Orca Communications Unlimited, LLC v. Noder

314 P.3d 89, 233 Ariz. 411, 37 I.E.R. Cas. (BNA) 382, 671 Ariz. Adv. Rep. 15, 2013 WL 5655898, 2013 Ariz. App. LEXIS 221
Court of Appeals of Arizona·Decided October 17, 2013·No. No. 1 CA-CV 12-0183·Published·Cited by 13 cases

Opinion

OPINION

HOWE, Judge.

¶ 1 Orea Communications Unlimited, LLC, appeals the trial court’s dismissal of its complaint against Ann J. Noder that alleged that Noder breached her contract with Orea and committed several business torts against the company. For the reasons set forth below, we affirm the court’s dismissal of Orca’s claims for breach of contract and fraud, but vacate the court’s dismissal of Orca’s claims [414] for breach of the covenant of good faith and fair dealing, breach of fiduciary duty and duty of loyalty, tortious interference with business expectancies and unfair competition.

FACTS AND PROCEDURAL HISTORY

¶ 2 Orea is an Arizona limited liability company that provides public relations services primarily to companies in the United States. From July 1, 2002, until May 1, 2009, Noder served as Orca’s president. As president, Noder had full access to and control over Orca’s financial information, customer information, contracts with vendors and customers, and customer and employee relationships. Because Noder had no professional experience in public relations when she began working for Orea, Orea provided her with extensive on-the-job training. As part of her employment, Noder executed a Confidentiality, Non-Solicitation, and Non-Competition Agreement (“the Agreement”). The Agreement consisted of four restrictive covenants that prohibited Noder from using or disclosing confidential information for any purpose other than to benefit the company without the company’s consent (“the confidentiality covenant”); providing conflicting services (“the non-compete covenant”); soliciting any customer or “potential customer” (“the customer non-solicitation covenant”); and hiring current or certain former employees (“the employee non-solicitation covenant”). The Agreement was not itself a “contract of employment” between Orea and Noder but addressed only her confidentiality, noncompetition, and non-solicitation obligations to Orea. Orea and Noder agreed that the Agreement should be read consistently with any employment agreement that they may enter.

¶ 3 The confidentiality covenant, set forth in section 4.3, prohibited Noder from “directly or indirectly circumventing] or competing] with The Company with regard to any Confidential Information.” The Agreement defined confidential information in section 2.2 as “knowledge or information not generally known to the public or in the public relations industry” that Noder learned from her employment with Orea that related to Orea, its business partners, or the business of its customers or potential customers. This included “any information [Noder] learn[ed] of, possessed] as a result of, or accessed] through” Noder’s employment. The definition excluded “publicly known” information, information “readily accessible to the public in a written publication,” but included information that was only available through “substantial searching of published literature” or that had to be “pieced together” from a number of publications or sources. In the event of a dispute, the covenant placed on Noder the burden of proving that information was not confidential. The confidentiality covenant had no geographical or temporal limitation, but the Agreement stated in section 4.3.5 that if a temporal limitation was required to enforce the covenant, the covenant would bind Noder for twelve months from the last date of her employment with Orea.

¶ 4 The non-compete covenant, set forth in section 4.4.1, prohibited Noder from directly or indirectly advertising, soliciting, or providing “Conflicting Services” within the “Restricted Territory.” The Agreement defined “Conflicting Services” in section 2.1 as “any product, service or process of any person or organization other than The Company, which directly competes with a product, service or process with which Employee works directly or indirectly during [her] employment with The Company or about which Employee acquires Confidential Information during Employee’s employment with The Company.” The Agreement defined “Restricted Territory” in section 4.4.4 as the largest of the following geographic areas that a court would find enforceable: all fifty United States and the District of Columbia; Maricopa County, Arizona; within 150 radial miles of Orca’s Phoenix offices; within 100 radial miles of Orea’s Phoenix offices; within 50 radial miles of Orca’s Phoenix offices; within 25 radial miles of Orea’s Phoenix offices; or within 10 radial miles of Orca’s Phoenix offices.

¶ 5 The customer non-solicitation covenant, set forth in section 4.4.2, prohibited Noder from “requesting], inducting], or attempting] to induce any Customer or Potential Customer who does business in the Restricted Territory to terminate or adversely [415] alter its relationship with The Company.” The Agreement defined “Customer or Potential Customer” in section 2.3 as any person or entity who “at any time during [Noderfs employment” with the company had contracted or billed, or “received any product or service, or process from the company”; was in contact with the company or its employees, agent, or owner about receiving “any product, service, or process” from the company that Noder knew or should have known about; or “had been solicited” by the company, or whom the company had been considering or planning to solicit, in an effort in which Noder was involved or of which she should have been aware. The employee non-solicitation covenant prohibited Noder from attempting “to hire, employ or associate in business with any person employed by [Orea] or who has left the employment of [Orea] within the preceding six months.”

¶ 6 The Agreement also provided in section 4.4 that Noder was required to abide by the non-compete and the non solicitation covenants for eighteen months after her employment with Orea ended. That section further provided that if a court determined that the eighteen-month period was unenforceable, the time-limitation would be stepped down to the longest of the following enforceable periods: fifteen months, twelve months, nine months, or six months.

¶ 7 In February 2009, Noder negotiated with Orca’s owner to purchase the company. During these negotiations, Noder represented to the owner that she agreed with the owner’s proposed sale terms and would have counsel prepare a sale and purchase agreement based on those terms. Noder never gave the owner a purchase agreement, however, and instead presented a counter-proposal. The owner refused this counter-proposal, and the negotiations ended. Noder then contacted a number of Orea’s potential customers, telling them that she planned to form a competing company and encouraging them to wait until she formed her own company so that she could obtain their business. On May 1, 2009, Noder resigned from Orea and formed Pitch Public Relations, LLC, an Arizona limited liability company that offered the same or similar services as Orea.

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Orca Communications Unlimited, LLC v. Noder, 314 P.3d 89, 233 Ariz. 411, 37 I.E.R. Cas. (BNA) 382, 671 Ariz. Adv. Rep. 15, 2013 WL 5655898, 2013 Ariz. App. LEXIS 221 (Ark. Ct. App. 2013).

314 P.3d 89 (Orca Communications Unlimited, LLC v. Noder) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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