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Cook Martin Poulson PC v. Smith

Cook Martin Poulson PC v. Smith, 2020 UT App 57 (Christiansen Forster, J.)

Contempt

An employee worked for an employer and signed a noncompete agreement. The employer terminated the employee. Upon discovering that the employee was still providing services to several of the employer’s clients—contrary to the noncompete agreement—the employer sued the employee and asked for an injunction against the employee. The district court granted a preliminary injunction prohibiting the employee from soliciting former clients or working for current clients. The district court also ordered the employee to produce electronic information in discovery; the employee offered for the employer to inspect the documents on the employee’s computer, but the employee did not give the employer copies of the documents. The employer then discovered that the employee had continued to perform work for former clients. For all these actions, the district court held the employee in contempt. For sanctions, the district court struck the employee’s counterclaim, awarded attorney fees, and entered summary judgment in favor of the employer. The employee appealed. The Utah Court of Appeals reversed in part and affirmed in part, holding:

  • The district court plainly erred in concluding that the employee violated the preliminary injunction. The plain language of the preliminary injunction only prohibited the employee from soliciting former clients and from working for the employer’s current clients; the plain language did not prohibit the employee from working for former clients. It was plain error for the district court to find the employee in contempt for violating the preliminary injunction solely on the basis that the employee provided services to former clients; the court made no finding that the employee solicited those former clients. 
  • The district court was within its discretion in holding the employee in contempt for violating the discovery order. Utah R. Civ. P. 34(c)(2) required the employee to produce electronic information in the form required by the employer, and if the employer did not specify the form, then in the form “ordinarily maintained” or “reasonably usable.” Here, the employer requested the electronic information to be provided in paper or disk form, and the employee did not produce the information in the form requested by the employer. 
  • Because the Court of Appeals reversed the contempt finding for violating the preliminary injunction but upheld the contempt finding for discovery violations, the Court of Appeals remands to the district court to reconsider sanctions, including its summary judgment ruling. 

Read the full court opinion

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