Court Opinion

ID: 6496225
Source: CourtListenerOpinion
Date Created: 2022-06-29 15:04:19.314384+00
Date Added: 2024-06-11T08:48:38.843153
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                  No. 21-0893
                              Filed June 29, 2022

MILTNER INSURANCE SERVICES, LLC,
     Plaintiff-Appellant,

vs.

CASEY M. ROBERTS,
     Defendant-Appellee.
________________________________________________________________

      Appeal from the Iowa District Court for Adams County, Bradley McCall,

Judge.

      An employer appeals a district court decision denying its breach-of-contract

claim. REVERSED AND REMANDED.

      Robert J. Engler of Cambridge Law Firm, P.L.C., Atlantic, for appellant.

      Matthew M. Sahag of Dickey, Campbell & Sahag Law Firm, PLC, Des

Moines, for appellee.

      Considered by May, P.J., and Schumacher and Badding, JJ.
                                          2

BADDING, Judge.

       An employee signed a non-piracy agreement requiring her to return all

confidential documents to her employer upon her termination. But after she quit

her job, the employee kept an electronic copy of the employer’s client list and then

opened a competing business just down the street. The employer sued for breach

of contract. On the claim relevant to this appeal, the district court found the

employee’s “mere possession” of the client list after her termination was not a

breach of the non-piracy agreement. Because we conclude mere possession was

a breach, we reverse and remand.

I.     Background Facts and Proceedings

       Casey Roberts began her employment with Miltner Insurance Services,

LLC1 (Miltner) in 2012 as a customer service representative. Long-time employees

Jayne Templeton and Katrina Ogburn collectively own Miltner, having bought it in

January 2018. Nearly all the purchase price—$1.42 million out of $1.50 million—

was attributable to the business’s goodwill and client list.      Shortly after the

purchase, Miltner and Roberts entered into a non-piracy and trade secret

agreement. The agreement prohibited Roberts from soliciting any of Miltner’s

accounts for two years after termination of her employment with Miltner. It also

stated that Roberts could not “divulge, disclose, or communicate” any information

about Miltner, including Miltner’s customer list.

1The entity was known as Miltner Insurance Agency, Inc. when Roberts began her
employment. The business was sold as a going concern in 2018, and the name
was changed.
                                            3

       Roberts signed a second non-piracy agreement in December 2018. That

agreement included, in part:

               CONFIDENTIALITY AND NON-DISLCOSURE. Employee
       shall at no time divulge or disclose any information regarding the
       business of the Corporation, including, but not limited to customer
       lists, renewal lists, information concerning customers, any other
       matter connected with or pertaining to the business of the
       Corporation. It is understood and agreed by the parties hereto that
       all such information . . . shall, at all times, remain the sole and
       exclusive property of the Corporation. Upon termination, Employee
       will return to Corporation all records or documents of any kind or
       character which contain, evidence or pertain to information regarding
       the business of the Corporation.
               NON-COMPETE—BUSINESS. Employee agrees that [ ] she
       will not, within the period of three (3) years following the date of [her]
       termination of employment . . . , directly or indirectly, by or for [ ]
       herself, or as the agent of another, or through all others as his/her
       agent: (a) divulge the names of [Miltner’s] policy holders or accounts
       to any other person, firm or corporation; (b) in any way seek to
       induce, bring about, promote, facilitate, or encourage the
       discontinuance of or in any way solicit for on or behalf or [ ] herself
       or others, or in any way quote rates, accept, receive, write, bind,
       broker, or transfer any insurance business, policies, risk or accounts,
       written, issued, covered, obtained (whether through the efforts of the
       Employee or not) or carried by [Miltner].

The agreement provided for liquidated damages, injunctive relief, and legal

expenses upon a breach. The liquidated-damages portion gave Miltner different

remedies for breaches occurring in the first, second, and third years following

termination of Roberts’s employment.

       Roberts sent Miltner’s client list to her private email before she signed the

second non-piracy agreement.2 Then, in January 2019, Roberts resigned from

2 Roberts claims she was not planning to resign when she emailed the client list to
herself but later kept it to make sure she was not soliciting Miltner’s clients. At trial,
Roberts testified that she deleted the client list upon receipt of a cease and desist
letter from Miltner’s counsel. Yet, a responsive letter sent from her counsel to
Miltner in November 2019 suggested that Roberts still had the list since she offered
to delete it upon Miltner meeting certain demands.
                                          4

Miltner because she was upset the company hired a new employee who would be

paid more than Roberts. She then accepted employment as an independent agent

with a separate insurance group, where she sells insurance in the same fields as

Miltner, from an office roughly two blocks away. Roberts conceded at trial that she

was in direct competition with Miltner. But she testified that she has not solicited

any of Miltner’s clients. At trial, Miltner could not show which, if any, clients they

lost to Roberts.

       Miltner launched this litigation against Roberts in May 2020. The petition

alleged five counts. The first two were for breach of contract relating to Roberts

seeking to solicit clients on Miltner’s client and renewal lists within the first and

second years following termination of her employment, in violation of the non-

compete provision of the agreement. Count three was for breach of contract for

Roberts’s retention of Miltner’s client and renewal lists, in violation of the

confidentiality and non-disclosure provision of the agreement. Count four was for

breach of contract stemming from Roberts’s retention of educational materials and

an employee handbook, also in violation of the confidentiality and non-disclosure

provision of the agreement. Count five sought injunctive relief.

       The matter proceeded to trial. In its ruling, the district court found the

December 2018 non-piracy agreement to be valid and enforceable, but the court

determined it only prohibited Roberts from using Miltner’s proprietary information

to solicit clients from Miltner’s customer base and from servicing current clients of

Miltner. The court found Roberts’s mere possession of the client list did not violate

the agreement, and Miltner did not prove she used the client list to steal clients.

Even so, the court found the evidence undisputed that Roberts took training
                                           5

materials valued at $140 when she ended employment with Miltner. So the court

entered judgment against Roberts and in favor of Miltner in that amount. Miltner

appeals.

II.    Standard of Review

       Because the answer to the question raised on appeal turns on contract

interpretation and construction, our review is for errors at law. Colwell v. MCNA

Ins. Co., 960 N.W.2d 675, 676–77 (Iowa 2021); Homeland Energy Sols., LLC v.

Retterath, 938 N.W.2d 664, 683 (Iowa 2020). “We will reverse a district court’s

judgment if we find the court has applied erroneous rules of law, which materially

affected its decision. In contrast, the district court’s findings of fact are binding on

us if they are supported by substantial evidence.” NevadaCare, Inc. v. Dep’t of

Human Servs., 783 N.W.2d 459, 465 (Iowa 2010) (internal citation omitted).

III.   Analysis

       On appeal, Miltner only challenges the district court’s determination under

count three, that “[t]he mere possession by Roberts, for some period of time, of the

Miltner . . . client list, was not a violation of the Non-Piracy Agreement” and “[o]nly

the use of that client list to pirate clients from the agency was prohibited.” Miltner

maintains Roberts’s post-termination possession of the client list was enough to

amount to breach.

       As a refresher, the agreement provided:

              Employee shall at no time divulge or disclose any information
       regarding the business of the Corporation, including, but not limited
       to customer lists, renewal lists, information concerning customers,
       any other matter connected with or pertaining to the business of the
       Corporation. It is understood and agreed by the parties hereto that
       all such information, customer lists, renewal lists, goodwill and
       information concerning customers shall, at all times, remain the sole
                                           6

       and exclusive property of the Corporation. Upon termination,
       Employee will return to Corporation all records or documents of any
       kind of character which contain, evidence or pertain to information
       regarding the business of the Corporation.

       Miltner readily agrees the first sentence requires disclosure and, under that

provision, “mere possession” of the client list is not enough to breach the

agreement. But the final two sentences, according to Miltner, do make “mere

possession” of the list after termination of employment a breach.               Roberts

responds that, under the circumstances, the principal purpose of the agreement

was to prohibit divulging or disclosing the client list. While Roberts acknowledges

the agreement required her to return the client list upon termination, she submits

there was no breach because that purpose was not violated.

       It is true, as Roberts points out, that “[w]ords and other conduct are

interpreted in the light of all the circumstances, and if the principal purpose of the

parties is ascertainable it is given great weight.” Retterath, 938 N.W.2d at 683

(alteration in original) (citation omitted). But this rule must yield to the foundational

principle that “the most important evidence of the parties’ intentions at the time

they entered into the contract is the words of the contract.” NevadaCare, 783

N.W.2d at 466. When reviewing the words of a contract, “[c]ourts must strive to

give effect to all the language of a contract.” Fashion Fabrics of Iowa, Inc. v. Retail

Invs. Corp., 266 N.W.2d 22, 26 (Iowa 1978).

       Because an agreement is to be interpreted as a whole, it is assumed
       in the first instance that no part of it is superfluous; an interpretation
       which gives a reasonable, lawful, and effective meaning to all terms
       is preferred to an interpretation which leaves a part unreasonable,
       unlawful, or of no effect.
                                           7

Id. It is only when it is not possible to give effect to all parts of the contract that

“the court will seek to interpret the contract in a way that will at least effectuate the

principal or main apparent purpose of the parties.” 11 Williston on Contracts § 32:9

(4th ed. May 2022 update).

       Here, it is possible to give effect to all parts of the contract, as Miltner did

when laying out its breach-of-contract claims.         By focusing on the “principal

purpose” of the parties, rather than the language of the contract itself as Roberts

does, parts of the contract would be rendered superfluous.             The agreement

provides two separate mandates.          The first sentence prohibits disclosure of

proprietary information, including the customer list, “at any time,” which would

encompass both before and after termination. The final sentence requires Roberts

to return any such proprietary information to Miltner upon termination. So the

non-piracy agreement prohibits not just disclosure or use of the client list, but also

possession of the list after employment ends.3 The latter restriction prohibits

exactly what Roberts admittedly did, emailing herself Miltner’s client list and

retaining—i.e., merely possessing—that list after terminating her employment with

the company.4 This is consistent with the district court’s conclusion that Roberts

3This is not an anomalous concept. Cf. Basic Chems., Inc. v. Benson, 251 N.W.2d
220, 230 (Iowa 1977) (finding a customer list can be a protected trade secret);
Lemmon v. Hendrickson, 559 N.W.2d 278, 281 (Iowa 1997) (considering an
employment agreement requiring an employee to return customer lists upon
ending employment).
4 We also note the principle that “when a contract contains both general and

specific provisions on a particular issue, the specific provisions are controlling.”
Retterath, 938 N.W.2d at 683 (citation omitted). But here, the provisions are
speaking to different issues—disclosure of confidential information on the one
hand, and retention of it following termination on the other. So there is no need to
apply this rule.
                                          8

violated the same provision by retaining an educational manual following her

termination, although she testified that she later threw it away.

IV.    Conclusion

       We find the district court’s denial of relief under count three of Miltner’s

petition was error. We reverse and remand the case to the court to determine the

damages and other relief to which Miltner is entitled.

       REVERSED AND REMANDED.