The opinion of the court was delivered by: Joan N. Ericksen United States District Judge
H&R Block Enterprises, Inc. (H&R Block), brought this action against Mary Short and AAA Tax Specialists, Inc., (collectively, Defendants) alleging breach of contract against Short and tortious interference with contractual relations and misappropriation of trade secrets against Defendants. By Order dated March 2, 2006, the Court granted in part and denied in part H&R Block's motion for a preliminary injunction on its breach of contract claim. H&R Block now moves for summary judgment on its breach of contract claim. For the reasons set forth below, the Court grants in part and denies in part H&R Block's motion.
H&R Block provides tax preparation and related services to companies and individuals throughout the United States. Short was employed as a tax preparer for H&R Block in its St. Paul district for approximately twenty-four years. During her employment, Short executed a Premium Tax Service Tax Professional Employment Agreement (Employment Agreement).*fn1
The Employment Agreement contains covenants restricting Short's ability to compete with H&R Block, solicit H&R Block clients, and solicit H&R Block employees after departure from H&R Block.
On December 31, 2004, Short resigned from H&R Block. Less than one month later, on January 26, 2005, she formed AAA Tax Specialists (AAA). Days or weeks after she left H&R Block, Short created a list of clients that she had serviced while working at H&R Block. From that list, Short created approximately 170 mailing labels. On or about February 9, 2005, she sent postcards to some of her former H&R Block clients. The postcards stated:
After being involved in your personal finances for these years, I wanted to let you know that I have ended my relationship with H&R Block.
I am sorry for any inconvenience to you.
I had too many problems with policies and pricing, as well as personal issues, which caused me to find employment elsewhere.
If you have any questions or need help, please feel free to call me at 651-489-6939.
In 2005, at least 90 out of 127 tax returns prepared at AAA were for Short's former H&R Block clients. In 2006, over half of Short's clients were former H&R Block clients. After the Court issued an injunction restraining Short from soliciting or providing services to certain H&R Block clients, Short turned away approximately forty to forty-five former H&R Block clients. She referred these clients to another tax return preparer, not H&R Block.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, Rule 56(e) requires the nonmoving party to respond by submitting evidentiary materials that designate "specific facts showing that there is a genuine issue for trial. " Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Section 11 of the Employment Agreement provides: Non-competition Covenant.
Associate covenants that for two (2) years following the vo luntary or involuntary termination of Associate's employment (such period to be extended by any period(s) of violation), Associate shall not, directly or indirectly, provide any of the following services to any of the Company's Clients: (1) prepare tax returns, (2) file tax returns electronically, or (3) provide bookkeeping or any other alternative or additional service that the Company provides within the Associate's district of employment. Company clients are defined as (i) every person or entity whose federal or state tax return was prepared or electronically transmitted by the Company in the Associate's district of employment during the 2003 or 2004 calendar year, and (ii) every person or entity for whom the Company provided bookkeeping or other alternative or additional services within the Associate's district of employment during the 2003 or 2004 calendar year. For purposes of this definition, Company includes a Block associate in violation of his or her employment agreement. Associate acknowledges that the Company has made available to associates information regarding the geographic boundaries of the district.
Section 12 of the Employment Agreement provides:
Associate covenants that for two (2) years following the voluntary or involuntary termination of Associate's employment (such period to be extended by any period(s) of violation), Associate shall not directly or indirectly solicit or divert the Company's Clients or otherwise interfere with the Company's continuing relationships with its clients. Company Clients are those defined in Section 11.
H&R Block argues that Short breached the non-competition and nonsolicitation covenants (client covenants) by soliciting and performing tax preparation services for H&R Block St. Paul district clients within two years of her departure from H&R Block. H&R Block seeks to enforce those restrictive covenants.
The Employment Agreement is "governed by the laws of the State of Missouri without reference to its conflict of laws principles." Under Missouri law, "[a] restrictive covenant in an employment agreement is only valid and enforceable if it is necessary to protect trade secrets and customer contacts, and if it is reasonable as to time and place." Victoria's Secret Stores, Inc. v. May Dep't Stores Co., 157 S.W.3d 256, 260 (Mo. Ct. App. 2004). The party seeking to enforce a covenant bears the burden of demonstrating its validity. Id. Here, Short does not dispute the validity of the covenants. Moreover, as discussed in the Court's March 2 Order, H&R Block has demonstrated that the covenants are reasonably limited to a narrow class of people and are reasonable as to time. Thus, the Court concludes that the restrictions are valid.
In addition, H&R Block has submitted evidence that Short violated the restrictive covenants. Specifically, H&R Block has offered evidence that, following her departure, Short used H&R Block's customer information to send postcards to her former H&R Block clients. The postcards opened by acknowledging her involvement in the clients' personal finances, informed the clients that she was leaving H&R Block, indicated that she had concerns about H&R Block's pricing, and invited the clients to call her if they required assistance. The phone number Short provided in the postcards is identical to the number listed as the contact number in AAA's Articles of Incorporation. In addition, H&R Block has submitted evidence that Short prepared tax returns for former H&R Block clients. In 2005, at least 90 out of 127 tax returns prepared by Short were for former H&R Block clients. In 2006, over half of Short's clients were former H&R Block clients.
Short does not argue that she has not violated the restrictive covenants. Nor does she offer any evidence that would demonstrate a genuine issue for trial on H&R Block's breach of contract claim. Viewing the record in the light most favorable to Short, no reasonable fact finder could conclude that Short did not solicit and provide services to ...