The full case caption appears at the
end of this opinion. LANSING, Judge Magic Valley Truck Brokers, Inc. (“Magic Valley”) sued a former employee, David Meyer,for breach of a noncompetition covenant in his employment contract. Magic Valley also suedMeyer’s new employer, Continental Truck Freight Brokers, Inc. (“Continental”), for tortiousinterference with prospective business advantage and tortious interference with contract. Followinga court trial the district court found that Meyer had breached the noncompetition covenant, but thecourt awarded no damages because it concluded that no actual damages had been proven and thatthe liquidated damages provision of the noncompetition covenant in Meyer’s employment contractwas unenforceable. The court also held that Magic Valley had failed to prove the damages elementof the interference with contract claim against Continental. Magic Valley appeals, with Meyer andContinental filing cross-appeals. BACKGROUND Magic Valley operates a truck brokerage business which provides service as an intermediarybetween shippers and transport truckers. Magic Valley identifies truckers who are available totransport loads for shippers and arranges for pickups and deliveries, charging a commission for thisservice. Magic Valley hired Meyer to serve as a truck broker in 1984. At that time, Meyer signeda written employment agreement that included the following covenant against competition:Noncompetition and Solicitation Agreement. The Employee agrees that at no timeduring the period of employment with Magic Valley or for the period of one (1) yearimmediately following the termination of employment, regardless of the circumstancesof termination, will Employee, on behalf of Employee or any other person orcorporation, do either or both of the following:
A. Contact any Customer, by any means, with whom Employee hadany contact during the employ of Magic Valley for the purpose ofarranging shipments of commodities in a truck brokerage capacity.
B. Engage in any capacity in the truck brokerage business, or contactany Customer of Magic Valley (regardless whether Employeecontacted the Customer during the employ of Magic Valley) within aradius of 300 miles from Boise, Idaho.
The agreement also provided that Meyer would not, within one year following termination of hisemployment, copy, use, or give to anyone else, records or information regarding Magic Valley’smethods of operation, the identities or commodity-shipping operations of Magic Valley customers,or other specialized information related to Magic Valley’s business. The terms of the agreementaddressing damages for a breach included the following:
Damage Remedies. Should the Employee breach this Agreement, thedamages sustained by the Magic Valley are uncertain, speculative anddifficult to ascertain. Accordingly, the parties agree upon a methodof determining the damages, that the amount determined is reasonable,and shall constitute liquidated damages and not a penalty. Theliquidated damages are as follows:
The agreement then specified that the liquidated damages for violation of the covenant againstengaging in competition within a 300-mile radius of Boise would be $5,000 for each calendar monthof such competition, and the liquidated damages for violation of the covenants against solicitingMagic Valley customers and using or distributing confidential business information would be $1,000per customer and $500 per item of information. [FOOTNOTE 1]
In 1996, Meyer became dissatisfied with working for Magic Valley and approached acompetitor, Continental, about potential employment. Meyer’s father, Dennis Meyer, was alreadyemployed by Continental, apparently in a management capacity. On April 30, 1996, Dennis Meyermet with the president of Magic Valley, Wesley Blaser, to discuss the options available to, andconstraints on, David Meyer. Dennis Meyer told Blaser that David Meyer could be employed inContinental’s Portland, Oregon office, which was more than 300 miles from Boise, if Magic Valleyintended to enforce the noncompetition agreement. The trial evidence is in dispute regarding theremaining content and the outcome of the meeting. According to Dennis Meyer, Blaser voiced noobjection to David Meyer’s going to work for Continental. Blaser, on the other hand, testified thatat the meeting he stated his intent to “look at our contract and go by it.” Meyer quit his employmentwith Magic Valley on the day of the meeting and began working for Continental, in its Boise office,the next day. On May 8, 1996, Magic Valley’s attorneys sent written notification to Continental thatemployment of Meyer within a 300-mile radius of Boise would be viewed as a violation of thenoncompetition clause. On June 25, 1996, the attorneys also sent a letter to Meyer expressing theposition that his employment with Continental was a violation of the noncompetition covenant anddemanding payment of liquidated damages at the rate of $5,000 per month as specified in theemployment agreement. When Meyer and Continental failed to comply with Magic Valley’sdemands, Magic Valley instituted actions against both. Magic Valley alleged that Meyer hadbreached the noncompetition agreement by working for Continental, by contacting Magic Valleycustomers, and by using Magic Valley’s business information. Against Continental, Magic Valleyasserted claims of tortious interference with prospective business advantage and interference withcontract. The two lawsuits were consolidated for trial. After a court trial, the district court found that Magic Valley had not proved that Meyersolicited any Magic Valley customers during his employment with Continental or violated terms ofthe agreement prohibiting use of Magic Valley’s confidential business information. As to that portionof the covenant prohibiting employment in the truck brokerage business within a 300-mile radius ofBoise, however, the court found that the restrictions placed on Meyer were reasonable andenforceable and that Meyer had breached this term by his employment with Continental. The courtnonetheless declined to award either liquidated damages or actual damages for the breach. The courtfound that the liquidated damages provision of the contract was exorbitant and void as a penalty andthat Magic Valley had failed to prove any actual damages with reasonable certainty. As to the actionagainst Continental, the court found that Magic Valley had not proved interference with its businessbut did prove that Continental intentionally interfered with the noncompetition covenant. The courtconcluded that Magic Valley was not entitled to recover for this tortious interference with contract,however, because it had not shown any resulting damages. On appeal, Magic Valley claims that the district court erred in finding the liquidated damagesclause an unenforceable penalty because the defendants neither pleaded such a defense nor met theburden of proving that the clause was a penalty. Magic Valley asserts that it proved entitlement torecover either actual damages or liquidated damages from Meyer and Continental. The defendantsfiled a cross-appeal, asserting that Magic Valley should be estopped from enforcing thenoncompetition agreement or, alternatively, that the district court erred in finding that there was abreach of the covenant by Meyer and tortious interference by Continental. ANALYSIS A. Standard of Review When a case has been tried to a court, it is the province of the trial judge to weigh theconflicting evidence and testimony and to judge the credibility of witnesses. I.R.C.P. 52(a); KootenaiElec. Coop., Inc. v. Washington Water Power, 127 Idaho 432, 434-35, 901 P.2d 1333, 1335-36(1995). On appellate review, the trial court’s findings that are supported by substantial andcompetent evidence will not be set aside. Kootenai Elec. Coop., Inc., supra; Margaret H. WayneTrust v. Lipsky, 123 Idaho 253, 256, 846 P.2d 904, 907 (1993). Further, the trial court’s findingsof fact will be liberally construed in favor of the judgment entered. Abbott v. Nampa Sch. Dist. No.131, 119 Idaho 544, 547, 808 P.2d 1289, 1292 (1991). This court is not bound by the trial court’slegal conclusions, however, and is free to draw its own legal conclusions from the facts presented.Kootenai Elec. Coop., Inc., 127 Idaho at 435, 901 P.2d at 1336; Kawai Farms, Inc. v. Longstreet,121 Idaho 610, 613, 826 P.2d 1322, 1325 (1992). B. Estoppel Defense We consider first an issue raised in the defendants’ cross-appeal–whether the district courterred in declining to apply the doctrine of quasi-estoppel against Magic Valley. Quasi-estoppelapplies when a person asserts a claim or position inconsistent with a position previously taken, withknowledge of the facts and of his or her rights, to the detriment of the person seeking application ofthe doctrine. Sun Valley Hot Springs Ranch, Inc. v. Kelsey, 131 Idaho 657, 662, 962 P.2d 1041,1046 (1998); The Highlands, Inc. v. Hosac, 130 Idaho 67, 70, 936 P.2d 1309, 1312 (1997); Mitchellv. Zilog, Inc., 125 Idaho 709, 715, 874 P.2d 520, 526 (1994); KTVB v. Boise City, 94 Idaho 279,281-82, 486 P.2d 992, 994-95 (1971). The inconsistent position must have procured some advantageto the challenged party or produced some disadvantage to the other; or the person invoking theestoppel must have been induced to change his position. Mitchell, supra; KTVB, supra. Continental and Meyer assert that, at the meeting between Dennis Meyer and Wesley Blaseron April 30, 1996, Blaser gave the impression that he did not object to Meyer working forContinental in its Boise office. The defendants argue that because Blaser, acting on Magic Valley’sbehalf, indicated acquiescence in Meyer’s change of employment, Magic Valley’s claims are barredby the doctrine of quasi-estoppel. The district court, however, did not accept the defendants’ version of the conversationbetween Dennis Meyer and Blaser. The district court did not find that Blaser had given an impressionthat he would waive the noncompetition agreement. Rather, the court found that Blaser took theview that he could authorize no action without first talking to his sister (the co-owner of MagicValley) and to Magic Valley’s lawyers. Testimony at trial supports these findings, and this Court willnot substitute its view for that of the trial court on issues of credibility, the weight given to testimony,or reasonable inferences drawn from the evidence. Kootenai Elec. Coop., Inc., supra. The facts asfound by the trial court did not demonstrate a basis for application of quasi-estoppel against MagicValley. C. Breach of Contract We next address Meyer’s argument that the district court erred in finding that he breachedthe noncompetition covenant. Meyer asserts that because Magic Valley provided no evidence thathe contacted Magic Valley customers or improperly used confidential information about MagicValley’s business, it did not prove a breach. Meyer misreads the contract. The noncompetition covenant prohibits not only contactingMagic Valley’s customers but also engaging “in any capacity in the truck brokeragebusiness . . . within a radius of 300 miles from Boise, Idaho.” It was undisputed at trial that Meyerwas employed in Boise as a truck broker for Continental. His argument that this did not constitutea breach of the covenant is without merit. D. Tortious Interference with Contract In its cross-appeal, Continental challenges the trial court’s finding that Continentalintentionally interfered with the contract between Magic Valley and Meyer. If Continental is correctin this regard, then it should have been deemed a prevailing party below. Four elements must be proven in order to establish a prima facie case of tortious interferencewith contract. The plaintiff must show that 1) there was a contract in existence; 2) the defendantknew of the contract; 3) the defendant intentionally interfered with the contract, causing a breach; and4) injury to the plaintiff resulted from the breach. Ostrander v. Farm Bureau Mut. Ins. Co., 123Idaho 650, 654, 851 P.2d 946, 950 (1993); Barlow v. International Harvester Co., 95 Idaho 881,893, 522 P.2d 1102, 1114 (1974). Malice in the sense of ill will is not a required element. Id. Thetrial court found that Magic Valley had proven the first three elements of this tort, but not the finalelement, injury resulting from the breach. Continental argues that there could be no tortious interference with the employment contractbetween Meyer and Magic Valley because Meyer’s employment was terminable at-will and he wascontractually free to leave at any time. This argument is inapt, however, because the district courtdid not find that Continental interfered with Magic Valley’s employment of Meyer but, rather, thatit interfered with Meyer’s performance of the covenant not to compete. Knowingly engaging an employee for work that would violate the employee’s covenantagainst competition with a former employer is actionable as tortious interference. On this precisepoint, Comment (i) to section 768 of the RESTATEMENT (SECOND) OF TORTS states:
An employment contract . . . may be only partially terminable at will. Thus it mayleave the employment at the employee’s option but provide that he is under acontinuing obligation not to engage in competition with his former employer. Underthese circumstances a defendant engaged in the same business might induce theemployee to quit his job, but he would not be justified in engaging the employee towork for him in an activity that would mean violation of the contract not to compete.(emphasis added).
In conformity with this comment, a number of jurisdictions have held that a formeremployer can recover from a new employer for tortiously interfering with an employee’s covenantagainst competition. See, e.g., Barnes Group, Inc. v. C & C Products, 716 F.2d 1023 (4th Cir.1983); Mixing Equipment Co. v. Philadelphia Gear, Inc., 436 F.2d 1308 (3d Cir. 1971); Premix,Inc. v. Zappitelli, 561 F. Supp. 269 (N.D. Ohio 1983); Koehler v. Cummings, 380 F. Supp. 1294(M.D. Tenn. 1971); Certified Laboratories of Texas v. Rubinson, 303 F. Supp. 1014 (E.D. Pa.1969); Mattison v. Johnston, 730 P.2d 286 (Ariz. App. 1986); Carroll Anesthesia Assoc. v.Anesthecare, Inc., 507 S.E.2d 829 (Ga. Ct. App. 1998); Fowler v. Printers II, 598 A.2d 794 (Md.App. 1991); United Laboratories, Inc. v. Kuykendall, 370 S.E.2d 375 (N.C. 1988); Morgan’s HomeEquipment Corp. v. Martucci, 136 A.2d 838 (Pa. 1957). In order to be liable for tortious interference with a noncompetition covenant, it is notnecessary that the new employer actively induce the employee to leave his former position. The issueof paramount import is whether the new employer, with knowledge of the covenant, “engag[ed] theemployee to work for him in an activity that would mean violation of the contract not to compete.” RESTATEMENT, supra, � 768 cmt. i. See Fowler, supra (holding that inducement to terminate theformer employment is not necessary for the tortious interference if the new employer knowinglyengaged the employee to perform work that violates the noncompetition agreement). In the case atbar, it is uncontroverted that Continental knew of the existence of the covenant not to compete.Indeed, a representative of Continental initiated discussions with Magic Valley’s president to addresswhether Magic Valley intended to enforce the clause. Continental then intentionally employed Meyeras a truck broker in Boise in knowing violation of the terms of the covenant. Accordingly, the districtcourt did not err in holding that the first three elements of tortious interference with contract had beenproved. E. Damages As noted above, the district court declined to award damages against either Meyer orContinental, finding that Magic Valley had not proved actual damages and that the liquidated damageclause was void as a penalty. On appeal, Magic Valley asserts error in both of these determinations. 1. Actual damagesWhen damages are sought for lost business profits, the amount of the loss must be provenwith reasonable certainty. Williams v. Bone, 74 Idaho 185, 189, 259 P.2d 810, 812 (1953); CuddyMountain Concrete, Inc. v. Citadel Construction, Inc., 121 Idaho 220, 225, 824 P.2d 151, 156 (Ct.App. 1992). “Reasonable certainty” does not require that damages be proved with mathematicalexactitude, but the evidence must be sufficient to take the damages out of the realm of speculation.Cuddy Mountain Concrete, Inc., supra; Nelson v. World Wide Lease, Inc., 110 Idaho 369, 378, 716P.2d 513, 522 (Ct. App. 1986). Damages also must be shown to be the proximate consequence ofthe defendant’s actionable conduct. McOmber v. Nuckols, 82 Idaho 280, 284, 353 P.2d 398, 401(1960); Zanotti v. Cook, 129 Idaho 151, 154, 922 P.2d 1077, 1080 (Ct. App. 1996); Wing v. Hulet,106 Idaho 912, 918, 684 P.2d 314, 320 (Ct. App. 1984). The district court’s finding that Magic Valley did not prove, with reasonable certainty, actualdamages caused by breach of the noncompetition covenant is supported by the trial record. MagicValley’s president acknowledged that he had no evidence of any business being taken from MagicValley by Meyer. The only evidence presented by Magic Valley bearing on quantification of damageswas the testimony of the company’s secretary-treasurer. She testified that during Meyer’s finaltwelve months of service for Magic Valley, from May 1, 1995 to April 30, 1996, he generated grossreceipts of approximately $97,000, as compared to gross receipts of approximately $57,000generated by Meyer’s inexperienced replacement. After netting out the salaries of the twoindividuals, she calculated that the reduction in profit for Magic Valley was approximately $27,000. The district court was correct in concluding that this testimony did not provide an accuratemeasure of damages for breach of the noncompetition covenant, for this decline in Magic Valley’sprofit was the result of Meyer’s departure from Magic Valley, not of his employment by a competitor. The same decline in income would have occurred regardless of whether Meyer worked for acompetitor or went into an entirely unrelated industry. Meyer’s employment was terminable at will,and Magic Valley does not claim entitlement to damages caused merely by his choice to leave thecompany. Therefore, we perceive no error in the district court’s finding that Magic Valley failed toprove actual damages caused by Meyer’s breach of the noncompetition covenant or by Continental’stortious interference with Meyer’s performance of the covenant. 2. Liquidated damages Historically, courts of equity developed a rule, later adopted by courts of law, that contractualclauses prescribing penalties for a breach of the contract would not be enforced because of thepotential for over-reaching and unconscionable bargains. JOHN D. CALAMARI & JOSEPH M. PERILLO,THE LAW OF CONTRACTS, � 14-31, at 589 (4th ed. 1998). Modern courts continue to refuse toenforce contract clauses that appear designed to deter a breach or to punish the breaching party ratherthan to compensate the injured party for damage occasioned by the breach. CALAMARI & PERILLO,supra, � 14.31, at 590. See also Graves v. Cupic, 75 Idaho 451, 456, 272 P.2d 1020, 1023 (1954).It is permissible, however, for the parties to a contract to set in advance (i.e., to “liquidate”)damages for a potential breach if certain criteria are met. The Idaho Supreme Court has expressedthe test for an enforceable liquidated damages clause as follows:Generally speaking, parties to a contract may agree upon liquidated damages inanticipation of a breach, in any case where the circumstances are such that accuratedetermination of the damages would be difficult or impossible, and provided that theliquidated damages fixed by the contract bear a reasonable relation to actual damages.But, where the forfeiture or damage fixed by the contract is arbitrary and bears noreasonable relation to the anticipated damage, and is exorbitant and unconscionable,it is regarded as a �penalty’, and the contractual provision therefor is void andunenforceable. Graves, 75 Idaho at 456, 272 P.2d at 1023. See also Clampitt v. A.M.R. Corp., 109 Idaho 145, 148,706 P.2d 34, 37 (1985); McEnroe v. Morgan, 106 Idaho 326, 331, 678 P.2d 595, 600 (Ct. App.1984). The burden of proving that the damages specified in the contract bear no reasonable relationto actual damages or that the liquidated damages are exorbitant and unconscionable rests upon theparty seeking relief from the liquidated damages clause. Howard v. Bar Bell Land & Cattle Co., 81Idaho 189, 197, 340 P.2d 103, 107 (1959); McEnroe, 106 Idaho at 332, 678 P.2d at 601; LockhartCo. v. B.F.K., Ltd., 107 Idaho 633, 636, 691 P.2d 1248, 1251 (Ct. App. 1984); Fleming v.Hathaway, 107 Idaho 157, 161, 686 P.2d 837, 841 (Ct. App. 1984). See also CALAMARI & PERILLO,supra, � 14.31 at 593-94. [FOOTNOTE 2] In the present case, the district court determined that the first prong of the Graves test–thataccurate determination of actual damages would be difficult or impossible–was satisfied, and neitherparty takes exception to that finding. As to the second prong, however, the district court concludedthat the liquidated damages amount set by Meyer’s employment contract was exorbitant andunconscionable and therefore constituted an unenforceable penalty. Magic Valley first challenges this decision with an assertion that the district court should nothave addressed the penalty issue because Meyer did not plead it in his answer as an affirmativedefense. We think that Magic Valley is in no position to make this argument, however, becauseMagic Valley’s complaint did not refer to the liquidated damages clause or request an award ofliquidated damages. The complaint requested only “damages in an amount to be proved at trial.”Although the claim for liquidated damages was presented at trial without objection from thedefendants and was tried by consent, the absence of any claim for liquidated damages in MagicValley’s complaint obviated any burden that would otherwise have fallen upon Meyer under IdahoRule of Civil Procedure 8(c) to plead an affirmative defense thereto. Magic Valley next argues that the district court’s refusal to enforce the liquidated damagesclause was erroneous because, in rendering its decision, the district court observed that “theimposition of $5,000 a month penalty on an employee who was hired at $10,200 per year is clearly [FOOTNOTE 3] a punishment for working in the same business in the same area.” According to Magic Valley, thiscomment discloses error because it shows that the court “made a comparison only to Meyer’s traineesalary and not to the actual damages suffered by Magic Valley as a result of the breach.” We do not agree with Magic Valley’s assessment of the district court’s analysis. In itsfindings of fact and conclusions of law, the district court clearly recognized and expressed the testto be whether the liquidated damages fixed by the contract “bear a reasonable relationship to theactual damages anticipated to be incurred.” The district court’s statement comparing the claimed$60,000 in liquidated damages to Meyer’s initial salary was merely an additional comment by thecourt on the severity of the burden upon Meyer as a further indicia that the underlying intent of theclause was to deter or punish a breach rather than to estimate damages. Finally, Magic Valley argues that the liquidated damages provision should have been enforcedbecause the defendants did not meet their burden to prove that the liquidated damages did not beara reasonable relation to actual damages. This Court will not overturn a trial court’s finding as towhether liquidated damages constitute an unconscionable penalty unless the finding is clearlyerroneous. Clampitt, 109 Idaho at 149, 706 P.2d at 38. The trial court’s determination here is not clearly erroneous. The defendants showed stepsthey had taken to ensure that, during the first year, Meyer’s employment with Continental would notinterfere with Magic Valley’s relationship with its existing customers. According to this evidence,Meyer did not contact any businesses that were known to be customers of Magic Valley, and if hereceived a call from such a business, it was passed on to another broker. He was hired principally tohandle the accounts of two produce companies located in Washington and Colorado, areas whichwere not regularly served by Magic Valley. Continental also presented testimony that it made noprofit, but lost money, on Meyer’s services during the first year. [FOOTNOTE 4] From this evidence, which was uncontradicted, the trial court could reasonably infer that actual damages suffered by Magic Valley,if any, were minimal and that the $60,000 in liquidated damages sought by Magic Valley was grosslydisproportionate and bore no reasonable relation to the actual loss. Accordingly, we affirm the district court’s determination that, on the facts presented here, theliquidated damage clause of the noncompetition covenant was unenforceable. F. Attorney Fees All parties seek an award of attorney fees on appeal pursuant to Idaho Code � 12-120(3).Magic Valley also claims attorney fees against David Meyer under an attorney fee clause in theemployment contract. This Court, however, declines to award attorney fees because we do not viewany of the three parties before us as having prevailed in the appeal. Magic Valley, as the appellant,was unsuccessful with respect to the claims of error that it asserted, and the respondents wereunsuccessful on the issues raised in their cross-appeal. [FOOTNOTE 5] Therefore, the parties shall bear their respective attorney fees incurred on appeal. See Baker v. Boren, 129 Idaho 885, 934 P.2d 951 (Ct.App. 1997). For the same reason, no costs are awarded pursuant to Idaho Appellate Rule 40. CONCLUSION Neither the appellant, Magic Valley, nor the respondents and cross-appellants, Meyer andContinental, have shown error in the trial court’s decision. Accordingly, the judgment of the districtcourt is affirmed. Chief Judge PERRY and Judge SCHWARTZMAN, CONCUR. :::FOOTNOTES::: FN1 The contract also authorized an injunction remedy. FN2 When a liquidated damages clause is unenforceable as a penalty, actual damages, if proven, are recoverable. City of Idaho Falls v. Beco Const., 123 Idaho 516, 522, 850 P.2d 165, 171(1993); Graves, 75 Idaho at 459, 272 P.2d at 1026. FN3 This finding refers to Meyer’s starting salary at Magic Valley in 1984, when the employment contract was executed. FN4 It is also noteworthy that Magic Valley presented no evidence of how the rate of $5,000 per month was selected as liquidated damages or to show that this amount was the result of any genuine attempt to estimate damage likely to arise from breach of the noncompetition covenant. FN5 Moreover, it should be noted that Magic Valley’s claim against Continental sounds in tort, not in contract.
MAGIC VALLEY TRUCK BROKERS, INC., Plaintiff-Appellant-Cross Respondent, v. DAVID E. MEYER and CONTINENTAL TRUCK FREIGHT BROKERS, INC., Defendants-Respondents-Cross Appellants. Docket No. 24513 In The Court Of Appeals Of The State Of Idaho 1999 Opinion No. 34 Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Deborah A. Bail, District Judge. Filed: May 7, 1999 Judgment for defendants in action for breach of noncompetition covenant and tortiousinterference with contract, affirmed. Dillion, Bosch & Daw, Chdt., Boise, for appellant. Charles A. Daw argued. Beer & Cain, Boise, for respondent. Stephen L. Beer argued.
