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Date: 08-25-2023

Case Style:

Jacqueline Damon v. Navsav Holdings, LLC

Case Number: 8:23-cv-351

Judge: Brian C. Buescher

Court: United States District Court for the District of Nebraska (Douglas County)

Plaintiff's Attorney:

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Defendant's Attorney: Not Available

Description: Omaha, Nebraska employment law lawyers represented Plaintiff who sued her former employer challenging a restrictive covenant in an employment contract.

Jacqueline Damon was an at-will employee of Universal Group, Ltd. Damon who was then a resident of Omaha, Nebraska, started working for Universal in 2014. That same year, Universal promoted Damon to the position of Account Manager, a position sometimes referred to a Lead Marketing CSR, which is a non-sales position. Damon's employment duties at Universal were administrative and included servicing Universal's commercial accounts, submitting claims, and addressing billing issues, almost exclusively for Austin Beber. Damon averred that at no time did her employment duties involve trying to solicit or procure policies or clients and that she was never paid commissions because she never had nor had she ever undertaken sales responsibilities.

Damon obtained a Nebraska resident license from the Nebraska Department of Insurance on October 16, 2014, so that she could perform services for Universal as an account manager for property, casualty, and personal lines of insurance. Damon has maintained that license to date, although she converted it to a non-resident license in 2016 after she moved to Ankeny, Iowa. From the time of issuance “to date,” that license identifies Damon's business address as Universal's Omaha office location; her business fax number as Universal's Omaha office fax number starting with the Nebraska “402” area code; and her business phone number as her cell phone number starting with the Nebraska “402” area code.

When Damon moved to Ankeny, Iowa, in March or April of 2016, she began working remotely for Universal from her home. However, she remained assigned to Universal's Omaha office location as her primary office and throughout her employment with Universal she was occasionally physically present at Universal's Omaha office location as part of her employment duties. While Damon was employed with Universal, she was referred to as a member of the Nebraska Team” and Universal published materials (e.g., the business website) to the public with that reference about her. Also, Universal provided Damon with business cards that noted her business location as the Universal Omaha office location and phone number. At all times during Damon's employment with Universal, Universal provided her with an email signature block that noted her business location as the Universal Omaha office location and phone number.

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Beginning with the initial question of whether “the restraint is in aid of some legitimate interest of the employer,” the non-competition provision in the April Agreement for Damon, § 4. (a)., is “ancillary to a contract of employment and [is] apparently necessary to afford fair protection to the employer.” Gaver, 856 N.W.2d at 127-28 (second requirement). Standing alone, it also does not appear to be “unduly harsh and oppressive on the party against whom it is asserted.” Waadah, 861 N.W.2d at 443; Gaver, 856 N.W.2d at 127. This is so, because it “contain[s] reasonable temporal and geographical restrictions,” Gaver, 856 N.W.2d at 128, where it applies for “a period of one (1) year from the date of Employee's last date of employment with NavSav, and within a five (5) mile radius of Employee's primary office location during Employee's employment.” Filing 1-1 at 29. Indeed, Damon avers that her new place of business with UNICO is in Lincoln, Nebraska, more than five miles from her former Omaha office while employed with NavSav, so she is not in violation of this provision even if it is enforceable. Filing 16 at 6 (¶ 11). However, the non-competition provision does not satisfy the first requirement under Nebraska law where it “is . . . injurious to the public” because it does not stand alone; it is linked with non-solicitation provisions that violate Nebraska public policy. See Gaver, 856 N.W.2d at 127 (third requirement is that the covenant “is not injurious to the public”).

The non-solicitation provision in the April Agreement is not enforceable because it is not “reasonably limited to restricting the former employee from contacting customers with whom the former employee had had personal contact while employed by the former employer.” id. at 128; accord Castillo, 435 F.3d at 897 (stating that under Nebraska law, “[a] noncompete agreement may be valid only if it restricts the former employee from working for or soliciting the former employer's clients or accounts with whom the former employee actually did business and has personal contact” (internal quotation marks and citation omitted)). Instead, the non-solicitation provision, § 4. (b)., precludes soliciting “any customer that is a part of any book of business owned by NavSav or a NavSav related or affiliated entity, or divert[ing] (or attempt[ing] to divert) any customer that is a part of any book or business owned by NavSav or a NavSav related or affiliated entity from continuing to do business with Employer for a period of five (5) years from Employee's last date of employment with Employer.” Filing 1-1 at 78. This provision barring contact with “any customer that is a part of any book of business owned by NavSav” greatly exceeds the permissible scope of customers an employee may be precluded from contacting by a restrictive covenant under Nebraska law. Gaver, 856 N.W.2d at 128; Castillo, 435 F.3d at 897. Still further there is no evidence that Damon ever solicited any customers of any of NavSav's affiliates identified in § 21 of the April Agreements. Filing 1-1 at 36. Thus, the inclusion of affiliates' customers is not reasonably necessary to protect NavSav's legitimate business interests. Gaver, 856 N.W.2d at 128.

The Court finds that a five-year bar on contacts with NavSav customers, even if Damon had once had personal contact with them while working for NavSav, appears to be an excessive-perhaps even punitive-temporal bar, where Damon worked for NavSav only for about thirteen months. id. (stating that restrictive covenants must not have unreasonable temporal limitations). The non-solicitation provision applicable to employees in § 4. (c). of the April Agreement, also for five-years, is equally unreasonable. Filing 1-1 at 30.

Again, at least for purposes of a preliminary injunction, the Court does not believe it can “blue-pencil” the April Agreement to leave just the non-competition provision, standing alone, even with its reasonable one-year and five-mile limitations without contradicting Nebraska public policy. See Waadah, 861 N.W.2d at 441 (explaining that “we must either enforce [a covenant] as written or not enforce it at all” (quoting CAE Vanguard, Inc., 518 N.W.2d at 655-656)).[7]

Thus, Damon has not just “a fair chance of prevailing,” see Wildhawk Invs., 27 F.4th at, 593 (defining likelihood of success), but a high probability of success on the merits of her claim that the April Agreement is unenforceable. Therefore, this Winter factor weighs very heavily in favor of granting the requested preliminary injunction against enforcement of the April Agreement.

1. Damon's Motion for Temporary Restraining Order, Filing 4, is denied as moot; but

2. Damon's Motion for Preliminary Injunction, also in Filing 4, is granted.

A separate Preliminary Injunction will issue in this case upon the posting of the security required above.

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