We are often asked whether specific noncompete agreements are enforceable. The answer is that it depends. Generally, in Minnesota, noncompete agreements are enforceable, if they are reasonable. To determine the reasonableness of a noncompete agreement, the court considers: (1) whether the restraint is necessary for the protection of the business or goodwill of the employer, (2) whether the restraint is greater than necessary to adequately protect the employer’s legitimate interests, (3) how long the restriction lasts and (4) the geographic scope of the restriction. The case below, is an example of how one Minnesota court applied the the law to the facts of the case before it.
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Life Time Fitness, Inc., Plaintiff,
v.
Daniel DeCelles, Defendant.
Civil No. 12-420(DSD/SER).
United States District Court, D. Minnesota.
February 28, 2012.
ORDER
DAVID S. DOTY, District Judge.
This matter came before the court on February 27, 2012, upon the motion for temporary restraining order (TRO) by plaintiff Life Time Fitness, Inc. (LTF). LTF and defendant Daniel DeCelles appeared through counsel. Based on a review of the file, record and proceedings herein, and for the following reasons, the court grants the TRO in part.
BACKGROUND
LTF is a Minnesota corporation with health and fitness clubs across the nation, including five locations in Arizona. See Compl. ¶¶ 1, 5. LTF provides personal training services, with the goal of “promot[ing] healthy life styles and help[ing] … [clients] meet fitness goals.” Id. ¶ 7. DeCelles began working at the Tempe, Arizona LTF location on 1616 West Ruby Drive as a personal trainer on June 28, 2010. His primary responsibilities at LTF included recruiting new members; creating and conducting workout programs for existing members; and tracking members’ “health history, workout routines, completed workouts, data regarding LTF services… and personal contact information.” Id. ¶ 8.
DeCelles signed a personal trainer employment agreement (Agreement) as a condition of employment. The Agreement required DeCelles to not “directly or indirectly use [confidential business and proprietary information[1] (CBPI)] at any time during … employment at LTF.” Campbell Decl. Ex. 1, at 3. DeCelles also could not “directly or indirectly, during … employment at LTF or thereafter, use or disclose CBPI to any person or organization, unless authorized in writing by a person of authority at LTF.” Id. Upon termination of employment, DeCelles further agreed to “turn over to LTF any and all tangible items supplied … by LTF (including but not limited to CBPI), all member lists, and employee lists.” Id. at 4.
The Agreement also included several covenants:
2. Covenant Not to Solicit the Business of LTF Members, Customers, Clients, and Employees
I agree that during the term of my employment and for a period of twelve (12) months after my termination at LTF, … [I] will not directly or indirectly, on behalf of myself or any other person or entity:
a. call upon LTF’s members (including those solicited, obtained, serviced and/or maintained by Employee) for the purpose of soliciting and/or providing personal training-related services;
b. canvas, solicit, or accept any similar or competitive personal training-related business from any customer, member, employee and/or client of LTF;
c. induce customers, members, employees and/or clients to patronize any Competing Business offering or intending to offer personal training; or
d. request, advise, assist, or in any way facilitate any customer, member, or client of LTF to withdraw, reduce or cancel its business relationship with LTF.
3. Covenant Not to Solicit LTF Employees for other Employment
I agree that during the term of my employment and for a period of twelve (12) months after my termination at LTF, I will not directly or indirectly, on behalf of myself or any other person or entity:
a. request, advise, assist, or in any way facilitate any employee or supplier of LTF to withdraw, reduce or cancel its business or employment relationship with LTF; or
b. induce, solicit, request or advise any of LTF’s employees to accept employment with any Competing Business or otherwise take any action detrimental to the relationships between LTF and its employees.
4. Covenant Not to Compete
I agree that during the term of my employment with LTF and for a period of nine (9) months after my termination at LTF, I will not, directly or indirectly, on behalf of myself or any other person or entity:
a. be employed by or serve as an independent contractor or consultant to any Competing Business within the Covered Geographic Area;[2] or
b. advertise, market, sell, take orders for, or provide Personal training-related services for any Competing Business in the Covered Geographic Area.
Id. at 3-4.
DeCelles left his employment with LTF on November 12, 2011, and allegedly took thirty to forty LTF client files to his new employer, Arizona Spine and Disc. See id. ¶ 16; Compl. ¶¶ 24-26. After LTF contacted Arizona Spine and Disc regarding the terms of the Agreement, Decelles’s employment was terminated. See Compl. ¶ 26. In late January DeCelles began working at Pro Fitness (PF). See Campbell Decl. ¶ 23; Compl. ¶ 26. PF is a personal-fitness facility engaged in a business similar to LTF. See Compl. ¶ 28-30. PF is located at 7420 S. Rural Road, roughly 2.8 miles from LTF’s Tempe location. Ella Decl. Ex. 2.
Since joining PF, several LTF personal trainers have received phone calls on their personal phones from the owner of PF asking them to join the PF staff. See Compl. ¶ 33. Further, several LTF members who DeCelles previously trained have cancelled their memberships and requested refunds for money paid for personal training. See id. ¶¶ 34-35. LTF is required to issue refunds without a copy of the original member contracts, which LTF alleges DeCelles stole. Id. ¶ 37.
On February 17, 2012, LTF moved for a TRO, and the court scheduled a hearing for February 27, 2012. Following oral argument, the court advised the parties to confer and submit a joint proposed order by the end of the business day. The parties did not reach agreement, and the court now addresses the motion.
DISCUSSION
I. Personal Jurisdiction
DeCelles argues that the court lacks personal jurisdiction. “Due process is satisfied when a defendant consents to personal jurisdiction by entering into a contract that contains a valid forum selection clause.” Dominum Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 728 (8th Cir. 2001) (citations omitted).[3] “Forum selection clauses are prima facie valid and are enforced unless they are unjust or unreasonable or invalid ….” M.B. Rests. Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir. 1999) (citation omitted). The Agreement states that “both parties agree that venue shall be proper in the state and federal courts of Minnesota.” Campbell Decl. Ex. 1, at 5. DeCelles does not argue that the forum selection clause is improper. Therefore, DeCelles has consented to personal jurisdiction in Minnesota.
DeCelles next argues that the court must determine whether the forum selection clause is permissive or mandatory prior to entering a TRO. The court disagrees. See, e.g., Bel Canto Design, Ltd. v. MSS HiFi, No. 11-cv-2126, 2011 WL 4036409, at *2 (D. Minn. Sept. 12, 2011) (transferring case to new venue after entering TRO); see also Mo. Housing Dev. Comm’n v. Brice, 919 F.2d 1306 (8th Cir. 1990) (citation omitted) (noting that more than one district may serve as a proper venue). Therefore, jurisdiction is proper.[4]
II. TRO
A TRO is an extraordinary equitable remedy, and the movant bears the burden of establishing its propriety. See Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003). The court considers four factors in determining whether a TRO should issue: (1) the threat of irreparable harm to the movant in the absence of relief, (2) the balance between that harm and the harm that the relief may cause the non-moving party, (3) the likelihood of the movant’s ultimate success on the merits and (4) the public interest. See Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc).
As an initial matter, the court must determine whether Minnesota or Arizona law applies to this dispute. The court applies choice-of-law rules under diversity jurisdiction. See Interstate Cleaning Corp. v. Commercial Underwriters Ins. Co., 325 F.3d 1024, 1028 (8th Cir. 2003). The Agreement states that “[t]he law of the state of Minnesota shall govern the terms, interpretation, and enforcement of the Agreement.” Campbell Decl. Ex. 1, at 5. Minnesota courts traditionally enforce choice-of-law provisions. See Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d 377, 380 n.1 (Minn. 1980). Therefore, the court applies Minnesota law.
A. Irreparable Harm
LTF argues that the continued competition by DeCelles in violation of the Agreement will result in irreparable harm. To show irreparable harm, “a party must show that the harm is certain and great and of such imminence that there is a clear and present need for equitable relief.” Iowa Utils. Bd. v. F.C.C., 109 F.3d 418, 425 (8th Cir. 1996). “[P]otential loss of goodwill qualifies as irreparable harm.” Id. at 426. Irreparable harm is presumed, where, as here, a “professional employee[] … acquire[s] influence over patients or clients of their employer.” See Rosewood Mortg. Corp. v. Hefty, 383 N.W.2d 456, 459 (Minn. Ct. App. 1986) (citation omitted). Moreover, DeCelles acknowledged that “immediate irreparable damage will result to LTF if [the] employee breaches any of the covenants set forth in this Agreement.” Campbell Decl. Ex. 1, at 4. Therefore, this factor weighs in favor of LTF.
B. Balance of Harms
The court has already determined that plaintiff’s goodwill is harmed by defendant’s acts. Balanced against that harm is the harm to the defendant’s ability to work as a personal trainer. Such harm is lessened, however, by the fact that there is no evidence in the record that a TRO will prevent DeCelles from working. Cf. CDI Energy Servs., Inc. v. W. River Pumps, Inc., 567 F.3d 398, 403 (8th Cir. 2009) (holding that balance of harms favored defendant when it “appear[ed] undisputed that an injunction would put the defendants out of business”). Indeed, DeCelles is only prevented from working within a five mile radius of LTF facilities. See Campbell Decl. Ex. 1, at 2. Therefore, this factor weighs in favor of LTF.
C. Likelihood of Success on the Merits
The court next considers the likelihood that the movant will prevail on the merits. S & M Constructors, Inc. v. Foley Co., 959 F.2d 97, 98 (8th Cir. 1992). A TRO “motion is too early a stage of the proceedings to woodenly assess a movant’s probability of success on the merits with mathematical precision.” Gen. Mills, Inc. v. Kellogg Co., 824 F.2d 622, 624 (8th Cir. 1987). The court does not decide whether the movant will ultimately win, or if a greater than fifty-percent likelihood of success exists. See Glenwood Bridge, Inc. v. City of Minneapolis, 940 F.2d 367, 371 (8th Cir. 1991).
LTF alleges claims for breach of contract, misappropriation of trade secrets, conversion, breach of the duty of loyalty, unfair competition and tortious interference with prospective business relationships. LTF need only demonstrate that it is likely to succeed on one claim in order to satisfy this prong of Dataphase. See United Healthcare Ins. Co. v. AdvancePCS, 316 F.3d 737, 742-43 (8th Cir. 2002).
Although disfavored, noncompete agreements are enforced when reasonable and supported by adequate consideration. See Prow v. Medtronic, Inc., 770 F.2d 117, 120 (8th Cir. 1985) (interpreting Minnesota law). To determine the reasonableness of a noncompete agreement, the court considers: (1) whether the restraint is necessary for the protection of the business or goodwill of the employer, (2) whether the restraint is greater than necessary to adequately protect the employer’s legitimate interests, (3) how long the restriction lasts and (4) the geographic scope of the restriction. Id. (citing Bennett v. Storz Broad. Co., 134 N.W.2d 892, 899 (1965)).[5]
In the present action, restraint is necessary to protect the legitimate interest of LTF in its “goodwill, trade secrets, and confidential information.” Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 4556 (Minn. Ct. App. 2001) (citation omitted). Further, the covenant is narrow in its geographic scope and length of time. See, e.g., Boston Scientific Corp. v. Duberg, 754 F. Supp. 2d. 1033, 1039 (D. Minn. 2010) (citation omitted) (noting that one-year restrictions are “consistently found” to be reasonable); Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d 698, 703 (Minn. Ct. App. 1989) (upholding a geographic restriction that was limited to area necessary to protect former employer). Moreover, consideration is not an issue. See Overholt Crop Ins. Serv. Co., 437 N.W.2d at 702 (explaining that “no independent consideration is necessary” to support a noncompete agreement when entered into at inception of employment). Therefore, because the covenant is reasonable, plaintiff is likely to succeed in its breach of contract claim, and this factor weighs in favor of LTF.[6]
D. Public Interest
The public interest does not strongly favor one party over the other. There is a public interest in upholding contractual agreements. See Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801, 805 (8th Cir. 2003). There also is a public interest in unrestrained competition. See Calvin Klein Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 505 (8th Cir. 1987). Here, it appears that DeCelles is engaging in competition that is in violation of the Agreement. Therefore, the public interest factor favors LTF. Accordingly, based upon a balancing of the four Dataphase factors, a TRO is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1. Plaintiff’s motion for a temporary restraining order [ECF No. 2] is granted in part;
2. Defendant whether alone, through an LLC or other corporate entity, or in concert with others, including any officer, agent, employee, and/or representative of Pro Fitness is restrained from directly or indirectly:
a. Being employed by, contracting with, or being connected in any manner with, any business competitive with LTF within a five mile radius of any place of business owned or affiliated with LTF that offers or intends to offer personal training;
b. Calling upon any of LTF’s members, customers, or clients for the purpose of soliciting or selling to any such persons any products or services similar to those of LTF;
c. Providing services to, diverting or taking away any of LTF’s clients;
d. Soliciting any of LTF’s employees;
e. Communicating, disclosing, divulging or furnishing any of LTF’s confidential and proprietary information or trade secrets to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever;
f. Using any of LTF’s confidential and proprietary information or trade secrets; or
g. Interfering with LTF’s current prospective business relations;
3. Defendant shall immediately cease employment with Pro Fitness;
4. Defendant shall return all of LTF’s confidential, proprietary, and trade secret information in his possession and control, including, but not limited to, all member files and contracts;
5. Defendant shall preserve all documents and data of any nature whatsoever, including but not limited to electronic documents, electronic mail, and corporate documents of or relating to LTF or Pro Fitness, and is not to destroy any documents or data of any nature whatsoever during the pendency of this action;
6. The parties may engage in expedited discovery, which includes one, eight-hour deposition per side;
7. Plaintiffs shall post a bond of $5,000 pursuant to Federal Rule of Civil Procedure 65 within two business days of the issuance of this order; and
8. This order shall remain in effect for fourteen days.
[1] Confidential business and proprietary information includes “any information or material that (a) is not generally known other than by LTF, (b) is reasonably determined to be confidential and (c) Employee may obtain knowledge about as a result of employment with LTF.” Campbell Decl. Ex. 1, at 2.
[2] A “covered geographic area” includes “the area within a five (5) mile radius from any place of business owned or affiliated with LTF that offers or intends to offer personal training.” Campbell Decl. Ex. 1, at 2.
[3] The court notes that only a prima facie showing of jurisdiction is necessary at the TRO stage. Coen v. Coen, 509 F.3d 900, 904 (8th Cir. 2007).
[4] DeCelles also appears to argue that venue is improper. A motion to transfer venue, however, is not before the court.
[5] The court notes that Arizona supplies a similar analysis. See Compass Bank v. Hartley, 430 F. Supp. 2d 973, 979-81 (D. Ariz. 2006).
[6] Even if the noncompete was unreasonable, the court has the power to “blue pencil” the Agreement. See Witzke v. Mesabi Rehab. Servs., Inc., 768 N.W.2d 127, 129 n.1 (Minn. Ct. App. 2009) (citation omitted) (giving court discretion “to modify unreasonable restrictions on competition in an employment agreement by enforcing restrictions only to the extent reasonable”); see also Campbell Decl. Ex. 1, at 4 (“If a court of competent jurisdiction holds that the restrictions … are unreasonable under the circumstances then existing, the parties to this Agreement agree that the Court shall substitute the maximum period, scope, or geographical area reasonable under the circumstances.”).
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-420(DSD/SER)
Life Time Fitness, Inc.,
Plaintiff,
v. ORDER
Daniel DeCelles,
Defendant.
V. John Ella, Esq., Sarah M. Fleegel, Esq. and Jackson
Lewis, LLP, 225 South Sixth Street, Suite 3850,
Minneapolis, MN 55402, counsel for plaintiff.
Leslie M. Witterschein, Esq., James A. Wahl, Esq. and
Monroe, Moxness & Berg, PA, 8000 Norman Center Drive,
Suite 1000, Bloomington, MN 55437 and Lee Henman, Jr.,
Esq. and Henman Law Firm, PC, 3131 East Camelback Road,
Suite 200, Phoenix, AZ 85016, counsel for defendant.
This matter came before the court on February 27, 2012, upon
the motion for temporary restraining order (TRO) by plaintiff Life
Time Fitness, Inc. (LTF). LTF and defendant Daniel DeCelles
appeared through counsel. Based on a review of the file, record
and proceedings herein, and for the following reasons, the court
grants the TRO in part.
BACKGROUND
LTF is a Minnesota corporation with health and fitness clubs
across the nation, including five locations in Arizona. See Compl.
¶¶ 1, 5. LTF provides personal training services, with the goal of
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 1 of 13
“promot[ing] healthy life styles and help[ing] … [clients] meet
fitness goals.” Id. ¶ 7. DeCelles began working at the Tempe,
Arizona LTF location on 1616 West Ruby Drive as a personal trainer
on June 28, 2010. His primary responsibilities at LTF included
recruiting new members; creating and conducting workout programs
for existing members; and tracking members’ “health history,
workout routines, completed workouts, data regarding LTF services
… and personal contact information.” Id. ¶ 8.
DeCelles signed a personal trainer employment agreement
(Agreement) as a condition of employment. The Agreement required
DeCelles to not “directly or indirectly use [confidential business
and proprietary information (CBPI)] at any time during … 1
employment at LTF.” Campbell Decl. Ex. 1, at 3. DeCelles also
could not “directly or indirectly, during … employment at LTF or
thereafter, use or disclose CBPI to any person or organization,
unless authorized in writing by a person of authority at LTF.” Id.
Upon termination of employment, DeCelles further agreed to “turn
over to LTF any and all tangible items supplied … by LTF
(including but not limited to CBPI), all member lists, and employee
lists.” Id. at 4.
Confidential business and proprietary information includes 1
“any information or material that (a) is not generally known other
than by LTF, (b) is reasonably determined to be confidential and
(c) Employee may obtain knowledge about as a result of employment
with LTF.” Campbell Decl. Ex. 1, at 2.
2
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 2 of 13
The Agreement also included several covenants:
2. Covenant Not to Solicit the Business of LTF
Members, Customers, Clients, and Employees
I agree that during the term of my
employment and for a period of twelve (12)
months after my termination at LTF, … [I]
will not directly or indirectly, on behalf of
myself or any other person or entity:
a. call upon LTF’s members (including
those solicited, obtained, serviced and/or
maintained by Employee) for the purpose of
soliciting and/or providing personal trainingrelated
services;
b. canvas, solicit, or accept any similar
or competitive personal training-related
business from any customer, member, employee
and/or client of LTF;
c. induce customers, members, employees
and/or clients to patronize any Competing
Business offering or intending to offer
personal training; or
d. request, advise, assist, or in any way
facilitate any customer, member, or client of
LTF to withdraw, reduce or cancel its business
relationship with LTF.
3. Covenant Not to Solicit LTF Employees for
other Employment
I agree that during the term of my
employment and for a period of twelve (12)
months after my termination at LTF, I will not
directly or indirectly, on behalf of myself or
any other person or entity:
a. request, advise, assist, or in any way
facilitate any employee or supplier of LTF to
withdraw, reduce or cancel its business or
employment relationship with LTF; or
b. induce, solicit, request or advise any
of LTF’s employees to accept employment with
any Competing Business or otherwise take any
action detrimental to the relationships
between LTF and its employees.
4. Covenant Not to Compete
I agree that during the term of my
employment with LTF and for a period of nine
(9) months after my termination at LTF, I will
3
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 3 of 13
not, directly or indirectly, on behalf of
myself or any other person or entity:
a. be employed by or serve as an
independent contractor or consultant to any
Competing Business within the Covered
Geographic Area; or 2
b. advertise, market, sell, take orders
for, or provide Personal training-related
services for any Competing Business in the
Covered Geographic Area.
Id. at 3-4.
DeCelles left his employment with LTF on November 12, 2011,
and allegedly took thirty to forty LTF client files to his new
employer, Arizona Spine and Disc. See id. ¶ 16; Compl. ¶¶ 24-26.
After LTF contacted Arizona Spine and Disc regarding the terms of
the Agreement, Decelles’s employment was terminated. See Compl.
¶ 26. In late January DeCelles began working at Pro Fitness (PF).
See Campbell Decl. ¶ 23; Compl. ¶ 26. PF is a personal-fitness
facility engaged in a business similar to LTF. See Compl. ¶ 28-30.
PF is located at 7420 S. Rural Road, roughly 2.8 miles from LTF’s
Tempe location. Ella Decl. Ex. 2.
Since joining PF, several LTF personal trainers have received
phone calls on their personal phones from the owner of PF asking
them to join the PF staff. See Compl. ¶ 33. Further, several LTF
members who DeCelles previously trained have cancelled their
memberships and requested refunds for money paid for personal
A “covered geographic area” includes “the area within a five 2
(5) mile radius from any place of business owned or affiliated with
LTF that offers or intends to offer personal training.” Campbell
Decl. Ex. 1, at 2.
4
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 4 of 13
training. See id. ¶¶ 34-35. LTF is required to issue refunds
without a copy of the original member contracts, which LTF alleges
DeCelles stole. Id. ¶ 37.
On February 17, 2012, LTF moved for a TRO, and the court
scheduled a hearing for February 27, 2012. Following oral
argument, the court advised the parties to confer and submit a
joint proposed order by the end of the business day. The parties
did not reach agreement, and the court now addresses the motion.
DISCUSSION
I. Personal Jurisdiction
DeCelles argues that the court lacks personal jurisdiction.
“Due process is satisfied when a defendant consents to personal
jurisdiction by entering into a contract that contains a valid
forum selection clause.” Dominum Austin Partners, L.L.C. v.
Emerson, 248 F.3d 720, 728 (8th Cir. 2001) (citations omitted). 3
“Forum selection clauses are prima facie valid and are enforced
unless they are unjust or unreasonable or invalid ….” M.B.
Rests. Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir. 1999)
(citation omitted). The Agreement states that “both parties agree
that venue shall be proper in the state and federal courts of
Minnesota.” Campbell Decl. Ex. 1, at 5. DeCelles does not argue
The court notes that only a prima facie showing of 3
jurisdiction is necessary at the TRO stage. Coen v. Coen, 509 F.3d
900, 904 (8th Cir. 2007).
5
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 5 of 13
that the forum selection clause is improper. Therefore, DeCelles
has consented to personal jurisdiction in Minnesota.
DeCelles next argues that the court must determine whether the
forum selection clause is permissive or mandatory prior to entering
a TRO. The court disagrees. See, e.g., Bel Canto Design, Ltd. v.
MSS HiFi, No. 11-cv-2126, 2011 WL 4036409, at *2 (D. Minn. Sept.
12, 2011) (transferring case to new venue after entering TRO); see
also Mo. Housing Dev. Comm’n v. Brice, 919 F.2d 1306 (8th Cir.
1990) (citation omitted) (noting that more than one district may
serve as a proper venue). Therefore, jurisdiction is proper. 4
II. TRO
A TRO is an extraordinary equitable remedy, and the movant
bears the burden of establishing its propriety. See Watkins Inc.
v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003). The court considers
four factors in determining whether a TRO should issue: (1) the
threat of irreparable harm to the movant in the absence of relief,
(2) the balance between that harm and the harm that the relief may
cause the non-moving party, (3) the likelihood of the movant’s
ultimate success on the merits and (4) the public interest. See
Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 114 (8th
Cir. 1981) (en banc).
DeCelles also appears to argue that venue is improper. A 4
motion to transfer venue, however, is not before the court.
6
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 6 of 13
As an initial matter, the court must determine whether
Minnesota or Arizona law applies to this dispute. The court
applies choice-of-law rules under diversity jurisdiction. See
Interstate Cleaning Corp. v. Commercial Underwriters Ins. Co., 325
F.3d 1024, 1028 (8th Cir. 2003). The Agreement states that “[t]he
law of the state of Minnesota shall govern the terms,
interpretation, and enforcement of the Agreement.” Campbell Decl.
Ex. 1, at 5. Minnesota courts traditionally enforce choice-of-law
provisions. See Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d
377, 380 n.1 (Minn. 1980). Therefore, the court applies Minnesota
law.
A. Irreparable Harm
LTF argues that the continued competition by DeCelles in
violation of the Agreement will result in irreparable harm. To
show irreparable harm, “a party must show that the harm is certain
and great and of such imminence that there is a clear and present
need for equitable relief.” Iowa Utils. Bd. v. F.C.C., 109 F.3d
418, 425 (8th Cir. 1996). “[P]otential loss of goodwill qualifies
as irreparable harm.” Id. at 426. Irreparable harm is presumed,
where, as here, a “professional employee[] … acquire[s] influence
over patients or clients of their employer.” See Rosewood Mortg.
Corp. v. Hefty, 383 N.W.2d 456, 459 (Minn. Ct. App. 1986) (citation
omitted). Moreover, DeCelles acknowledged that “immediate
irreparable damage will result to LTF if [the] employee breaches
7
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 7 of 13
any of the covenants set forth in this Agreement.” Campbell Decl.
Ex. 1, at 4. Therefore, this factor weighs in favor of LTF.
B. Balance of Harms
The court has already determined that plaintiff’s goodwill is
harmed by defendant’s acts. Balanced against that harm is the harm
to the defendant’s ability to work as a personal trainer. Such
harm is lessened, however, by the fact that there is no evidence in
the record that a TRO will prevent DeCelles from working. Cf. CDI
Energy Servs., Inc. v. W. River Pumps, Inc., 567 F.3d 398, 403 (8th
Cir. 2009) (holding that balance of harms favored defendant when it
“appear[ed] undisputed that an injunction would put the defendants
out of business”). Indeed, DeCelles is only prevented from working
within a five mile radius of LTF facilities. See Campbell Decl.
Ex. 1, at 2. Therefore, this factor weighs in favor of LTF.
C. Likelihood of Success on the Merits
The court next considers the likelihood that the movant will
prevail on the merits. S & M Constructors, Inc. v. Foley Co., 959
F.2d 97, 98 (8th Cir. 1992). A TRO “motion is too early a stage of
the proceedings to woodenly assess a movant’s probability of
success on the merits with mathematical precision.” Gen. Mills,
Inc. v. Kellogg Co., 824 F.2d 622, 624 (8th Cir. 1987). The court
does not decide whether the movant will ultimately win, or if a
8
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 8 of 13
greater than fifty-percent likelihood of success exists. See
Glenwood Bridge, Inc. v. City of Minneapolis, 940 F.2d 367, 371
(8th Cir. 1991).
LTF alleges claims for breach of contract, misappropriation of
trade secrets, conversion, breach of the duty of loyalty, unfair
competition and tortious interference with prospective business
relationships. LTF need only demonstrate that it is likely to
succeed on one claim in order to satisfy this prong of Dataphase.
See United Healthcare Ins. Co. v. AdvancePCS, 316 F.3d 737, 742–43
(8th Cir. 2002).
Although disfavored, noncompete agreements are enforced when
reasonable and supported by adequate consideration. See Prow v.
Medtronic, Inc., 770 F.2d 117, 120 (8th Cir. 1985) (interpreting
Minnesota law). To determine the reasonableness of a noncompete
agreement, the court considers: (1) whether the restraint is
necessary for the protection of the business or goodwill of the
employer, (2) whether the restraint is greater than necessary to
adequately protect the employer’s legitimate interests, (3) how
long the restriction lasts and (4) the geographic scope of the
restriction. Id. (citing Bennett v. Storz Broad. Co., 134 N.W.2d
892, 899 (1965)). 5
The court notes that Arizona supplies a similar analysis. 5
See Compass Bank v. Hartley, 430 F. Supp. 2d 973, 979-81 (D. Ariz.
2006).
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In the present action, restraint is necessary to protect the
legitimate interest of LTF in its “goodwill, trade secrets, and
confidential information.” Medtronic, Inc. v. Advanced Bionics
Corp., 630 N.W.2d 438, 4556 (Minn. Ct. App. 2001) (citation
omitted). Further, the covenant is narrow in its geographic scope
and length of time. See, e.g., Boston Scientific Corp. v. Duberg,
754 F. Supp. 2d. 1033, 1039 (D. Minn. 2010) (citation omitted)
(noting that one-year restrictions are “consistently found” to be
reasonable); Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d
698, 703 (Minn. Ct. App. 1989) (upholding a geographic restriction
that was limited to area necessary to protect former employer).
Moreover, consideration is not an issue. See Overholt Crop Ins.
Serv. Co., 437 N.W.2d at 702 (explaining that “no independent
consideration is necessary” to support a noncompete agreement when
entered into at inception of employment). Therefore, because the
covenant is reasonable, plaintiff is likely to succeed in its
breach of contract claim, and this factor weighs in favor of LTF. 6
Even if the noncompete was unreasonable, the court has the 6
power to “blue pencil” the Agreement. See Witzke v. Mesabi Rehab.
Servs., Inc., 768 N.W.2d 127, 129 n.1 (Minn. Ct. App. 2009)
(citation omitted) (giving court discretion “to modify unreasonable
restrictions on competition in an employment agreement by enforcing
restrictions only to the extent reasonable”); see also Campbell
Decl. Ex. 1, at 4 (“If a court of competent jurisdiction holds that
the restrictions … are unreasonable under the circumstances then
existing, the parties to this Agreement agree that the Court shall
substitute the maximum period, scope, or geographical area
reasonable under the circumstances.”).
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D. Public Interest
The public interest does not strongly favor one party over the
other. There is a public interest in upholding contractual
agreements. See Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc.,
336 F.3d 801, 805 (8th Cir. 2003). There also is a public interest
in unrestrained competition. See Calvin Klein Cosmetics Corp. v.
Lenox Labs., Inc., 815 F.2d 500, 505 (8th Cir. 1987). Here, it
appears that DeCelles is engaging in competition that is in
violation of the Agreement. Therefore, the public interest factor
favors LTF. Accordingly, based upon a balancing of the four
Dataphase factors, a TRO is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1. Plaintiff’s motion for a temporary restraining order [ECF
No. 2] is granted in part;
2. Defendant whether alone, through an LLC or other
corporate entity, or in concert with others, including any officer,
agent, employee, and/or representative of Pro Fitness is restrained
from directly or indirectly:
a. Being employed by, contracting with, or being connected
in any manner with, any business competitive with LTF within
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a five mile radius of any place of business owned or
affiliated with LTF that offers or intends to offer personal
training;
b. Calling upon any of LTF’s members, customers, or
clients for the purpose of soliciting or selling to any such
persons any products or services similar to those of LTF;
c. Providing services to, diverting or taking away any
of LTF’s clients;
d. Soliciting any of LTF’s employees;
e. Communicating, disclosing, divulging or furnishing
any of LTF’s confidential and proprietary information or trade
secrets to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever;
f. Using any of LTF’s confidential and proprietary
information or trade secrets; or
g. Interfering with LTF’s current prospective business
relations;
3. Defendant shall immediately cease employment with Pro
Fitness;
4. Defendant shall return all of LTF’s confidential,
proprietary, and trade secret information in his possession and
control, including, but not limited to, all member files and
contracts;
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5. Defendant shall preserve all documents and data of any
nature whatsoever, including but not limited to electronic
documents, electronic mail, and corporate documents of or relating
to LTF or Pro Fitness, and is not to destroy any documents or data
of any nature whatsoever during the pendency of this action;
6. The parties may engage in expedited discovery, which
includes one, eight-hour deposition per side;
7. Plaintiffs shall post a bond of $5,000 pursuant to
Federal Rule of Civil Procedure 65 within two business days of the
issuance of this order; and
8. This order shall remain in effect for fourteen days.
Dated: February 28, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
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