Eng. Logistics v. Kelle's Transp. Serv.

1

2024 UT App 137

England Logistics, Inc.; England Carrier Services, LLC; and C.R. England, Inc., Appellees, v. Kelle's Transport Service, LLC, et al., ^[1]

No. 20220997-CA

Court of Appeals of Utah

October 3, 2024

Third District Court, Salt Lake Department The Honorable Mark S Kouris No. 180909680

Troy L. Booher, Caroline A. Olsen, Taylor P. Webb, and Lincoln W Hobbs, Attorneys for Appellants

Jeffery S. Williams, Walter A. Romney, Shannon K. Zollinger and Justin R. Olsen, Attorneys for Appellees

Judge Ryan D. Tenney authored this Opinion, in which Judges Michele M. Christiansen Forster and David N. Mortensen concurred.

OPINION

Ryan D. Tenney, Judge

¶1 Several years ago, Kelle's Transport Service (referred to in this case as Soar) hired away some employees of C.R. England and its related affiliates (collectively, C.R. England). But these employees had each signed noncompete agreements while employed by C.R. England. C.R. England later sued, raising claims against both Soar and the departed employees. After several years of litigation, the case went to trial. At the close of trial, a jury found in C.R. England's favor on some of its claims, including that the employees had breached their noncompete agreements and that Soar had intentionally interfered with economic relations. But the jury awarded only a small amount of damages, and it also found against C.R. England on several of its claims. The district court later granted C.R. England's request for costs, and it also granted C.R. England's request for the attorney fees that it had incurred prosecuting its claims for breach of the noncompete agreements.

¶2 Soar now appeals, raising various arguments relating to the rulings and verdicts entered below. We resolve the arguments presented to us as follows:

• We affirm the district court's conclusion that the noncompete agreements were enforceable under Utah law.

• We reverse the district court's denial of Soar's motion for judgment as a matter of law on the intentional interference with economic relations claim.

• We affirm the district court's awards of costs and attorney fees to C.R. England.

BACKGROUND

¶3 C.R. England is one of the largest refrigerated trucking companies in the country, and through several of its affiliate companies, it provides various services to others involved in the trucking industry. Soar is a smaller trucking company and is a competitor of C.R. England. C.R. England and Soar are both headquartered in Salt Lake County.

¶4 In 2017 and 2018, Soar was growing and sought to hire people with experience and skill in the trucking industry. During this period, Soar hired away eight C.R. England employees (the Employees), each of whom had held a management or senior role with C.R. England.

¶5 Of note, the Employees had each previously signed noncompete, nondisclosure, and non-solicitation agreements (collectively, the noncompete agreements) with C.R. England in order to receive or maintain their employment with the company. With minor variations, the noncompete agreements prohibited the Employees from accepting employment with, operating, or conducting any business "which competes in any areas of the Company Businesses" in which they "have worked or have been privy to Confidential Information," in any "state, county, city or other recognized geographic area within the United States, or any foreign country in which the Company is conducting or has conducted business at any time." The noncompete agreements stated that these restrictions lasted for one year following the end of employment with C.R. England. Soar was aware that the Employees had signed these noncompete agreements, but Soar believed the agreements were unenforceable, so it promised the Employees that it would "back them up" if C.R. England "sought to enforce their noncompete obligations."^[2]

¶6 C.R. England later filed suit against both Soar and the Employees. C.R. England raised fourteen causes of action. These included nine breach of contract claims-one for each of the eight Employees' alleged violations of the noncompete agreements, and another against Soar for violating a transportation brokerage agreement it had with C.R. England. C.R. England also brought several tort claims against all of the defendants, including claims for intentional interference with economic relations, civil conspiracy, violating the Utah Uniform Trade Secrets Act, and violating the Utah Unfair Competition Act. Finally, C.R. England brought a claim for unjust enrichment solely against Soar.

¶7 Before trial, the parties stipulated to a preliminary injunction. This injunction prohibited the Employees from sharing with Soar any confidential information that they had learned while working for C.R. England. By agreement, this preliminary injunction would last "during the pendency of this case."

¶8 The case proceeded to a four-day trial. During this trial, much of the testimony established the details set forth above, including how Soar had hired the Employees and about the nature of the noncompete agreements. For purposes of this appeal, we note two particular developments.

¶9 First, during its case, C.R. England introduced deposition testimony from Mica Bolta. Bolta was an executive recruiter in the trucking industry and had assisted Soar in recruiting the Employees. Bolta testified about her observations of the industry practice regarding noncompete agreements. Bolta testified that in "[her] experience in the logistics industry . . . it is usually frowned upon to switch employers and to try and solicit customers or employees within the first 12 to 24 months, depending on what your nonsolicit agreement says." C.R. England disclosed Bolta as a fact witness prior to trial, but it did not disclose her as an expert witness.

¶10 Second, at the close of C.R. England's case, Soar moved for judgment as a matter of law on all of C.R. England's claims pursuant to rule 50(a) of the Utah Rules of Civil Procedure. As part of this motion, Soar asked the court to hold that the noncompete agreements were unenforceable as a matter of law, arguing, among other things, that there was inadequate consideration. Soar also argued that the noncompete agreements were negotiated in "bad faith" because (1) the Employees were at will and (2) the agreements were not "reasonably tailored" to C.R. England's needs where the company used the same "boilerplate contract" for its various employees. With respect to C.R. England's claim for intentional interference with economic relations, Soar asked the court to hold that there was insufficient evidence (indeed, no evidence) to establish the elements of the tort-including, of note here, that Soar had acted in "violation of statute or law" or of a "recognized custom in the industry."

¶11 The district court denied the motion as to all claims. In its ruling, the court concluded that the noncompete agreements were enforceable as a matter of law. The court noted that under a test previously set forth by the Utah Supreme Court, a noncompete agreement: (1) must "be supported by consideration," (2) cannot have involved "bad faith" "in the negotiation of the contract," (3) must "be necessary to protect the goodwill of the business," and (4) must "be reasonable in its restrictions as to time and area." See System Concepts, Inc. v. Dixon, 669 P.2d 421, 425-26 (Utah 1983). Applying this test, the district court first ruled that the Employees' offers of employment (whether to initiate or continue employment) "suffice[d]" for consideration in this case. Second, the court ruled that there was no bad faith because, in its view, the Employees were "in the same bargaining position as the employer." Third, the court ruled that the restrictions were necessary to protect the goodwill of C.R. England's business given "the thin, thin margins that ha[d] been testified to in the trucking industry." And fourth, the court ruled that the agreements' restrictions as to time and area were reasonable. In making this latter determination, the court noted that a one-year restriction had been upheld in several past cases, and it concluded that the restrictions at issue here were reasonable in light of evidence that had been offered about the "time when [confidential] information gets stale" in the trucking industry.

¶12 At the close of trial, the jury found that each of the Employees had violated their noncompete agreements. The jury also found Soar and its executives liable for intentional interference with C.R. England's economic relations, but it found the three employees against whom that claim was ultimately submitted not liable.^[3] The jury then found against C.R. England on its other claims, including its claims for misappropriation of trade secrets, civil conspiracy, unjust enrichment, and violation of the Utah Unfair Competition Act. Overall, C.R. England prevailed on 9 of the 14 claims that it had brought against Soar. Although C.R. England had sought $300,000 in damages, the jury awarded it just $12,000 in total damages-$6,000 for cumulative violations of the noncompete agreements and $6,000 for intentional interference with economic relations. After the jury returned its verdict, the court denied C.R. England's request for a permanent injunction.

¶13 After the verdict, Soar filed a renewed motion for judgment as a matter of law pursuant to rule 50(b) of the Utah Rules of Civil Procedure, but it did so only as to C.R. England's intentional interference with economic relations claim. In this motion, Soar argued that C.R. England had failed to present any evidence that Soar had acted with improper means-that is, means contrary to either law or established industry standards. The district court denied the motion.

¶14 Both parties later filed ...