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The Minnesota Court of Appeals determined that an employee was acting within the course and scope of his employment when he solicited a wider range of his former employer’s clients than was permitted under a non-compete agreement of which his current employer was aware. In October 1991, when Paul J. Hagen sold his insurance agency to Burmeister & Associates, Inc., the sale included three contracts, two of which contained non-compete agreements, the court’s decision stated. The agreements were to remain in effect until February 2001. In November 1994, Hagen approached American Agency, Inc. about possible employment, providing copies of the non-compete agreements he had made with Burmeister. After hiring Hagen, American approved a letter Hagen said would be sent to close friends and family, who he was allowed to approach under the terms of the non-compete agreements. The following day, Hagen sent letters to former clients later determined to be outside of his “close friends and family” circle. Of the 1000-name policyholder list, 50 names were determined to fall within the “close friends and family designation.” Hagen had sent approximately 250 solicitations In Hagen v. Burmeister & Assoc., Inc., the Hennepin County District Court determined that Hagen violated the non-compete agreement and the Minnesota Trade Secrets Act (MTSA). However, the court initially dismissed the company’s MTSA against American Agency. The Court of Appeals ordered the district to make a determination on retrial. In response, the Hennepin County District Court, relying on the case Kasner v. Gage, ruled American Agency could not be held liable for Hagen’s agreement violations. Kasner stated that an employer could not be found liable for the tortuous or criminal acts of an employee without evidence that the act committed was similar to conduct authorized by, or incidental to conduct authorized by, the employer. “On an appeal from the summary judgment where there are no genuine issues of material fact,” Court of Appeals Judge Roland C. Amundson wrote in the Court of Appeals’ opinion, “our inquiry is whether the district court erred in its application of the law.” The Court of Appeals found that the district court’s reliance upon Kasner was correct; however, its application left something to be desired. “[T]he district court did not err in relying on Kasner,” the Court of Appeals wrote. “The district court did, however, err in its application of Kasner‘s principles to this case.” The court ruled that “Hagen’s solicitation was entirely within the enterprise of American Agency.” The court said American Agency approved the actual text of the letter and also provided all of the resources, including stationary, postage, and envelopes. The letters also were written at and sent from the company’s offices. The court ruled that, although this case did differ from Kasner, where the employee ran an autonomous office for a national company, the difference held the key to finding American Agency liable. “In contrast, here, Hagen did not operate his own insurance agency, but worked in American Agency’s office and was subject to direct supervision,” the court wrote. “Hagen was a supervised employee, but despite being fully aware of the conditions of Hagen’s non-compete clause, American Agency simply failed to supervise the solicitation.” The court ruled American Agency’s claiming ignorance should not exempt it from liability for Hagen’s action; rather, that lack of knowledge should have sparked the vigilance that would have prevented the solicitations from occurring. “[American Agency] didn’t know exactly who on the list were appropriate for solicitation,” the opinion stated. “Ignorance of this significant fact should have alerted them to supervise Hagen. Accordingly, Hagen was acting within the scope of his employment when he solicited clients in violation of his non-compete agreement with Burmeister.”

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