Opinion
No. A04-1188.
Filed April 12, 2005.
Appeal from the District Court, Sherburne County, File No. CX-03-2134.
Jesse Gant, III, Jesse Gant, III, Attorney at Law, P.A., (for appellant)
Chad W. Strathman, Jeremy D. Sosna, Strathman Sosna, P.C., (for respondents).
Considered and decided by Halbrooks, Presiding Judge; Toussaint, Chief Judge; and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant Shane Berg challenges the trial court's grant of a directed verdict, arguing that he presented sufficient evidence to support his breach-of-contract and tortious-interference-with-contract claims. Appellant also argues that the trial court abused its discretion by excluding an audiotaped conversation. Because the evidence is insufficient to support appellant's claims and because the trial court did not abuse its discretion by excluding the audiotaped conversation, we affirm.
FACTS
This case involves a dispute regarding a non-compete provision in the sale of a business. In April 2003, appellant Shane Berg purchased Miller Lawn Service from respondent David Miller. The $156,400 purchase price included: $50,300 for equipment, $1,000 for a non-compete covenant, and $105,100 for 65 lawn-care and snow-removal contracts. The contracts included services such as mowing and trimming, fertilizing and spraying, spring and fall cleaning, aeration, and snow removal.
Miller and Berg finalized their agreement in a business-sale agreement (agreement) that contained the final terms of the sale. The agreement contains a covenant not to compete, which provides, "Seller and David A. Miller, individually, agree that by this covenant they are specifically restricted from acting as an owner, manager, partner, employee, or consultant, within the lawn care industry." The agreement further provides, "This Covenant Not to Compete shall be for a period of five (5) years from and after the date of this Agreement and within Western and Northwestern suburbs of Minneapolis, MN."
After he sold Miller Lawn Services to Berg, Miller continued his involvement with his other two businesses — TreeMendous, Inc. (TreeMendous), a landscaping business and tree nursery, and Distinctive Design Irrigation, Inc. (DDI), a company that installs and services irrigation systems. The parties agree that since the sale, Miller has not performed lawn-care services, but Berg claims that the phrase "lawn care industry" in the non-compete covenant includes landscaping and irrigation services. As a result, Berg commenced litigation, claiming: (1) breach of contract against Miller, and (2) tortious interference with contract against Miller, TreeMendous, and DDI for landscaping and irrigation work performed.
Daniel Bauer is an agent with business broker Opportunities in Business (OIB) and served as the broker for the sale of Miller Lawn Service. At the jury trial, Bauer testified that he used a "business profile" to advertise Miller Lawn Service. Under "Type of Business" in the business profile, the description reads:
This lawn maintenance and snow removal business has been serving the northwest suburbs for the last 15 years. The business is split doing residential, town homes, and commercial property. Most of the properties have been with the seller for the last 15 years. The business also does fertilization and between 15-20 landscape jobs per year.
The business profile also indicated that the reason for sale was the seller's desire to focus on his other two businesses. Bauer met with Berg and provided him with the business profile.
Bauer assisted Berg in making an offer to purchase Miller Lawn Service by filling out a pre-drafted, preliminary document entitled "offer to purchase." Bauer later made addenda to the offer to purchase, including a non-compete provision. The non-compete covenant provided, "seller not to compete in same or similar businesses for a period of 5 years in the Western and Northwestern suburbs of Minneapolis." Bauer testified that he never discussed with Berg and Miller what "same or similar" business meant or whether landscaping or other services were included in the non-compete covenant. This preliminary draft of the non-compete provision was later replaced by the non-compete provision set forth in the final business-sale agreement. As previously noted, that provision provided that Miller would not act "as an owner, manager, partner, employee or consultant, within the lawn care industry" "for a period of five (5) years." Bob Griesgraber, another OIB representative, drafted the final business-sale agreement, including the final non-compete provision that includes the phrase "lawn care industry." Griesgraber did not testify at trial.
Berg admitted that he did not discuss the terms of the non-compete provision with Miller, but he testified that he discussed the non-compete provision with Bauer. But Bauer testified that he never discussed with the parties whether landscaping was included in the final covenant not to compete. Berg understood "lawn care industry" to include lawn care, snow removal, landscaping, and irrigation.
Berg testified that he was aware that Miller was going to pursue his other two businesses, TreeMendous and DDI, following the sale of Miller Lawn Service. Berg further testified that he was aware before the sale that TreeMendous was a landscaping company and that DDI was an irrigation company. Berg testified that the landscaping that TreeMendous performed was not included in the term "lawn care." Berg testified that he never asked Miller to sell his ownership interest in TreeMendous or to stop working for TreeMendous prior to the sale.
Berg testified that he performed work pursuant to all 65 contracts and that his income doubled as a result of purchasing Miller Lawn Care. Berg admitted that none of the contracts that he purchased from Miller involved landscaping or irrigation work and that he did not submit any landscaping contracts or irrigation proposals to any of the customers for whom he did lawn care and snow removal.
Robert Fitch, executive director of the Minnesota Nursery and Landscape Association (MNLA), testified that irrigation, landscaping, and lawn care are separate categories defined as follows: (1) irrigation involves the design, installation, and maintenance of landscape or lawn sprinklers for residential or commercial properties; (2) landscaping involves preparing the landscape, installing plants, walkways, retaining walls, ponds, or other features in residential or commercial landscapes; and (3) lawn care involves lawn mowing, maintenance or fertilization, and pest control in lawns.
At the close of Berg's case, respondents moved the trial court to grant a directed verdict. The trial court granted respondents' motion for a directed verdict and dismissed Berg's claims in their entirety. This appeal follows.
DECISION I
Berg argues that the trial court erred by granting a directed verdict on his breach-of-contract and tortious-interference-with-contract claims.
A district court may grant a motion for a directed verdict when, as a matter of law, the evidence is insufficient to present a question of fact to the jury. See Minn. R. Civ. P. 50.01; Wall v. Fairview Hosp. Healthcare Servs., 584 N.W.2d 395, 405 (Minn. 1998). When the district court grants a motion for a directed verdict, this court determines whether the evidence and its inferences could reasonably sustain a contrary verdict. Northwestern State Bank of Luverne v. Gangestad, 289 N.W.2d 449, 453 (Minn. 1979).
Breach of Contract
In Minnesota, restrictive covenants are subject to standard rules of contract interpretation. See Snyder's Drug Stores, Inc. v. Sheehy Props., Inc., 266 N.W.2d 882, 884-85 (Minn. 1978). Where the language in a contract is ambiguous, the court may examine extrinsic evidence to determine the intention of the parties. Donnay v. Boulware, 275 Minn. 37, 44, 144 N.W.2d 711, 716 (1966). In construing ambiguous contract terms, a court should place itself in the positions of the parties at the time the agreement was negotiated and executed, consider the agreement as a whole, view the surrounding circumstances, and endeavor to arrive at what the parties must have reasonably contemplated. Id.
The trial court found "as a matter of law that if the term `lawn care' is defined to include services such as mowing, clipping, raking, fertilizing, and similar things like that, then [Berg] has produced no evidence to show that [respondents] have breached the agreement." Further, the trial court found "no evidence, beyond [Berg's] asserted subjective belief, to support [Berg's] asserted reading" that "lawn care" should be defined to include the above-listed lawn-care activities, as well as landscaping and irrigation work. Finally, the trial court found that Berg's reading of the non-compete provision is unreasonable and unenforceable as a matter of law based on its vague geographic scope and five-year duration.
Berg argues that he presented sufficient evidence to create a fact issue for the jury regarding whether the phrase "lawn care industry" in the non-compete provision included landscaping services. In support of this argument, Berg contends (1) that OIB advertised Miller Lawn Service in its business profile as a company that performed landscaping jobs; (2) Bauer testified that "the parties knew that landscaping was a part of the deal or non-compete covenant and included in the term `lawn care industry,' because it was part of the same or similar business Respondent-Miller was doing under Miller Lawn Service, Inc., as evidenced by the Business Profile"; and (3) Fitch testified that although landscaping, lawn care, and irrigation are three separate industries, there are businesses that advertise as performing lawn service that also do landscaping and irrigation.
To the extent that "lawn care industry" is ambiguous, the evidence is insufficient to conclude that the parties intended "lawn care industry" to include landscaping and irrigation. Though OIB's business profile stated that Miller Lawn Service performed landscaping jobs, none of the 65 contracts that Berg purchased included landscaping work. Additionally, Berg admitted that he never inquired about the possibility of purchasing any contracts for landscaping.
Further, Berg misconstrues Bauer's testimony. Bauer did not testify that "the parties knew that landscaping was a part of the deal or non-compete covenant and included in the term `lawn care industry.'" In fact, Bauer testified that the parties did not discuss what they meant by "lawn care industry." Bauer's testimony merely confirmed what the business profile states — Miller Lawn Service performed a limited number of landscaping jobs.
The other evidence in this case likewise compels the conclusion that Berg and Miller did not intend for "lawn care industry" to include landscaping and irrigation. First, Berg testified that he had no idea what Miller thought the term "lawn care" meant. Second, Berg admitted that the inclusion of the phrase "lawn care industry" in the non-compete provision did not preclude Miller from doing landscaping work. Third, Berg knew Miller planned to dedicate more time to TreeMendous and DDI after selling Miller Lawn Service. Fourth, the fact that the parties ascribed a $1,000 value to the non-compete provision supports the conclusion that the term has a narrow meaning. Fifth, Fitch's unrebutted expert testimony shows that "lawn care" is a separate industry from "landscaping." See Eric A. Carlstrom Constr. Co. v. Indep. Sch. Dist. No. 77, 256 N.W.2d 479, 485 (Minn. 1977) (holding that courts look to the evidence of industry custom and usage to determine the intended meaning of ambiguous contract terms when words are connected to a particular trade). The fact that Fitch acknowledged there are businesses that advertise as doing lawn service that also do landscaping and irrigation does not diminish Fitch's testimony that landscaping, lawn care, and irrigation are three separate industries.
In addition to Berg's failure to establish liability, Berg also failed to establish damages with the requisite certainty. The plaintiff carries the burden in a non-compete action to prove by a preponderance of the evidence that (a) profits were lost, (b) the loss was directly caused by the breach of the covenant not to compete, and (c) the amount of such causally related loss is capable of calculation with reasonable certainty rather than benevolent speculation. B Y Metal Painting, Inc. v. Ball, 279 N.W.2d 813, 816 (Minn. 1979).
The only evidence that Berg submitted to show damages were invoices from TreeMendous and DDI for work that these companies performed. Berg failed to prove that he would have entered into and completed any of TreeMendous and DDI's contracts. Furthermore, Berg admitted that he did not bid on any landscaping contracts and never inquired about performing such work with the customers whose lawn-care contracts he purchased. The trial court aptly stated, "At best, [Berg] merely argued that [respondents] entered into landscaping and irrigation contracts, and that [Berg] wants the money from those contracts."
The evidence could not have supported a verdict of breach of the non-compete covenant because Berg has not produced sufficient evidence such that a reasonable jury could conclude that the parties intended "lawn care industry" to include landscaping and irrigation in addition to traditional lawn-care services. Thus, the directed verdict in favor of respondents was proper.
Berg also argues that the trial court erred in finding that the non-compete provision is unenforceable as a matter of law because Berg offered to limit the geographic scope "to the area where the businesses that [Berg] bought and that TreeMendous, DDI, and Mr. Miller were doing business at," thus removing the perceived vagueness from the provision's geographic location. Berg also argues that the five-year duration in the non-compete provision is not unreasonable because Berg and Miller were both business owners and not in an employer-employee relationship, like the parties in Dean Van Horn Consulting Assoc., Inc. v. Wold, 395 N.W.2d 405, 408 (Minn.App. 1986) (holding that a three-year non-compete provision was unreasonable).
But the trial court is not required to modify the non-compete provision to make it more reasonable. See Klick v. Crosstown State Bank of Ham Lake, Inc., 372 N.W.2d 85, 88 (Minn.App. 1985) ("While it is certainly within the power of the trial court to modify this contract, no cases say that a court must do so."). This court reviews a trial court's decision not to modify an unreasonably restrictive covenant on an abuse-of-discretion standard. Id. Here, the trial court did not abuse its discretion in refusing to modify the non-competition agreement because Berg's proposed change to the geographic scope is similarly vague. Limiting the geographic scope "to the area where the businesses that [Berg] bought and that TreeMendous, DDI, and Mr. Miller were doing business at" may comprise the same geographic location — the western and northwestern suburbs of Minneapolis. Furthermore, Berg did not offer to reduce the five-year duration of the non-compete provision.
Berg is correct that courts recognize a distinction between restrictive covenants as they relate to the ordinary commercial transaction involving business or property transfers and those that relate to employment contracts entered into by wage earners. See Bennett v. Storz Broadcasting Co., 270 Minn. 525, 534, 134 N.W.2d 892, 899 (1965). But the test is still whether the non-compete provision is reasonable. Id.; see also Davies Davies Agency, Inc. v. Davies, 298 N.W.2d 127, 130-31 (Minn. 1980) (holding that a five-year non-compete provision restricting an insurance agency employee from engaging in insurance business within 50-mile radius of Minneapolis, St. Paul, or Duluth was overbroad). Furthermore, public policy requires non-compete covenants to be strictly construed because they are restraints on trade. Snyder's Drug Stores, 266 N.W.2d at 885. We conclude that the district court did not abuse its discretion in refusing to modify the non-competition agreement. On this record, the district court properly granted the motion for directed verdict dismissing appellant's breach-of-contract claim.
Tortious Interference with Contract
Berg also argues that because Miller worked for TreeMendous and DDI to provide landscaping and irrigation services, these companies breached the non-compete covenant restricting Miller from working within the lawn-care industry.
The essential elements of a wrongful-interference-with-contractual-relationship claim are: (1) the existence of a contract; (2) the alleged wrongdoer's knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages. Furlev Sales and Assocs, Inc., v. N. Am. Auto. Warehouse, Inc., 325 N.W.2d 20, 25 (Minn. 1982). In order to make a successful claim, the claimant must establish all five elements of tortious interference with a contract. St. Jude Med., Inc. v. Medtronic, Inc., 536 N.W.2d 24, 30 n. 6 (Minn.App. 1995).
Here, Berg failed to establish the existence of a valid non-compete provision as discussed above. Even if the non-compete provision were valid, Berg has not established that TreeMendous or DDI intentionally procured a breach of the contract because it is undisputed that these companies did not perform lawn-care services. Furthermore, Berg has failed to submit any evidence that TreeMendous or DDI had an intent to interfere with any of Berg's contracts. Finally, Berg has not established that he suffered damages.
The evidence did not support a finding of tortious interference of contract. Thus, the directed verdict in favor of respondents was proper.
II
Finally, appellant argues that the trial court abused its discretion by excluding an audiotaped conversation between Berg and Bauer that Berg wanted to use for impeachment.
A trial court's evidentiary rulings will not be reversed absent a clear abuse of discretion. State v. Amos, 658 N.W.2d 201, 203 (Minn. 2003). On appeal, the appellant has the burden of establishing that the trial court abused its discretion and that appellant was thereby prejudiced. Id. The trial court ruled that the audiotape was not admissible because it was "largely unintelligible," contained multiple hearsay, and its relevance was substantially outweighed by its potential to waste time and confuse the jury.
Berg argues that the trial court's finding that the audiotape was unintelligible was erroneous when the trial court rejected Berg's offer to have an expert "provide the trial judge with the equipment to have heard the tape clearly." But Berg cites no authority to support his contention that the trial court abused its discretion by not permitting an expert to attempt to make the audiotape intelligible. We conclude that the trial court did not abuse its discretion by excluding the audiotape.