Healthcare Servs. of the Ozarks, Inc. v. Copeland - 198 S.W.3d 604 (Mo. 2006)

Rule:

Noncompete agreements are typically enforceable so long as they are reasonable. In practical terms, a noncompete agreement is reasonable if it is no more restrictive than is necessary to protect the legitimate interests of the employer. Noncompete agreements are enforceable to the extent they can be narrowly tailored geographically and temporally. In addition, such restrictions are not enforceable to protect an employer from mere competition by a former employee, but only to the extent that the restrictions protect the employer's trade secrets or customer contacts. Missouri law in this regard follows the "modern rule." The employer is undoubtedly entitled to have his interest in his trade secrets protected, such as secret processes of manufacture which may be of vast value. And that protection may be secured by restraining the employee from divulging these secrets or putting them to his own use. He is also entitled not to have his old customers by solicitation or such other means enticed away from him. But freedom from all competition per se apart from both these things, however lucrative it might be to him, he is not to be protected against. He must be prepared to encounter that even at the hands of a former employee.

Facts:

Pearl Walker Copeland was hired by Healthcare Services of the Ozarks, Inc., d/b/a Oxford Healthcare (Oxford) in 1979 and LuAnn Helms was hired in 1996. Copeland signed a non-compete agreement June 1, 1993, and Helms signed a non-compete agreement September 2, 1997. Each was required to sign the agreement in order to continue their employment with Oxford. Each agreement provided that for two years following separation from Oxford the respective employee would not "either directly or indirectly on [her] own account or as agent, stockholder, owner, employer, employee or otherwise, engage in a business competitive to that of [Oxford] within a radius of 100 miles from Joplin, Missouri." Each agreement further provided that the employee would not "in any way divert or attempt to divert from [Oxford] any business or employees whatsoever" and that each employee would not "influence any of the customers or employees of [Oxford]" during the two-year period. On January 21, 2000, Copeland and Helms each submitted a notice of resignation with an effective date of February 21, 2000. Although the stipulation does not contain an exact date that Copeland and Helms were hired by Integrity, soon after Copeland submitted her notice of resignation, she attended meetings and began working with others, including the Missouri Division of Aging, on behalf of ASA Healthcare, Inc., d/b/a Integrity Home Care (Integrity). Oxford filed an action alleging breach of contract, and it sought to enforce the agreement. The trial court found that the non-compete agreements were valid and enforceable and that Copeland and Helms each breached their non-compete agreement with Oxford, but that Oxford did not prove it was damaged as a result of the breaches of those agreements. The trial court also found that the restraining orders and injunctive relief that had been issued during the time the actions were pending were justified, had been issued properly and providently, and ordered the cash bonds posted by Oxford, together with interest accrued thereon, returned to Oxford. Finally, the trial court found against Copeland and Helms on both counts of their respective counterclaims against Oxford and assessed costs to Copeland and Helms. Judgment was entered in accordance with the trial court's findings. Copeland and Helms appealed and Oxford cross-appealed.

Issue:

Were the non-compete agreements signed by Copeland and Helms valid and enforceable?

Answer:

Yes.

Conclusion:

In partially reversing, the appellate court determined that counterclaims filed by the employees were not barred due to res judicata based on a finding in federal court that they lacked standing to pursue certain challenges. Next, the agreements were valid and enforceable because Oxford had a protectable interest in its patient base; the fact that Oxford was a nonprofit corporation did not mean that it did not have protectable business interests. There was no claim for interference with a business expectancy since Oxford was justified in attempting to enforce its rights. The trial court should have awarded damages for the patients that it lost when Integrity relied on a certification held by one employee to begin operations sooner. However, the trial court was entitled to reject exhibits regarding lost employees as speculative.