Manitowoc Co. v. Lanning

379 Wis.2d 189

906 N.W.2d 130

2018 WI 6

The MANITOWOC COMPANY, INC., Plaintiff–Respondent–Petitioner,

v.John M. LANNING, Defendant–Appellant.

No. 2015AP1530

Supreme Court of Wisconsin.

Oral Argument: September 5, 2017

Opinion Filed: January 19, 2018

For the plaintiff-respondent-petitioner, there were briefs filed by Suzanne M. Glisch, Joel S. Aziere, and Buelow Vetter Buikema Olson & Vilet, LLC, Waukesha. There was an oral argument by Joel S. Aziere.

For the defendant-appellant, there was a brief filed by Oyvind Wistrom and Lindner & Marsack, S.C., Milwaukee. There was an oral argument by Oyvind Wistrom.

SHIRLEY S. ABRAHAMSON, J.

¶ 1 This is a review of a published decision of the court of appeals reversing a judgment of the Circuit Court, Manitowoc County, Gary L. Bendix, Judge.¹ The circuit court granted the motion of The Manitowoc Company, Inc., the plaintiff, for summary judgment and denied the cross-motion for summary judgment of the defendant, John M. Lanning. After a bench trial on damages, the circuit court awarded Manitowoc Company $97,844.78 in damages, $1,000,000 in attorney fees, and $37,246.82 in costs against Lanning.

¶ 2 The court of appeals reversed the circuit court judgment in favor of Manitowoc Company. It concluded that Lanning's non-solicitation of employees provision (sometimes referred to herein as an NSE provision) imposed by Manitowoc Company as part of Lanning's employment agreement is governed by Wis. Stat. § 103.465 (2013–14) and that it is unenforceable under the statute.²

¶ 3 The non-solicitation of employees provision prohibits Lanning from directly or indirectly soliciting, inducing, or encouraging any employee of Manitowoc Company to terminate his or her employment with Manitowoc Company or to accept employment with a competitor, supplier, or customer of Manitowoc Company. The scope of the non-solicitation of employees provision includes all of Manitowoc Company's 13,000 world-wide employees regardless of an employee's position within Manitowoc Company or the employee's connection to Lanning.

¶ 4 Two issues of law are presented on the cross-motions for summary judgment:³

1. Does Wis. Stat. § 103.465, which explicitly refers to a "covenant not to compete," apply to the non-solicitation of employees provision prohibiting Lanning from soliciting, inducing, or encouraging any employee of Manitowoc Company to terminate his or her employment with Manitowoc Company or to accept employment with a competitor, supplier, or customer of Manitowoc Company?

2. If Wis. Stat. § 103.465 governs Lanning's nonsolicitation of employees provision, is the provision enforceable under § 103.465 ?⁴

¶ 5 In response to the first issue, the particular terms of the non-solicitation of employees provision at issue in the instant case do not appear to have been analyzed by any prior Wisconsin court decision.⁵ We conclude, as prior cases have concluded, that although Wis. Stat. § 103.465 explicitly refers to a covenant not to compete, the plain meaning of § 103.465 is not limited to a covenant in which an employee agrees not to compete with a former employer.⁶ This court has explicitly stated that "it would be an exercise in semantics to overlook § 103.465 merely because [a provision] of the agreement is not labeled a 'covenant not to compete.' "⁷ Rather, § 103.465 has been applied to agreements viewed as restraints of trade.

¶ 6 Indeed, this court has acknowledged that "the explicit purpose of Wis. Stat. § 103.465, as plainly stated in the statute, is to invalidate covenants that impose unreasonable restraints on employees" and that § 103.465"essentially deals with restraint of trade ... regardless of whether a restriction is labeled a 'non-disclosure' provision or a 'covenant not to compete.' "⁸

¶ 7 The court has repeatedly recognized that a restraint of trade may take many forms. The court has interpreted Wis. Stat. § 103.465 as applying not only to traditional covenants in which an employee agrees not to compete with a former employer,⁹ but also to other terms of an agreement including provisions barring the solicitation of the employer's customers or former customers,¹⁰ non-disclosure/confidentiality agreements between employers and employees,¹¹ and a no-hire provision between two employers.¹²

¶ 8 These cases clearly demonstrate that the application of Wis. Stat. § 103.465 depends upon whether the particular terms of the agreement constitute a restraint of trade by restricting competition or imposing an unreasonable restraint on employees. These cases focused on the effect of the restraint rather than its label.¹³

¶ 9 We conclude that Lanning's non-solicitation of employees provision restricts Lanning's ability to engage in the ordinary competition attendant to a free market, specifically restricting Lanning's freely competing for the best talent in the labor pool. In addition, the limitation on Lanning also affects access to the labor pool by a competitor of Manitowoc Company (including Lanning's current employer, SANY America). Accordingly, we conclude that Lanning's non-solicitation of employees provision is a restraint of trade governed by Wis. Stat. § 103.465.

¶ 10 With regard to the second issue, we conclude that Lanning's non-solicitation of employees provision is unenforceable under Wis. Stat. § 103.465. It does not meet the statutory requirement that the restriction be "reasonably necessary for the protection of the employer." Wis. Stat. § 103.465.

¶ 11 Accordingly, we affirm the decision of the court of appeals and remand the cause, as did the court of appeals, to the circuit court with instructions to enter judgment in favor of Lanning.

I

¶ 12 To the extent that the facts affect the issues before the court, no genuine dispute about material facts is presented.

¶ 13 Manitowoc Company is a manufacturer with two divisions: a food service equipment division and a construction crane division. Lanning began his employment with Manitowoc Company in 1985 as a chief engineer in Manitowoc Company's crane division. Lanning worked for Manitowoc Company for over 25 years. Lanning was successful, knowledgeable, and well-connected within Manitowoc Company.

¶ 14 In 2008, Lanning signed an employment agreement with Manitowoc Company that included provisions relating to confidential information, intellectual property, and nonsolicitation of employees.¹⁴ The validity of only the nonsolicitation of employees provision is challenged in the instant case.

¶ 15 Lanning terminated his employment with Manitowoc Company effective January 6, 2010. Beginning on January 8, 2010, Lanning became the director of engineering for SANY America, a direct competitor with Manitowoc Company's crane division. Manitowoc Company claims that Lanning engaged in a number of actions that violated the non-solicitation of employees provision.

¶ 16 For example, Manitowoc Company asserts that Lanning communicated with at least nine Manitowoc Company employees about potential employment opportunities at SANY, took one Manitowoc Company employee out to lunch in connection with SANY recruitment efforts, took another Manitowoc Company employee on a tour of a SANY crane manufacturing plant in China, and participated in a third Manitowoc Company employee's job interview with SANY.

¶ 17 Lanning's non-solicitation of employees provision prohibits him, for two years following termination of his employment, from soliciting, inducing, or encouraging any Manitowoc Company employee to terminate his or her employment with Manitowoc Company or to accept employment with a competitor, supplier, or customer of Manitowoc Company.

¶ 18 The circuit court concluded that even if Lanning's non-solicitation provision is viewed as a restriction on trade or competition subject to Wis. Stat. § 103.465, the provision was reasonable and enforceable under the statute.

¶ 19 The court of appeals concluded that Lanning's nonsolicitation of employees provision was a restraint of trade governed by Wis. Stat. § 103.465.¹⁵ It further concluded that because the provision was not reasonable, it was not enforceable under the statute. The court of appeals reversed the judgment of the circuit court in favor of Manitowoc Company.

II

¶ 20 We first address the standard of review. This court applies the same method of analysis to a motion for summary judgment as does a circuit court. Summary judgment is appropriate where, based on the pleadings, depositions, interrogatories, and affidavits on file, there is no genuine dispute as to any material fact, and a party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2) ; Star Direct, 319 Wis. 2d 274, ¶ 18, 767 N.W.2d 898 ; Belding v. Demoulin, 2014 WI 8, ¶ 13, 352 Wis. 2d 359, 843 N.W.2d 373 ; Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315–17, 401 N.W.2d 816 (1987) ; Mut. Serv. Cas. Ins. Co. v. Brass, 2001 WI App 92, ¶ 4, 242 Wis. 2d 733, 625 N.W.2d 648, overruled on other grounds by Star Direct, 319 Wis. 2d 274, ¶ 78 n.12, 767 N.W.2d 898.

¶ 21 The instant case requires us to interpret both a statute and a written contract. The interpretation and enforceability of both a statute and a written contract ordinarily present questions of law that this court determines independently of the circuit court and court appeals while benefiting from the analyses of these courts. See, e.g., Moustakis v. DOJ, 2016 WI 42, ¶ 16, 368 Wis. 2d 677, 880 N.W.2d 142 ; Star Direct, 319 Wis. 2d 274, ¶ 18, 767 N.W.2d 898 ; Streiff v. Am. Family Mut. Ins. Co., 118 Wis. 2d 602, 603 n.1, 348 N.W.2d 505 (1984).

III

¶ 22 The first issue of law presented is whether Wis. Stat. § 103.465 applies to Lanning's non-solicitation of employees provision.

¶ 23 We begin our discussion by setting forth the texts of Wis. Stat. § 103.465 and Lanning's non-solicitation of employees provision.

¶ 24 Wisconsin Stat. § 103.465 is broadly entitled "Restrictive covenants in employment contracts" and refers explicitly to a covenant by an employee not to compete with the employer during or after the...