Electronic Payment v. Kennedy

CourtCourt of Appeals of Arizona
DecidedDecember 23, 2021
Docket1 CA-CV 20-0382
StatusUnpublished

This text of Electronic Payment v. Kennedy (Electronic Payment v. Kennedy) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Electronic Payment v. Kennedy, (Ark. Ct. App. 2021).

Opinion

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE ARIZONA COURT OF APPEALS DIVISION ONE

ELECTRONIC PAYMENT PROVIDERS, INC. dba BILLINGTREE,1 Plaintiff/Appellant,

v.

ROBERT F. KENNEDY, et al., Defendants/Appellees.

No. 1 CA-CV 20-0382 FILED 12-23-2021

Appeal from the Superior Court in Maricopa County No. CV2017-011715 The Honorable Daniel G. Martin, Judge

AFFIRMED IN PART; REVERSED AND REMANDED IN PART; VACATED IN PART

COUNSEL

Snell & Wilmer L.L.P., Phoenix By Joshua R. Woodard, Shalayne L. Pillar Counsel for Plaintiff/Appellant

Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Phoenix By Joseph T. Clees, L. Eric Dowell Counsel for Defendants/Appellees

1This caption is amended as reflected. The amended caption shall be used on all further documents filed in this appeal. ELECTRONIC PAYMENT v. KENNEDY, et al. Decision of the Court

MEMORANDUM DECISION

Presiding Judge D. Steven Williams delivered the decision of the Court, in which Judge Jennifer B. Campbell and Judge James B. Morse Jr. joined.

W I L L I A M S, Judge:

¶1 Plaintiff Electronic Payment Providers, Inc. d/b/a BillingTree (“BillingTree”) appeals from summary judgment in favor of defendants Robert Kennedy and Benjamin Lange, on BillingTree’s claims for breach of contract, breach of the duty of good faith and fair dealing, and tortious interference with business expectancy, arising out of employment agreements between BillingTree and the defendants. For reasons that follow, we affirm in part, reverse in part, vacate in part, and remand for further proceedings consistent with this decision.

FACTUAL AND PROCEDURAL HISTORY

¶2 BillingTree, an Arizona corporation, provides electronic payment processing products and services including automated clearinghouse processing, credit and debit card processing, payment gateways, and web payment portals. BillingTree primarily provides its products and services to collection agencies. In 2009, BillingTree hired Kennedy as a regional sales manager, and, in 2013, hired Lange as an account manager. Both Kennedy and Lange were assigned to specific geographical areas within the United States and were responsible for selling BillingTree’s products and services in those territories. Although the parties dispute which regions of the United States the defendants serviced, BillingTree does not contend the defendants serviced every region of the United States.

¶3 While at BillingTree, Kennedy and Lange each entered into various written agreements, including a 2016 employment agreement (collectively, the “Agreements”). In the Agreements, defendants agreed to non-competition and non-solicitation covenants. The non-competition covenant, which restricted defendants’ right to compete with BillingTree for a period of twelve months after termination, prohibited the following conduct:

2 ELECTRONIC PAYMENT v. KENNEDY, et al. Decision of the Court

[T]he Employee shall not, directly or indirectly, (A) engage in any Competing Business within the Restricted Territory or (B) own, invest in, finance, manage, control, operate, provide services, advice or other support to, participate in, enter into any partnership or joint venture with, a Competing Business within the Restricted Territory; provided, that the Employee shall not be in violation of the foregoing by reason of his/her ownership of not more than five percent (5%) of the outstanding shares of the stock of any corporation which is listed on a national securities exchange.

¶4 “Restricted Territory,” i.e., the territory in which defendants were prohibited from competing with BillingTree, was defined using the following “step-down” provision:

[T]he United States, Canada and Europe; provided, however, that if (and only if) required by a final decision or order of a court of competent jurisdiction or arbitrator in order for the provisions of this Section 9 to remain valid and enforceable against the Employee, “Restricted Territory” means the United States and Canada; provided, however, that if (and only if) required by a final decision or order of a court of competent jurisdiction or arbitrator in order for the provisions of this Section 9 to remain valid and enforceable against the Employee, “Restricted Territory” means the United States.

Thus, defendants were, in its most restrictive step, prohibited from competing with BillingTree in the United States, Canada, and Europe and, in its least restrictive step, prohibited from competing with BillingTree anywhere in the United States.

¶5 The non-solicitation covenant, which similarly covered the twelve-month period following defendants’ termination, restricted defendants’ right to:

(A) call on or solicit any client of the Company for purposes of diverting such client to a Competing Business; or (B) induce, solicit, encourage or cause (or attempt to induce, solicit, encourage or cause) any client, vendor, supplier, strategic alliance partner, bank, licensor, licensee or other party to cease conducting business or reduce the amount of business it does with the Company; or (C) in any way interfere with the relationship between any client, vendor,

3 ELECTRONIC PAYMENT v. KENNEDY, et al. Decision of the Court

supplier, strategic alliance partner, bank, licensor, licensee or other party and the Company.

“Client” was defined to include:

(i) the actual clients and customers of the Company, and (ii) those active prospective clients or customers of the Company which the Employee alone, or in combination with others, handled, serviced, or solicited at any time during the one (1) year period immediately preceding the termination of the Employee’s employment with the Company.

¶6 In November 2016, Lange terminated his employment with BillingTree; Kennedy followed in February 2017. In December 2016, defendants formed LucentPay, a company which, like BillingTree, sells electronic payment processing products and services, with a focus on providing such services to collection agencies. In the year following their departure, defendants successfully solicited BillingTree’s customers for the purpose of converting their payment processing products from BillingTree to LucentPay’s products and services. LucentPay’s client base includes approximately twenty of BillingTree’s former customers.

¶7 BillingTree responded by filing this action against defendants for breach of contract, breach of the duty of good faith and fair dealing, and tortious interference with business expectancy. BillingTree moved for partial summary judgment on the issue of liability and defendants moved for summary judgment on all claims, contending the non-competition and non-solicitation covenants were overly broad and unenforceable as a matter of law.2 The court denied BillingTree’s motion, granted defendants’ motion finding both covenants overbroad and unenforceable as a matter of law, and held BillingTree could not proceed on its claims for breach of contract, breach of the duty of good faith and fair dealing, and tortious interference

2 Defendants also moved for summary judgment on the basis that a nondisclosure and assignment agreement, which the parties signed after the Agreements, superseded the Agreements and effectively removed the non-competition and non-solicitation covenants. However, the court refused to enter summary judgment on that ground, finding a genuine dispute of material fact as to the intent of the parties in entering into the nondisclosure and assignment agreement. Because defendants do not advance this argument on appeal, we consider the issue waived. Van Loan v. Van Loan, 116 Ariz. 272, 274 (1977) (“The failure to raise an issue . . .

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Electronic Payment v. Kennedy, Counsel Stack Legal Research, https://law.counselstack.com/opinion/electronic-payment-v-kennedy-arizctapp-2021.