must modify an overbroad
                noncompete covenant when possible. Becauše the district court failed to

                Legislature renumbered it as NRS 613.195(6) but left the pertinent
                language intact. See 2021 Nev. Stat., ch. 77, § 22.5, at 315.
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                properly analyze whether the noncompete covenant could be revised under
                NRS 613.195(6) in this case. we must reverse and remand.2
                              Courts may refuse to modify a contract that is "so lacking in the
                essential terms" that the court would have to provide them. Ins. Ctr., Inc.
                v. Taylor, 499 P.2d 1252, 1256 (Idaho 1972); see also Eichmann v. Nat'l
                Hosp. & Health Care Servs., Inc., 719 N.E.2d 1141, 1149 (Ill. App. Ct. 1999)
                (refusing to modify a        noncompete provision because the "drastic
                modifications" required to make it enforceable "would be tantamount to
                fashioning a new agreement"); Bayly, Martin & Fay, Inc. v. Pickard, 780
                P.2d 1168, 1172-73 & n.19 (Okla. 1989) (refusing to modify a noncompete
                covenant because the defects were so substantial that the covenant "would
                have to be rewritten" and would require "the making of a new contract").
                This accords with the general rule prohibiting courts from creating new
                contracts for parties. Cent. Adju.stment Bureau, Inc. v. Ingram, 678 S.W.2d
                28, 37 (Tenn. 1984) (citing Samuel Williston & Arthur L. Corbin, On the
                Doctrine of Beit v. Beit, 23 Conn. B.J. 40, 49-50 (1949)). NRS 613.195(6)
                does not change these or other fundamental precepts of contract law. It
                nonetheless mandates judicial revision of a restrictive covenant if this can
                be done without subjecting employees to unreasonable terms. See Taylor,
                499 P.2d at 1255-56; Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 844
                (Mo. 2012).
                              The federal district court considered NRS 613.195(6) in Paws
                Up Ranch, LLC v. Martin, concluding that once a covenant is found

                      2 We reject respondents' request that we affirm based on the unclean
                hands doctrine. The district court did not address respondents' unclean
                hands defense, which raises factual and legal issues that are for the district
                court to resolve in the first instance.
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                unenforceable as written, it then becomes the court's, rather than the
                parties', responsibility under NRS 613.195(6) to draft a reasonable
                noncompete covenant, "revising, creating and defining the contours of the
                right to be enforced." 463 F. Supp. 3d 1160, 1168 (D. Nev. 2020). We are
                not persuaded by this approach. See Blanton v. N. Las Vegas Mun. Court,
                103 Nev. 623, 633, 748 P.2d 494, 500 (1987) (noting that federal district
                court decisions are not binding on this court). If courts had a modification
                power that extended all the way to drafting a new contract, it would cross
                the line from the permissible modification of an existing noncompete
                covenant into the impermissible creation of a new contract for the parties.
                As discussed above, other courts have rejected the idea that modification
                goes that far.
                             NRS 613.195(6) calls for a court to "revise" the noncornpete
                covenant—not to rewrite or redraft it. When the Legislature aniended NRS
                613.1.95 in 2021, it left subsection (1) intact. 2021 Nev. Stat., ch. 77, § 22.5,
                at 314-15.   Under subsection (1), noncompete covenants with the same
                overbreadth issues described in sulosection (6) are "void and unenforceable."
                Reading subsection (1) harmoniously with subsection (6) indicates that
                there are instances when a noncompete covenant will be unenforceable,
                such as when no valuable consideration supports the noncompete covenant
                or when the court would need to rewrite rather than revise the noncompete
                covenant.        But   overbreadth   alone   will   not   render   the   covenant
                unenforceable if the restrictions can be rnodified under subsection (6) so that
                they are reasonable and do not impose an undue hardship on the employee
                or a restraint greater than necessary for the employer's protection.
                                                CONCLUSION
                             We reverse and remand.            The district court erred by
                invalidating the covenant based on procedural unconscionability and in
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                failing to adequately consider whether the overbroad scope of the covenant
                could be modified. On remand, the district court must determine whether
                it can modify the covenant under NRS 613.195(6). If the noncom.pete
                covenant is modifiable, then the court should revise the covenant so that it
                is reasonable under NRS 613.195(1).

                                                            a:oat
                                                   Pickering I      7             J.

                We concur:

                                              J.
                Cadish

                                              J.

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