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holding non-solicitation agreement contained ambiguity that trial court needed to resolve with parol evidence
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Court of Appeals Case No. 20A-PL-1285
03-31-2021
Rex CARROLL, Appellant-Defendant, v. LONG TAIL CORPORATION, d/b/a CodeClouds, Appellee-Plaintiff.
Attorneys for Appellant: J. Blake Hike, Larry L. Barnard, Jon A. Bragalone, Carson LLP, Fort Wayne, Indiana Attorney for Appellee: Michael H. Michmerhuizen, Barrett McNagny LLP, Fort Wayne, Indiana
Attorneys for Appellant: J. Blake Hike, Larry L. Barnard, Jon A. Bragalone, Carson LLP, Fort Wayne, Indiana
Attorney for Appellee: Michael H. Michmerhuizen, Barrett McNagny LLP, Fort Wayne, Indiana
Brown, Judge.
[1] Rex Carroll appeals the trial court's order granting a motion for preliminary injunction filed by Long Tail Corporation, dba CodeClouds ("Long Tail"). We affirm in part and reverse in part.
Facts and Procedural History
[2] In 2009, Kinkar Saha began CodeClouds in Calcutta, India ("CodeClouds India"), and he later relocated to New Zealand and formed CodeClouds New Zealand ("CodeClouds New Zealand"). Brian Hill began working on web development projects with Saha, with Hill completing design aspects and Saha performing the development aspects, and at some point they moved into the affiliate marketing sector, or a segment of e-commerce industry in which a series of interveners generate sales by directing traffic for businesses and people to websites. They formed Long Tail in 2012, and each had shares in the corporation.
[3] In 2014, Hill wanted help increasing sales, and Carroll, who had no experience working in the affiliate marketing industry, started working as an independent contractor on a part-time and commission-based capacity, and he and Hill "split ... 50-50" anything he brought in. Transcript Volume II at 14. Saha introduced Carroll to the affiliate industry, and Saha and Hill spent significant time training and educating him on the importance of partnerships and introducing their industry partnerships. Saha and Hill also sent Carroll to a few trade shows to meet partners and clients.
[4] In 2016, Saha and Hill attempted to merge the companies into a single legal entity but, upon finding it very difficult to do so given the three different countries involved, stopped and signed instead "the dba" to Long Tail and "just add[ed] a company named Long Tail to CodeClouds USA." Id. at 85. At some point, Hill became the sole owner of Long Tail Corporation, and Saha retained ownership of CodeClouds New Zealand and CodeClouds India. In June of that same year, a Non-Compete Agreement was executed between Long Tail Corporation "of ... Roanoke, IN 46763" and CodeClouds "IT Solutions Private Limited of 74A Calcutta Street, Khandallah, Wellington 6035, NZ." Exhibits Volume I at 3. That same month, a Non-Disclosure Agreement was executed between Long Tail Corporation and CodeClouds "IT Solutions Private Limited." Id. at 17.
The record does not contain a "dba" agreement, and the parties do not point to such an agreement.
[5] In January 2017, Carroll was named the director of business development for all of CodeClouds, and his job was to complete sales for all of CodeClouds "whether it was Long Tail, CodeClouds India or CodeClouds New Zealand," and he "worked with all the ... customers." Transcript Volume II at 17-18. At some point, he became unhappy with his pay as an independent contractor, and in March 2017, he requested to become an employee. That same month, he and Long Tail executed a document titled, "Non Solicitation, and Confidentiality Agreement" ("NSA"), which identified "Long Tail Corporation, 5722 Coventry Lane, Fort Wayne, Indiana 46804 (the ‘Company’)" and defined Carroll as "the ‘Contractor.’ " Exhibits Volume I at 30. The NSA includes provisions governing the nonsolicitation of Customers and Contractors as well as a confidentiality provision.
When asked who drafted the agreement in an attempt to protect Long Tail's interests, Hill answered that he thought "it was from ... an internet site, potentially LegalZoom," Transcript Volume II at 36, and later indicated affirmatively when asked if he chose the agreement because he felt it fit his needs. See id. at 45.
[6] In August 2018, CodeClouds Australia was formed. Carroll was the director of business development until around October 2018, when he was made Vice President of Sales for all of CodeClouds. For the period of July 2018 to June 2019, Carroll earned a total of $244,726, which included $72,500 in salary from Long Tail and the remainder for commissions for bringing in new customers of the CodeClouds entities and maintaining the relationships with their existing customers. Carroll also earned profit sharing.
[7] On September 13, 2019, Carroll resigned. After Carroll left, Long Tail discovered that certain documents were missing including service agreements, notes that Carroll may have taken on phone calls, and any type of records of his conversations. When Carroll returned his company computer, it had been factory reset and "[t]here was nothing on it." Transcript Volume II at 27. Carroll also took a contact list of CodeClouds customers. At some point after leaving, Carroll formed Sketch Frames, a business that competes with CodeClouds. On January 23, 2020, Long Tail filed a complaint against Carroll. On March 20, 2020, Long Tail filed a motion for a preliminary injunction. On the same day, it filed a First Amended Verified Complaint for Preliminary Injunction, Permanent Injunction, and Damages asserting that Carroll violated the NSA by soliciting its clients and using its confidential information and trade secrets, breached the duty of loyalty, and committed acts involving tortious interference with business and contractual relations, conversion, misappropriation of trade secrets, and unfair competition. Carroll filed his answer denying Long Tail's allegations and asserted the NSA was unenforceable as a matter of public policy.
[8] The court held a hearing at which it heard testimony from, among others, Hill, Carroll, and Saha. The court admitted Carroll's contact lists from two email addresses, one from the "codeclouds.com" domain and the other from the "longtailtech.com" domain, as of September 13, 2019, as Exhibits 7-1 and 7-2. Id. at 93, 96. The court admitted the following lists: (1) as Exhibit 7-6, certain customers who would have paid CodeClouds New Zealand until the time Carroll resigned; (2) as Exhibit 7-7, an export of certain company names and customers of CodeClouds USA from the same time period as Exhibit 7-6; (3) as Exhibit 7-8, an export of certain company names and customers of CodeClouds India from the same time period as Exhibits 7-6 and 7-7; (4) as Exhibit 7-10, certain contacts from Carroll's business Skype account; (5) as Exhibits 7-11 and 7-12, the contacts for all leads and the names of customer entity names, respectively, of Long Tail; (6) as Exhibit 7-13, a "list doc" in Excel format of certain information maintained by Carroll, including columns of Company Names with corresponding names of individuals related to all CodeClouds entities as of the date that Carroll resigned, id. at 115; (7) as Exhibit 7-14, an invoice record of all customers to whom were sent an invoice from CodeClouds Australia and for whom Carroll was responsible for contacting and maintaining the relationships; (8) as Exhibit 7-15, an invoice record of all customers to whom were sent an invoice from CodeClouds India and for whom Carroll was responsible for maintaining the relationships; and (9) as Exhibit 10, a list of certain companies and contact persons that Carroll had downloaded and for which he had been provided access as Vice President.
Exhibit 10 consists of information for clients and contains headings for the time created, time last modified, customer ID, customer name, display name, company name, first and last names of a contact, Skype identity, Facebook, Twitter, credit limit, price list, payment terms, currency code, notes, website, contact type, customer address ID, billing attention, billing address, billing code, billing phone, billing fax, shipping attention, shipping address, payment reminder, and status. See Exhibits Volume I at 184-250; Exhibits Volume II at 3-23.
[9] On June 11, 2020, the trial court entered a thirty-four page order granting Long Tail's motion for preliminary injunction. The court found in part that Long Tail (CodeClouds USA), CodeClouds New Zealand, CodeClouds India, and CodeClouds Australia comprise the CodeClouds entities; the sales for all CodeClouds entities as well as the maintenance of all customer relationships of CodeClouds entities were handled by Long Tail; and Carroll's responsibilities included generating sales for all of the CodeClouds entities and servicing and maintaining relationships with their existing customers. The court enjoined Carroll from: contacting or soliciting any customer or partner of CodeClouds entities, including any person listed in "Exhibits 7-1, 7-2, 7-6 through 7-9, 7-11 through 7-16," for the purpose of gaining the business of such customer, providing the customer any products or services which are the same or substantially similar to those provided by Long Tail, or interfering with the business relationship; approaching soliciting, or enticing contractors of Long Tail to leave Long Tail's employment; and soliciting, contacting, or performing work for any person or entity in Exhibit 10 until further order of the court. Appellant's Appendix Volume II at 40.
To the extent the trial court mentioned Exhibit 7-9, we note that the Exhibits Volume does not contain an Exhibit 7-9 and that Long Tail's counsel referenced Exhibit 7-9 at the hearing and stated: "Your Honor, I think this is a duplicate of Exhibit 10 which is already admitted. So yeah, I'm going to withdraw Exhibit 7-9 as its already in Exhibit 10." Transcript Volume II at 108. With respect to the trial court's mention of Exhibit 7-16, Saha testified that Exhibit 7-16 "looks like the document which [Carroll] provided but this contained all the customer and contact (sic). They're from all CodeCloud USA." Id. at 122. The Exhibits Volume does not contain an Exhibit 7-16.
Discussion
[10] Generally, to obtain a preliminary injunction, the moving party must demonstrate by a preponderance of the evidence: (1) a reasonable likelihood of success at trial; (2) the remedies at law are inadequate; (3) the threatened injury to the movant outweighs the potential harm to the nonmoving party from the granting of an injunction; and (4) the public interest would not be disserved by granting the requested injunction. Cent. Ind. Podiatry, P.C. v. Krueger , 882 N.E.2d 723, 727 (Ind. 2008). We review a trial court's grant or denial of a preliminary injunction for abuse of discretion. Id. "An abuse of discretion can occur under various circumstances, including when the trial court misinterprets the law." Heraeus Med., LLC v. Zimmer, Inc. , 135 N.E.3d 150, 152 (Ind. 2019) (citing Myers v. Myers , 560 N.E.2d 39, 42 (Ind. 1990) ). To the extent our analysis depends on the trial court's interpretation of a purely legal question, we afford that matter de novo review. Id. (citing Harrison v. Thomas , 761 N.E.2d 816, 818 (Ind. 2002) (noting that "construction of the terms of a written contract is a pure question of law for the court, reviewed de novo")).
[11] In Heraeus , the Indiana Supreme Court addressed a non-solicitation covenant and held: "Noncompetition agreements restrict former employees from using valuable information obtained during their employment—such as trade secrets or confidential client data—to harm their former employers." Id. at 152-153. "But because these agreements ‘are in restraint of trade,’ courts enforce them only if they are reasonable." Id. at 153 (quoting Krueger , 882 N.E.2d at 728-729 ; and citing Dicen v. New Sesco, Inc. , 839 N.E.2d 684, 687 (Ind. 2005) ). "Noncompetition agreements ‘in employment contracts are in restraint of trade and disfavored by the law.’ " Id. (quoting Krueger , 882 N.E.2d at 728-729 ). "These agreements are thus strictly construed against employers." Id. (citing Krueger , 882 N.E.2d at 729 ).
[12] "Unlike reasonableness in many other contexts, the reasonableness of a noncompetition agreement is a question of law." Krueger , 882 N.E.2d at 729. "In arguing the reasonableness of a non-competition agreement, the employer must first show that it has a legitimate interest to be protected by the agreement." Id. "The employer also bears the burden of establishing that the agreement is reasonable in scope as to the time, activity, and geographic area restricted." Id. "Indiana courts have held that ‘the advantageous familiarity and personal contact which employees derive from dealing with an employer's customers are elements of an employer's ‘good will’ and are a protectable interest which may justify a restraint....’ " Id. (quoting Licocci v. Cardinal Assocs., Inc. , 445 N.E.2d 556, 561-562 (Ind. 1983) (citations omitted)).
[13] When a contract's terms are unambiguous, we do not go beyond the four corners of the contract to investigate meaning. Care Grp. Heart Hosp., LLC v. Sawyer , 93 N.E.3d 745, 756 (Ind. 2018) (citing Performance Servs., Inc. v. Hanover Ins. Co. , 85 N.E.3d 655, 660 (Ind. Ct. App. 2017) ). "Unless the terms of the agreement are ambiguous, they will be given their plain and ordinary meaning." Pohl v. Pohl , 15 N.E.3d 1006, 1009 (Ind. 2014) (quoting Bailey v. Mann , 895 N.E.2d 1215, 1217 (Ind. 2008) ). "But as with other contracts, if there is an ambiguity, we may consider extrinsic (parol) evidence to resolve it, with the aim of carrying out the parties’ likely intent." Id. "Indeed, parol evidence may be considered if it is not being offered to vary the terms of the written contract but to show that fraud, intentional misrepresentation, or mistake entered into the formation of a contract." Downs v. Radentz , 132 N.E.3d 58, 64 (Ind. Ct. App. 2019). In addition, parol evidence may be considered to apply the terms of a contract to its subject matter and to shed light upon the circumstances under which the parties entered into the written contract. Id. See also Millner v. Mumby , 599 N.E.2d 627, 629 (Ind. Ct. App. 1992) (holding that parol evidence may be considered to apply the terms of a contract to its subject matter) (citing Stockwell v. Whitehead , 47 Ind. App. 423, 430, 94 N.E. 736, 739 (1911) ; Ames v. Ames , 46 Ind. App. 597, 600-601, 91 N.E. 509, 511 (1910) ); id. (holding that parol evidence may be considered to shed light upon the circumstances under which the parties entered into the written contract) (citing Ransdel v. Moore , 153 Ind. 393, 401, 53 N.E. 767, 769 (1899) ; Kentucky & I.B. Co. v. Hall , 125 Ind. 220, 224, 25 N.E. 219, 220 (1890) ).
A. Soliciting Customers of CodeClouds New Zealand, CodeClouds Australia, and CodeClouds India
[14] Carroll argues that the trial court erred in enjoining him from soliciting customers of CodeClouds Australia, CodeClouds New Zealand, and CodeClouds India. He argues that the trial court improperly utilized extrinsic evidence concerning the manner in which Long Tail and the other CodeClouds entities conducted themselves and testimony of a CodeClouds customer to create an ambiguity where none existed in the definition of "Company" and "Customer" in the NSA. He asserts that even if the definitions of Company and Customer were ambiguous, any such ambiguity must be strictly construed against Long Tail.
[15] The NSA provided:
2. NON SOLICITATION OF CUSTOMERS. In consideration of being engaged as a[ ] Contractor by the Company, the Contractor agrees that the Contractor shall not, during the term of the Contractor's employment with the Company and for a period of two year(s) thereafter directly or indirectly contact or solicit, or attempt to contact or solicit, any Customer of the Company for purposes of:
(a) gaining the business of such Customer, or providing such Customer any products or services which are the same as or substantially similar to, or in competition with, the products or services sold by the Company at the time of the Contractor's termination; or
(b) advising any person not to do business with the Company, or interfering in any way with the business relationship between the Company and any Customer, contractor, supplier or any other person with whom the Company has a business relationship during the term of this Agreement.
Exhibits Volume I at 31. In the "Definitions" section, the NSA states: "1. DEFINITIONS. In this Agreement, unless the context otherwise requires...." Id. at 30. It also defined Customer as:
(1) any person who is a client, customer or partner of the Company at the time of the termination of the Contractor's employment; (2) any person who was a client or customer or partner of the Company at any time during the Contractor's employment; and (3) any person who was pursued by the Company as a potential or prospective client or customer or partner by way of any written submission made by the Company during the contractor's employment.
Id. at 31.
[16] While the NSA defined "Customer," it did not define "client" or "partner." Id. Black's Law Dictionary defines "client" in part as a "person or entity that employs a professional for advice or help in that professional's line of work"; and "partner" as "[s]omeone who shares or takes part with another, esp. in a venture with shared benefits and shared risks; an associate or colleague" and "[o]ne of two or more persons who jointly own and carry on a business for profit < the firm and its partners were sued for malpractice>." BLACK'S LAW DICTIONARY 309, 468, 1295 (10th ed. 2014). The American Heritage Dictionary defines "client" in part as the "party for which professional services are rendered ..." and a "customer or patron: clients of the hotel "; and "partner" as "[o]ne that is united or associated with another or others in an activity or a sphere of common interest, especially: ... A member of a business partnership." AM. HERITAGE DICTIONARY 347, 450, 1282 (4th ed. 2006). We cannot say that the NSA by its own terms is unambiguous including as it relates to the affiliate industry, i.e. , whether a certain person or entity could be a ‘customer’ of one CodeClouds unit but simultaneously a ‘client’ of another CodeClouds unit, and the persons and entities to which the parties intended the NSA to apply.
The trial court's order found in part that the affiliate industry "involves a process whereby a person or entity – an affiliate – uses a website to drive Internet traffic to another website where goods or products are offered for sale," that the affiliate "receives a commission for the traffic driven to the seller's website," and an example of an affiliate website "is an ad that appears on Facebook's newsfeed that drives traffic to the actual seller of goods or services." Appellant's Appendix Volume II at 10.
[17] As noted, parol evidence may be considered to resolve an ambiguity and apply the terms of a contract to its subject matter and to shed light upon the circumstances under which the parties entered into the written contract. See Pohl , 15 N.E.3d at 1009 ; Downs , 132 N.E.3d at 64 ; Millner , 599 N.E.2d at 629. The record reveals that Carroll testified his job was to obtain new customers for CodeClouds and some of those customers paid CodeClouds US, some paid CodeClouds New Zealand, and some paid CodeClouds Australia. He indicated that it was his job to bring the customers in regardless of who they paid. Hill testified that Carroll was named the director of business development for all of CodeClouds in January 2017, and Carroll's job was to complete sales for all of CodeClouds "whether it was Long Tail, CodeClouds India or CodeClouds New Zealand," and he "worked with all the ... customers." Transcript Volume II at 17-18. He testified that Carroll was made the Vice President of Sales for "all of CodeClouds" in October 2018. Id. at 19. When asked if "regardless of who the client paid did Long Tail or CodeClouds US at that time provide services to all those clients," Hill answered affirmatively. Id. at 20. When asked if he considered "the customers of CodeClouds to be customers of Long Tail regardless of who they pay directly," he answered affirmatively. Id. at 21. Saha indicated that CodeClouds had a CRM, or a computer system, which kept all the sales information. When asked if it was for all the CodeClouds entities, he answered affirmatively and stated "it's one (1) single CRM for all our corporate entities," and when later asked to clarify if there was a distinction between CodeClouds New Zealand or CodeClouds US, he answered that it was a single CRM for all entities because "doing the sales" was "between the companies." Id. at 86.
[18] Under these circumstances, we conclude that the customers of CodeClouds Australia, CodeClouds New Zealand, and CodeClouds India fall under the definition of "Customer" in the NSA. Accordingly, and in light of the procedural posture and Carroll's role at Long Tail, we cannot say the trial court abused its discretion by finding that Long Tail was entitled to a preliminary injunction with respect to the customers of CodeClouds Australia, CodeClouds New Zealand, and CodeClouds India.
[19] Even assuming that the customers of CodeClouds Australia, CodeClouds New Zealand, and CodeClouds India were not "Customers" as defined by the NSA, we cannot say reversal is warranted. The NSA provided:
4. CONFIDENTIALITY. From the date hereof and hereafter, Contractor shall not, directly or indirectly, disclose
or use Confidential information for any purpose other than set out in this Agreement, except where:
(a) Contractor has received the prior written approval of the Discloser to use or disclose the particular information in a manner not already expressly authorized by the terms of this Agreement;
(b) Contractor is compelled to disclose the information by law or regulatory order, provided that Contractor shall first notify the Discloser before such disclosure in order to give the Discloser a reasonable opportunity to seek an appropriate protective order and/or waive compliance with the terms of this Agreement and if Contractor is still required to make a disclosure, Contractor shall disclose only as much of the information as is required by law or regulatory order; or
Contractor shall notify the Discloser in writing immediately upon discovery of any unauthorized use or disclosure of Confidential information or any other breach of this Agreement and shall reasonably cooperate with the Company to regain possession of such Confidential Information and prevent its further unauthorized use or disclosure.
Five business days of receipt of the Discloser's request, Contractor shall destroy or return to the Discloser all materials containing Confidential Information, and at the Discloser's option, Contractor shall certify that it has fully satisfied this request.
Id. at 31-32.
[20] The NSA also provided:
(a) "Confidential Information" means any and all information that is or has been received by Contractor from the Company or any of its Affiliates (collectively, the "Discloser") and that:
(i) relates to the Discloser's business, operations or activities; or
(ii) is designated by the Discloser as being confidential or is disclosed in circumstances where Contractor would reasonably understand that the disclosed information would be confidential;
but excludes information that, without a breach of any obligation owed to the Discloser:
(i) is or subsequently becomes publicly available;
(ii) became known to Contractor before the Discloser's disclosure of such information to Contractor, as evidenced by the Contractor's written records;
(iii) was disclosed by a third party having a lawful right to do so; or
(iv) was independently developed by Contractor;
and, without limiting the generality of the foregoing, Confidential Information shall include trade secrets, data, reports, investigations, property inspections, research, projections, work in progress, designs, plans, programs, strategies, government filings and all other confidential concepts, know-how, methods of doing business, ideas, materials or information prepared or performed by or on behalf of the Discloser.
Id. at 30-31.
[21] While the NSA does not define "Affiliates," an "affiliate" is generally defined in part as a "person, organization, or establishment associated with another as a subordinate, subsidiary, or member: network affiliates. " AM. HERITAGE DICTIONARY 29 (4th ed. 2006). The verb "affiliate" means to "adopt or accept as a member, subordinate associate, or branch," "associate (oneself) as a subordinate, subsidiary, employee, or member," or "become closely connected or associated," id. , and we have previously observed that "[a]ffiliate" is defined as "to bring into close association or connection," "to attach or unite on terms of fellowship," and "to associate oneself; be intimately united in action or interest." Armstrong v. State , 22 N.E.3d 629, 638 (Ind. Ct. App. 2014) (quoting THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE , UNABRIDGED EDITION 24 (1967)), trans. denied.
[22] We find that parol evidence may be considered to resolve any ambiguity and apply the terms of the NSA to its subject matter. See Pohl , 15 N.E.3d at 1009 ; Downs , 132 N.E.3d at 64 ; Millner , 599 N.E.2d at 629. Following an unsuccessful attempt to merge the companies into a single legal entity, Saha and Hill executed a non-compete agreement and a non-disclosure agreement in June 2016 – all of which occurred prior to Carroll's signing of the NSA in March 2017. As noted above, Long Tail doing business as CodeClouds USA provided services to all clients, regardless of which entity the client paid, and every CodeClouds entity shared the same computer system. Under these circumstances, we conclude that CodeClouds New Zealand, CodeClouds Australia, and CodeClouds India were affiliates of Long Tail which was doing business as CodeClouds USA.
[23] With respect to whether the information constituted confidential information under the NSA, Hill's testimony reveals that Long Tail considered the names of its customers to be confidential information whether they were paying CodeClouds New Zealand or CodeClouds Australia. When asked what he did to protect the information, he stated they had a "CRM system called ZOHO CRM," which was password protected and only allowed certain users into the system. Transcript Volume II at 23. He stated that only five of 350 employees had access to the customer list. He testified that Carroll took the contact list of CodeClouds customers admitted as Exhibit 10, CodeClouds considered the information to be confidential, and the list included customers who paid CodeClouds USA, CodeClouds New Zealand, and CodeClouds Australia. When asked how having a customer list in the hands of a competitor hurt Long Tail, he answered: "[W]e provide the sales and customer service to all of Long Tail or all of CodeClouds so anybody with that, you know – anybody that would have that list, um, would not be good for any and all CodeClouds." Id. at 33. Saha indicated that Carroll did not have any experience in the affiliate industry and that he and Hill spent a good amount of time training Carroll and teaching him about the affiliate industry.
[24] When asked if those individuals listed in Exhibit 10 were the same people for whom he oversaw servicing on CodeClouds’ behalf, Carroll answered: "The ones that were clients of any of the different entities, yes." Id. at 55. He testified that he considered the customer list for the CodeClouds brands to be confidential and that it would be fair to say that he would not want such a list falling into the hands of a competitor. When asked if the reason he took the contact list was to contact people after he left, he answered: "That was a thought in my mind, yes." Id. at 56. He also admitted that CodeClouds paid him to develop those contacts. Under these circumstances, we conclude that the NSA prohibited Carroll from using this information and we cannot say that the trial court abused its discretion in granting a preliminary injunction with respect to the customers of CodeClouds New Zealand, CodeClouds Australia, and CodeClouds India. B. Soliciting Contractors of Long Tail
Because we conclude that the grant of the preliminary injunction based upon the NSA was not an abuse of discretion, we need not address Carroll's claim that Long Tail is not entitled to a preliminary injunction under the Indiana Uniform Trade Secrets Act.
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[25] Carroll argues that the provision relating to non-solicitation of contractors applies to all of Long Tails’ contractors, the trial court made no finding that Long Tail had a legitimate protectable interest in its entire workforce, and, absent that finding or any evidence to support that finding, Heraeus Med., LLC mandates that the judgment of the trial court enjoining Carroll from soliciting Long Tail's contractors be reversed on the grounds that the provision is unreasonable and unenforceable as a matter of law.
[26] In Heraeus Med., LLC , the Indiana Supreme Court addressed a nonsolicitation covenant, which Zimmer, Inc., the employer, drafted and which prohibited its employee, Robert Kolbe, from recruiting Zimmer employees to work for a competitor. 135 N.E.3d at 152. The Court held that "[a]s written, the Kolbe Agreement's employee nonsolicitation covenant is overbroad because it applies to all Zimmer employees." Id. at 153. Specifically, the Court held:
As the Court of Appeals correctly held, the covenant, as written, is unreasonably broad because it extends to "any individual employed" by Zimmer—not just to those who "have access to or possess any knowledge that would give a competitor an unfair advantage." [ Heraeus Med., LLC v. Zimmer, Inc. , 123 N.E.3d 158, 167 (Ind. Ct. App. 2019) ]; see also Krueger , 882 N.E.2d at 729 ("In arguing the reasonableness of a non-competition agreement, the employer must first show that it has a legitimate interest to be protected by the agreement." (citing Sharvelle [v. Magnante , 836 N.E.2d 432, 436-437 (Ind. Ct. App. 2005)] )).
Id. at 155. The Court held that "[a] court can blue-pencil unreasonable provisions from a restrictive covenant if the covenant is clearly divisible into parts and if a reasonable restriction remains to be enforced after the unreasonable portions have been eliminated." Id. at 155-156. The Court concluded that "the covenant not to solicit ‘any individual employed’ by Zimmer cannot be blue-penciled because there is no language that we could excise to render its scope reasonable" and the thus "the overbroad covenant is void and unenforceable." Id. at 156.
[27] The NSA states:
3. NON SOLICITATION OF CONTRACTORS. In consideration of being engaged as a[ ] Contractor by the Company, the Contractor agrees that, during the term of the Contractor's employment with the Company and for a period of two year(s) from such date of termination, the Contractor shall not, directly or indirectly, approach, solicit, entice, or attempt to approach, solicit, or entice Contractors of the Company to leave the employment of the Company.
Exhibits Volume I at 31. The NSA at one point refers to Carroll as "the ‘Contractor,’ " but it does not define "Contractor" elsewhere. Id. at 30. As written, the NSA extends to any Contractor of the Company and not just to those who have access to or possess any knowledge that would give a competitor an unfair advantage. Based upon Heraeus Med., LLC , we conclude that the covenant related to Contractors is overbroad and unenforceable. Accordingly, we reverse this portion of the trial court's preliminary injunction.
C. Soliciting Long Tail's Former Customers
[28] Without citation to the trial court's order, Carroll asserts that the trial court erred in enjoining him from soliciting Long Tail's former customers and that the court did not distinguish between former and present customers.
[29] To the extent Carroll cites Clark's Sales & Serv., Inc. v. Smith , 4 N.E.3d 772 (Ind. Ct. App. 2014), trans. denied , we find that case distinguishable. In Clark's Sales and Serv., Inc. , a restriction prohibited John D. Smith from providing services competitive to those offered by Clark's Sales & Service, Inc., or those provided by Smith on behalf of Clark's to anyone who was a customer of Clark's during the term of Smith's employment. Clark's Sales & Serv., Inc. , 4 N.E.3d at 781. The court observed that the restriction, as written, prohibited Smith from providing any service competitive to those offered by Clark's and applied to every customer of Clark's during Smith's fourteen-year employment. Id. The court stated that the restriction applied to all customers of Clark's during the term of Smith's employment and applied regardless of whether Smith had any contact whatsoever with those customers. Id.
[30] The Court stated:
This Court has held that although present customers are a protectable interest of an employer, a contract prohibiting contact with any past or prospective customers, no matter how much time has elapsed since their patronage ceased, was vague and too broad. Seach [v. Richards , Dieterle & Co. , 439 N.E.2d 208, 214 (Ind. Ct. App. 1982)]. While any customer of Clark's during Smith's fourteen-year employment may arguably be considered a present customer of Clark's, the impossibility of enforcement for the broad restriction contained in 7(C) cannot be overlooked, as it is unlikely that the expansive customer base referenced in 7(C) could be readily identified by either Clark's or Smith. Accordingly, we agree with the trial court's conclusion that Clark's attempt to protect a customer base spanning the entire term of Smith's employment is overly broad and unreasonable.
Id. at 781-782 (footnote omitted).
[31] As pointed out by the trial court, the restriction in Clark's Sales & Serv., Inc. was found to be too broad in part because it included customers with whom the employee never had contact. The court concluded that "the prohibition just seeks to protect the relationships Carroll was paid to nurture and develop." Appellant's Appendix Volume II at 29. It also concluded that Carroll had "responsibility for maintaining the relationship with every single customer of the CodeClouds entities." Id. at 30. The record reveals that, when Saha was asked if Carroll provided services for every single customer of CodeClouds regardless of who the customer paid, he answered affirmatively.
[32] In Seach , which was cited by Carroll and by this Court in Clark's Sales & Serv., Inc. , the contract provided that the employee agreed not to "[c]ontact, advise, visit or in any way solicit directly or indirectly any present past or prospective client (prospective client defined as a person or business previously contacted at least once) of the Firm...." Seach , 439 N.E.2d at 213. The Court observed that there was "no limitation whatsoever regarding when the past clients with whom contact is prohibited may have been customers of the Firm" and that the contract prohibited "contact with all past or prospective customers of the Firm, no matter how much time has elapsed since their patronage ceased or the contact was made." Id. at 214. The Court concluded that the restraint was vague and too broad. Id.
[33] Unlike in Seach , the NSA defined "Customer" as:
(1) any person who was a client, customer or partner of the Company at the
time of the termination of Contractor's employment; (2) any person who was a client or customer or partner of the Company at any time during the Contractor's employment; and (3) any person who was pursued by the Company as a potential or prospective client or customer or partner by way of any written submission made by the Company during the Contractor's employment.
Exhibits Volume I at 31. Accordingly, we find Seach distinguishable. In light of Carroll's involvement with every customer of the CodeClouds entities, we cannot say that the trial court abused its discretion on this basis.
[34] For the foregoing reasons, we reverse the court's order to the extent it prohibited Carroll from soliciting contractors and we affirm the court's order in all other respects.
[35] Affirmed in part and reversed in part.
Vaidik, J., and Pyle, J., concur.