BUD ANDERSON HEATING AND COOLING, INC. APPELLANT
MIKE NEIL AND ABSOLUTE HVAC, LLC APPELLEES
FROM THE BENTON COUNTY CIRCUIT COURT [NO. 04CV-16-906]
HONORABLE DOUG SCHRANTZ, JUDGE
Moore Pendergraft LLP, by: Timothy C. Hutchinson, for
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.,
by: Bryce G. Crawford, for appellee.
D. VAUGHT, Judge
Bud Anderson Heating and Cooling, Inc. (BAHC), appeals the
Benton County Circuit Court's denial of BAHC's
complaint for injunction and temporary restraining order
against appellee Mike Neil seeking to enforce a noncompete
agreement Neil signed while employed by BAHC.
provides services for heating, ventilation, and
air-conditioning ("HVAC") equipment and also sells
HVAC units and indoor-air-quality products such as duct
cleaning services, filters, and UV lighting to residential
customers. BAHC hired Neil as a salesperson in 2002. On
February 19, 2013, Neil signed a noncompete agreement with
BAHC. The noncompete agreement restricted Neil from competing
in Washington, Benton, Madison, or Carroll counties for
twelve months after the termination of his employment with
BAHC. Neil reviewed the terms of this noncompete agreement
again in 2014, about a year after signing it.
working at BAHC, Neil had no experience in the HVAC industry.
Throughout his employment with BAHC, Neil was consistently
ranked as a top salesperson. When Neil began employment at
BAHC, he received on-the-job sales training, although the
parties presented conflicting evidence as to how much of that
training was provided by BAHC and how much he undertook on
his own. Through his sales job, Neil became familiar with
BAHC customers, including knowledge about the age of
customers' HVAC units, which gave him insight into which
customers were likely to be in the market for new HVAC units.
Neil also learned financial information about customers, such
as their present and future ability to purchase a unit or
other equipment. In his work, Neil had intimate knowledge of
BAHC's pricing structure. Specifically, Neil became
familiar with the lowest retail price at which BAHC could
6, 2016, Neil turned in his letter of resignation to BAHC and
began working for Absolute Heat and Air, LLC
("Absolute"). Absolute is located approximately two
miles from BAHC's office in Lowell and serves the same
areas in Northwest Arkansas that BAHC serves. Absolute sells
the same kind of indoor-air-quality products and UV lighting
that BAHC provides, although there was disputed testimony as
to whether they target the same markets. Absolute primarily
focuses on new construction and commercial customers, while
BAHC primarily focuses on the residential market, but it is
unclear how much these target markets overlap. Neil signed
and submitted a price bid for an HVAC product to a former
residential customer of BAHC's on behalf of Absolute.
BAHC also submitted a bid for this very same job.
brought suit to enforce the noncompete agreement. After
dismissing Absolute, the only issue before the court was an
injunction seeking to enforce the noncompete agreement. At
the final hearing, the circuit court found that BAHC had
proved it maintains a protectable interest in its customer
list. However, the circuit court denied any injunctive relief
finding that there was no evidence that "Neil 'was
able to use' information obtained from BAHC." BAHC
filed a timely notice of appeal.
addressing BAHC's first argument on appeal, we must
address Neil's contention that the appeal is moot. Neil
argues that, because the terms of the noncompete agreement
specifically applied for a period of one year after
termination of employment, and since more than a year has now
elapsed since Neil resigned, there can be no enforceable
remedy under the contract, making the appeal moot. BAHC
contends that this case falls within the "capable of
repetition yet evading review" exception to the mootness
doctrine, relying on language to that effect in Box v.
J.B. Hunt Transport, Inc., 2017 Ark.App. 605, at 3-4,
533 S.W.3d 603, 607.
becomes moot when any judgment rendered by a court would have
no practical legal effect on a previously existing legal
controversy. Ark. State Highway & Transp. Dep't
v. O.J.'s Serv. Two, Inc., 2015 Ark. 388, at 3, 473
S.W.3d 24, 25. Neil's mootness argument hinges on the
premise that BAHC cannot be awarded a prospective one-year
injunction that extends beyond the
one-year-from-date-of-termination period specified in the
contract. This is a contested point of law on which it would
be improper to dismiss BAHC's appeal as moot.
jurisdictions have expressly recognized that "even
though the terms of the noncompete clause have expired, it is
not beyond the court's power to fashion an equitable
remedy by extending the term of noncompetition for a period
of one year from the issuance of the injunction."
See Hodges v. Schlinkert Sports Assoc., Inc., 89
F.3d 310, 312 (6th Cir. 1996) ("Alabama law appears to
permit its trial courts to award equitable relief after trial
by extending the operation of a noncompetition clause beyond
its expiration date in response to a request for general
equitable relief."). Similarly, in Tropicana Prods.
Sales, Inc. v. Phillips Brokerage Co., 874 F.2d 1581,
1583 (11th Cir. 1989), the Eleventh Circuit Court of Appeals
stated that "this Court has been willing after trial on
the merits to extend injunctive relief beyond the period of
time which might be established under the literal terms of a
disputed contract." It went on to say that
"Tropicana's claim on the merits is not mooted by
the 90-day durational limit set forth in its agreement with
Phillips." Tropicana Products and Sales, Inc.,
874 F.2d at 1583. Finally, we note that in Duffner v.
Alberty, 19 Ark.App. 137, 718 S.W.2d 111 (1986), which
is the case on which the circuit court relied in applying the
"able to use standard" below, we reviewed a
noncompete case in which the circuit court had awarded
"[a]n injunction . . . for a period of twelve months
commencing on the date of the decree."
Duffner, 19 Ark.App. at 141, 718 S.W.2d at 113
(emphasis added). Duffner was decided on other
grounds, and the availability of prospective injunctive
relief after the expiration of the contractual noncompete
period was not addressed in our opinion, but the procedural
history in Duffner adds weight to the argument that
such relief is available under Arkansas law.
dissent argues that BAHC did not specifically request a
one-year prospective injunction in its complaint and cannot
seek that remedy for the first time on appeal. However, the
record below reflects that BAHC sought general equitable
relief in the form of an injunction, then repeatedly asked
the circuit court to issue an injunction running for one year
from the date of the order, and both Neil and the circuit
court understood that to be the remedy sought. Moreover,
BAHC's arguable failure to articulate that specific
relief in its complaint is a legal issue that has never been
raised by Neil and has never been ruled on by the circuit
court. Therefore, it is not clear and obvious on the record
before us that BAHC could not obtain the relief it seeks on
appeal, a one-year prospective injunction. To hold otherwise
would be to base a mootness dismissal on our determination of
a substantive legal argument that is not before us.
the litigation of a noncompete agreement falls within the
capable-of-repetition-yet-evading-review exception to the
mootness doctrine. See Honeycutt v. Foster, 371 Ark.
545, 268 S.W.3d 875 (2007). This exception applies to cases
in which the justiciable controversy will necessarily expire
or terminate before adjudication. Wright v. Keffer,
319 Ark. 201, 890 S.W.2d 271 (1995). Examples of such cases
are abortion-law challenges, election-procedure cases, and
cases involving various court procedures. Shipp v.
Franklin, 370 Ark. 262, 267, 258 S.W.3d 744, 748 (2007).
Because there is well-established Arkansas law limiting the
time period for which a former employee may be restricted
from competing, the litigation of noncompete agreements falls
within this exception. According to Howard W. Brill and
Christian H. Brill, Arkansas Law of Damages §
19:3 (6th Ed. 2014), "[w]hile the courts have upheld
time limits of one year and two years, restrictions of three
years and five years were unreasonable and invalid." The
dissent's position that appeals concerning a noncompete
agreement become moot once the contractual noncompete period
has expired would place Arkansas employers between a rock and
a hard place: designation of a longer restrictive period
would likely be struck down as unreasonable, while limiting
the restriction period to comply with the law would
effectively cut off the employer's ability to obtain
appellate review. It is not our role to prohibit noncompete
agreements in Arkansas; to impose impossible-to-reconcile
legal requirements would do just that.
turn to the merits of BAHC's appeal. To the extent that
BAHC argues that the circuit court applied the wrong legal
standard, we review questions of law de novo. Weigh Sys.
S., Inc. v. Mark's Scales & Equip., Inc., 347
Ark. 868, 873, 68 S.W.3d 299, 301 (2002). BAHC also
challenges the sufficiency of the evidence as to some of the
circuit court's findings. The standard for evidentiary
matters decided in a bench trial is "not whether there
is substantial evidence to support the finding of the court,
but whether the trial court's findings were clearly
erroneous or clearly against the preponderance of the
evidence." Optical Partners, Inc. v. Dang, 2011
Ark. 156, at 14, 381 S.W.3d 46, 55; Ark. R. Civ. P. 52(a). A
finding is "clearly erroneous" when "although
there is evidence to support it, the reviewing court is left
with a definite and firm conviction that a mistake has been
made." Essential Accounting Sys., Inc. v.
Dewberry, 2013 Ark.App. 388, at 5, 428 S.W.3d 613, 616.
argues that the circuit court applied the wrong legal
standard in determining whether to grant the injunction.
Specifically, it challenges the circuit court's use of
the "able to use" standard from Duffner v.
Alberty, arguing that it is an incorrect statement of
law, or alternatively, that it was misapplied in this case.
BAHC first argues that the Duffner "able to
use" language "has either been ignored or rejected
in subsequent cases." BAHC waived this argument below.
While not citing Duffner, BAHC argued in its
"Plaintiff's Reply to Defendant's Post Trial
Brief" for the exact legal standard it now asserts as
Finally, the fact that BAHC won the Anderson job is
irrelevant because, as stated above, Arkansas law does not
require a party seeking to enforce a noncompete agreement to
prove that the former employee is actually utilizing the
proprietary information. "The question is whether [the
former employee] would be able to use the
information obtained to gain an unfair competitive
advantage." Statco Wireless v. Southwestern Bell
Wireless, 80 Ark.App. 284, 295, 95 S.W.3d 13, 19 (2003).
BAHC acquiesced to use of the "able to use"
standard and cannot now argue that it is contrary to
also argues that the court incorrectly applied the "able
to use" standard by requiring it to prove that Neil had
"actually used" BAHC's proprietary information
to obtain an unfair competitive advantage. BAHC is correct
that an "actual use" standard would be contrary to
established law. We have never before required proof that the
former employee has actually used the employer's
protected interest at the time of trial. We have stated that
the "able to use" standard focuses on the ability
of the employee to use such information rather than ...