United States District Court, W.D. Missouri, Western Division
ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
ROSEANN A. KETCHMARK, JUDGE UNITED STATES DISTRICT COURT
before the Court is Plaintiff's Motion for Preliminary
Injunction (the “Motion”) (doc. 3) and
suggestions in support (doc. 4). Defendant filed suggestions
in opposition (doc. 20), the Court held a hearing on the
Motion (doc. 25), Plaintiff filed supplemental suggestions in
support (doc. 26), and Defendant filed supplement suggestions
in opposition (doc. 28). After review of the Motion, all
briefing and argument of counsel, evidence of record, and
applicable law, the Motion is hereby GRANTED IN PART
AND DENIED IN PART.
PRELIMINARY INJUNCTIVE RELIEF
determining whether to issue preliminary injunctive relief,
courts weigh the following factors: (1) the probability that
the movant will succeed on the merits; (2) the threat of
irreparable harm to the movant; (3) the state of the balance
between this harm and the injury that granting the injunction
will inflict on other parties; and (4) the public interest.
Kroupa v. Nielsen, 731 F.3d 813, 818 (8th Cir. 2013)
(citing Dataphase Sys. v. C L Sys., 640 F.2d 109,
113 (8th Cir. 1981)). No single factor is determinative;
rather, they must be “balanced to determine whether
they tilt toward or away” from granting the injunction.
Noodles Dev., LP. v. Ninth Street Partners, LLP, 507
F.Supp.2d 1030, 1034 (E.D. Mo. Apr. 13, 2007).
Substantial Likelihood of Success
Block asserts a claim for breach of contract arguing that
Defendant, both personally and through his spouse, breached
and continues to breach the noncompetition and
nonsolicitation covenants (collectively, the
“Covenants”) of his Franchise Lease Agreements
Block has shown a substantial likelihood of success on the
merits of portions of its breach of contract claim against
Defendant. The evidence of record demonstrates that Defendant
has violated and is actively violating the FLAs'
reasonable noncompetition and nonsolicitation covenants by
which he has agreed to be bound.
The FLAs and Their Covenants Are Enforceable
Missouri law, “[n]on-compete agreements are typically
enforceable so long as they are reasonable.”
Healthcare Servs. of the Ozarks, Inc. v. Copeland,
198 S.W.3d 604, 610 (Mo. banc 2006). The Missouri Supreme
Court has found that a noncompetition agreement is valid and
enforceable if it: (1) “is no more restrictive than is
necessary to protect the legitimate interest of the
employer”; and (2) can be “narrowly tailored
geographically and temporally.” Id.; see
also Osage Glass, Inc. v. Donovan, 693 S.W.2d 71, 74
(Mo. banc 1985) (“Covenants against competition must
serve a proper interest of the employer in protecting the
good will of a business, and must be reasonably limited in
time and space.”).
restrictions are enforceable to protect “the
employer's trade secrets or customer contacts.”
Healthcare Servs., 198 S.W.3d at 610; see also
Superior Gearbox Co. v. Edwards, 869 S.W.2d 239, 247
(Mo.Ct.App. 1993) (“[A] covenant restricting an
employee's right to compete must be reasonably necessary
to protect the employer's legitimate interests and
reasonable as to time and geographic scope.”). The
post-termination Covenants in the FLAs protect interests that
Missouri recognizes as legitimate and are protectable as a
matter of law, including: H&R Block's investment in
the parties' transactions; H&R Block's
established brand, goodwill, and confidential business
information; and H&R Block's interest in preventing
Defendant from unfairly using such assets to compete with
H&R Block, diverting away its clients, and obtaining an
undue advantage for his competing business. See,
e.g., Safety-Kleen Sys., Inc. v. Hennkens, 301
F.3d 931, 937 (8th Cir. 2002) (“The Missouri courts
have frequently held that . . . substantial and
individualized customer contacts are a protectable interest
warranting injunctive relief enforcing a covenant not to
compete.”); Kessler-Heasley Artificial Limb Co. v.
Kenney, 90 S.W.3d 181, 186 (Mo.Ct.App. 2002)
(“Stock in customers, also referred to as customer
contacts, are a legitimate protectable interest.”).
H&R Block also has a legitimate and protectable interest
in protecting its client information and client relationships
from use by a competitor. See Mid-States Paint &
Chem. Co. v. Herr, 746 S.W.2d 613, 617 (Mo.Ct.App. 1988)
(“The employer has protectable interests in trade
secrets and customer contacts.”); see also Naegele
v. Biomedical Sys. Corp., 272 S.W.3d 385, 389
(Mo.Ct.App. 2008) (“In Missouri, the courts have
identified two protectable interests of employers: customer
contacts and trade secrets.”).
case, the Covenants are also appropriately narrow in both
time and geographic reach. First, the noncompetition and
nonsolicitation provisions are limited to two years after the
termination of the FLAs, subject to tolling for periods of
noncompliance. Furthermore, the geographic area of the
noncompetition provision is limited to Defendant's former
franchise territories and an area within twenty-five miles of
those territories. See, e.g., H&R Block Tax
Servs. LLC v. Clayton, No. 4:16-cv-00185, 2016 WL
1247205, at *3 (W.D. Mo. Mar. 24, 2016) (Bough, J.)
(upholding 2-year, 25-mile non-competition agreement in a
franchise agreement); H&R Block Enters. LLC v.
Ascher, No. 4:15-cv-00178, 2015 WL 12746197, at *2 (W.D.
Mo. Apr. 3, 2015) (Bough, J.) (upholding three- or five-year,
50-mile non-competition agreement under an asset purchase
agreement); Kessler-Heasley, 90 S.W.3d at 188
(upholding five-year limit within a 50-mile radius);
Watlow Elec. Mfg. Co. v. Wrob, 899 S.W.2d 585,
587-88 (Mo.Ct.App. 1995) (upholding five-year time limit);
Champion Sports Ctr., Inc. v. Peters, 763 S.W.2d
367, 368-70 (Mo.Ct.App. 1989) (enforcing a restrictive
covenant barring the seller of a business from competing with
it for eight years in three counties). The Covenants are also
appropriate under Missouri law because they were agreed to as
part of a business transaction. See Orthotic &
Prosthetic Lab, Inc. v. Pott, 851 S.W.2d 633, 643 n.4
(Mo.Ct.App. 1993) (explaining that “Missouri courts
have long recognized a distinction between covenants
ancillary to a sale of a business and covenants merely
ancillary to an employment contract, showing substantially
greater liberality in enforcing the former”).
Covenants are valid under Missouri law and will be enforced
against Defendant. They are reasonably tailored to protect
H&R Block's legitimate interests and are reasonably
tailored in time and geographic scope.
Defendant Breached the Covenants
noncompetition and nonsolicitation Covenants run for two
years following the termination of Defendant's FLAs
(tolled for any periods of Defendant's noncompliance).
The FLAs were terminated on ...