Charles Milne Associates v. Toponce

770 P.2d 1313, 12 Brief Times Rptr. 1516, 1988 Colo. App. LEXIS 376
Colorado Court of Appeals·Decided November 3, 1988·No. Nos. 86CA0222, 86CA1071 and 86CA1471·Published·Cited by 1 cases

Opinion

VAN CISE, Judge.

This is a consolidation of several appeals arising from an action brought in May 1985 by plaintiff, Charles Milne Associates (CMA), a Colorado corporation, against defendant Jerry D. Toponee, Sr. (Toponee) based on Toponce’s breach of a covenant not to compete contained in his employment contract with CMA. Toponce’s sons, defendants Jerry D. Toponee, Jr., and Scott To-ponee, and Toponce’s company, Toponee and Associates, were later joined as additional defendants.

In 86CA0222, Toponee appeals a January 1986 order finding him in contempt of a preliminary injunction entered in August 1985, in which he was ordered to pay $5,000 into court to be “held by the clerk on the express condition that Toponee does not engage in any further conduct in violation of the preliminary injunction order,” and awarding CMA its attorney fees incurred in bringing and pursuing the contempt proceeding. In 86CA1071, CMA and its then attorneys, John N. McNamara and Kathryn Nielson, appeal an award against them of the attorney fees incurred by To-ponce’s sons and his company. In 86CA1471, CMA appeals the denial of a permanent injunction and the judgment entered in the amount of $30,000 plus interest against CMA’s bond based on the court’s holding that Toponee had been wrongfully enjoined, and, also in 86CA1471, CMA and attorney McNamara appeal the award to Toponee of his attorney fees and expenses imposed one-half against each. We affirm in part and reverse in part.

CMA is a manufacturers’ representative for certain lines of office furniture and supplies. Toponee, a resident of Utah, was hired in 1983 to serve as a salesman for CMA primarily in Utah but also in Wyoming and Idaho. His contract contained a provision that for three years after termination of his employment with CMA he would not act as an agent, employee, or representative for any company which CMA had represented during the two years immediately prior to his termination. To-ponee worked two years for CMA.

In February 1985, the Alma Desk Company (Alma), one of CMA’s leading lines, terminated its contract with CMA. At about the same time, Toponee quit CMA and a short time later (all events happening within 25 days), Toponee and Alma entered into their own manufacturer’s representative agreement. Toponee began acting as Alma’s representative in Colorado, New Mexico, Wyoming, and Utah.

In May 1985, CMA brought this action seeking (1) an injunction barring Toponee from acting as a representative for Alma and (2) damages for Toponce’s interference with CMA’s contract with Alma. After an evidentiary hearing in August 1985, the trial court granted a preliminary injunction prohibiting Toponee from acting on behalf of Alma in any capacity until the matter was finally heard on the merits of the complaint. The court required CMA to [1316]*1316post a bond in the amount of $30,000. This preliminary injunction was not appealed.

Three days after the injunction was entered, Toponee placed his sons on the payroll of Toponee and Associates, the entity through which he conducted his manufacturer’s representative business. Although neither son had ever been a manufacturer’s representative before, the sons undertook the representation of the product lines covered by the injunction against their father. About two weeks after the entry of the injunction, Toponee sold Toponee and Associates to one of his sons and then went to work for that company as an agent.

CMA then initiated contempt proceedings against Toponee. At the same time, CMA moved to join Toponee and Associates and Toponce’s sons as defendants and to file an amended complaint to assert claims that they were in concert with or participating with Toponee in violating the injunction. The motion was granted and the new parties were served with copies of the verified amended complaint and copies of the transcript of the court’s preliminary injunction order. They filed an answer and asked for an award of attorney fees.

On January 3, 1986, after a lengthy evi-dentiary hearing, the court found Toponee to be in contempt of the preliminary injunction. It required him to post $5,000, and ordered him to pay CMA’s attorney fees incurred in connection with the contempt proceedings.

After finding Toponee in contempt, the trial judge recused himself but retained jurisdiction over the contempt aspect of the case in order to hold a hearing on attorney fees. This matter was heard, and, on March 5, Toponee was ordered to pay CMA $6,500 for its attorney fees and $741.50 for its costs incurred, and the $5,000 previously deposited was directed to be applied on those fees.

Meanwhile, on January 8, the parties took the deposition of an official of Alma. He denied any interference by Toponee with the contract between CMA and Alma. On January 16, CMA filed a notice of dismissal of the interference claim without prejudice and served a copy on opposing counsel.

At the commencement of trial on March 14 before a newly assigned judge, CMA dropped all claims against the sons and the interference claim against Toponee. The court then ordered CMA to show cause why attorney fees should not be granted to the sons and Toponee and Associates pursuant to § 13-17-102, C.R.S. (1987 Repl. Vol. 6A), for bringing them into the case.

A three-day trial was then conducted by the new judge on CMA’s remaining claim, i.e., for a permanent injunction barring To-ponee from violating the covenant not to compete. On March 18, at the conclusion of CMA’s case, the court dismissed this claim. It held:

1. There was a covenant not to compete in effect between Toponee and CMA.
2. Colorado law applied to the covenant and, therefore, the covenant not to compete was void and unenforceable under § 8-2-113, C.R.S. (1986 Repl. Vol. 3B).
3. In the event Utah law should apply, under Utah case law the covenant not to compete was unreasonable and thus unenforceable.
4. Toponee was wrongfully preliminarily enjoined from acting as a manufacturer representative for Alma.
5. No permanent injunctive relief could be granted because there was no evidence of damage suffered by CMA.

It entered judgment in favor of Toponee for his costs, and set up a time schedule for motions and responses to motions for attorney fees and for a damages award against the preliminary injunction bond.

Following hearings in June, the court, on September 25, held that CMA’s claims in its amended complaint against the sons and Toponee and Associates “were frivolous in terms of jurisdiction and groundless in terms of the evidence presented, or actually not presented,” and awarded them $3,029.25, to be paid $29.25 by CMA, $500 [1317]*1317by CMA attorney Kathryn A. Nielson, and $2,500 by CMA attorney John N. McNamara. The court held that the interference with contract claim was groundless. Accordingly, it awarded Toponee $8,041 in attorney fees and $929.45 in expenses incurred in defense of the interference with contract claim, payable one-half by CMA and one-half by McNamara. It determined that the claim for injunctive relief was not groundless, and awarded no fees for defending against that claim.

The court also found that, as a result of being wrongfully preliminarily enjoined from acting as a sales representative for Alma, Toponee lost six months’ draw ($31,-002) and a trip to Japan (worth $12,500), a total of $43,502 in damages.

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Charles Milne Associates v. Toponce, 770 P.2d 1313, 12 Brief Times Rptr. 1516, 1988 Colo. App. LEXIS 376 (Colo. Ct. App. 1988).

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Charles Milne Associates v. Toponce
770 P.2d 1313 (Colorado Court of Appeals, 1988)