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Mar 25, 2021

Order for Permanent Injunction Not Open for Interpretation

On March 2, 2021, the Missouri Court of Appeals, Eastern District, in Chemline Inc. v. Mauzy, affirmed in part and reversed and remanded in part, a St. Louis County Circuit Court’s order finding a sales representative in contempt of the court’s permanent injunction order expressly prohibiting contact with his former employer’s customers. The trial court assessed a compensatory fine, despite plaintiff’s failure to demonstrate that it suffered actual damages as a result of the contemptuous conduct, and attorneys’ fees.

The case involved restrictive covenants, including a non-compete and non-solicitation agreement, between Chemline Inc. and its former sales representative Timothy Mauzy.  Mauzy left Chemline and began working for IXS Coatings in a sales capacity.  Seven months later, Chemline filed a petition for injunctive relief, claiming Mauzy violated the non-compete and non-solicitation provisions of his employment agreement in that he contacted customers with whom he had a relationship during his employment with Chemline.  Both Chemline and IXS coatings are in the business of custom coating for use in industrial and commercial application and, thus, are direct market competitors.

The trial court entered an order of permanent injunction prohibiting Mauzy from contacting five specific customers with whom he had a relationship during his employment at Chemline.  Four months after the injunction was entered, Chemline. file a motion for contempt and to show cause alleging Mauzy’s interactions with an employee from one of the five customers constituted a willful violation of the order.  The trial court found Mauzy engaged in “willful disobedience” of the order and entered a judgment of contempt, awarded Chemline $6,000 in attorney’s fees and $2,000 in compensatory damages for interfering with Chemline’s business relationships. 

Mauzy appealed claiming the trial court erred in: 1) finding him in contempt because the conduct was not clearly, unambiguously, and expressly prohibited by the order; 2) assessing a $2,000 compensatory fine where there was no evidence of actual damage; and 3) awarding Chemline Inc. $6,000 in attorney’s fees because he did not violate the injunction order, willfully or otherwise.

As to Point I regarding whether the order clearly, unambiguously and expressly prohibited Mauzy’s conduct, Mauzy claimed the order only precluded contact with the companies and not their individual employees. Mauzy did not deny being in contact with employees from former clients. He further claimed the order prohibited contacting former clients for “business-related solicitation” and not personal communication, though this distinction was not addressed in the order at issue, nor did Mauzy request clarification of the trial court’s order before directly violating it.  The Court of Appeals found no error in the trial court’s conclusion that the order’s prohibition on “contacting” former clients, encompassed all communications.

As to Point II regarding the court assessing a compensatory fine, the Court of Appeals held the trial court erred in assessing the $2,000 compensatory fine as there was no evidence that Chemline. suffered any actual damage as a result of Mauzy’s conduct.  Because compensatory fines are meant to be remedial in nature, these fines must be related to actual damage suffered.  Chemline could not demonstrate a quantified diminution in business sales for which compensatory damages would be appropriate.  Thus, the trial court erred in assessing and remanded for reconsideration of the compensatory fine. 

As to Point III regarding the award of attorney’s fees, the trial court’s order was affirmed, as the trial court has inherent authority to assess attorneys’ fees in a civil contempt proceeding.  The Court of Appeals will affirm an award of attorneys’ fees unless it constitutes an abuse of discretion, which was not found in this case. 

Moral of the story: don’t try to get cute with interpreting a court’s permanent injunction order.  “No communication” does in fact mean NO communication