Midcom, Inc. v. Oehlerking
Midcom, Inc. v. Oehlerking
Concurring in Part
(concurring in part and dissenting in part).
[¶ 29.] I agree with the Court’s conclusion on Issue I. I dissent on the majority’s decision to affirm the trial attorney’s fees and award appellate attorney’s fees. The trial court’s award of $18,360.05 in attorney’s fees for the trial was excessive. This was the full amount requested. Moreover, if this Court is going to affirm the excessive award, then we should not award any appellate attorney fees since Midcom has already received more than a reasonable amount.
[¶30.] The trial court awarded Midcom, $18,360.05 in attorney’s fees for the trial phase. Oehlerking’s attorney’s fees amount to a little over $3,000. While it is true Oehlerking appeared pro se for a portion of the litigation period, he retained an attorney for three out of the five months. Yet, Oehlerking’s attorney’s fees amount to a little over $3,000.
. Midcom argues the attorney's fees would have been another $1,150 had Oehlerking’s counsel billed for travel time. Even then, the total attorney's fees would have been $4,150, still substantially less than Midcom's requested fees.
Opinion of the Court
[¶ 1.] While employed at Midcom, Inc., Anthony J. Oehlerking signed a covenant not to compete. When he resigned to work for a direct competitor, Midcom sought to enforce the covenant. Oehlerk-ing claimed, however, that it was void and otherwise unenforceable. After a trial, the circuit court ruled that the covenant was valid and enforceable. The court issued two judgments, one enjoining Oehlerking from violating the covenant, and one awarding Midcom attorney’s fees based on a provision in the contract allowing a reasonable award of fees to the prevailing party. Oehlerking appeals both judgments. Because Oehlerking’s notice of appeal from the first judgment was untimely, we dismiss that appeal. On the second judgment, we affirm the award of attorney’s fees.
Background
[¶ 2.] Midcom is based in Watertown, South Dakota. It produces electronic components primarily for the telecommunications industry. Just after he received his degree in electrical engineering, Oehlerking was hired by Midcom in 1994 as a design engineer. Over the next several years, he earned promotions and salary increases. Then, in 1998, Midcom offered him a “Performance Stock Unit Appreciation Rights Agreement.” Included in the agreement was a covenant not to compete provision. He signed a second similar agreement in February 2000 with another noncompetition clause. By its terms, Oeh-lerking was restricted from competing directly or indirectly with Midcom anywhere it does business for at least two years after leaving his job with Midcom..
[¶ 4.] As a consequence, Oehlerking suffered a twenty percent salary reduction. He believed that the true effect was a sixty-five percent reduction because he lost the bonuses and contributions to his retirement account. His taxable income before the reduction, as reflected by his tax documents, was $115,901 in 2000, and $90,041 in 2001. In 2002, his income fell to $71,404, and, in 2003, it increased to $79,055. According to Midcom, though, his income before the reductions was “unusually high” because of the bonuses paid for fiscal years 1999 and 2000.
[¶ 5.] Nonetheless, when Midcom instituted its benefits reductions, it assured Oehlerking and other employees that the salaries would eventually be restored. Indeed, Midcom began increasing salaries in July 2002. Oehlerking’s salary went from $70,054 during the reduction, to $85,800 after the restoration. For Oehlerking, however, this was not a “restoration” because he still did not receive bonuses or retirement contributions. Equally detrimental, in Oehlerking’s view, was his demotion from the manager of the LAN business unit to a product manager. In losing his managerial responsibilities, he felt “deeply saddened, psychologically distressed, and humiliated.” According to Midcom, however, he was demoted because the company had restructured. In fact, Oehlerking’s last performance review, in April 2004, was positive. Also, the demotion did not affect his salary. And, according to the company, he retained the same, if not more, job responsibilities.
[¶ 6.] Despite these changes, which began in 2001, Oehlerking continued with the company. In 2004, however, he was contacted by Pulse Engineering of San Diego, California and offered employment that would return some of the benefits he originally enjoyed with Midcom. This opportunity was attractive to Oehlerking, and, on June 25, 2004, he gave Midcom his resignation letter. Thereafter, he was invited to meet with his supervisor, in-house counsel, and Midcom’s president. Oehlerking went to the meeting thinking that Midcom might present him with a counteroffer. But the covenant not to compete was the only item on the agenda. Pulse Engineering is a direct competitor of Midcom, selling the same products for the same applications.
[¶ 7.] After he left in July 2004, Mid-com brought suit to enforce the covenant not to compete by seeking an injunction, as well as attorney’s fees allowable under the agreement Oehlerking had signed. On July 29, 2004, after an evidentiary hearing, the circuit court issued a preliminary injunction enforcing the terms of the agreement and enjoining Oehlerking from accepting or continuing employment with Pulse Engineering.
[¶8.] In trial the following October, Oehlerking argued that Midcom detrimentally altered all material aspects of his employment so much that it amounted to a “constructive discharge.” Under this theory, he claimed that the covenant was void. He further asserted that Midcom was es-topped from enforcing the covenant against him because it had not enforced the same covenant against at least three
[¶ 9.] After the trial, Midcom requested attorney’s fees and costs of $18,360.05.
[¶ 10.] On appeal, Oehlerking argues that (1) the circuit court erred in enforcing the covenant not to compete, and (2) the court erred in its award of attorney’s fees. Midcom contends that Oehlerking failed to timely file his notice of appeal on the first issue.
1. Timeliness of Appeal
[¶ 11.] If Oehlerking failed to timely appeal, we will have no jurisdiction to consider his arguments. Long v. Knight Const. Co., Inc., 262 N.W.2d 207, 208-09 (S.D. 1978). Under our former version of the rule, in effect at the time, an appeal was timely when a notice of appeal was filed “within sixty days after the judgment or order shall be signed, attested, filed, and written notice of entry thereof shall have been given to the adverse party.” SDCL 15-26A-6.
[¶ 12.] In this case, Oehlerking seeks review of two judgments. The first judgment was dated November 8, 2004, and was filed on December 9, 2004. Notice of entry of the judgment was sent by first class mail to Oehlerking on December 14, 2004. The second judgment was dated and filed on February 23, 2005. Notice of entry of this judgment was sent by first class mail to Oehlerking on March 10, 2005.
[¶ 13.] The first judgment appears to “finally and completely” adjudicate all issues relating to the enforceability of the covenant not to compete.
[¶ 14.] This Court has not had occasion to review whether a judgment is final for purposes of an appeal when there is a later judgment that awards attorney’s fees based on the first judgment, which adjudicated the underlying merits. This question, however, has been the subject of frequent litigation. The United States Supreme Court’s decision in Budinich v. Becton Dickinson & Co. is instructive. 486 U.S. 196, 108 S.Ct. 1717, 100 L.Ed.2d 178 (1988). The specific issue addressed in Budinich was “whether a decision on the merits is a ‘final decision’ as a matter of federal law under [28 USC] § 1291 when the recoverability or amount of attorney’s fees for the litigation remains to be determined.” Id. at 199, 486 U.S. 196, 108 S.Ct. at 1720, 100 L.Ed.2d 178. In accord with 28 USC § 1291 “ ‘all final decisions of the district courts’ are appealable to the court of appeals.” Id. at 198-99, 486 U.S. 196, 108 S.Ct. at 1720, 100 L.Ed.2d 178 (quoting 28 USC § 1291).
[¶ 15.] The Supreme Court recognized that generally a “final decision” is defined as “one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Id. at 199, 486 U.S. 196, 108 S.Ct. at 1720, 100 L.Ed.2d 178 (citing Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945)). Finality still inheres in the judgment or order even when there is a question to be decided after the judgment ending litigation on the merits, if it does “not alter the order or moot or revise the decisions embodied in the order.” Id. (citations omitted).
[¶ 16.] The Court indicated that a question relating to an award of attorney’s fees would fit this description because the request is generally “collateral to” and “separate from” the judgment on the merits. Specifically, the Court stated that “[a]s a general matter, at least, we think it indisputable that a claim of attorney’s fees is not part of the merits of the action to which the fees pertain. Such an award does not remedy the injury giving rise to
[¶ 17.] Also helpful is the analysis from the Eighth Circuit Court of Appeals of two different approaches to characterizing an attorney’s fee request. Obin v. District No. 9 of the Int’l Ass’n of Machinists & Aerospace Workers, 651 F.2d 574, 583 (8thCir. 1981). The first approach regarded attorney’s fees as equivalent to a claim of costs; thus, not an attempt to amend or alter a judgment. The second distinguished attorney’s fees from cost disbursements because costs, arguably, are “capable of being taxed by the clerk” and attorney’s fees are most likely determined after a hearing on the matter and after consideration of submissions from the parties. Id. at 580. Also, in the second approach, fees were considered different because an appeal often resulted from an award of attorney’s fees, and costs almost never gave rise to an appeal.
[¶ 18.] Rejecting the first approach, the court in Obin agreed that attorney’s fees differ from cost disbursements. However, the court did not accept the view in the second approach that a request for attorney’s fees is integral to the final judgment on the merits. Rather, the court stated that an award of fees merely seeks what is due from the judgment, and “differs in effect from a judgment on the merits[.]” Id. at 581 (citing Knighton v. Watkins, 616 F.2d 795, 797 (5thCir. 1980)). Therefore, the court, “[f]rom both a policy and a legal standpoint,” declared that “a claim for attorney’s fees should be treated as a matter collateral to and independent of the merits of the litigation.” Id. at 583 (emphasis added).
[¶ 19.] Deciding not to treat an award of attorney’s fees as part of the final judgment, the court feared the possibility that appellate courts could be inundated with successive appeals arising out of the same litigation.
This court has a real concern over fragmentation of appeals. In the interests of orderly and expeditious consideration of all issues arising from a single lawsuit, disputes on appeal over the merits, as well as disputes regarding the allowance of attorney’s fees to the prevailing party, should ordinarily be considered and decided by this court in either a single or consolidated appellate proceeding. This court deems it essential that all district courts follow a consistent practice of promptly hearing and deciding attorney’s fees claims ... so that any appeal by an aggrieved party from the allowance or disallowance of fees can be considered by this court together with any appeal taken from a final judgment on the merits.
Id. Consequently, when a final judgment has been entered on the merits in the Eighth Circuit, the time for appeal begins from the date of entry of that judgment, regardless of a subsequent determination of attorney’s fees.
[¶ 21.] Oehlerking does not dispute the timing of the first judgment. It was filed on December 9, 2004, and notice of its entry was sent on December 14, 2004. Thus, under SDCL 15-26A-6, for his appeal to be timely he had to file the notice of appeal “within sixty days after the judgment or order shall be signed, attested, filed, and written notice of entry thereof shall have been given to the adverse party.” See Sawyer, 2000 SD 144, ¶ 9, 619 N.W.2d at 647. Oehlerking filed his notice of appeal on April 22, 2005, well beyond the permitted time. Because Oehlerking’s appeal is untimely, we do not have jurisdiction to consider his claims. His appeal from the December 9, 2004 judgment is dismissed.
2. Attorney’s Fees
[¶ 22.] Oehlerking’s appeal from the February 23, 2005 judgment was timely. Therefore, we must determine whether the circuit court’s award of attorney’s fees to Mideom was reasonable. After the court ruled that the covenant not to compete was enforceable and enjoined Oeh-lerking from acting in violation of its terms, Midcom sought $18,360.05 in attorney’s fees. Oehlerking does not dispute that the contract provides that the prevailing party may recover their reasonable attorney’s fees for the litigation. Mideom was the prevailing party on all issues in the underlying action. Nonetheless, Oehlerking insists that Midcom’s request was “not reasonable in light of the time, effort and work performed.”
[¶ 23.] We review an award of attorney’s fees under the abuse of discretion standard. See Crisman v. Determan Chiropractic, Inc., 2004 SD 103, ¶ 24, 687 N.W.2d 507, 513 (citations omitted). After conducting a hearing on Oehlerking’s objections, the circuit court determined, in light of this Court’s reasonableness factors, that Midcom’s request was in fact reasonable. See id. ¶ 27 (citing Duffy v. Circuit Court for the Seventh Judicial Cir
[¶ 24.] When awarding Midcom attorney’s fees, the circuit court considered the required factors identified by this Court. In light of those factors and the case as a whole, the court then found Midcom’s fee request to be reasonable. Based on our review of the court’s decision, we cannot say the court abused its discretion when it awarded Midcom $18,360.05 in attorney’s fees and costs.
[¶ 25.] Midcom has also filed a motion seeking $9,007.50 in appellate attorney’s fees, relying on the same contract provision. Midcom is the prevailing party on appeal and therefore fees are allowable. See SDCL 15-17-38; Schuldies v. Millar, 1996 SD 120, ¶ 37, 555 N.W.2d 90, 100 (citations omitted). As required by SDCL 15-26A-87.3, Midcom also submitted a verified and itemized statement of costs incurred and legal services rendered for this appeal. We award Midcom $2,500 as reasonable for this appeal.
[¶26.] On Issue 1, the appeal is dismissed; on Issue 2, the judgment is affirmed.
. Under our new rule, effective July 1, 2006, "unless otherwise provided by statute or order of the court, [motions for attorneys’ fees] must be filed no later than fourteen days after entry of judgment[.]” See SDCL 15—6—54(d)(2)(B).
. This rule was amended, effective July 1, 2006: for all judgments filed from that date on, an appeal must "be taken within thirty days after the judgment or order shall be signed, attested, filed and written notice of entry thereof shall have been given to the adverse party.” SDCL 15-26A-6 (emphasis added).
.The first judgment stated:
Ordered, Adjudged and Decreed Defendant Anthony J. Oehlerking is enjoined through and until June 25, 2006, from being employed, directly or indirectly, by Pulse Engineering, Inc., or any affiliate thereof, or any other company carrying on a like business to Midcom, Inc., in the United States and those countries where Midcom. Inc. continues to sell or solicit for sale its products. It is further
Ordered, Adjudged and Decreed that a declaratory judgment enter until [sic] SDCL 21-24 that the non-compete covenant is valid, bind
. The amount of taxable disbursements awarded to Midcom was left blank, indicating that it was "to be inserted by the Clerk or determined by the [c]ourt if there is an objection to the amount." We previously stated that leaving this amount blank does not affect the finality of the judgment. See Doughtry v. Hyde, 50 S.D. 122, 208 N.W. 581, 582 (1926).
. The second judgment provided:
Ordered, Adjudged and Decreed that Plaintiff's Motion For Award of Attorney's Fees and Disbursements is granted and that Plaintiff have and recover $18,360.05 for attorney's fees and disbursements from Defendant. It is further
Ordered, Adjudged and Decreed that these Findings of Facts, Conclusions of Law, and Judgment, together with the Findings of Fact, Conclusions of Law and Judgment filed December 9, 2004, are and constitute a final judgment in the case.
. In two cases, the Eighth Circuit Court of Appeals found cause to distinguish Budinich’s
Reference
- Full Case Name
- MIDCOM, INC., Plaintiff and Appellee, v. Anthony J. OEHLERKING, Defendant and Appellant
- Cited By
- 14 cases
- Status
- Published