Opinion
No. 110489.
2015-02-13
POSTAL PRESORT, INC., Appellant, v. Ray STASIECZKO, Appellee.
Appeal from Sedgwick District Court; Jeffrey Syrios, Judge.Kurt A. Harper, of Sherwood, Harper, Dakan, Unruh & Pratt, L.C., of Wichita, for appellant.Randall K. Rathbun and Molly M. Gordon, of Depew Gillen Rathbun & McInteer, LC, of Wichita, for appellee.
Appeal from Sedgwick District Court; Jeffrey Syrios, Judge.
Kurt A. Harper, of Sherwood, Harper, Dakan, Unruh & Pratt, L.C., of Wichita, for appellant. Randall K. Rathbun and Molly M. Gordon, of Depew Gillen Rathbun & McInteer, LC, of Wichita, for appellee.
Before SCHROEDER, P.J., BUSER and ATCHESON, JJ.
MEMORANDUM OPINION
PER CURIAM.
Plaintiff Postal Presort, Inc., sued Defendant Ray Stasieczko, a former employee, in Sedgwick County District Court for pirating what it claimed to be a trade secret and to enforce a noncompete agreement. Following a bench trial, the district court found no trade secret and limited the noncompete agreement to Postal Presort customers in Wichita. The company has appealed both of those rulings. We find no basis to reverse the district court and, therefore, affirm.
The parties are well familiar with both the facts underlying their legal dispute and the history of this litigation. We have no need to recount them in detail. Postal Presort prepares and distributes direct mail advertising for small businesses and has done so for many years. In addition to traditional direct mail, Postal Presort handles computerized document production. The company has a number of customers in Wichita but also does work on a continuing basis for businesses elsewhere in the state, around the country, and in Israel. Stasieczko had considerable experience in the photocopier industry when he started work with Postal Presort in 2012. At that time, Postal Presort had Stasieczko sign a noncompete agreement preventing him from competing “against [Postal Presort] locations” for 2 years after termination of his employment with the company.
With Stasieczko's expertise, Postal Presort began to explore contracting with companies that sell, lease, and work on photocopiers to act as agents to promote its services to their customers. The evidence indicates Stasieczko, with general approval of Postal Presort executives, envisioned creating a distinct entity to engage the photocopier distributors in generating business. That entity would be a consortium of companies like Postal Presort and would divide the new business among the participating companies. Stasieczko's familiarity with and contacts in the photocopier distribution industry were an integral part of the plan.
In late November 2012, Stasieczko and Bryan Pulliam, Postal Presort's founder, met with representatives of other companies to discuss the concept and invite participation in its development. There was conflicting evidence at trial as to whether Stasieczko sought to promote the consortium for his own benefit after Pulliam left the meeting. The participants in that meeting all signed a confidentiality agreement not to disclose what was discussed. Again, there was conflicting evidence as to the purpose of the confidentiality agreement—to protect the marketing concept specifically or to cover other agenda items, including a new envelope design Pulliam had developed.
During the next 2 months, Stasieczko incorporated a company dubbed MAPA in Illinois to pursue photocopier distributors as agents for direct mail businesses and held meetings to promote MAPA. Although Stasieczko continued to work for Postal Presort, the company had not sanctioned those efforts. In early February 2013, Stasieczko resigned from Postal Presort. On February 27, Postal Presort sued Stasieczko. Pertinent to the appeal, Postal Presort contended Stasieczko had breached the noncompete agreement he signed when he started with the company and had violated the Kansas Uniform Trade Secrets Act, K.S.A. 60–3320 et seq. , by misappropriating the plan to market through photocopier distributors. Stasieczko duly answered. The district court issued a temporary restraining order and a temporary injunction, neither of which is disputed on appeal.
The district court conducted a 2–day bench trial in July 2013. The district court found the noncompete agreement to be enforceable for its 2–year term as to any Postal Presort customers in Wichita. The district court, however, determined MAPA and Stasieczko's efforts to promote it fell outside the scope of the agreement. The district court also found that the concept of using photocopier distributors did not amount to a trade secret protected under the Kansas Act. Postal Presort timely appealed those rulings. Stasieczko has not cross-appealed.
We first take up the trade secret ruling. The Kansas Act defines a covered “trade secret” this way:
“[I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(i) derives independent economic value, actual or potential from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” K.S.A. 60–3320(4).
If the disputed matter is not a trade secret within the meaning of the Act, there can be no violation of the Act. That is the crux of the appeal. Whether something constitutes a trade secret is a question of fact. Progressive Products, Inc. v. Swartz, 292 Kan. 947, 957, 258 P.3d 969 (2011). We, therefore, review the district court's determination that no trade secret had been appropriated to see if it is supported by substantial competent evidence. 292 Kan. at 955. Substantial competent evidence is “such legal and relevant evidence as a reasonable person might accept as being sufficient to support a conclusion.” Venters v. Sellers, 293 Kan. 87, 93, 261 P.3d 538 (2011). To the extent the district court specifically resolved conflicting testimony and made credibility determinations, we respect those calls and otherwise take the evidence in a light favoring the prevailing party, here Stasieczko on this issue. See Progressive Products, Inc., 292 Kan. at 955.
In its role as factfinder, the district court essentially concluded that the concept of marketing direct mail services of the type Postal Presort provides through a network of photocopier distributors lacked the degree of development and concreteness necessary to be a trade secret. At the point Stasieczko left Postal Presort and took steps to develop the concept, it was, according to the district court, simply an idea. And that is not enough to be protected under the Act. We agree.
For example, running a light rail commuter service from Wichita to Kansas City is an idea, but it is not a trade secret. Even meeting with potential investors or design engineers to discuss the concept doesn't turn it into a trade secret. While the idea behind MAPA and marketing direct mail services through distributors in a related industry may be more doable than a commuter train or a private space station, for that matter, the ultimate practicality of an idea doesn't make it a trade secret either. As the statutory definition requires, a trade secret must be something possessed of present or potential economic value because it remains confidential, and that something must have substantial content or structure in the nature of a formula, method, or process. Although those requirements do not precisely define a trade secret and in a given case it might be difficult to say for certain whether an idea had matured and developed into a trade secret, this is not such a case. Here, the evidence indicates the idea hadn't progressed from the rudimentary conceptual stage when Stasieczko left Postal Presort.
Had Postal Presort or the proposed consortium actually signed up photocopier distributors under an agreed compensation scheme, the business plan clearly would include proprietary information of interest to competitors and presumably could be classified as a trade secret. Armed with precise information about compensation and other particulars of the arrangement, competitors could outbid Postal Presort or the consortium for the services of the photocopier distributors and effectively appropriate the operation. Even an as yet-to-be implemented business plan with a compensation schedule and similar details likely would be proprietary and might well be a trade secret.
But the district court's conclusion that Postal Presort really had nothing much beyond a bare idea has substantial support in the record evidence. We, therefore, affirm that aspect of the judgment denying relief to Postal Presort under the Act. There simply was no trade secret, within the meaning of K.S.A. 60–3220(4), to be protected.
We turn to the district court's ruling on the noncompete agreement. The relevant part of the three-paragraph agreement provides: “Stasieczko agrees not to enter into competition against POSTAL PRESORT, INC[.], locations as they become known to me during my employment with POSTAL PRESORT, INC[.], for a period of two years following termination of employment with POSTAL PRESORT, INC[.] for any reason....” The agreement is a contract. As a general matter, a contract should be construed to give effect to the intent of the parties consistent with the plain meaning of the language used and considering the whole of the agreement. Thoroughbred Assocs. v. Kansas City Royalty Co., 297 Kan. 1193, 1206, 308 P.3d 1238 (2013) (whole agreement); Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 900, 220 P.3d 333 (2009) (plain language). A noncompete agreement will be strictly construed against the employer benefiting from it. Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755, 762, 112 P.3d 81 (2005). The time and territorial limitations imposed must be reasonable in light of the specific facts. 279 Kan. at 763. On appeal, Stasieczko does not argue the agreement to be contrary to public policy and, therefore, unenforceable in any fashion. See Eastern Distributing Co., Inc. v. Flynn, 222 Kan. 666, 671, 567 P.2d 1371 (1977) (noncompete agreement entered into to limit ordinary competition rather than for specific business purpose considered unenforceable as unreasonable and contrary to public interest).
The district court ordered specific performance of the noncompete agreement for the 2–year period following Stasieczko's resignation from Postal Presort. The parties don't quarrel with that aspect of the judgment, so neither do we.
Postal Presort says the district court erred in limiting the geographical reach of the noncompete agreement to its customers in Wichita. Postal Presort argues that the restriction should apply worldwide, since it has geographically far-flung customers. The issue turns on how to construe the reference to Postal Presort “locations” in the agreement. Postal Presort has one location in the sense of an office or place of business operations, and that is in Wichita. From that location, the company does work for customers from Wichita and elsewhere.
We concede the meaning of the word “locations” as used in the agreement is something less than clear. But that doesn't especially help Postal Presort, since the language is to be strictly construed against the company. We readily reject Postal Presort's suggested reading as restricting Stasieczko anywhere in the world. Apart from the apparent unreasonableness of a restriction of that breadth, the agreement's language cannot be naturally read that way. Had the parties intended a global restriction, there would have been no need to refer to “locations” at all. The agreement would have more likely simply precluded “competition against Postal Presort for a period of two years following termination of employment with Postal Presort for any reason.” The omission of any reference to locations or geographic area would presumably signal a global restriction. Of course, an explicit statement that the restriction applied “worldwide” would have been clearer still.
We, likewise, don't think the language lends itself to precluding competition with all of Postal Presort's customers. The use of “locations” in contrast to “customers” or “clients” would be an odd way of expressing a restriction of that sort.
Ultimately, we cannot say the district court imposed an unreasonable interpretation in keeping Stasieczko from competing in Wichita—Postal Presort's location—with customers there. The evidence indicated the company had a fair customer base in Wichita, although nothing quantified the percentage of customers there. If Postal Presort did no work for Wichita customers, the district court's construction would be suspect. But that isn't the case. The restriction also would seem to extend to some other location where Postal Presort might open a second office or facility during the term of Stasieczko's employment, thereby accounting for the plural use of “locations.” The record evidence and the standards for construing noncompete agreements support the district court's judgment as to the geographical reach of the agreement.
Finally, Postal Presort takes issue with the district court's determination that the noncompete agreement did not apply to MAPA or Stasieczko's efforts to enlist distributors of photocopiers to market direct mail and digital document services. Postal Presort contends MAPA amounts to a competitor because it would promote a marketing scheme in which the distributors might solicit its current customers on behalf of the direct mail companies participating in MAPA. Although this may be a closer question, the language of the noncompete agreement doesn't extend as far as Postal Presort wants it to. Especially given the rule of strict construction, the language more naturally would confine “competition” to the same business and services Postal Presort provides. Neither MAPA nor a similar marketing plan would directly compete with Postal Presort. Any impact on Postal Presort's business, either by capturing existing customers or snapping up potential new customers, would be indirect. In this respect, the noncompete agreement wouldn't seem to prevent Stasieczko from going to work for an advertising agency doing a marketing campaign for one of Postal Presort's competitors.
The district court also found that MAPA was not operating in Wichita and, thus, was outside the reasonable geographical restriction of the noncompete agreement. As we understand the record evidence, neither MAPA nor Stasieczko had contacted customers or potential customers of Postal Presort located in Wichita to offer a directly competing service. The district court's alternative reason for concluding the noncompete agreement did not apply to MAPA or Stasieczko's related efforts has factual support and, therefore, further anchors the judgment.
In all respects, the district court's judgment construing the noncompete agreement and finding no protectable trade secret rests within the evidence and the governing law.
Affirmed.