Washel v. Bryant

770 N.E.2d 902, 18 I.E.R. Cas. (BNA) 1730, 2002 Ind. App. LEXIS 1003, 2002 WL 1397977

• Court: Indiana Court of Appeals
• Decided: June 28, 2002
• Docket: 53A04-0110-CV-450
• Status: Published

Opinions

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

Rebecca Washel, d/b/a Hi-Tek Hair Body & Nails ("Washel!"), sued her former employee, Glenda Bryant, to enforce the terms of a non-competition provision in their employment agreement. Following a hearing, the trial court denied Washel's request for preliminary and permanent in-junctive relief. In this interlocutory appeal,¹ Washel challenges that decision and raises the following restated issue: whether the trial court erred when it determined that Washel's remedy at law was adequate and denied her request for injunctive re-Hef.

We reverse.

FACTS AND PROCEDURAL HISTORY

Bryant worked as a hair stylist for Washel's beauty salon, Hi-Tek, pursuant to an employment agreement, which provided, in part, that Bryant could not open a competing shop within ten miles for two years from the date she left employment at Hi-Tek. That agreement also contained a liquidated damages clause that subjected the breaching party to $5,000 for every violation of the agreement. Bryant resigned on March 5, 2001, and about a month later she opened a hair salon within approximately three miles of Hi-Tek.

Washel filed a complaint against Bryant, seeking damages along with preliminary and permanent injunctive relief. Following a hearing, the trial court found that the liquidated damages clause provided Wash-el with an adequate legal remedy and denied Washel's request for injunctive relief. This interlocutory appeal ensued.

DISCUSSION AND DECISION

An injunction is an extraordinary equitable remedy that should be granted with great caution and used only sparingly. F.W. Means & Co. v. Carstens, 428 N.E.2d 251, 260 (Ind.Ct.App.1981). The determination to grant or deny a preliminary injunction rests within the trial court's equitable discretion and that determination will be reversed only upon an abuse of that discretion. Northern Indiana Pub. Service v. Dozier, 674 N.E.2d 977, 989 (Ind.Ct.App.1996).

Discretion to grant or deny an injunction is measured by several factors: (1) whether the plaintiff's remedies at law are inadequate, causing irreparable harm pending resolution of the substantive action; (2) whether the plaintiff has at least a reasonable likelihood of success at trial; (8) whether the plaintiff's threatened injury outweighs the potential harm to the defendant resulting from the granting of the injunction; and (4) whether the public interest will be disserved. Ed Bertholet & Assocs., Inc. v. Stefanko, 690 N.E.2d 361, 363 (Ind.Ct.App.1998).

In determining whether the trial court abused its discretion, we must also look to the trial court's findings of fact and determine whether the findings support the court's decision. McGlothen v. Heritage Einvtl. Servs., L.L.C., 705 N.E.2d 1069, 1074 (Ind.Ct.App.1999). We will not set aside the trial court's findings unless they are clearly erroneous. Id. Findings are clearly erroneous when the record lacks any facts or reasonable inferences to support them. Id. We consider the evidence only in the light most favorable to the judgment and construe findings together liberally in favor of the judgment. Barlow v. Sipes, 744 N.E.2d 1, 5 (Ind.Ct. App.2001). =

In denying Washel's request for injune-tive relief, the trial court entered detailed Findings of Fact and Conclusions of Law. Findings twenty through twenty-two are of particular interest: -

20. In paragraph K. of Defendant's Tender of Proposed Findings of Fact C . P § ? onelusions of Item? and Order, Bryant argues that "Plaintiff's remedies at law in this action are adequate because plaintiff maintains precise records of defendant's production output during the past five (5) years or longer and because the 1996 Contract provides a fixed sum of damages for each violation thereof[;]" . this court concurs;

. 21. Unlike many covenants not 1.30 compete, the Employment Agreement in the case at bar also includes an additional provision, a liquidated - damages clause; in the case at bar, the parties recognized the difficulty of measuring damages of any breach of confidentiality or competing businesses and mutually agreed that any violation thereof would qualify for Hquidated damages, the purpose of which is to address damages which are difficult to estimate or caleu-late; the parties should benefit from all of their bargained for mutual promises in their Employment Agreement, not just those promises addressing their respective duties of conduct when, in addition, they specifically intended to address the damages of such a breach by including a liquidated damages provision; calculating damages for Bryant's breach of the Employment Agreement is, in fact, difficult to measure; therefore, utilizing the parties' intention to address this difficulty by applying the liquidated damages clause is "plain, complete and efficient to the ends of justice" since the parties anticipated a remedy to address such breaches; while the court understands Washel's desire to terminate Bryant's business within ten miles for: two. years, to gmfi a permanent injunction would deprive both Washel and Ewan? of the‘benefit of thew-7169075?— ateql bargain which was contained in their Emp “We.” Agreement: ”em?“ nent injunction is an extraordinary equitable remedy that is not favored by the law; in fact, the court finds the law in .I di tually £ dy at 1 nC1ans CY & .reme y av "aw pvgr a'tn equitable injunction, ‘When such y dhqulgated dimaggs gagse F waITagt— songzct 12; iiveeirizzu'éiees- or in a valid '

.22' The court finds that. Washel failed to prove that her remedies at law are imadequate given the terms of her contract with Bryant[.]

. Washel co'ntend§ that the trial 001.1115 famed. when.1t denied .h'er request for in-junctive relief. “Specfilcafly, ‘Washel as-sex-ts that the liquidated damage? pr?“— sion, absent an accompanying injunction, does not provide her with an adequate remedy at law. We must agree.

The parties' agreement contemplates an injunctive remedy when it states, in pertinent part: "Should this [noneom-petition] provision be enforced against [Bryant] in any proceeding, the parties to this Agreement agree that no bond shall be posted by [Washel] in order to obtain an injunction order." Appellant's App. at 388. The liquidated damages clause then provides: "The parties agree that because damages for any violation of Provisions 6 and 7 of this Agreement may be difficult to prove, the parties stipulate that any violation of Provision 6 or 7 shall subject the breaching party to liquidated damages of $5,000 for each violation." Id.

The trial court's findings take an either- or approach with respect to legal and equitable relief. That is, the findings suggest that the court must choose between the two remedies as if they were mutually exclusive. The court concluded in its finding twenty-one that "to grant a permanent injunction would deprive both Washel and Bryant of the benefit of their negotiated bargain" for the liquidated damages clause, a legal remedy. We cannot agree. Rather, to disallow injunctive relief would deprive Washel of the benefit of Bryant's covenant not to compete. Nowhere does the agreement state or imply that liquidated damages shall be the exclusive remedy.

In interpreting an unambiguous contract, we give effect to the intentions of the parties as expressed in the four corners of the document. Art Country Squire, L.L.C,. v. Inland Mortgage Corp., 745 N.E.2d 885, 889 (Ind.Ct.App.2001). Clear, plain, unambiguous terms are conclusive of that intent. Id. We will neither construe clear and unambiguous provisions nor add provisions not agreed upon by the parties. Id. The meaning of a contract is to be determined from an examination of all of its provisions, not from a consideration of individual words, phrases, or even paragraphs: read alone. Id. (emphasis added). In this case, the parties' agreement both provided for liquidated damages and, as we have noted, contemplated an injunction. The trial court concluded that the liquidated damages clause provides Washel with an adequate remedy, but money damages and injunctive relief serve different purposes. The liquidated damage clause was intended to quantify the cost for violations of the agreement after-the-fact, while the injunctive remedy was meant to prevent future violations of the agreement. Thus, we agree with Washel that, "[the [liquidated] damage clause was intended to operate in tandem with an injunction not instead of it." Brief of Appellant at 8.

Further, the right to injunctive relief is not contingent upon the text of the agreement. It has long been the law in Indiana that an action seeking an injunction lies in equity and is, therefore, derived from the common law. Central Union Tel. Co. v. State, 110 Ind. 203, 12 N.E. 136, 1836 (1887); Sluder v. Mahan, 124 Ind.App. 661, 121 N.E.2d 187, 140 (1954); R.H. Martin, Inc. v. Indiana Dept. of Revenue, 512 N.E.2d 475 (Ind.Tax 1986); Daugherty v. Allen, 729 N.E.2d 228, 285 (Ind.Ct.App.2000). It is within the province of our courts, using both common law and chancery jurisdiction, to grant injunctive relief. Central Union Tel. Co., 110 Ind. 208, 12 N.E. at 136. The right to injunctive relief arises in an employment context, as in this case, when the remedy at law is inadequate. The liquidated damages clause in the parties' agreement does not obviate Washel's right to injunctive relief.

. We conclude that the trial court's finding that liquidated damages, standing alone, provided Washel with an adequate legal remedy was clearly erroneous. Although mere economic injury generally does not warrant the grant of a preliminary injunction,² the trial court has a duty to determine whether the legal remedy is as full and adequate as the equitable remedy. Paul v. I.S.I. Servs., Inc., 726 N.E.2d 318, 321 (Ind.Ct.App.2000). A legal remedy is adequate only where it is as plain and complete and adequate-or, in other words, as practical and efficient to the ends of justice and its prompt administration-as the remedy in equity. Daugherty, 729 N.E.2d at 2835. A legal remedy is not adequate merely because it exists as an alternative to an equitable form of relief. Paul, 726 N.E.2d at 321. |

What constitutes a "violation" under the employment agreement is a threshold question that must be determined before the legal remedy can be deemed adequate. The agreement itself is ambiguous. In her complaint, Washel alleges that each Hi-Tek customer and employee solicited by Bryant constitutes a separate violation. But the trial court's order does not address that question, and neither do the parties on appeal. Instead, the trial court found that the Hquidated damages clause was "adequate" merely because it was available as an alternative to injunctive relief. See Paul, 726 N.E.2d at 8321. The court found that Washel had opened a competing beauty salon and solicited over 200 Hi-Tek customers. Is Bryant's opening of a competing business a single violation, or does a single violation accrue everyday that she operates a competing business in violation of the agreement? Were the violation interpreted as daily, then Washel would be entitled to $5,000 for every day that Bryant operated her competing business. At that rate, by the time a final judgment is entered in this case, Washel's liquidated damages would likely exceed $2 million. If the violation occurs daily or whenever a customer can be shown to have left Hi-Tek for Bryant's shop, then the clause may be an unenforceable penalty. "Where the sum sought to be fixed as liquidated damages is grossly disproportionate to the loss, which may result from the breach, the courts will treat the sum as a penalty rather than as liquidated damages." Gershin v. Demming, 685 N.E.2d 1125, 1128 (Ind.Ct.App.1997). An unenforceable remedy is no remedy at all. In contrast, if Bryant has committed only a single violation by opening a competing business, then Washel's damages for the violation of the non-competition clause would be only $5,000, clearly not an adequate legal remedy.

But regardless of what constitutes a "violation," the liquidated damages clause in this agreement does not preclude injunce-tive relief because money damages will not remedy the ongoing violation of the covenant-the operation of a competing hair salon within ten miles for two years following separation. While damages might compensate Washel for Bryant's separate violations after-the-fact, it cannot prevent Bryant from repeatedly violating the agreement's non-competition clause by operating her own business. This is exactly the type of breach for which injunctive relief is particularly well suited. Without an injunction, Washel would be forced to amend her, complaint repeatedly to include every successive violation (possibly every day that Bryant's shop remains open) after filing her original complaint.

Worse yet, the trial court could issue its final judgment before the two-year limitation period in the non-competition clause expires. Obviously, Washel can only collect damages for after-the-fact violations that occur from the first violation until the court's final judgment. The two-year period does not end until April 2, 2008. And if, for example, the trial court were to issue its final judgment in December 2002, without an injunction, Bryant could continue to operate her competing hair salon in violation of the parties' agreement for some three additional months. A party that suffers economic injury that cannot be remedied by post-trial damages is entitled to injunctive relief. Daugherty, 729 N.E.2d at 2384. To collect damages resulting from Bryant's continued violation, Washel would have to file a second lawsuit-one virtually identical to this one-in order to seek redress. Washel should not be foreed to file more than one suit to remedy a continuous: violation. That type of duplicitous litigation is neither a practical nor efficient method by which to serve the ends of justice. See id. at 285.

We have previously held in Daugherty and Stefanko, that damages, absent an injunction, may provide an adequate legal remedy. But these cases are inapposite. In Daugherty, we did not address an employment agreement but a suit for defamation by a dentist against Daugherty, his former employee. We correctly reversed the trial court's grant of a preliminary injunction because the dentist's damages were calculable, giving him an adequate remedy at law. Daugherty, 729 N.E.2d at 286. There Daugherty had already proffered the alleged defamatory speech, and there was no indication from the dentist (other than unfounded supposition) that Daugherty would continue to defame him. Here, Bryant is operating a business on a daily basis that is in violation of the employment agreement, and she will, without an injunction, continue to do so. Unlike in Daugherty, this violation is not a "onetime" violation that may, in retrospect, be quantified with money damages at trial.

In Stefanko the trial court denied a preliminary injunction because the plaintiff failed to demonstrate irreparable harm, and, following a thorough discussion, we affirmed on that basis. Stefanko, 690 N.E.2d at 364. Then, in dicta, we went on to address the issue of an adequate legal remedy. Id. Without explanation, we summarily concluded that the agreement's liquidated damages clause, which provided for a 15% penalty on any bail bonds written in violation of the agreement, was an adequate legal remedy. Id. The dicta in Stefamko is not precedent on this issue. Further, as noted earlier, a legal remedy is not adequate merely because it exists as an alternative to an equitable form of relief. Paul, 726 N.E.2d at 321.

CONCLUSION

The agreement's liquidated damages clause is not an adequate legal remedy because it is not as practical, full, adequate, and efficient as the equitable remedy. Therefore, the trial court erred when it found that Washel had an adequate remedy at law and denied her request for preliminary and permanent injunctive relief.

Reversed.

BAKER, J., concurs. MATTINGLY-MAY, J., dissenting with separate opinion.

1 . Because Washel appeals, at least in part, from the trial court's denial of her request for a preliminary injunction, she brings this interlocutory appeal as a matter of right pursuant to Indiana Appellate Rule 14(A)(5).

2 . Our supreme court recently reiterated that mere economic injury does not warrant in-junctive relief. Indiana Family and Soc. Servs. Admin. v. Walgreen Co., 769 N.E.2d 158, 162 (Ind.2002). In that case, Walgreens failed to identify any injury beyond purely economic injury. Id. But here there is more than economic injury, namely, the violation of a prior agreement not to engage in specific conduct. ©