On March 2, 2021, the Missouri Court of Appeals for the Eastern District issued an opinion addressing Missouri law on civil contempt proceedings and judgments following an injunction that was entered by a trial court for breaches of an employment agreement containing non-competition and non-solicitation clauses. See Chemline Inc. v. Timothy Mauzy, No. ED108603 (Mo. App. E.D. Mar. 2, 2021).
Background
The underlying dispute in Chemline centered on a dispute between a sales representative—Timothy Mauzy (“Mauzy”)—and his former employer—Chemline Inc. (“Chemline”). Mauzy had an employment agreement with Chemline that contained non-competition and non-solicitation provisions. Mauzy left Chemline and Chemline thereafter sued Mauzy, claiming he violated these provisions.
The trial court agreed with Chemline and entered a permanent injunction order (“Order”) that, for a period of twelve (12) months from the date of the Order, prohibited Mauzy from contacting five (5) customers with whom Mauzy had a relationship during his employment with Chemline.
While the Order was in effect, Mauzy contacted or otherwise had contact with individual employees of some of the five (5) customers named in the Order. Chemline presumably caught wind of this contact and thereafter initiated contempt proceedings before the trial court. The trial court found Mauzy engaged in willful disobedience of the Order and entered a judgment of contempt.
In its judgment, the trial court ordered Mauzy to pay Chemline a $2,000 compensatory fine, in addition to $6,000 in attorneys’ fees. The trial court also found, however, “that Chemline cannot demonstrate a quantified diminution in their business sales as a result of [Mauzy’s] complained-of conduct.” Mauzy then appealed the contempt judgment.
Appeal
On appeal, Mauzy challenged the judgment on several grounds. First, he argued he did not willfully violate the Order, which—according to him—did not “clearly, unambiguously, and expressly prohibit[]” the type of contact he had with the individual employees of the five (5) customers.
Mauzy argued that this contact was not with the customer companies themselves. He also argued the contact was either not initiated by him or that the contact was otherwise not related to business matters or dealings.
The Eastern District rejected these arguments. It held “[u]nder the circumstances here, the prohibition on contacting the company customers encompasses the employee contact points with whom Mauzy closely worked.”
It also found the Order’s prohibition on “contact” was reasonably worded and so not so vague as to be unenforceable. In so finding, the Eastern District specifically noted that “the enforceability of the Order is not before this Court and a challenge to clarify or modify the Order should have been brought prior to an appeal from a contempt judgment.”
Second, Mauzy argued the $2,000 compensatory fine lacked evidentiary support in the record developed before the trial court and cited to Missouri case law stating that a compensatory fine must relate to actual damages suffered by a party as a result of the contemptuous conduct. Chemline, however, argued that the record contained testimony that its business relationships were harmed and it suffered lost profits—that is, it suffered damages which are difficult to quantify.
The Eastern District agreed with Mauzy for two reasons: (1) the trial court expressly found Chemline could not demonstrate a quantified diminution in business sales as a result of Mauzy’s conduct; and (2) there was no other evidence in the record of the value of any resulting loss to Chemline. As such, “the trial court had nothing before it on which to base a ‘compensatory fine.’” (citing Tashma v. Nucrown, Inc., 23 S.W.3d 248, 252 (Mo. App. E.D. 2000)).
Takeaways
Non-compete disputes may be resolved in several different ways. Sometimes their resolution occurs after a trial or hearing via a Court order and judgment, such as a permanent injunction, which dictates what the party or parties can or cannot do for a specific time period. Sometimes these orders use broad or simple terms and questions may reasonably exist as to their scope or meaning.
Chemline makes clear what an individual who is subject to such an order should do in the event of uncertainty about what an Order does or does not prohibit. Such an individual should seek clarification from the court that issued the order before engaging in questionable conduct and should not wait until contempt proceedings are initiated over their conduct to voice such questions or concerns.
Chemline, however, also makes clear that a party seeking to hold another party in contempt must be able to present some evidence of damages resulting from the contemptuous party’s conduct in order to request and obtain a compensatory fine. At the end of the day, the difficulty of proving damages such as lost profits and harm to business relationships will not excuse a party’s failure to present some evidence on this issue.
