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Wechem, Inc. v. Evans

Court of Appeals of Louisiana, Fifth Circuit

May 30, 2019

WECHEM, INC.
v.
WILL EVANS

          ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 788-451, DIVISION "I" HONORABLE NANCY A. MILLER, JUDGE PRESIDING

          COUNSEL FOR PLAINTIFF/APPELLEE, WECHEM, INC. Frederic T. LeClercq Andrew J. Baer Isaac H. Ryan

          COUNSEL FOR DEFENDANT/APPELLANT, WILL EVANS L. Etienne Balart Jennifer A. David

          Panel composed of Judges Susan M. Chehardy, Jude G. Gravois, and Marc E. Johnson

          SUSAN M. CHEHARDY CHIEF JUDGE

         Defendant appeals from a trial court judgment granting a preliminary injunction in favor of his former employer enforcing a non-competition/non-solicitation agreement signed by both parties. For the reasons that follow, we amend the trial court's judgment and affirm the judgment, as amended.

         FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         Plaintiff, Wechem, Inc. ("Wechem") is a Louisiana corporation engaged in the manufacture, sale, resale, distribution, and packaging of chemicals, including janitorial, industrial, water treatment and others, and institutional supplies and chemicals. The water treatment chemicals Wechem sells are primarily used in institutional HVAC applications.

         Defendant, Will Evans, was formerly employed by Wechem as a sales representative from 1991 until May 2018. At the time of his hire, Evans worked for Wechem on a commission basis with no formal written employment contract. In October 2007, as a condition of his continued employment, Evans was required to enter into a Sales Representative Exclusive Account Contract (the "Agreement"), which contained, among other provisions, an agreement not to compete and an agreement not to solicit customers. Paragraph 8 contained a geographical limitation prohibiting Evans from engaging in any business or selling any products similar to that of Wechem within nine Louisiana parishes and one Mississippi county for a twenty-four month period following his separation of employment with Wechem. Paragraph 10 contained a solicitation prohibition requiring Evans to refrain from selling to or soliciting Wechem's existing customers within the same nine Louisiana parishes and one Mississippi county, also for a period of twenty-four months.

         W. Earl Phillips, the president/chief executive officer for Wechem, executed the Agreement on behalf of Wechem on October 4, 2007. Evans initially refused to sign the contract due to concerns that, as written, the Agreement did not protect his future compensation regarding sales commissions. In response to Evans' concerns, Wechem added a compensation addendum, which provided:

The Sales Representative shall be paid pursuant to the current Wechem Commission Policy unless a different commission policy is agreed upon by Company and Sales Representative, and the policy is put in writing and signed by the appropriate Wechem representative.

         Once the compensation addendum was incorporated into the employment contract as per Evans' request, Evans signed the Agreement on October 23, 2007. By freely and voluntarily signing the Agreement, Evans conceded that he had read and fully understood "each and every provision" and that he "accept[ed] and agree[d] to the same." Evans worked under the terms and conditions of this Agreement from October 2007 until he separated from Wechem in May 2018.

         Pursuant to the compensation addendum, and under the "Wechem Commission Policy" existing at the time the Agreement was confected in 2007, commissions on all of Evans' sales were based on a 50/50 split of the profit amount realized on every sale, and his commission percentage averaged from 27% to 29% of gross sales each year. In the fall of 2017, Wechem announced its plan to modify the commission structure of its sales force. This modification differed from the compensation scheme Wechem had in place in 2007 when Evans executed the Agreement, in that it placed an approximate 18% cap on Evans' sales commissions yielding a decrease in Evans' annual commissions. In 2005, Evans received special training and obtained certification as a water technologist. Due to Evans' specialization in water treatment chemicals, Wechem management recognized that Evans' specialization set him apart from other Wechem sales representatives and that the modified compensation scheme would affect him differently. Thus, as a result of back-and-forth negotiations between Evans and Wechem's CEO, Olin Kropog, it was determined that the company's modified 18% cap on commissions as to Evans would be implemented only as to his sale of janitorial products-the commissions on Evans' sale of water treatment chemicals, which comprised approximately 75-80% of his sales, would remain unchanged.

         In an August 18, 2017 email from Kropog to Evans, Kropog memorialized that Wechem was not going to modify Evans' sales commission on water treatment chemicals, but that Wechem would apply the 18% commission to other non-water treatment products he sold. It is undisputed that the email transmitted by Kropog to Evans was sent in Kropog's capacity as the CEO of Wechem and that the email bore Kropog's electronic signature.[1] Evans was paid pursuant to the modified compensation scheme as outlined in Kropog's August 18, 2017 email, from that time through the date of his separation from the company in May 2018.

         In November 2017, while still employed with Wechem, Evans began communicating with Bill Buckley, the Senior Vice President/National Sales Manager of Momar, Inc., a direct competitor to Wechem.[2] Thereafter, in April 2018, Evans met with Buckley and Momar's owner, Julian Mohr, to discuss Evans' separation from Wechem and his move over to work as a sales representative for Momar. Also while still employed with Wechem, Evans became aware that one of the Mississippi customers he serviced for Wechem had advertised a request for public bid to supply water treatment chemicals. Evans withheld information regarding the upcoming bid opening from Wechem management. Instead, in anticipation of his transfer to Momar and in an attempt to obtain this customer's account for Momar, Evans provided Buckley with information regarding Wechem's contract with this Mississippi customer, which included Wechem's pricing structure and bid package. Additionally, prior to leaving Wechem, Evans admittedly contacted at least three of Wechem's existing customers in an attempt to solicit them to transfer their business to Momar, where he would soon be employed.

         According to Evans, his resignation from Wechem on May 30, 2018 was a direct consequence of Wechem's change in its commission policy and the resulting loss of his commission earnings.[3] Upon leaving, Evans immediately began working as a sales representative for Momar selling many of the same and/or similar products sold by Wechem, as well as other products that Wechem does not carry, and providing testing and treatment services. Additionally, within the first weeks of working for Momar, Evans targeted and tried to sell water treatment chemicals to customers that he had previously serviced while employed at Wechem.[4]

         Also soon after Evans' departure from Wechem, several of Wechem's customers advised Wechem that they were "moving in a different direction" and were no longer in need of Wechem's services. Evans conceded that he solicited several of these customers to move their business with him to Momar. According to Wechem, it did not become aware that Evans was in violation of the Agreement until August 2018, when a Wechem salesman attempted to make a sales call on one of its customers and was apprised that Evans had solicited the customer's water treatment business for Momar. Additionally, during his sales calls of former and existing Wechem customers, the Wechem salesman discovered Momar chemicals on the premises of several of these customers.

         After obtaining confirmation that Evans was in breach of the Agreement, Wechem sent a cease and desist letter to Evans and the owner of Momar via certified mail on September 7, 2018. Thereafter, on October 11, 2018, Wechem filed suit against Evans, seeking preliminary and permanent injunctions against him for violation of the Agreement's non-competition and non-solicitation provisions and for damages for breach of contract. Specifically, Wechem's petition sought to restrain and enjoin Evans for a period of twenty-four months from the date of his separation of employment with Wechem from (1) working for Momar and/or any other competitor of Wechem in Hinds County, Mississippi, and nine Louisiana parishes, and (2) from directly or indirectly soliciting or encouraging any Wechem customer to move its business to Momar.

         A hearing on the preliminary injunction was held on October 31, 2018. At the conclusion, the trial court orally rendered judgment granting Wechem's request for a preliminary injunction, finding that Wechem would suffer irreparable injury, loss or damage if the preliminary injunction was not issued; that Wechem was entitled to the relief sought; and, that Wechem had carried its burden of showing that it was likely to prevail on the merits. The trial court ruled that Evans was prohibited from working for any Wechem competitor, including Momar, in Hinds County, Mississippi and in the nine Louisiana parishes set forth in the Agreement. The trial court also prohibited Evans from directly or indirectly soliciting any Wechem customers that purchased Wechem products while Evans was employed by Wechem. A written preliminary injunction was entered on October 31, 2018.

         The instant appeal ensued.

         ISSUES PRESENTED FOR REVIEW

         On appeal, Evans avers that the trial court erred: (1) by enforcing the noncompetition Agreement between himself and Wechem, which Wechem purportedly breached by not paying Evans in accordance with the Agreement's compensation addendum; (2) by enjoining Evans from working in parishes in which Wechem failed to establish that it was carrying on a "like business" as required by La. R.S. 23:921(C); (3) by issuing an order that, effectively, prevents Evans from any employment with his current employer, regardless of whether such employment is "in competition" as is required by La. R.S. 23:921; and (4) by issuing an order that fails to sufficiently describe the prohibited conduct and/or is otherwise impermissibly overly broad.

         LAW AND DISCUSSION

         Applicable Legal Principles

         A preliminary injunction is essentially an interlocutory procedural device designed to preserve the status quo between the parties pending a trial on the merits. Novelaire Techs., L.L.C. v. Harrison, 08-157 (La.App. 5 Cir. 8/19/08), 994 So.2d 57, 60. The primary purpose of injunctive relief is to prevent the occurrence of future acts that may result in irreparable injury, loss, or damage to the applicant. Ryan Gootee Gen. Contractors, LLC v. Plaquemines Par. Sch. Bd. & One Const., Inc., 15-325 (La.App. 5 Cir. 11/19/15), 180 So.3d 588, 598. Although the judgment on a preliminary injunction is interlocutory, a party aggrieved by a judgment either granting or denying a preliminary injunction is entitled to an appeal. La. C.C.P. art. 3612.

         Typically, a trial court is granted wide discretion in determining whether an injunction is warranted, and its issuance of a preliminary injunction will not be disturbed on appeal absent manifest error or a clear abuse of discretion. Yorsch v. Morel, 26-662 (La.App. 5 Cir. 7/27/17), 223 So.3d 1274, 1281, writ denied, 17- 1475 (La. 11/13/17), 230 So.3d 207. However, where the trial court's decision is based on an erroneous interpretation or application of the law, rather than a valid exercise of discretion, such an incorrect decision is not entitled to deference by the reviewing court. West Carroll Health Sys., L.L.C. v. Tilmon, 47, 152 (La.App. 2 Cir. 5/16/12), 92 So.3d 1131, 1133.

         Historically, Louisiana has disfavored non-competition agreements. SWAT 24 Shreveport Bossier, Inc. v. Bond, 00-1695 (La. 6/29/01), 808 So.2d 294, 298. Louisiana's strong public policy restricting these types of agreements is premised on an underlying state objective to prevent an individual from contractually depriving himself of the ability to support himself and consequently becoming a public burden.[5] Id.; see also H2O Hair, Inc. v. Marquette, 06-930 (La.App. 5 Cir. 5/15/07), 960 So.2d 250, 258. Such agreements are deemed to be against public policy, except under limited circumstances delineated by statute. The applicable statute is La. R.S. 23:921, which provides, in pertinent part:

A. (1) Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void. However, every contract or agreement, or provision thereof, which meets the exceptions as provided in this Section, shall be enforceable.
C. Any person … may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like ...

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