Mayer Hoffman McCann, P.C. v. Barton

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________

No. 09-2061
___________

Mayer Hoffman McCann, P.C., *
*
Appellee, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
Thomas L. Barton; Anthony W. Krier; *
James N. Stelzer; John C. Walter, *
*
Appellants. *
___________

Submitted: January 13, 2010
Filed: August 11, 2010
___________

Before GRUENDER and SHEPHERD, Circuit Judges, and JARVEY,1 District Judge.
___________

SHEPHERD, Circuit Judge.

Mayer Hoffman McCann, P.C. (“MHM”), a professional corporation organized
in Missouri, is a national certified public accounting (CPA) firm. MHM sued its
former employees2 and shareholders—Thomas L. Barton, Anthony W. Krier, James

1
The Honorable John A. Jarvey, United States District Judge for the Southern
District of Iowa, sitting by designation.
2
Although appellants dispute that they were MHM employees, they were at least
at will employees of MHM pursuant to their own contractual agreements with MHM.
N. Stelzer, and John C. Walter (collectively, “appellants”), all CPAs licensed by the
State of Minnesota—to enforce restrictive covenants contained in contractual
agreements between the appellants and MHM. Following a bench trial, the district
court3 granted judgment to MHM, awarding MHM permanent injunctive relief and
$1,369,921 in liquidated damages. Appellants bring this appeal, contending that: (1)
enforcement of the restrictive covenants is contrary to Missouri law and (2) even if the
restrictive covenants are enforceable, the liquidated damages provision is void and
unenforceable under Missouri law. We reject these contentions and affirm the
judgment of the district court.

I.

From at least 1998 until August 15, 2005, appellants, along with CPA Tim
Talbott, were employees and shareholders of Bertram, Vallez, Kaplan & Talbot
(“Bertram Vallez”), a CPA firm located in New Hope, Minnesota. In August 1998,
Bertram Vallez entered into an Administrative Services Agreement with a predecessor
to CBIZ, Inc. (“CBIZ”),4 a public company that provides various financial services,
including some accounting services; employee services; and technology solutions.
Pursuant to the agreement, Bertram Vallez and CBIZ agreed to operate under the
Alternative Practice Structure model (“APS”).5 Bertram Vallez provided attest

3
The Honorable Gary A. Fenner, United States District Judge for the Western
District of Missouri.
4
Various subsidiaries of CBIZ, Inc. were associated with Bertram Vallez as well
as MHM. For ease of discussion, we collectively refer to these entities as “CBIZ.”
5
In general, an APS is an accounting firm

divided into two separate entities, a professional corporation and a
business corporation, separating the attest function activities from the
business services (such as consulting, financial planning, tax compliance
and planning, and other business advisory services). . . . The accounting

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services6 to clients, and CBIZ (1) performed nonattest services7 for clients and (2)
provided Bertram Vallez with “a variety of management advisory and business-related
services,” including “certain administrative, personnel, marketing, and other support
services.” (Appellants’ App. 165.) In exchange for CBIZ’s provision of
administrative services, Bertram Vallez agreed to pay 85% of its revenues to CBIZ.
Also in August 1998, Barton executed an Executive Employment Agreement with
CBIZ. Krier, Stelzer, and Walter entered into confidentiality and nonsolicitation
agreements with CBIZ (“Confidentiality Agreements”) on December 31, 2003,
August 17, 2003, and January 30, 2004, respectively.

In 2004, Bertram Vallez met with William Hancock, the president of MHM.
At that time, MHM and CBIZ operated under an APS. The parties discussed Bertram
Vallez joining MHM’s New Hope office. In additional discussions with CBIZ

firm (professional corporation) performs all attest functions, including
audits, reviews and compilations. It is 100% owned by certified public
accountants and is managed by a “managing member,” who is also a
CPA. The owners of the CPA firm are employees of the CPA firm (as
well as the business services company) and the rest of the personnel are
employees of the business services company. There is a long-term
administrative services agreement between the two, stipulating that
support and personnel staff are made available to the CPA firm by the
business services company. The latter also provides office space,
equipment and recordkeeping for the CPA firm.

James D. Campbell, Alternative Practice Structures, Penn. CPA J. 10, 10-11 (Winter
1999).
6
“Attest services are required to be performed by a licensed CPA or licensed
CPA firm.” (Trial Tr. vol. II, 215.) In most states, this includes audits and reviews.
(See id.)
7
Nonattest services do not require a CPA and include “tax work and consulting
services.” (Trial Tr. vol. II, 215-16.)

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management, Bertram Vallez indicated that they did not want to move to MHM’s
Minneapolis location. There was no binding agreement reached, but Talbot
understood that MHM would maintain its New Hope office for a period of at least
three years.

On August 15, 2005, four agreements relevant to this appeal were executed:
(1) the Termination Agreement between Bertram Vallez and MHM, (2) the Restated
Administrative Services Agreement between MHM and CBIZ, (3) the Subscription
and Affiliation Agreement between each appellant and MHM, and (4) the
Stockholder’s Agreement.8

Under the Termination Agreement, Bertram Vallez agreed to halt its accounting
practice in exchange for MHM’s agreement to provide accounting services to the
Bertram Vallez’s clients. MHM also agreed to include Bertram Vallez as a
predecessor company on its professional liability insurance so that appellants and
Talbott continued to receive insurance coverage for acts that occurred during the time
they worked for Bertram Vallez.

Pursuant to the Restated Administrative Services Agreement, MHM and CBIZ
agreed to continue operating under the APS, with MHM providing attest services and
CBIZ performing nonattest services as well as administrative and other support
services. In return for CBIZ’s provision of administrative services, MHM agreed to
pay 85% of its attest revenues to CBIZ.

Under the Subscription and Affiliation Agreement, each appellant purchased
1,000 shares of MHM stock. Per the agreement, each appellant “recognize[d] that [he]
may not resell the Shares unless [he] compl[ied] with the terms of the Stockholders

8
Although each appellant executed a separate Stockholder’s Agreement, the
agreements are identical such that we collectively refer to all of them as the
“Stockholder’s Agreement.”

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Agreement, and then, the Shares may only be sold to [MHM] or to individuals who
are not disqualified under applicable law to be stockholders of [MHM].” (Appellants’
App. 40.)

In the Stockholder’s Agreement, subject to certain conditions, MHM agreed to
repurchase each appellant’s shares of MHM stock upon the termination of his
employment with MHM. Appellants agreed that for the “Post-Employment
Restrictive Period,”9 a period of two years following the termination of their
employment, they would not: (1) solicit, directly or indirectly, or attempt to solicit
MHM’s clients or otherwise interfere with MHM’s relationship with its clients, or
(2) solicit MHM’s employees. Appellants further agreed not to copy, disseminate, or

9
The Stockholder’s Agreement does not specifically define “Post-Employment
Restrictive Period” but describes it, as relevant here, as “the post employment period
during which the non-competition provision of the Shareholders’ Executive
Employment Agreement or other contractual arrangements with [CBIZ] applies.”
(Appellants’ Add. 56-57.) The “Restrictive Period” under the Confidentiality
Agreements Krier, Stelzer, and Walter had with CBIZ was two years. Thus, their
“Post-Employment Restrictive Period” under the Stockholder’s Agreement was also
two years. The “Restriction Period” in Barton’s 1998 Executive Employment
Agreement with CBIZ was five years. It follows that Barton’s “Post Employment
Restrictive Period” under the Stockholder’s Agreement would also be five years.
However, the district court found “that MHM represented at trial that it would only
seek enforcement of Mr. Barton’s restrictive covenant for two years and that the
logistics of policing the agreement of varying lengths between partners of the same
firm warrants enforcement of Barton’s covenant for two years rather than five.”
Mayer Hoffman McCann, P.C. v. Barton, No. 4:08-CV-00574-GAF, 2009 WL
900741, at *4 (W.D. Mo. Apr. 1, 2009) (unpublished). MHM does not challenge this
factual finding on appeal and, thus, has waived any argument to the contrary. See
Freeman v. Ferguson, 911 F.2d 52, 56 (8th Cir. 1990) (“It is well settled in this circuit
if an issue is not raised on appeal it will be deemed abandoned.” (quotation omitted)).
Therefore, for purposes of this appeal, Barton’s “Post-Employment Restrictive
Period” was two years.

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use MHM’s confidential information at any time. The specific contractual provisions
are as follows:

5.1 Non-competition.

The Shareholder agrees that during the period in which the
Shareholder is employed by [MHM] and during the Post-Employment
Restrictive Period the Shareholder shall not, without the prior written
consent of [MHM], either directly or indirectly, solicit, attempt to solicit,
take away, attempt to take away, or otherwise interfere with [MHM’s]
relationship with any customer (including any customer in [MHM’s] data
base) . . . .

5.2 Nonsolicitation.

The Shareholder agrees that he shall not at any time (whether
during or after the Shareholder’s termination of employment with
[MHM]), without the prior written consent of [MHM], either directly or
indirectly (i) solicit (or attempt to solicit), induce (or attempt to induce),
cause or facilitate any employee, director, agent, consultant, independent
contractor, representative or associate of [MHM] to terminate his, her[,]
or its relationship with [MHM], or (ii) solicit (or attempt to solicit),
induce (or attempt to induce), cause [or] facilitate any supplier of
services or products to [MHM] to terminate or change his, her[,] or its
relationship with [MHM], or otherwise interfere with any relationship
between [MHM] and any of [MHM’s] suppliers of products or services.

5.3 Nondisclosure.

The Shareholder agrees that he shall not at any time (whether
during or after the period of his employment with [MHM]) directly or
indirectly copy, disseminate or use, for the Shareholder’s personal
benefit or the benefit of any third party, any Confidential Information,
regardless of how such Confidential Information may have been
acquired, except for the disclosure of such Confidential Information as

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 may be (i) in keeping with the performance of the Shareholder’s
employment duties with [MHM], (ii) as required by law, or (iii) as
authorized in writing by [MHM].

(Appellant’s Add. 56-57.) The Stockholder’s Agreement also provides that it is
identical to the stockholders’ agreements executed by MHM and all other MHM
shareholders and that Missouri law governs the rights and obligations of the parties.

From 2005 to 2007, appellants were employees and shareholders of MHM.
Talbot served as both an employee and shareholder of MHM as well as CBIZ’s
Managing Director of the New Hope office. Appellants had access to a substantial
amount of confidential MHM client information.10 In the fall of 2007, appellants
learned that MHM planned to merge its New Hope office into its Minneapolis office.11
On April 11, 2008, appellants formed Glennco, LLC (which they later renamed
Barton, Walter & Krier, LLC (“BWK”)) in anticipation of their departure from MHM.

10
The Stockholder’s Agreement defines “confidential information” as

all information or knowledge belonging to, used by, or which is in the
possession of [MHM] relating to [MHM’s] business, business plans,
strategies, pricing, sales methods, customers . . . , technology, programs,
finances, costs, employees (including without limitation, the names,
addresses or telephone numbers of any employees), employee
compensation rates or policies, marketing plans, development plans,
computer programs, computer systems, inventions, developments, trade
secrets, know how or confidences of [MHM] or [MHM’s] business,
without regard to whether any of such Confidential Information may be
deemed confidential or material to any third party, and [MHM] and the
Shareholder hereby stipulate to the confidentiality and materiality of all
such Confidential Information.

(Appellants’ Add. 57.)
11
Within a few weeks of appellants’ departure, MHM did combine its New
Hope office with its Minneapolis office.

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 In July 2008, appellants prepared a one-page letter addressed “To our valued
Clients and Friends,” which was dated August 2, 2008 (“Valued Clients letter”). (See
Appellants’ Appx. 84.) Each appellant had Valued Clients letters for the clients they
had worked with at MHM. The Valued Clients letter states that appellants have
resigned from MHM and are forming a new firm. (See id.) The Valued Clients letter
further states:

It is my hope that you will join me at our new firm. In order to make the
transition at this time I am providing you with a termination letter to end
your relationship with CBIZ and an engagement letter to begin a new
relationship with [BWK]. It is imperative that we receive these letters
back as soon as possible.

(Id.) The Valued Clients letter also requests that clients “not contact CBIZ to discuss
this matter.” (Id.)

On Friday, August 1, 2008, appellants left resignation letters on Talbott’s desk
which he found on Monday, August 4. Each letter stated that the appellant was
resigning his employment with MHM effective at 5:00 p.m. on August 1, 2008. The
letter further provided that the appellant was tendering his MHM shares for purchase
by MHM as provided for in the Stockholder’s Agreement.12 Appellants sent identical
letters to Hancock for delivery on August 4.

From August 2 through August 6, 2008, appellants personally called on MHM
clients and provided them with the Valued Clients letter, engagement letter, and the
termination letter. The appellants also emailed or faxed the letters to other MHM
clients, having obtained email addresses and fax numbers from MHM’s email

12
MHM has (1) made a down payment on the amount owed and (2) executed
notes payable to each of the appellants for the remainder to be paid as provided by the
Stockholder’s Agreement.

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contacts. In addition, appellants successfully recruited four MHM employees to go
to work for BWK.

On August 7, 2008, MHM filed this lawsuit in the Circuit Court of Jackson
County, Missouri, alleging that appellants breached the Stockholder’s Agreement by:
(1) soliciting MHM customers (Count I); (2) soliciting MHM employees (Count II);
and (3) using and disclosing MHM’s confidential information (Count III).13 The state
court granted MHM’s request for a temporary restraining order (TRO) that same day,
enjoining appellants from: (1) soliciting MHM’s customers and employees and (2)
using trade secrets or confidential information obtained from MHM. The state court
also ordered appellants to return all of MHM’s trade secrets and confidential
information.14 Following the entry of the TRO, BWK computers and devices, as well
as the BWK server, contained MHM confidential information in documents and
emails.15 In addition, MHM Caseware16 files were saved to the BWK server as late
as September 9, 2008.

On August 11, 2008, appellants removed this action to federal court. After an
evidentiary hearing on September 2, 2008, the district court entered a preliminary

13
The complaint also alleged a Count IV, but, as MHM has not pursued it, we
do not address it. See Barton, 2009 WL 900741, at *14 n.3.
14
Pursuant to the Stockholder’s Agreement, appellants agreed that, upon their
termination, they would (1) “return promptly to [MHM] all memoranda, notes,
records, reports, manuals, pricing lists, prints and other documents (and all copies
thereof) relating to [MHM’s] business . . . regardless [of] whether any such documents
constitute Confidential Information” and (2) “forward to [MHM] all Confidential
Information,” including such information acquired after their termination.
(Appellants’ Add. 58.)
15
This was revealed by a computer forensic search after this litigation began.
16
To manage its files, MHM uses “Caseware,” a commercial software product
that has been tailored considerably for MHM.
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injunction, enjoining appellants from: (1) soliciting, directly or indirectly, or
attempting to solicit MHM’s clients and employees; (2) seeking to perform any
additional attest services for MHM clients; and (3) using trade secrets or confidential
information obtained from MHM. The district court also ordered appellants to return
MHM’s trade secrets and confidential information, retaining no copies for themselves.
The court further ordered that “defendants provide immediate access to BWK’s
computers and servers and the home computers of defendants and their employees for
inspection by a computer forensic expert,” without “delet[ing] or transfer[ring] any
data from these computers until images have been made.” (Order Granting Prelim.
Inj. 2, Sept. 2, 2008)17

The parties filed cross-motions for summary judgment; however, the district
court did not rule on the motions. Following a bench trial, the court determined that:
(1) the Stockholder’s Agreement was supported by sufficient consideration in the
form of mutual promises; (2) MHM had a protectable interest in its customer
relationships, even though some of its clients were formerly Bertram Vallez’s clients;
(3) the restrictive covenants in the Stockholder’s Agreement are reasonable under
Missouri law; and (4) appellants knowingly and intentionally breached the restrictive
covenants by soliciting MHM’s customers and employees and willfully taking
MHM’s confidential information.

The court determined that MHM was entitled to liquidated damages because:
(1) there was no evidence suggesting the parties intended the provision to be a
penalty; (2) the undisputed evidence showed that the damages in this case were
difficult to quantify; and (3) the provision was reasonable and binding under the
circumstances of this case. The court stated that the agreements “point[] to the

17
Mark Lanterman, Chief Technology Officer for Computer Forensic Services,
Inc. (“CFS”), conducted a computer forensic search of BWK’s server and computers,
applying the search terms agreed upon by the parties, and located approximately 1,500
files and 64,000 emails containing one or more of the search terms.
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method of calculation found in the relevant CBIZ agreements to determine liquidated
damages[,]” and concluded that “[i]t [was] clear from the circumstances that the
Stockholder’s Agreement refers to MHM’s fees,” not CBIZ’s fees. Mayer Hoffman
McCann P.C. v. Barton, No. 4:08-CV-00574-GAF, 2009 WL 900741, at *21 (W.D.
Mo. Apr. 1, 2009) (unpublished). The court observed that “MHM presented
evidence” that “[t]he total owed to MHM for [appellants’] breach of the Stockholder’s
Agreement[] under the liquidated damages provision of the relevant contracts is
$1,369,921,” MHM’s “total billings between August 1, 2006[,] and July 31, 2008[,]
[for] clients solicited by [the appellants].” Id. at *22.18 Because the appellants
stipulated that they had each solicited all of the MHM clients and the prospective
client included in MHM’s liquidated damage-calculation, the court awarded MHM
$1,369,921 in liquidated damages and found appellants jointly and severally liable for
such damages. The court also granted MHM a permanent injunction, concluding that:
(1) MHM had shown irreparable injury in that at least 124 MHM clients had moved
their business from MHM to BWK after defendants solicited their business and (2)
imposition of such an injunction was not against public policy. The district court
denied appellants’ motion to alter and amend the findings and judgment. Appellants
bring this appeal.

18
From August 1, 2006, through July 31, 2007, MHM’s gross fee billings for
the solicited clients totaled $692,905. From August 1, 2007, through July 31, 2008,
MHM’s gross fee billings for the solicited clients totaled $672,859. BWK’s billings
for one “Qualified Prospective Customer,” defined by the Stockholder’s Agreement
as “any person, organization or other entity to which [MHM] . . . submitted a proposal
for attest services at any time during the twelve-month period prior to the termination
of [appellants’] employment[,]” (Appellants’ Add. 56), were $4,158. We note that,
although these amounts total $1,369,922, MHM sought $1,369,921, and the record is
silent as to the reason for this one dollar-difference.
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 II.

As a threshold matter, we note that appellants largely concede the facts
underlying the violations of the restrictive covenants in the Stockholder’s Agreement.
Rather, the thrust of their appeal is that both the restrictive covenants and the
liquidated damages provision are unenforceable under Missouri law. As an appellate
court sitting in diversity, we review these questions of Missouri law de novo. See
Praetorian Ins. Co. v. Site Inspection, LLC, 604 F.3d 509, 515 (8th Cir. 2010).

A.

Appellants assert that the restrictive covenants are unenforceable under
Missouri law because: (1) there was no consideration given by MHM in exchange for
them; (2) they are not ancillary to the requisite type of agreement; (3) MHM does not
have the required protectable interest; (4) they are not reasonable in scope; and
(5) they aid MHM in its violation of antitrust law. We address each argument in turn.

1.

Appellants first argue that the restrictive covenants fail for lack of
consideration. Just as with every other kind of contract, a contract containing a
restrictive covenant must be supported by consideration. See Sumners v. Serv.
Vending Co., 102 S.W.3d 37, 41 (Mo. Ct. App. 2003) (“Consideration . . . is a basic
element of a valid contract . . . .”). “The burden of showing legally sufficient
consideration rests on the party relying on the contract,” here, MHM. Allison v.
Agribank, FCB, 949 S.W.2d 182, 188 (Mo. Ct. App. 1997) (per curiam) (“As a
general rule, consideration is a necessary element for establishing the existence of a
valid contract.”).

“Consideration . . . is something of value that moves from one party to the
other.” Sumners, 102 S.W.3d at 41. More specifically, consideration is
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 a benefit to the party promising, or a loss or detriment to the party to
whom the promise is made. Benefit, as thus employed, means that the
promisor has, in return for his promise, acquired some legal right to
which he would not otherwise have been entitled, and detriment means
that the promisee has, in return for the promise, forborne some legal right
which he otherwise would have been entitled to exercise.

Id. (quotation omitted). A bilateral contract, like the Stockholder’s Agreement, in
which there are “mutual promises imposing some legal duty or liability on each
promisor[,] is supported by sufficient consideration to form a valid, enforceable
contract.” Id.

In Superior Gearbox Co. v. Edwards, 869 S.W.2d 239 (Mo. Ct. App. 1993), the
Missouri Court of Appeals enforced a noncompetition covenant in a stock purchase
agreement. Id. at 243-49. In the stock purchase agreement at issue there, Superior’s
employee, Edwards (1) “acknowledged that the milling machinery and procedures
developed and used by Superior were unique and were a valuable part of the
company’s assets,” and (2) “agreed that, if he should ever cease to be [a Superior
employee], for 10 years thereafter he would not engage in a business anywhere in the
United States that manufactures or sells gearboxes or uses plunge milling procedures
or technologies.” Id. at 243. Per the agreement, Edwards “was to (and did) receive
a five percent annual bonus as long as he remained with Superior.” Id. Eventually,
Edwards left Superior and operated a company in violation of the noncompete clause.
Id. Superior brought suit against Edwards for breach of contract. Id. at 241. The trial
court granted Superior injunctive relief, enforcing the terms of the noncompete clause.
Id. The Missouri Court of Appeals affirmed but reduced the 10-year injunction to 5
years. Id. at 248. However, in enforcing the noncompete clause, the court did not
specifically address whether the clause was supported by adequate consideration. See
id. at 243-49.

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 However, in Sturgis Equipment Co. v. Falcon Industries Sales Co., 930 S.W.2d
14 (Mo. Ct. App. 1996), the Missouri Court of Appeals refused to enforce a
restrictive covenant contained in a buy/sell agreement, concluding that it was not
supported by adequate consideration. Id. at 17.19 There, Edwin Johnson, a salesman
for Sturgis, executed a buy/sell stock agreement, in which he agreed not to compete
with Sturgis for two years following his termination. Id. at 15. In addition, Sturgis
obtained a right of first refusal to purchase Johnson’s stock and was “bound to
purchase any balance remaining unsold at the end of sixty days following . . .
Johnson’s termination.” Id. at 15-16. Eventually, Johnson left Sturgis, without
tendering his stock, and formed his own company that competed with Sturgis. Id. at
16. Sturgis brought suit for breach of contract, and the trial court found for Sturgis
and awarded him $292,663.97 in damages. Id.

However, the Missouri Court of Appeals reversed, holding, in part, that there
was inadequate consideration to support the noncompete clause. Id. at 17. The court
explained:

19
“[C]ourts do not [ordinarily] inquire into the adequacy of consideration.”
Restatement (Second) of Contracts § 79(c); see id. § 79(f) (noting the Restatement’s
rejection of “any supposed requirement of ‘mutuality of obligation’”). Although
Missouri has adopted the Restatement approach, see Valentine’s, Inc. v. Ngo, 251
S.W.3d 352, 354 (Mo. Ct. App. 2008), see also State ex rel. Vincent v. Schneider, 194
S.W.3d 853, 859 (Mo. 2006) (“As long as the requirement of consideration is met,
mutuality of obligation is present, even if one party is more obligated than the other.”
(quotation omitted)), even recent Missouri cases continue to recite mutuality of
obligation as a prerequisite to an enforceable contract, see, e.g., Birkenmeier v. Keller
Biomedical, LLC, No. ED 92671, ___ S.W.3d ___, ___, 2010 WL 1555227, at *9
(Mo. Ct. App. Apr. 20, 2010). We further note that Missouri law provides that “[t]he
ordinary rules of contractual construction and enforcement are not necessarily
applicable to . . . agreements” containing noncompete clauses. See AEE-EMF, Inc.
v. Passmore, 906 S.W.2d 714, 719 (Mo. Ct. App. 1995). Because we are to apply
Missouri law, see Praetorian, 604 F.3d at 515, and Sturgis inquires into the adequacy
of consideration given by an employer in exchange for an employee’s covenant not
to compete, see 930 S.W.2d at 17, we do so here.
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 Here, the buy/sell agreement basically stated that in exchange for Sturgis
agreeing to sell stock to Johnson and to buy back Johnson’s stock if he
desired to sell or if his employment terminated, Johnson agreed to not
compete with Sturgis for two years if he voluntarily terminated his
employment. The agreement did not state that the purpose of the
non-compete clause was to protect any special interest of the company.
No additional consideration was specified in the contract. The clause was
not part of an employment contract; Johnson was an employee at will.
The restriction contained in the buy/sell agreement was greater than
fairly required for Sturgis’ protection and was not supported by
sufficient consideration.

Id. The Sturgis Court also distinguished Superior Gearbox, stating:

There, as part of that covenant, the Superior shareholders acknowledged
that the milling machinery and procedures developed by the company
were unique and were a valuable part of the company’s assets.
Additionally, as part of the same agreement, the shareholders received
a five percent annual bonus for remaining with Superior.

Sturgis, 930 S.W.2d at 17. Therefore, under Superior Gearbox and Sturgis, Missouri
law does not provide that a stock purchase agreement containing a noncompete clause
can never, as a matter of law, be supported by adequate consideration. Thus, the
question before us is whether the Stockholder’s Agreement at issue here is
distinguishable from the buy/sell stock agreement in Sturgis.

In the Stockholder’s Agreement, appellants promised not to solicit MHM’s
clients or employees for a period of time following the termination of their
employment with MHM and not to, at any time, disclose or use MHM’s confidential
information. MHM agreed that it would purchase the appellants’ MHM shares within
45 days of the termination of their employment. The Sturgis court held that the
consideration of agreeing to buy back the employee’s stock, without more, was

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insufficient to support the broad non-compete clause at issue there.20 Id. However,
the Sturgis decision recognized the non-compete clause might have been enforced if
the stock purchase agreement had provided sufficient consideration such as “state[ing]
that the purpose of the non-compete clause was to protect any special interest of the
company[, providing] additional consideration[, or being] part of an employment
contract.”21 Id.

As part of the Stockholder’s Agreement in this matter, appellants
“acknowledge[d] that the restrictions contained in Sections 5.1 through 5.3 are
reasonable and necessary to protect the legitimate interests of [MHM].” (Appellant’s
Add. 58.) Those legitimate interests were identified in the Stockholder’s Agreement
and included confidential information or knowledge relating to MHM’s “business
plans, strategies, pricing, sales methods, customers, . . . technology, programs,
finances, costs, employees . . . , employee compensation rates or policies, marketing

20
Although we are bound to apply Sturgis, see Am. Family Mut. Ins. Co. v. Co
Fat Le, 439 F.3d 436, 439 (8th Cir. 2006) (“[W]e are bound in our construction of
Missouri law by the decisions of the Missouri courts.”), we note that MHM’s promise
to buy back appellants’ stock in MHM was beneficial to appellants. “Only licensed
professionals who are employed by the professional corporation may be shareholders
or directors. In addition, shares can only be transferred to other individuals licensed
to practice in the same profession.” 1A William Meade Fletcher, Fletcher Cyclopedia
of the Law of Private Corporations § 70.10 (perm. ed., rev. ed. 2002). Thus, there is
no ready market for the sale of shares of a professional corporation’s stock. See id.
Accordingly, “[i]f a buyback is not provided, a minority shareholder who resigns from
or is forced out as an employee of a professional corporation is in a difficult position,
absent a protective shareholders’ agreement.” 1 F. Hodge O’Neal, Robert B.
Thompson, & Blake Thompson, O’Neal and Thompson’s Close Corporations and
LLCs: Law and Practice § 2.9 (rev. 3d ed. 2004).
21
A later Missouri Court of Appeals decision has explained that “[t]he essence
of the [Sturgis] holding is that the evidence did not support a finding of knowledge of
trade secrets or of customer contact sufficient to support a restrictive covenant, and
so did not justify any kind of restriction.” Alltype Fire Prot. Co. v. Mayfield, 88
S.W.3d 120, 123-24 (Mo. Ct. App. 2002).
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plans, development plans, computer programs, computer systems, inventions,
developments, trade secrets, know how or confidences.” (Appellant’s Add. 57.)
Because this Stockholder’s Agreement clearly provides that the restrictive covenants
are necessary to protect the legitimate interests of the business and identifies those
interests, Sturgis does not bar enforcement of the restrictive covenants. See 930
S.W.2d at 17. Furthermore, the restrictions are not “greater than fairly required” for
MHM’s protection, as was the case in Sturgis. Id. Accordingly, we reject appellants’
argument that the restrictive covenants are unenforceable for lack of consideration.

2.

Next, appellants assert that Missouri law restricts the kinds of contracts that can
contain restrictive covenants and that the Stockholder’s Agreement does not fall
within this class of contracts. “The purpose of the restrictive covenant is to protect an
employer from unfair competition.” Schmersahl, Treloar & Co. v. McHugh, 28
S.W.3d 345, 350 (Mo. Ct. App. 2000). “Restrictive covenants that limit individuals
in the exercise or pursuit of their occupations, standing alone, are contracts in restraint
of trade that are unlawful in [Missouri]. However, a covenant not to compete that
forms part of a legitimate transaction is often described as an ‘ancillary restraint.’”
JTL Consulting, L.L.C. v. Shanahan, 190 S.W.3d 389, 396 (Mo. Ct. App. 2006)
(citations omitted). The Missouri Court of Appeals discussed the types of agreements
to which restrictive covenants may be ancillary in Renal Treatment Centers-Mo., Inc.
v. Braxton, 945 S.W.2d 557 (Mo. Ct. App. 1997). The court stated, “Promises
imposing restraints that are ancillary to a valid transaction or relationship include the
employer-employee and buyer-seller relationships and partners against partnerships.”
Id. at 563. The court also noted that “this [was] not an exclusive list.” Id. (emphasis
added). The Missouri Court of Appeals lengthened this nonexclusive list in JTL
Consulting, to include partnership agreements, independent contractor agreements,
and shareholder agreements in close corporations. 190 S.W.3d at 396.

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 Here, MHM is a professional corporation under Missouri law. Professional
corporations are governed by the law of general corporations, but additional statutory
provisions specific to professional corporations must be read in conjunction with, and
take precedence over, general corporation law. See Mo. Rev. Stat. § 356.031. We
find no Missouri authority addressing whether a restrictive covenant can be ancillary
to a shareholder’s agreement for a professional corporation. “When there is no state
supreme court case directly on point, our role is to predict how the state supreme court
would rule if faced with the issues before us.” Northland Cas. Co. v. Meeks, 540 F.3d
869, 874 (8th Cir. 2008) (quotation omitted). Missouri courts have expressly stated
that the list of agreements, which they have recognized as giving rise to a legitimate
interest sufficient to sustain a restrictive covenant, is not exclusive. See JTL
Consulting, 190 S.W.3d at 396; Renal Treatment Centers, 945 S.W.2d at 563.
Because JTL Consulting provides that restrictive covenants can be ancillary to
shareholder agreements in close corporations, see 190 S.W.3d at 396, and professional
corporations are “a special species of a close corporation,” 1A William Meade
Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 70.10 (perm. ed.,
rev. ed. 2002), we believe that the Missouri Supreme Court would hold that a
stockholder’s agreement between a professional corporation and a shareholder falls
within the class of contracts wherein restrictive covenants are appropriate. Thus, the
appellants’ assertion that the restrictive covenants cannot be ancillary to the
Stockholder’s Agreement fails.

3.

Appellants also contend that the restrictive covenants are unenforceable for lack
of a protectable interest. Missouri law requires that a party seeking to enforce a
noncompete agreement in an employment situation prove that it has a “legitimate
interest[]” in doing so. See AEE-EMF, Inc. v. Passmore, 906 S.W.2d 714, 719 (Mo.
Ct. App. 1995). “Missouri courts have identified two such ‘protectable interests.’
These are customer contacts and trade secrets.” Id. Customer contacts are
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“essentially the influence an employee acquires over his employer’s customers
through personal contact.” McHugh, 28 S.W.3d at 349 (quotation omitted); see also
Schott v. Beussink, 950 S.W.2d 621, 625 (Mo. Ct. App. 1997) (“Missouri courts
recognize that public policy approves employment contracts containing restrictive
covenants because the employer has a proprietary right in its stock of customers and
their goodwill . . . .”).

MHM’s client contacts are clearly a protectable interest under Missouri law.
See AEE-EMF, 906 S.W.2d at 719. Appellants do not dispute that they had
substantial contact with, and influence over, their clients while employed by MHM.
However, they argue that MHM did not have a protectable interest in its client
contacts for two reasons. First, appellants assert that MHM never acquired any rights
to these customer contacts as the contacts remained the property of appellants upon
the dissolution of Bertram Vallez. Second, appellants contend that MHM’s contacts
with the clients appellants solicited cannot be a protectable interest of MHM because
such clients had been appellants’ clients at Bertram Vallez prior to appellants’
execution of the Stockholder’s Agreement. We reject both of appellants’ arguments.

First, although the Articles of Dissolution for Bertram Vallez provide that its
remaining property was to be distributed among its shareholders, including appellants,
the district court found that the only remaining property owned by Bertram Vallez was
cash. This conclusion is supported by the language of the Termination Agreement,
executed by Bertram Vallez and MHM, which states that Bertram Vallez “wishes to
terminate its practice of public accountancy . . . and to make arrangements for the
future servicing of its clients; and [MHM] is willing to provide accounting services
to the clients of [Bertram Vallez] . . . as of [August 15, 2005].” (Appellants’ App. 97.)
The agreement further provides:

1. Orderly Transfer of Client work papers. [Bertram Vallez] hereby
agrees to provide for the orderly transition of client work papers
for clients listed on Schedule A hereto. [MHM] agrees to provide
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 accountancy services to the Clients . . . , to retain such client files
for a period of at least seven years . . . and to make such files
available to [Bertram Vallez] and its current owners at its New
Hope office upon reasonable notice.

(Id.) Thus, pursuant to the Termination Agreement, MHM took control of Bertram
Vallez’s client papers. Accordingly, appellants did not retain the rights to Bertram
Vallez’s contacts with the solicited clients.

Second, despite the fact that appellants had a relationship with the MHM clients
that they solicited prior to joining MHM, Missouri law recognizes that “an employer
may protect customer relationships even if the employee had contact with some of the
same customers before joining the employer.” Naegele v. Biomedical Sys. Corp., 272
S.W.3d 385, 389 (Mo. Ct. App. 2008) (emphasis added). In Naegele, the plaintiff,
Mary Anastasia Naegele, was employed by Matria Health Care (“Matria”) for 12
years where she “provid[ed] monitoring services to obstetric physicians specializing
in managing high risk pregnancies.” Id. at 386. She then worked as the national
director of sales for Biomedical Systems Corporation’s (“Biomedical’s”) Women’s
Health Services division, and, in taking the position, she executed a Confidentiality,
Nondisclosure, and Noncompetition Agreement. Id. Naegele eventually decided to
return to Matria. Id. at 387. After informing Biomedical of her decision, she filed a
petition for declaratory judgment, and Biomedical counterclaimed, seeking an
injunction. Id. Following the trial court’s ruling for Biomedical, Naegele appealed,
arguing that “Biomedical had no protectable interest in preexisting customers that she
initially developed a relationship with when she worked at Matria because they were
not contributed as part of an equity investment in a business venture and Biomedical
did not assist in developing these contacts.” Id. at 388-89 (quotations omitted).

The Missouri Court of Appeals rejected both arguments, explaining:

The fact that Biomedical did not purchase the customer contacts at issue
as part of an equity investment in a business venture is immaterial. As
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 Naegele’s employer, Biomedical had the right to require Naegele to
develop strong relationships with any and all customers that she could.
The evidence in the record showed that Biomedical invested
considerable money, time, and effort to allow Naegele to develop,
maintain, foster and preserve Biomedical’s relationships with its
customers, including the customers Naegele originally met during her
Matria employment. Biomedical had a legitimate business interest in
restraining Naegele from pursuing those customers with whom she
developed or strengthened a relationship while working for Biomedical,
regardless of whether those customer contacts originated with Naegele
while she was working at Matria.

Id. at 389 (emphasis added). Thus, Naegele refutes the appellants’ argument that their
preexisting relationship with MHM’s clients disqualifies MHM’s contacts with such
client from constituting a protectable interest under Missouri law. Accordingly, MHM
had the requisite protectable interest—customer contacts—to enforce the restrictive
covenants at issue.22
4.

Appellants next assert that the restrictive covenants are unreasonable in scope
and, therefore, unenforceable. “The purpose of restrictive covenants is to protect an
employer from unfair competition by a former employee without imposing
unreasonable restraint on the employee.” AEE-EMF, 906 S.W.2d at 719. Because
“[r]estrictive covenants limit[] the exercise or pursuit of an individual’s occupation

22
We note that, contrary to the district court’s determination that appellants
breached the restrictive covenant by soliciting MHM’s employees (Count II), MHM
had no protectable interest in its employees. See McHugh, 28 S.W.3d at 347, 349-51
(holding that Missouri law does not allow covenants not to solicit former coworkers
as such covenants are “in restraint of trade” in that they “restrict[] the flow of
competitive information about the labor market, including the availability of
opportunities and offers of employment to an employer’s at-will workforce”).
Because MHM was awarded no damages stemming from Count II, our determination
has no impact on the damage award in this case.
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[and] are in restraint of trade,” such covenants “must be reasonable as to time and
space” in order “to be valid and enforceable.” Id. “The party claiming benefit of a
noncompete clause within a contract has the burden of proving the reasonableness of
the clause.” Id.

The time period for the restrictive covenants at issue here is two years. This
amount of time has been found reasonable under the “overwhelming weight of case
authority” in Missouri. Alltype Fire Prot. Co. v. Mayfield, 88 S.W.3d 120, 123 (Mo.
Ct. App. 2002). Although the restrictive covenants in this case are not restricted
geographically, Missouri law recognizes that a customer restriction may substitute for
an explicit geographical restriction. See Schott, 950 S.W.2d at 623-24, 627
(concluding that a two-year restriction on CPAs soliciting their former employer’s
customers, or doing any accounting work for them, was enforceable, without a
geographical restriction, because “the covenant does not prevent employees from
practicing in any particular geographical area, it merely prohibits them from soliciting
employer’s clients”); Mills v. Murray, 472 S.W.2d 6, 11-12 (Mo. Ct. App. 1971)
(determining that a three-year restrictive covenant was reasonable, even absent a
geographical restriction, because the former employee was only restricted from
soliciting his former employer’s clients such that he could even “conduct a competing
business at [his former employer’s] doorstep as soon as [he] left [his former
employer’s] service”). As the Schott Court observed, where “the specificity of
limitation regarding the class of person with whom contact is prohibited increases, the
need for limitation expressed in territorial terms decreases.” 950 S.W.2d at 627
(quoting Seach v. Richards, Dieterle & Co., 439 N.E.2d 208, 213 (Ind. Ct. App.
1982)). Under Schott and Mills, the restrictive covenant at issue here is not
unenforceable, even though it lacks a geographical restriction, because it only
prohibits appellants from soliciting MHM clients—not from performing services for
MHM’s clients whom the appellants did not solicit. Furthermore, even if the
restrictive covenant completely barred the appellants from doing any accounting work
for MHM clients, the appellants would still be free to provide accounting services to

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all non-MHM clients anywhere. Therefore, the scope of the restrictive covenants at
issue here is reasonable under Missouri law.

5.

Finally, appellants allege that the restrictive covenants should not be given
effect because they purportedly aid MHM in its alleged violation of antitrust law, i.e.,
MHM and CBIZ’s operation under the APS.23 MHM equates this argument with the
affirmative defense of illegal contract and asserts that the appellants have waived the
argument by failing to raise it until they opposed MHM’s motion for summary
judgment. See Fed. R. Civ. P. 8(c)(1) (listing illegality as an affirmative defense that
must be raised in response to a pleading); Coury v. Prot, 85 F.3d 244, 255 (5th Cir.
1996) (affirming the trial court’s determination that defendant had waived the
affirmative defense of illegality of contract by failing to plead it). However, even if
appellants have not waived their argument, it still fails for two reasons. First,
appellants offer no authority demonstrating that the APS violates antitrust laws, and
we find none. Second, appellants’ argument is inconsistent with the purposes of
antitrust law. “Heavy-handed competitive tactics alone do not constitute an antitrust
violation . . . .” R.W. Int’l Corp. v. Welch Food, Inc., 13 F.3d 478, 487 (1st Cir.
1994).

The purpose of the [Sherman Antitrust] Act is not to protect businesses
from the working of the market; it is to protect the public from the failure
of the market. The law directs itself not against conduct which is
competitive, even severely so, but against conduct which unfairly tends
to destroy competition itself. It does so not out of solicitude for private
concerns but out of concern for the public interest.

23
The appellants do not argue that the restrictive covenants themselves violate
antitrust laws. See McDonald v. Johnson & Johnson, 722 F.2d 1370, 1378 (8th Cir.
1983) (“[C]ovenants not to compete generally are not violative of the antitrust laws.”).

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Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993). Here, appellants do
not invoke the protections of antitrust law in order to protect the public. Rather, they
do so in order to avoid their contractual obligations that, as the preceding analysis
establishes, are enforceable under Missouri law. Accordingly, we find appellants
injection of antitrust law into this contractual dispute inappropriate.24

In sum, we reject each of appellants’ arguments and hold that the restrictive
covenants contained in the Stockholder’s Agreement are enforceable.

B.

Appellants next contend that, even if this court concludes that the restrictive
covenants are enforceable, the award of liquidated damages must be reversed because
the liquidated damages clause in the Stockholder’s Agreement is unenforceable for
two reasons. First, appellants assert that the clause improperly calculates damages
based on CBIZ’s revenues rather than MHM’s revenues. Second, appellants argue
that, even if the district court was correct in its determination that the clause refers to
MHM’s revenues, it does not approximate MHM’s actual loss because MHM pays
85% of its revenues to CBIZ.

24
We also note that the Code of Professional Conduct of the American Institute
of Certified Public Accountants (“AICPA Code of Professional Conduct”), available
at http://www.aicpa.org/Research/Standards/CodeofConduct/Pages/default.aspx (last
visited June 1, 2010), referenced by both Missouri and Minnesota law, see Mo. Rev.
Stat. § 326.256.1-.2; Minn. Stat. § 326A.02 subd. 5(5), expressly allows accounting
firms to operate under the APS. See AICA Code of Professional Conduct,
Interpretations 101-14, 505-3.
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 In Missouri,

[t]he general rule is liquidated damages clauses are valid and
enforceable, while penalty clauses are invalid. Liquidated damages are
a measure of compensation which, at the time of contracting, the parties
agree shall represent damages in case of breach. Penalty clauses, on the
other hand, are a punishment for breach.

Valentine’s, Inc. v. Ngo, 251 S.W.3d 352, 354 (Mo. App. Ct. 2008) (quotation
omitted). Thus, the issue here is whether the parties intended the provision to be a
form of recoverable compensation—liquidated damages—or an unenforceable penalty
provision meant to compel performance. In order to distinguish between the two, we
ask whether: “(1) the amount fixed as damages [is] a reasonable forecast for the harm
caused by the breach; and (2) the harm [is] of a kind difficult to accurately estimate.”
Id. (quotation omitted). If both requirements are met, the liquidated damages
provision is valid. Id.

The “Liquidated Damages”25 clause at issue here provides, in pertinent part:

The Shareholder agrees that, in the event any revenues become payable
to the Shareholder or to any other person[,] firm[,] or entity with which
the Shareholder is affiliated in any capacity, as a result of a violation by
the Shareholder of any of the covenants contained in this Agreement, the
Shareholder shall pay to [MHM], or shall cause the person, firm[,] or
entity with which [the] Shareholder is affiliated to pay to [MHM], an
amount equal to the damages calculated pursuant to the shareholder’s
Executive Employment Agreement or other contractual arrangements
with CBIZ shall apply.

25
“While the label the parties attach to a provision is not conclusive, it is a
circumstance to be considered when deciding whether the provision is to be
considered liquidated damages or a penalty.” Diffley v. Royal Papers, Inc., 948
S.W.2d 244, 247 (Mo. Ct. App. 1997). Thus, the fact that the clause at issue is
entitled “Liquidated Damages” at least supports a determination that it is not an
invalid penalty clause.
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(Appellants’ Add. 58.) Thus, although this provision provides for liquidated damages
in the event of breach, the measure for such damages is not contained therein. Rather,
the clause references, for this measure, the appellants’ agreements with CBIZ. This
reference is the basis for appellants’ first argument—that the liquidated damage
provision is unenforceable because it purportedly calculates damages based on CBIZ’s
revenue not MHM’s revenue. However, we agree with the district court’s
determination that, although the Stockholder’s Agreement borrowed the calculation
for liquidated damages from appellants’ agreements with CBIZ, MHM’s fees were to
be used in the calculation, not CBIZ’s. CBIZ was not a party to the Stockholder’s
Agreement, and the purpose of the Liquidated Damages provision is to compensate
MHM for appellants breach of their promises not to solicit MHM’s clients, compete
with MHM, or disclose MHM’s confidential information. Therefore, as the district
court correctly determined, the amount of liquidated damages is MHM’s gross billings
for their former clients from August 1, 2006 through July 31, 2008.26

Appellants also argue that the liquidated damages provision is a penalty in that
“[t]he amount fixed is not reasonable because it does not approximate the actual loss
that could result to MHM for the breach.” (Appellants’ Br. 60.) Appellants’ argument
is based on the fact that, under the Restated Administrative Services Agreement,
MHM provides 85% of the fees it collects to CBIZ. However, appellants do not
dispute that MHM was entitled to collect 100% of the gross fees from its clients or
that MHM lost those fees when MHM clients, who appellants solicited, transferred
their business to BWK. Furthermore, appellants provide no authority to support their
position that the liquidated damages measure is unreasonable unless it is measured by
MHM’s net profits instead of the amount agreed upon in the Stockholder’s
Agreement.

26
Although it appears that the language in Barton’s Executive Agreement (the
only appellant who had such an agreement) contained a different measure for
liquidated damages, appellants do not raise this issue on appeal. Therefore, we do not
address it. See Freeman, 911 F.2d at 56.
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 As previously stated, Missouri imposes two requirements in order for a
liquidated damages clause to be enforceable—that the measure provided is “a
reasonable forecast for the harm caused by the breach” and “the harm [is] of a kind
difficult to accurately estimate.” Valentine’s, 251 S.W.3d at 354 (quotation omitted).
The “reasonable forecast for the harm” requirement is satisfied here in that MHM
receives an amount equal to the fees it received from the solicited client in the two
years preceding the solicitation. With regard to the second requirement, appellants do
not contend that the harm to MHM is of a kind that is easy to estimate. Furthermore,
even had appellants made such an argument, we would reject it because, at the time
the Stockholder’s Agreement was executed, the parties could not have estimated the
loss MHM would incur in the event appellants breached the agreements by soliciting
MHM clients. See id. at 355 (“Where the difficulty of proof of loss is great, the court
allows significant latitude in setting the amount of anticipated damages.”).
Accordingly, the liquidated damages clause is not an unenforceable penalty.
Therefore, we affirm the award of liquidated damages in the amount of $1,369,921.

III.

For the foregoing reasons, we affirm the judgment of the district court.
______________________________

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