JCCS v. Alborn

07/14/2020

DA 19-0521
Case Number: DA 19-0521

IN THE SUPREME COURT OF THE STATE OF MONTANA
2020 MT 179

JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C.,
a Montana Professional Corporation,

Plaintiff and Appellee,

v.

TERRY ALBORN, PAUL UITHOVEN, CHRISTINA RIEKENBERG,
JOE BATESON, and SHERM VELTKAMP,

Defendants and Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and For the County of Gallatin, Cause No. DV-13-736CX
Honorable Amy Eddy, Presiding Judge

COUNSEL OF RECORD:

For Appellants:

Michael J. Lilly, Bridget W. LeFeber, Berg Lilly, P.C., Bozeman, Montana

Carey E. Matovich, Matovich, Keller & Huso, P.C., Billings, Montana

For Appellee:

Kirk D. Evenson, Thomas A. Marra, Marra, Evenson & Levine, P.C., Great
Falls, Montana

For Amicus Curiae:

T. Thomas Singer, Amanda G. Hunter, Axilon Law Group, PLLC, Billings,
Montana

Submitted on Briefs: April 15, 2020

Decided: July 14, 2020
Filed:

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__________________________________________
Clerk

2
Justice Jim Rice delivered the Opinion of the Court.

¶1 Terry Alborn, Paul Uithoven, Christina Riekenberg, Joe Bateson, and Sherm

Veltkamp, (collectively, Appellants or Former Shareholders), appeal from the judgment

awarding $2,353,463.27 in damages to Junkermier, Clark, Campanella, Stevens, P.C.

(JCCS), entered by the Montana Eighteenth Judicial District Court, Gallatin County, after

a bench trial on remand from this Court’s decision in Junkermier, Clark, Campanella,

Stevens, P.C. v. Alborn, Uithoven, Riekenberg, P.C. (Junkermier I), 2016 MT 218, 384

Mont. 464, 380 P.3d 747. We affirm in part, reverse in part, and restate the issues as

follows:

1. Did the District Court err by concluding the Appellants were jointly and severally
liable for JCCS’ damages?

2. Did the District Court err by concluding the Covenant was reasonable?

3. Did the District Court err by awarding prejudgment interest?

4. Did the District Court err by denying Appellants’ motion for discovery sanctions?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 JCCS is a Montana accounting firm based in Great Falls, with offices in several

other Montana cities. In 2002, JCCS merged with Bozeman accounting firm Veltkamp,

Stannebein, and Bateson, P.C. (VSB), which had four shareholders, including Appellants

Uithoven, Bateson, and Veltkamp. Appellant Riekenberg was a non-shareholder employee

of VSB when it merged with JCCS, and she became a JCCS employee and shareholder

after the merger. Junkermier I, ¶ 3. Appellant Alborn became a JCCS shareholder in 1980,

and he served as the Bozeman office branch manager for the 10 years prior to the separation
3
giving rise to this action. Appellants were five of the six shareholders in JCCS’ Bozeman

office, and held nearly fifteen percent of JCCS’ shares. Junkermier I, ¶ 4.

¶3 Appellants were employed under the terms of an annual Shareholder’s Employment

Agreement (Employment Agreement, or Agreement). The Employment Agreement

defined the parties’ rights and obligations and contained a covenant restricting competition

(Covenant) that provided, in part:

7. POST-EMPLOYMENT REPRESENTATION OF CLIENTS. If this
Agreement is terminated for any reason and Shareholder provides
professional services . . . in competition with [JCCS] the Shareholder agrees
as follows:

a. To pay to [JCCS] an amount equal to one hundred percent (100%) of the
gross fees billed by [JCCS] to a particular client over the twelve month period
immediately preceding such termination, if the client was a client of [JCCS]
within the twelve month period prior to Shareholder’s leaving [JCCS]
employment (hereinafter “particular client”), and the particular client is
thereafter within one year of date of termination served by Shareholder,
Shareholder’s partners, or any professional services organization employing
the Shareholder.

. . .

f. For purposes of this Section, a Shareholder shall be considered to be in
competition with [JCCS], by providing professional services within the
county of the Shareholder’s primary office (the office through which the
Shareholder provides the majority of his professional services), or any county
contiguous thereto.

Junkermier I, ¶ 5. Appellants acknowledged, as part of the Employment Agreement, they

were entering it “with full understanding of the nature and extent” of the Covenant, and

that they understood the Employment Agreement “would not be entered into without the

[Covenant.]” Junkermier I, ¶ 5.

4
¶4 The Employment Agreement also contained a section titled “Disclosure of

Information” that prohibited shareholders from disclosing confidential information, which

was defined to include “lists of [JCCS’] clients.” This provision stated it applied both

during the Agreement’s term and “at all times after the termination of employment with

[JCCS].” The Employment Agreement further specified that any and all confidential

information was “the sole and exclusive property of [JCCS].” Junkermier I, ¶ 6.

¶5 In Spring of 2013, Appellants began discussing a split from JCCS and forming a

new accounting firm together, due to frustrations with the firm, and in June of 2013, met

with a consultant to obtain advice about separating from JCCS. Junkermier I, ¶ 9. Around

the same time, Appellants informed JCCS CEO Jerry Lehman (Lehman) in writing that

they wanted to discuss leaving JCCS. Lehman called a special meeting of the shareholders

to discuss Appellants’ potential departure. At the meeting, the JCCS shareholders

appointed a committee to attempt negotiation of Appellants’ transition from the firm. A

discussion with Appellants was initiated, including proposals regarding compensation for

the accounts of JCCS’ Bozeman clients, but no agreement was reached. On June 20, 2013,

Lehman met with the Bozeman office employees and informed them Appellants were

leaving JCCS. The same day, JCCS sent all Bozeman employees a “COBRA Election

Notice” informing them of their health insurance rights upon termination of their

employment. Junkermier I, ¶ 10. Appellants worked for JCCS through June 30, 2013.

Junkermier I, ¶ 11.

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¶6 On July 1, 2013, Appellants and almost all of the JCCS Bozeman staff began

working at a newly formed accounting firm, Alborn, Uithoven, Riekenberg, P.C., d/b/a

Amatics CPA Group (Amatics). The same day, Amatics ran a full-page advertisement in

the Bozeman Daily Chronicle announcing its formation and location, and stating that

Amatics had “evolved” from JCCS. Junkermier I, ¶ 11.

¶7 Prior to leaving JCCS, at the request of Alborn, a JCCS employee downloaded a

copy of JCCS’ Bozeman client list. The list was taken to a local printing shop for printing

of letters to the clients, which Amatics mailed on its first day of business. The letter asked

the clients to choose whether they wanted to continue their relationship with JCCS, or

continue their relationship with the shareholders and staff of the former JCCS Bozeman

office, now doing business as Amatics. JCCS also sent a letter to the Bozeman clients

informing them of the changes in mid-July. Ultimately, about 2,100 of the 2,400 clients

on the client list transferred their accounting work from JCCS to Amatics. Junkermier I,

¶ 12.

¶8 Following the split, JCCS filed a complaint against Appellants to declare the

Covenant enforceable and to recover damages. The complaint included claims for breach

of contract and breach of fiduciary duty. Pursuant to the Covenant, JCCS sought 100% of

the gross fees that JCCS billed in fiscal year 2013 to clients that were served by Amatics

in fiscal year 2014. Junkermier I, ¶ 13. In June of 2015, on the parties’ cross-motions for

summary judgment, the District Court held that the Employment Agreement was

unenforceable because it was merely an agreement to agree, and was also a contract of

6
adhesion. It then conducted a bench trial on the remaining claim of breach of fiduciary

duty, determining that Appellants, except for Alborn, owed no legal duty to JCCS.

Junkermier I, ¶ 14. It held that Alborn breached his fiduciary duty to JCCS, but concluded

Alborn was not liable for damages because JCCS failed to prove damages by substantial

evidence. Junkermier I, ¶ 15.

¶9 JCCS appealed the District Court’s summary judgment ruling and trial rulings to

this Court in Junkermier I. JCCS argued the District Court erred by declaring the covenant

was unenforceable as a matter of law, and by failing to determine whether the Covenant

was reasonable under the three-part test set forth in Dobbins, De Guire & Tucker, P.C. v.

Rutherford, MacDonald & Olson (Dobbins), 218 Mont. 392, 708 P.2d 577 (1985). We

agreed, reversing the judgment and remanding to the District Court “to analyze the

Covenant’s reasonableness under Dobbins and, if necessary, to analyze [JCCS’] damage

stemming from Alborn’s breach[.]” Junkermier I, ¶ 65.

¶10 After our decision in Junkermier I, Alborn filed a motion for discovery sanctions

based upon JCCS’ failure to produce documents in response to his requests, related to his

defense of the breach of fiduciary duty claim. The documents consisted of an email and

memo written by Alborn to JCCS before he left in which he informed JCCS that Amatics

planned to send a letter to JCCS’ Bozeman clients. Alborn asked the District Court to

dismiss the breach of fiduciary duty claim as a sanction. The District Court denied the

motion, concluding that although JCCS should have produced the memo, the conduct

7
encompassed in the documents was only a part of the District Court’s conclusion that

Alborn breached his fiduciary duty, and therefore, sanctions were not appropriate.

¶11 After conducting a bench trial, the District Court determined JCCS had proven the

Covenant was reasonable based on the Dobbins factors. Additionally, it held Appellants

were jointly and severally liable for the damages arising out of the Covenant’s breach,

pursuant to the contractual calculation of one year’s billings to JCCS’ clients, in the total

amount of $2,353,463.27, and that JCCS was entitled to prejudgment interest in the amount

of 5.25% per annum, beginning July 1, 2013. Former Shareholders appeal.

STANDARD OF REVIEW

¶12 This Court reviews a district court’s findings of fact for clear error and its

conclusions of law for correctness. “Clear error exists if substantial credible evidence fails

to support the findings of fact, if the district court misapprehended the effect of the

evidence, or if we have a definite and firm conviction that the district court made a

mistake.” Abbey/Land v. Glacier Constr. Partners, LLC, 2019 MT 19, ¶ 33, 394 Mont.

135, 433 P.3d 1230 (citation omitted). A district court’s interpretation of a contract is a

question of law which we review for correctness. Ballou v. Walker, 2017 MT 197, ¶ 11,

388 Mont. 283, 400 P.3d 234. Finally, we review a district court’s decision regarding

discovery sanctions for an abuse of discretion. “A district court abuses its discretion when

it acts arbitrarily, without the employment of conscientious judgment, or when its decision

exceeds the bounds of reason.” Cox v. Magers, 2018 MT 21, ¶ 13, 390 Mont. 224, 411

P.3d 1271 (citations omitted).

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 DISCUSSION

¶13 1. Did the District Court err by concluding the Appellants were jointly and severally
liable for JCCS’ damages?

¶14 The District Court concluded Appellants were jointly and severally liable for the

contractually calculated $2,353,463.27 judgment, based on § 28-1-302, MCA, and upon its

determination that Appellants acted in concert when they took JCCS’ clients and formed

their own firm, Amatics. Appellants argue this conclusion is inconsistent with the plain

reading of the Covenant, which they contend mandates imposition of separate, individual

damage awards against each Appellant, in the amount of $2,353,463.27, for a total

judgment of $11,767,316.35, and that the District Court rewrote the Covenant to conclude

that the Covenant required only a single, joint assessment of damages. JCCS answers that

the District Court correctly interpreted the Covenant based on § 28-1-302, MCA, and that

JCCS never sought multiple awards because Appellants’ position is based upon an absurd

reading of the Covenant.

¶15 Appellants’ argument fails under the law, facts, and logic. We first note that statutes

are to be construed in a manner that does not “lead to absurd results if a reasonable

interpretation can avoid it.” City of Missoula v. Fox, 2019 MT 250, ¶ 18, 397 Mont. 388,

450 P.3d 898 (quoting Mont. Sports Shooting Ass’n v. State, 2008 MT 190, ¶ 11, 344

Mont. 1, 185 P.3d 1003) (internal quotations omitted). Likewise, when interpreting a

contract, “the language of a contract is to govern its interpretation if the language is clear

and explicit and does not involve an absurdity.” Performance Mach. Co. v. Yellowstone

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Mt. Club, LLC, 2007 MT 250, ¶ 21, 339 Mont. 259, 169 P.3d 394 (quoting § 28-3-401,

MCA).

¶16 Appellants’ proffered construction of the Covenant as requiring imposition of five

times the damages awarded by the District Court is a thinly-veiled attempt to invalidate the

Covenant as grossly unreasonable, but is not a reasonable rendering of the language of the

Covenant.1 If Appellants had divided up the JCCS accounts and went their separate ways,

acted individually to serve their respective accounts, and were separately ordered to pay a

penalty for the clients they served, the total liquidated damages for their combined

individual liabilities for all of the JCCS accounts would likewise have been $2,353,463.27.

The same calculation results under the facts here because the only reasonable reading of

the Covenant requires payment of liquidated damages for each client account only once

(“the Shareholder agrees . . . [t]o pay to [JCCS] an amount equal to one hundred percent

(100%) of the gross fees billed by [JCCS] to a particular client over the twelve month

period immediately proceeding such termination . . . if the particular client is . . . served by

Shareholder, Shareholder’s partners, or any professional services organization employing

the Shareholder.” (emphasis added)). The language of the Covenant contemplates that

each client would be “served” only once—by the “Shareholder, Shareholder’s partners, or

any professional services organization employing the Shareholder”—and that a single

liquidated damage penalty would be owed for such service. Consistent therewith is the

1
Appellants made a similar argument in Junkermier I, although there contended the obligation
was $6,917,510.00 per Appellant.

10
imposition of a single penalty even if services were rendered to a client by multiple

“Shareholder’s partners,” which could include, as here, former JCCS Shareholders. Even

though individual Shareholder contracts were signed, and a client could potentially receive

some service from more than one Shareholder, JCCS can be damaged only once, and thus,

the liquidated damages created in all of the contracts was tied “to a particular client” who

was deemed to be served only once. After JCCS has been paid the stated amount of

liquidated damages for service of their former client, the Covenant regarding that

“particular client” is satisfied. There is no indication in the text of an intention to reach

beyond that damage award for collection of multiple awards for additional service by

others. As JCCS argues, “[w]hile JCCS might appreciate a ‘windfall’ judgment for five

times the amount, that is not what the liquidated damage provision provided, nor is it what

the District Court awarded, or what JCCS sought. It also does not mean the District Court

re-wrote the Agreements. Rather, JCCS may not ‘double dip’ and collect amounts in

excess of its damages[.]” Such a reading is unreasonable and leads to absurd results.

¶17 The record also demonstrates that, as the District Court determined, the Appellants

“acted in concert.” Leaving JCCS, the Appellants formed and worked together as a new

entity, and served JCCS’ former clients under their common contractual obligation to JCCS

under the Covenant, engaging in a joint endeavor. Indeed, from the initial announcement

of their departure from JCCS, Appellants worked in concert, including as alleged and

defended in this litigation. While the Covenant did not originate as a joint obligation,

nonetheless, by acting in concert, Appellants’ contractual obligations to pay a singular

11
liquidated damage penalty for each JCCS client they took with them to Amatics became

their joint obligation to JCCS. As § 28-1-302, MCA, provides, in pertinent part, “all joint

obligations and covenants shall be taken and held to be joint and several obligations[.]”

¶18 We hold the District Court did not err by concluding Appellants are jointly and

severally liable, due to their joint obligation by their concerted actions. Because we find

the District Court did not rewrite the Covenant, but rather made a conclusion based on its

reasonable interpretation, we need not reach Appellants’ argument that the District Court

erred by re-writing the clause because of the clause’s potential in terrorum effects.

¶19 2. Did the District Court err by concluding the Covenant was reasonable?

¶20 The District Court concluded the Covenant placed a reasonable burden on JCCS,

the Appellants, and the public. Appellants argue the District Court erred by so concluding,

and further, that JCCS has no legitimate business interest in its client base.

¶21 As we explained in Junkermier I, “[c]ontracts that restrain trade are strongly

disfavor[ed], and therefore, ‘covenants that act as an absolute prohibition on trade—absent

an express statutory exception—are void.’” Junkermier I, ¶ 39 (citing § 28-2-708, MCA;

Access Organics, Inc. v. Hernandez, 2008 MT 4, ¶ 17, 341 Mont. 73, 175 P.3d 899; Mungas

v. Great Falls Clinic, LLP, 2009 MT 246, ¶¶ 37-38, 354 Mont. 50, 221 P.3d 1230))

(internal quotations omitted). However, “when a contract contains a restraint on a person’s

ability to practice their profession, but such restraint is not an absolute prohibition,” a

determination must be made as to the covenant’s reasonableness. Junkermier I, ¶ 39 (citing

12
Mungas, ¶ 39). To determine the reasonableness of such a covenant, we examine the three

factors articulated in Dobbins:

1. The covenant should be limited in operation either as to time or place;
2. The covenant should be based on some good consideration; and
3. The covenant should afford reasonable protection for and not impose an
unreasonable burden upon the employer, the employee or the public

Junkermier I, ¶ 40 (citing Mungas, ¶ 39; Access Organics, Inc., ¶ 16; Mont. Mt. Prods. v.

Curl, 2005 MT 102, ¶ 11, 327 Mont. 7, 112 P.3d 979; Daniels v. Thomas, Dean & Hoskins,

Inc., 246 Mont. 125, 144, 804 P.2d 359, 370 (1990); State Medical Oxygen & Supply v.

American Medical Oxygen Co., 240 Mont. 70, 74, 782 P.2d 1272, 1275 (1980); Dobbins,

218 Mont. at 397, 708 P.2d at 580). In Junkermier I, ¶ 65, we remanded this matter “to

analyze the Covenant’s reasonableness under Dobbins[.]” As part of the consideration of

the third Dobbins factor, we consider whether the employer possesses a legitimate business

interest in the covenant. Junkermier I, ¶ 47. The parties’ arguments are directed toward

the continued applicability of the Dobbins test, and, if so, the reasonableness of the

Covenant under the third Dobbins factor.

Applicability of Dobbins

¶22 Appellants argue as a threshold matter that Dobbins should be overturned by this

Court, and thus, not applied in this case. However, under the law of the case doctrine “a

prior decision of this Court resolving a particular issue between the same parties in the

same case is binding and cannot be relitigated.” State v. Gilder, 2001 MT 121, ¶ 9, 30

Mont. 362, 28 P.3d 488 (citing State v. Wooster, 2001 MT 4, ¶ 12, 304 Mont. 56, 16 P.3d

409). The principle of the law of the case doctrine “is that an issue that has been finally
13
decided cannot be relitigated” and therefore, it serves the purpose of judicial economy and

the need for finality of judgments. State v. Black, 245 Mont. 39, 44, 798 P.2d 530, 533

(1990). Many of Appellants’ arguments involve to some degree issues we decided in

Junkermier I, and thus run counter to the law of this case.

¶23 In Junkermier I, ¶ 40, we held the Covenant at issue was only a partial restraint on

Appellants’ trade, and therefore, the Dobbins factors applied. We remanded to the District

Court to make a determination about whether the Covenant “afford[ed] reasonable

protection for and [did] not impose an unreasonable burden upon the employer, the

employee, or the public.” Junkermier I, ¶¶ 40, 49. In doing so, we acknowledged the

District Court must balance “the nature of Former Shareholders’ relationships with their

clients with the protectable interest in [JCCS’] client base.” Junkermier I, ¶ 48. Because

we decided in Junkermier I that Dobbins applied in this case, and must be analyzed by the

District Court on remand, the law of the case bars Appellants from now arguing that

Dobbins should be overturned and cannot be applied. This issue has already been finally

decided, and it cannot be relitigated. We decline to reverse Dobbins.

Protection for the employer

¶24 Appellants first argue the District Court erred because it found that JCCS had a

legitimate business interest in its client base. In Junkermier I, ¶ 42, Appellants made a

similar argument, contending JCCS “did not have a legitimate business interest in the

Covenant because its actions following the [Appellants’] departure demonstrate that the

Covenant was not necessary to protect its goodwill, customer relations, and trade

14
information.” We rejected this argument in Junkermier I, concluding that “protecting the

basis of [JCCS’] bargain may justify restrictions against unfettered access to confidential

information and established business relationship by Former Shareholders who, without

such a restriction, have no disincentive to take advantage of their former employer.”

Junkermier I, ¶ 48. Likewise, our rejection of this argument is further demonstrated by our

instruction on remand to balance “the nature of Former Shareholder’s relationships with

their clients with the protectable interest in [JCCS’] client base.” Junkermier, ¶ 48

(emphasis added). Because we decided this issue in Junkermier I, the Covenant’s

legitimate business interest is the law of the case. And, nonetheless, the District Court’s

findings further supported that determination (“The reality in this case is the Defendants

had the financial benefit of the JCCS client base for over five and a half (5 1/2) years

without having paid anything for the income stream generated to them during that time

frame. While the Defendants take the position that the clients they left with are really ‘their’

clients and not ‘JCCS’ clients, this position ignores the reality of the business relationship

they entered into.”). We conclude the District Court did not err by finding JCCS had a

legitimate business interest in the Covenant of protecting its client base.

¶25 Appellants also argue the District Court erred by concluding JCCS proved the

Covenant provided them with reasonable protection. In support of the Covenant, JCCS

presented the expert testimony of Thomas E. Copley, a C.P.A. and certified valuation

analyst, who testified that partially restrictive covenants like JCCS’ have been common

within the accounting industry in Montana and across the United States for the last 40 to

15
60 years. As to the calculation method of such covenants generally, Copley testified the

value of a partially restrictive covenant is typically 100% to 125% of gross recurring

collected revenue of the selling accounting practice, according to the Association of

International Certified Public Accountant’s Rule of Thumb for valuing accounting

practices. He likewise testified that JCCS’ Covenant, requiring 100% of the fees, was very

similar to other covenants he has reviewed and is a standard in the industry. Indeed, Copley

testified that many firms, including the one he works for, require more than 100% of the

gross fees billed in such covenants. Appellants did not provide any evidence to refute

Copley’s testimony.

¶26 We conclude the District Court did not err by determining the Covenant provided

reasonable protection to JCCS.

Burden on the employee

¶27 Appellants argue the District Court incorrectly analyzed this factor by considering

the economic impact on Amatics, rather than the Shareholders individually. However, as

we discussed under our above analysis of the joint nature of their endeavor, we conclude

the District Court did not err.

¶28 We are likewise unpersuaded by Appellants’ argument that JCCS failed to prove

the Covenant placed a reasonable burden on the former shareholders. Copley determined,

based on the Covenant’s language and the clients that went with Appellants, that

Appellants owed JCCS $2,353,463.27. Copley reviewed Appellants’ financial information

and testified that, in his opinion as a forensic accountant, they could have afforded to pay

16
the amount required by the Covenant. He also explained Amatics’ profit and loss

statements from 2014 to 2018 indicated cash flow in an amount that would have been able

to service the debt associated with paying JCCS. Indeed, Amatics’ financial information

revealed Appellants have paid themselves almost $2.5 million in salaries and bonuses since

leaving JCCS. Likewise, Alborn, Uithoven, and Riekenberg had an approximate additional

$610,000 in retained earnings, bringing the total benefit to the former Shareholders to just

over $3 million. And, every year since 2013, the fiscal end gross revenue of Amatics has

exceeded the amount of liquidated damages owed to JCCS. This information is particularly

relevant considering Copley’s testimony that Appellants would be able to amortize the

partially restrictive payment over a fifteen year period, which would allow them an income

tax deduction, and effectively lessen the actual cost in real dollars from $2.3 to $1.6 million.

¶29 Appellants did not refute Copley’s testimony. Alborn admitted Appellants had not

tried to acquire financing to pay the amount due to JCCS, and he agreed with the valuation

of the client base taken from JCCS at $2.3 million. Alborn likewise admitted that although

Amatics has never paid JCCS for the clients Amatics took, they have paid for clients from

other firms, including for a shareholder they hired from a different accounting firm who

was restricted by a similar covenant. Alborn also acknowledged Amatics had amortized

these payments, as Copley suggested they would be able to do with the money owed to

JCCS. The testimony of Appellants’ expert, Steven Mintz, Ph.D., C.P.A., likewise failed

to establish an unreasonable burden upon Appellants. As the District Court explained,

Dr. Mintz had far less experience with covenants than Copley, in that he had not actually

17
worked in the CPA profession for 45 years, had no experience with partially restrictive

covenants other than reading about them, had never analyzed the reasonableness of one,

and had never read one like the one at issue prior to his testimony in this case. Additionally,

Dr. Mintz admitted it was reasonable for JCCS to expect to be paid for the clients the

Appellants took, although he had no opinion as to what amount would be reasonable.

Riekenberg likewise testified that although he thought the amount to be paid to JCCS was

too much, he could not provide an amount he believed would be reasonable or feasible.

Based on the substantial credible evidence presented, we cannot conclude the District Court

erred by finding JCCS had proven the Covenant placed a reasonable burden upon

Appellants.2

Burden on the public

¶30 We likewise conclude substantial evidence supports the District Court’s finding that

the Covenant does not place an unreasonable burden on the public. While Appellants are

correct that we do not support covenants that restrict the public from working with the

individual or business of their choice, Appellants present no evidence that the Covenant at

issue did so. As we discussed above, Appellants could finance and pay the liquidated

damages due to JCCS reasonably, and therefore, they would not be forced to turn down

2
Although classified as a separate issue in their briefing, Appellants also argue the amount of
damages awarded was unsupported by the evidence. However, given the extensive evidence
discussed above, including the uncontroverted testimony of Copley regarding the amount and the
calculation method set forth in the Covenant, we conclude the District Court’s damage
determination was well supported.

18
clients even if those clients wanted to use Appellants’ services. Likewise, Appellants did

not present any testimony or evidence that they could not continue to serve clients if they

were required to comply with the Covenant. Rather, Dr. Mintz testified the Covenant had

no effect on the clients going with the Defendants, as they were entitled to choose under

the terms of the partially restrictive covenant. Thus, as the District Court found, Appellants

could still serve any former JCCS client who chose to work with Appellants, but Appellants

would be contractually obligated to pay JCCS for that client, just as they did when they

purchased clients from other accounting firms.

¶31 Therefore, we concur with the District Court’s determination that the Covenant is

reasonable.

¶32 3. Did the District Court err by awarding prejudgment interest?

¶33 The District Court awarded JCCS prejudgment interest in the amount of 5.25% per

annum, commencing July 1, 2013. Appellants argue the award should not have started on

July 1, 2013, based on the specific provisions of the Employment Agreement. Appellants

also argue the District Court erred by utilizing § 27-1-211, MCA, to grant prejudgment

interest, because the damages were not a sum certain. In response, JCCS argues the District

Court’s application of § 27-1-211, MCA, was proper because, although the sum owing was

not certain, it was capable of certain calculation. JCCS admits that a correct reading of the

Covenant results in interest accrual beginning on August 1, rather than July 1, but JCCS

argues this Court should not reverse the District Court as to this one month difference

because difference in interest due would be de minimus.

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¶34 Section 27-1-211, MCA, provides,

Each person who is entitled to recover damages certain or capable of being
made certain by calculation and the right to recover that is vested in the
person upon a particular day is entitled also to recover interest on the
damages from that day except during the time that the debtor is prevented by
law or by the act of the creditor from paying the debt.

(Emphasis added.) The relevant portion of the Covenant provides,

b. Such sums shall be paid in monthly installments over a three year period,
the first such installment being due within thirty (30) days of the date when
the Shareholder, the Shareholder’s partners, or any professional services
organization employing Shareholder, does work for a particular client, and
which payments, exclusive of the initial payment shall include interest as
hereinafter provided.

c. Such sum shall bear interest at the rate of New York prime rate . . .
which interest shall commence at the date first payment is due

(Emphasis added.)

¶35 First, we agree with JCCS that the District Court did not err in utilizing § 27-1-211,

MCA, because, although the damages were not a sum certain, they were capable of certain

calculation based on the information provided in the Covenant. The Covenant provided

the formula for calculation, 100% of the gross fees billed over a twelve month period, and

it also provided the interest rate should be based on the New York prime rate, commencing

on the first date payment is due.

¶36 Based the plain language interpretation of the Covenant’s language, however, we

conclude the District Court erred with regards to the date interest began accruing. The

Covenant provides the first payment is due within 30 days of the date the shareholder or

professional services organization begins doing work for the particular client. Amatics

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began doing work for JCCS’ clients on July 1, 2013, the date they began taking business

from JCCS clients. Therefore, as JCCS concedes, the payment date should have been 30

days after July 1, 2013—or August 1, 2013. Although the parties do not provide a

calculation of the difference this would mean, to us it appears not to be de minimus.

¶37 Therefore, we affirm the award of prejudgment interest, but reverse to the extent

necessary to calculate interest due commencing on August 1, 2013.

¶38 4. Did the District Court err by denying Appellants’ motion for discovery
sanctions?

¶39 Appellants argue the District Court abused its discretion when it denied their motion

for discovery sanctions, because JCCS intentionally withheld an email and attached memo

written by Appellant Alborn, in which Alborn advised JCCS that Appellants intended to

send a letter to JCCS’ clients announcing their departure and desire to continue to serve

the clients. JCCS argues Appellants waived their right to appeal this issue because they

did not appeal the District Court’s prior conclusion that Alborn breached his fiduciary duty.

In the alternative, JCCS argues the District Court did not abuse its discretion because the

letter at issue was written by Appellant Alborn, who should have been well aware of the

letter, and that, the District Court properly found that the conduct at issue was only a partial

basis for its determination that Alborn breached his fiduciary duty.

¶40 In reviewing a district court’s denial of a motion for discovery sanctions for an abuse

of discretion, “we generally defer to the district court because it is in the best position to

determine both whether the party in question has disregarded the opponent’s rights, and

which sanctions are most appropriate.” Spotted Horse v. BNSF Ry. Co., 2015 MT 148,
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¶ 15, 379 Mont. 314, 350 P.3d 52 (citing Richardson v. State, 2006 MT 43, ¶ 21, 331 Mont.

231, 130 P.3d 634). Likewise, “[i]n determining whether a trial court abused its discretion,

the question is not whether the reviewing court agrees with the trial court, but rather

whether the trial court acted arbitrarily without the employment of conscientious judgment

or exceeded the bounds of reason, in view of all the circumstances.” Spotted Horse, ¶ 15

(citing Schuff v. A.T. Klemens & Son, 2000 MT 357, ¶ 27, 303 Mont. 274, 16 P.3d 1002).

¶41 As the District Court explained, Alborn’s alleged failure to inform JCCS of the

planned Amatics client letter and newspaper announcement was not the only action by

which he breached his fiduciary duty. Specifically, it was Alborn who coordinated the

tasks necessary for the Appellants to leave JCCS to form Amatics, including issuance of

the instruction to download JCCS’ client list. It is notable that the email was originally

written by Alborn, yet he failed to raise it on an appeal from the District Court’s

determination that he breached his fiduciary duty. We will defer to the District Court’s

ruling that, although JCCS should have produced the email, discovery sanctions were not

warranted.

¶42 Affirmed in part, reversed in part, and remanded for further proceedings consistent

with this opinion.

/S/ JIM RICE

We concur:

/S/ INGRID GUSTAFSON
/S/ LAURIE McKINNON
/S/ JAMES JEREMIAH SHEA
/S/ DIRK M. SANDEFUR
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