Opinion
Case No. 21-CV-6-NDF
2021-12-14
INTERSTATE POWER SYSTEMS, INC. d/b/a Interstate Bearing Systems, a Minnesota Corporation, Plaintiff, v. Michael BEATY, a Wyoming Resident, and Basin Industrial Solutions LLC, a Wyoming Limited Liability Company, Defendants.
Christopher M. Brennan, Woodhouse Roden Nethercott LLC, Tara Brooke Nethercott, Crowley Fleck PLLP, Cheyenne, WY, Joseph M. Windler, Pro Hac Vice, Kyle R. Kroll, Pro Hac Vice, Winthrop & Weinstine PA, Minneapolis, MN, for Plaintiff. Nicholas A. Norris, Lubnau Law Office PC, Gillette, WY, for Defendants.
Christopher M. Brennan, Woodhouse Roden Nethercott LLC, Tara Brooke Nethercott, Crowley Fleck PLLP, Cheyenne, WY, Joseph M. Windler, Pro Hac Vice, Kyle R. Kroll, Pro Hac Vice, Winthrop & Weinstine PA, Minneapolis, MN, for Plaintiff.
Nicholas A. Norris, Lubnau Law Office PC, Gillette, WY, for Defendants.
ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
NANCY D. FREUDENTHAL, UNITED STATES DISTRICT JUDGE This matter comes before the Court on Plaintiff Interstate Power Systems, Inc. ("Interstate")’s Motion for Summary Judgment (CM/ECF Document [Doc.] 30) filed October 25, 2021. Defendants Michael Beaty and Basin Industrial Solutions ("Beaty") filed a response on November 15, 2021. (Doc. 42). The Court has carefully considered the briefing and the parties’ oral arguments from the hearing which took place on December 13, 2021.
FACTUAL BACKGROUND
The following facts are undisputed. Interstate, a company with a branch in Gillette, Wyoming, as well as in numerous other locations around the United States, serves the mining, energy, manufacturing, agriculture, construction, transportation, marine, and power service industries. Doc. 24 - Stipulations. Interstate's services in Wyoming include crane services. Id. Beaty was employed by Interstate from 2015 to 2017 in the Gillette branch and ran the crane services department. Beaty Dep.; Doc. 32, Ex. A at 23:20. During this period, Beaty was not party to a non-compete agreement with Interstate. Id. at 25:14.
In 2017, Beaty left his job at Interstate—along with two Interstate crane technicians—and began working in crane services for Black Rock Mining Services. Id. at 25, 26. Beaty's departure rendered Interstate unable to provide crane services in the field. Id. at 29. Beaty's departure also caused Interstate's crane services customers to move their business to Black Rock. Doc. 24.
In September of 2018, Beaty began talking with Interstate employees Don Botkin and Mike Howard about the possibility of his returning to Interstate as a crane services supervisor. Doc. 32, Ex. A at 33:8. The negotiations continued beyond January of 2019. Id. at 56:21. During a March 14, 2019 meeting between Beaty, Botkin, and Howard, Beaty was provided with a non-compete agreement which he signed that day. Id. at 63:22, 65:17; Doc. 24; Doc. 31, Ex. C.
Pertinently, the non-compete agreement provided that Beaty acknowledged that he would be required to sign the non-compete agreement prior to commencing employment, that employment with the company was sufficient consideration, and that
Employee agrees that, during Employee's employment with Company, and for a period of three (3) years after termination of Employee's employment with the Company, regardless of the reason for termination of Employee's employment, Employee will not, directly or indirectly, personally engage in, nor shall Employee own, manage, operate, join, control, consult with, participate in the ownership, operation or control of, be employed by, or be connected in any manner with any person or entity which solicits, offers, offers to provide, or provides any services or products similar to those which Company offers to its customers or prospective customers. This restriction applies within a 200-mile radius from Company's location in Gillette, Wyoming, or any other location of the Company that exists as of the date on which Employee's employment with Company ends.
Doc. 31, Ex. C.
The agreement also provides that the parties acknowledge that
If any or all of the above covenants or agreements are held to be unenforceable because of the scope or duration of such covenant or agreement or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the scope, duration and area of such covenant or agreement to the extent that allows the maximum scope, duration and area permitted by applicable law.
Id.
On March 22, 2019, Beaty signed Interstate's offer of employment letter and began working as a crane services supervisor on April 8, 2019. Doc. 31, Ex. E; Doc. 24. Prior to the start of his employment, he also received and acknowledged Interstate's employee handbook which provides, inter alia, that employees have a duty of loyalty. Doc. 31, Exs. F, G.
To start the new crane department, Interstate made expenditures in excess of $200,000, including certification training for Beaty and the other new crane technicians at the Crane Institute of America in Florida, computers, trucks, a shop, software, and other equipment. See Doc. 32, Ex. A; Doc. 31.
On July 14, 2020, while still an employee of Interstate, Beaty formed Basin Industrial Solutions, LLC ("Basin"). Doc. 24. On August 24, 2020, Beaty resigned from his position at Interstate and began working for Basin. Doc. 32, Ex. B. Basin has offered and/or provided crane services to numerous former Interstate customers within the 200-mile non-compete radius since August 24, 2020. Doc. 24.
Interstate filed a complaint on January 13, 2021 (Doc. 1), bringing claims for breach of contract (the non-compete), conversion, violation of the Wyoming Uniform Trade Secret Act, violation of the Defend Trade Secrets Act, tortious interference, breach of the duty of loyalty, and injunctive relief. Interstate seeks summary judgment on two of these claims: Beaty's breach of contract and breach of the duty of loyalty.
STANDARD OF REVIEW
The Court shall grant a motion for summary judgment if the movant has demonstrated that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). This standard requires more than the "mere existence of some alleged factual dispute between the parties." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Rather, it requires "there be no genuine issue of material fact." Id. "A fact is material if, under the governing law, it could have an effect on the outcome of the lawsuit. A dispute over a material fact is genuine if a rational jury could find in favor of the nonmoving party on the evidence presented." Smothers v. Solvay Chems., Inc. , 740 F.3d 530, 538 (10th Cir. 2014) (citing Tabor v. Hilti, Inc. , 703 F.3d 1206, 1215 (10th Cir. 2013) ). Conversely, summary judgment is inappropriate where there is a genuine dispute over a material fact, i.e., "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Roberts v. Jackson Hole Mountain Resort Corp. , 884 F.3d 967, 972 (10th Cir. 2018) (quoting Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ).
On a motion for summary judgment, "we examine the record and all reasonable inferences that might be drawn from it in the light most favorable to the non-moving party, without making credibility determinations or weighing the evidence." Roberts , 884 F.3d at 971, n.3. Initially, the moving party has the burden of production and the burden of establishing that summary judgment is appropriate as a matter of law. Kannady v. City of Kiowa , 590 F.3d 1161, 1169 (10th Cir. 2010). If the movant does so, the nonmovant "must bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which it carries the burden of proof." Id. (quoting Jenkins v. Wood , 81 F.3d 988, 990 (10th Cir. 1996) ).
To defeat a motion for summary judgment, the non-movant must show more than "[t]he mere existence of a scintilla of evidence in support of the [non-moving party's] position ... there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson , 477 U.S. at 252, 106 S.Ct. 2505. "[E]vidence, including testimony, must be based on more than mere speculation, conjecture or surmise." Bones v. Honeywell Int'l, Inc. , 366 F.3d 869, 875 (10th Cir. 2004). Unsubstantiated conclusory allegations carry no probative weight in summary judgment proceedings and do not create a genuine issue of material fact. Id. (quoting Phillips v. Calhoun , 956 F.2d 949, 951 n.3 (10th Cir. 1992) ).
ANALYSIS
I. Beaty's Breach of the Duty of Loyalty
Interstate moves for summary judgment on their claim that Beaty, through his conduct leading up to his August 24, 2020 resignation, breached the duty of loyalty he owed to Interstate as an agent and supervisor. Interstate argues that Wyoming courts follow the duty of loyalty rule put forth in the Restatement (Second) of Agency § 393 : "Unless otherwise agreed, an agent is subject to a duty not to compete with the principal concerning the subject matter of his agency." The source of Interstate's assertion that Wyoming has adopted § 393 is Hopper v. All Pet Animal Clinic, Inc. , 861 P.2d 531, 539 (Wyo. 1993), where the court cites § 393 cmt. e as support for the observation that "[t]he enforceability of a covenant not to compete depends upon a finding that the proper balance exists between the competing interests of the employer and the employee." Id.
The court parenthetically notes that Restatement (Second) of Agency § 393 cmt. e provides "that without a covenant not to compete, an agent, employee, can compete with a principal despite past employment and can begin preparations for future competition, such as purchasing a competitive business, before leaving present employment." Hopper , 861 P.2d at 539.
The Wyoming Supreme Court's reference to a comment in the Restatement is a less than explicit adoption of the entirety of § 393. Interstate does not provide any further case law on this subject and this Court cannot find any clear adoption of § 393 in any Wyoming cases. A similar rule is favorably cited in Thompson v. Searl , 76 Wyo. 264, 301 P.2d 804, 806 (1956) ("The rule is well stated in 3 C.J.S., Agency, § 165 : ‘... it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with the subject matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for himself in excess of his lawful compensation....’ ") Regardless, Beaty does not make the argument that the Wyoming Supreme Court would not explicitly adopt the Restatement (Second) of Agency § 393 given the right circumstances.
Yet, because this is a diversity case and the issue is one of state law, the Court must predict how the Wyoming Supreme Court would rule. See Amparan v. Lake Powell Car Rental Cos. , 882 F.3d 943, 947 (10th Cir. 2018) ("When the federal courts are called upon to interpret state law, the federal court must look to the rulings of the highest state court, and, if no such rulings exist, must endeavor to predict how that high court would rule.") Given the Wyoming Supreme Court's favorable citation to § 393 cmt. e—as well as Wyoming's adoption of similar legal principles—this Court predicts that Wyoming would adopt the Restatement (Second) of Agency § 393 (or, at the very least, the rules contained in § 393 cmt. e) and moves forward with its analysis.
Interstate asserts that there is no genuine dispute that Beaty competed with Interstate concerning the subject matter of his agency (crane services) prior to leaving Interstate's employ. In support, they offer various exhibits and citations to Beaty's deposition.
First, they point to an August 4, 2020 email from Beaty to "Chad A Berens" wherein Beaty attaches photocopies of his various crane-related accreditations and notes that he has "[s]everal clients already set up with Basin Industrial Solutions." Doc. 31, Ex. J. However, neither Interstate (in their argument section) nor the exhibit make clear who Chad Berens is, why the email was sent, or the context of the email. In another section of Interstate's brief, they assert that the email was sent to Wyoming Machinery. Doc. 31, p. 8. And in Beaty's deposition, he testifies that the email was connected to his attempt to purchase a truck for Basin (presumedly from Wyoming Machinery, although this is not definitive). Doc. 32, Ex. A, 206:1-5. Beaty also testifies that when he wrote that several clients were already set up with Basin Industrial Solutions, he was referring to clients for a spray foam insulation service he was hoping to start offering through Basin. Id. at 204:22-24. Interstate does not argue that it offered spray foam insulation services. Accordingly, there is a genuine dispute as to whether this email shows that Beaty was competing with Interstate on August 4, 2020.
Second, Interstate offers a series of emails between Beaty (using an electronic signature indicating that he was the owner and field supervisor of Basin) and Ann Wonch (an employee of Wyoming Workers’ Compensation) dated August 21, 2020. Doc. 32, Ex. M. In the emails, Beaty writes that "I have customers waiting for work to be completed." However, the emails do not indicate what type of work is being referenced. In Beaty's second affidavit (Doc. 42, Ex. A), he asserts that the statement regarding waiting customers referenced Decker Coal, for whom Beaty was preparing to offer non-competitive services. Again, there is a genuine dispute here as to whether Beaty was competing with Interstate prior to his resignation.
Third, Interstate offers an email from Beaty to a "caberens@wyomingcat.com." Doc. 32, Ex. J. The Court is unsure what this email represents except for Interstate's assertion that it is generally a "similar statement" to a creditor. The Court will not spend further time trying to deduce its importance.
Fourth, Interstate offers what they characterize as a "one-year agreement for providing crane services to Interstate customer Decker Coal." Doc. 32, Ex. K. The document was signed August 13, 2020 and shows that Basin agreed to provide Decker, among other services, with inspection and repair service to overhead and mobile cranes. Id. at p. 12. Interstate also argues that the attached rate sheet to the agreement shows that Beaty undercut Interstate's rates for crane services. Id. at 14.
The Restatement (Second) of Agency § 393 cmt. e provides that an employee is not "entitled to solicit customers for such rival business before the end of his employment nor properly do other similar acts in direct competition with the employer's business." Beaty does not dispute the validity or timing of Basin's agreement with Decker but does assert that the agreement did not constitute competition because "Master Services Agreements" do not obligate a company to offer any work. Doc. 42, Ex. A at p. 3. However, a work agreement complete with a payment rate chart incontrovertibly rises to the level of soliciting customers (successfully, in this case). And, as the agreement was for the provision of crane services, Basin certainly qualified as a rival business to Interstate. Therefore, Beaty violated Restatement (Second) of Agency § 393 ’s duty of loyalty through Basin's August 13, 2020 agreement with Decker Coal. No rational jury could find in favor of Beaty on the evidence presented to the Court.
Accordingly, Interstate's motion for summary judgment on the claim for breach of the duty of loyalty is GRANTED.
II. Beaty's Breach of Contract (of the Non-Compete)
Interstate also moves for summary judgment on their claim that Beaty breached his non-compete agreement. It is undisputed that, through Basin, Beaty has offered and/or provided crane services to numerous former Interstate customers within the 200-mile non-compete radius around Gillette since August 24, 2020. Doc. 24. Therefore, the question before the Court is whether the agreement is enforceable given the undisputed facts offered by the parties.
"A valid and enforceable covenant not to compete requires a showing that the covenant is: (1) in writing; (2) part of a contract of employment; (3) based on reasonable consideration; (4) reasonable in durational and geographical limitations; and (5) not against public policy." Hopper v. All Pet Animal Clinic , 861 P.2d 531, 540 (Wyo. 1993) (citing A.E.P. Industries, Inc. v. McClure , 308 N.C. 393, 302 S.E.2d 754, 760 (1983) ). Accordingly, we will go through the elements in turn.
a. Non-Compete Covenant in Writing?
Interstate offers the written non-compete agreement signed by Beaty on March 14, 2019. Doc. 31, Ex. C. Beaty does not dispute that he signed the agreement. Doc. 32, Ex. A, 65:17.
b. Part of a Contract of Employment? Based on Reasonable Consideration?
"[T]he Wyoming Supreme Court has recognized the rule that a covenant not to compete entered into contemporaneously with the employment itself is enforceable and is supported by sufficient consideration." CBM Geosolutions, Inc. v. Gas Sensing Tech. Corp. , 2009 WY 113, ¶ 13, 215 P.3d 1054, 1059 (Wyo. 2009) (citing Hopper , 861 P.2d at 540 ). A non-compete agreement is enforceable if the "promise not to compete is ancillary to the existence of an otherwise valid transaction or relationship." Hopper , 861 P.2d at 540 (citing Restatement (Second) of Contracts § 187 ).
It is undisputed that Beaty signed the non-compete on March 14, 2019 and signed the employment agreement on March 22, 2019. Yet Beaty argues that the non-compete is not part of a contract of employment and not based on reasonable consideration because he signed the non-compete eight days before signing the employment agreement. This is not a meritorious argument. The non-compete repeatedly references Beaty's future employment with Interstate. Doc. 31, Ex. C. And, CBM Geosolution ’s rule that the non-compete be entered into contemporaneously with the employment to be enforceable does not necessitate a finding of exact simultaneity in the two acts.
Beaty asserts that he had not yet received an official offer of employment when he signed the non-compete. ("It is undisputed that Beaty did not receive an offer of employment until March 20, 2019.") Doc. 42, p. 14. However, Beaty had been in talks with Interstate regarding his potential employment since September of 2018. It is difficult to imagine why Beaty would have been meeting with Interstate on March 14, 2019, or why he would have signed the non-compete that day, without an informal offer on the table and a formal offer in the works.
The Court finds that the signing of the non-compete agreement and the signing of the employment agreement eight days later are sufficiently contemporaneous to show that the non-compete was part of a contract of employment and based on reasonable consideration.
c. Reasonable in Durational and Geographical Limitations?
"The reasonableness of a covenant not to compete is assessed based upon the facts of the particular case and a review of all of the circumstances." Hopper , 861 P.2d at 540. "A restraint on trade is reasonable only if it (1) is no greater than is required for the protection of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public." Brown v. Best Home Health & Hospice, LLC , 2021 WY 83, ¶ 25, 491 P.3d 1021, 1030 (Wyo. 2021) (citing Hopper , 861 P.2d at 539 ) (internal citations omitted). "To establish the restraint is no greater than necessary to protect the employer's interest, the employer has the initial burden of proving a non-compete agreement has a fair relation to, and is necessary for, the business interests for which protection is sought." Id. at 1030, 1031. Such business interests include trade secrets, confidential information, and special influence by the employee obtained during the course of employment over the employer's customers. Id. at 1031. Other examples of legitimate interests include business goodwill and other "distinct special business interests." Id. (noting that "[i]n CBM Geosolutions , Gas Sensing had a special business interest worthy of protection because it had trained its employees in innovative technologies which helped maintain the company's competitive edge in the marketplace.")
Interstate argues that its business interests—for which the non-compete was necessary—include 1) protection of trade secrets and confidential information, 2) protection against the special influence that a crane and field supervisor gains over customers, 3) protection for the challenges and difficulties of replacing talent in the crane services industry, and 4) recoupment of Interstate's significant monetary investment in the new crane department. Doc. 31 at 16. Some of these interests, the Court notes, are inter-related with each other.
Beaty asserts that under Wyoming law, Interstate does not have legitimate business interests to protect. Rather than analyze all of Beaty's arguments, the Court will simply enumerate what it finds to be Interstate's legitimate interests for which a non-compete is necessary to protect. First, Beaty does not dispute that Interstate invested significant resources in starting its crane department. Without a customer base for crane services, such an investment is not likely to produce profits. The non-compete agreement in this case protected against the possibility that Beaty would leave Interstate with all the crane services customers in tow, rendering their sizable investment in crane services worthless (at least until they were able to hire and train another crew and generate another customer base). That Beaty had previously left Interstate, taking with him all of Interstate's crane services customers and employees, only heightened the necessity of a non-compete agreement when he rejoined the company in 2019.
This largely coincides with a company's interest to protect against the "special influence by the employee obtained during the course of employment over the employer's customers." Best Home Health , 491 P.3d at 1031. Although it is undisputed that Beaty had worked with some of Interstate's customers prior to rejoining Interstate in 2019, it is also undisputed that Beaty spent the majority of his time at Interstate in the field, with customers, as the primary point person for Interstate. Doc. 32, Ex. A, 157:10-13. It is also undisputed that some of Interstate's customers were companies Beaty had not worked with in the past. Id. at 51:21–52:22. That Beaty was the reliable face of Interstate's crane department for customers undoubtedly gave him a "special influence" over those customers when he decided to leave. Beaty also created quotes for Interstate customers and was aware of Interstate's special discounted pricing rates for certain customers. Doc. 32, Ex. I, 94:1—96:4. As such, he would have been able to easily undercut Interstate's pricing if he so chose.
Accordingly, the Court finds that Interstate had legitimate business interests to protect for which a non-compete agreement was necessary. The next relevant inquiry, then, is whether the non-compete agreement's restraint is "no greater than is required for the protection of the employer." Best Home Health , 491 P.3d at 1030.
Geographically, the parties stipulated that the non-compete's 200-mile radius around Interstate's location in Gillette encompasses the Powder River Basin, where Interstate offers numerous services to customers in the coal mining industry. The parties also stipulated that Interstate's Gillette branch drew customers from a 200-mile radius that included parts of Wyoming, Montana, North Dakota, South Dakota, and Nebraska. A 200-mile non-compete with a radius centered on Gillette is eminently reasonable when the business interests in play service a limited number of customers from a 200-mile surrounding area. See Hopper , 861 P.2d at 544 ("Reasonable geographic restraints are generally limited to the area in which the former employee actually worked or from which clients were drawn.") ("A broad geographic restriction may be reasonable when it is coupled with a specific activity restriction within an industry or business which has an inherently limited client base.")
Beaty argues that the geographical scope of the non-compete is unreasonable because its restrictions apply not only to a 200-mile radius around Gillette but also to "any other location of the Company that exists as of the date on which Employee's employment with Company ends." Doc. 31, Ex. C. The Court agrees that—because Beaty's special influence over customers likely only existed within the 200-mile radius of Gillette—the non-compete restriction zones around Interstate's 21 other locations in ten other states (Doc. 1, ¶ 8) are unreasonable. But this does not make the non-compete unenforceable. Wyoming has adopted the Restatement (Second) of Contracts § 184 which allows the enforcement of a reasonable narrower term in a non-compete agreement. Hopper , 861 P.2d at 546. "When the parties agree to terms of a covenant, one of which is too broad, the court is permitted to enforce a narrower term which effectuates these public policy goals without arbitrarily invalidating the entire agreement between the parties and creating an uncertain business environment." Id. The Court will thus only enforce the geographically "narrower term" in the non-compete—i.e., the 200-mile radius around Interstate's Gillette location—and finds that this geographic restraint in the non-compete sufficiently protects Interstate's interests and is no greater than is required. Beaty also argues that the durational scope of the non-compete (a period of three years after termination of Employee's employment) is not reasonably related to the interest Interstate is seeking to protect. Because Interstate was able to hire (within weeks of Beaty's resignation) a certified electrician and train him to provide crane services (Doc. 35, Ex. 2, 39:2—45:24), Beaty argues that a restraint lasting more than a year cannot be justified.
In deciding whether a durational restraint is reasonable, a "court must determine how much time is needed for the risk of injury to be reasonably moderated." Hopper , 861 P.2d at 544 (quoting Harlan M. Blake, Employee Agreements Not to Compete , 73 Harv.L.Rev. 625, 648, 677 (1960) ). When a non-compete's restraint "is for the purpose of protecting customer relationships, its duration is reasonable only if it is no longer than necessary for the employer to put a new individual on the job and for the new employee to have a reasonable opportunity to demonstrate his [or her] effectiveness to the customers." Id. "If a restraint on this ground is justifiable at all, it seems that a period of several months would usually be reasonable. If the selling or servicing relationship is relatively complex, a longer period may be called for." Id.
In Hopper , the court found that the three-year durational requirement of the non-compete did not have a reasonable relationship with the protection of All Pet's (a vet clinic) interests because clients visited the clinic at least once a year and accordingly a replacement veterinarian would be able to demonstrate his or her professionalism within a one-year period. Id. at 545. The court found that a one-year period sufficiently protected All Pet's interests. Id. As will be explained below, this Court finds that a one-year period is sufficient in this case as well.
Here, Interstate's business interests are, to some degree, all related to protecting customer relationships. It is undisputed that Beaty, during his period of employment, had access to Interstate's internal rate and cost information as well as customer's past and future crane services needs. Interstate argues that this necessitates a three-year durational restraint. This information is, of course, extremely valuable, and Beaty's remembrance of such details could be thought of in terms of adding to his special influence over customers—precisely because it would allow him to just narrowly undercut Interstate's rates. However, Interstate makes no cogent argument why a three-year period would protect them while a one-year period would not. Interstate, citing to Beaty's deposition (Doc. 32, Ex. A, 157:14–24), asserts that Interstate performed recurring work for customers such as annual inspections as well as unplanned work that arises ad hoc. Therefore, a one-year period would presumably allow a replacement crane supervisor time to demonstrate his professionalism to all of Interstate's crane services customers through at least one interaction, if not more. Meanwhile, there is no evidence offered to the Court to show that the effect of Beaty's confidential knowledge of Interstate's rates would be tempered by a three-year non-compete rather than a one-year period. Accordingly, the Court holds that enforcement of a one-year durational period in the non-compete sufficiently protects Interstate's interests and is no greater than is required.
Beaty also argues that the scope of the type of activity restraint in the non-compete is unreasonable, as it forbids the provision of "any services or products similar to those which Company offers to its customers." Doc. 31, Ex. C. If this Court were to find that such a restraint was greater than required for the protection of the employer, it could, as above, "enforce a narrower term." Hopper , 861 P.2d at 546. However, enforcement of a narrower term here would have no real effect—Beaty previously worked in crane services for Interstate and works in crane services now for Basin. The narrowest type of activity restraint would still logically include crane services given the interests Interstate seeks to protect.
Finally, at oral argument, Beaty asserted that facially unreasonable non-competes are automatically void and unenforceable and urged the Court to consult a recent case, Skaf v. Wyoming Cardiopulmonary Services, P.C. , 2021 WY 105, 495 P.3d 887 (Wyo. 2021). But Skaf confirms that trial courts in Wyoming may modify restrictive covenants. Id. at 902. Wyoming has adopted the "partial enforcement" approach to equitable reformation, which "reforms and enforces the restrictive covenant to the extent that it is reasonable." Id. Skaf makes clear that certain restrictive covenants can be so unreasonable that they are beyond the power of a court to reform, such as when "[a] covenant is so lacking in the essential terms which would protect the employee ... [a] trial court or arbitrator must supply restrictions to make it reasonable." Id. This is in line with Skaf ’s statement that equitable reformation does not "allow the court or arbitrator to rewrite a contract to create a new agreement for the parties." Id. Here, the Court is not rewriting the non-compete, nor is it supplying restrictions. It is only enforcing narrower terms within those already written in the contract. Accordingly, Beaty's argument that the non-compete is facially unreasonable and thus unenforceable fails.
Having determined that the scope of the non-compete (as enforced by the Court) is no greater than is required for Interstate's protection, we will next examine undue employee hardship and public interest before making a final determination of the non-compete's reasonableness and enforceability. See Best Home Health , 491 P.3d at 1030 ("A restraint on trade is reasonable only if it (1) is no greater than is required for the protection of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public")
d. Undue Hardship
Interstate argues that the non-compete agreement does not pose an undue burden on Beaty because he has a college education and "could have done a lot of things" to support himself. Doc. 32, Ex. A, 299:23–300:7. Beaty does not dispute this, nor does he raise any other public policy concerns which could render the non-compete unenforceable. Accordingly, the Court finds that the non-compete's restraint (as narrowly enforced) does not impose undue hardship on Beaty and is not injurious to the public.
e. Enforceability
As a recapitulation of the standard, a valid and enforceable non-compete agreement "requires a showing that the covenant is: (1) in writing; (2) part of a contract of employment; (3) based on reasonable consideration; (4) reasonable in durational and geographical limitations; and (5) not against public policy." Hopper , 861 P.2d at 540. Because these elements have been met, the Court finds that the non-compete agreement—with a geographical scope of a 200-mile radius around Gillette and a one-year term after Beaty's termination—is valid and enforceable.
Accordingly, Interstate's motion for summary judgment on the claim for breach of contract (non-compete) is GRANTED IN PART.
CONCLUSION
Interstate asserts that they are entitled to a determination of damages, requests that it be granted leave to submit a petition for attorneys’ fees and costs (as allowed by the non-compete agreement), and requests leave to file a motion for injunctive relief to enforce the non-compete agreement.
As the issue of damages was not properly briefed to establish damages to a reasonable degree of certainty, such a determination will not be made by the Court at the summary judgment stage nor will it accept further briefing on the matter. It is worth noting that in Wyoming "lost profits are generally recognized as a proper element of recovery for breach of a covenant not to compete." Hopper , 861 P.2d at 547. Further guidance on non-compete damages calculations can be found in Hopper as well as WSP, Inc. v. Wyoming Steel Fabricators and Erectors, Inc. , 2007 WY 80, ¶ 19-23, 158 P.3d 651, 655 (Wyo. 2007).
The Court grants leave to file a motion for attorneys’ fees in relation to enforcement of the non-compete after all claims in the case have been resolved. Because the one-year term of the non-compete agreement (as enforced) expired on August 24, 2021, the Court does not grant leave to file a motion for injunctive relief.
For the foregoing reasons, Plaintiff's motion for summary judgment on their breach of the duty of loyalty and breach of contract claims (Doc. 30) is GRANTED IN PART.
IT IS SO ORDERED.