Jeld-Wen Holdings, Inc. v. Ribas

Filing 26

ORDER: Denying Motion for a Preliminary Injunction 5 ); Denying Motion to Dismiss Case for Lack of Jurisdiction 13 . Signed on 8/11/2011 by Judge Owen M. Panner. (dkj)

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

JELD-WEN HOLDING, INC., an
Oregon corporation,
ntiff,

Civ. No. 11-3043-CL

ORDER
v.

JAIME RIBAS, an

dual,
De

PANNER,

J.

On July 26, 2011,

I presided over a show-cause hearing

regarding Jeld-Wen's request for a
the reasons that

llow, Jeld-Wen's re

1

injunction. For
st for a prel

injunction {#5) is DENIED. Additionally, Jaime Ribas motion to
dismiss for

1

- ORDER

k

personal jurisdiction {#13) is DENIED.

BACKGROUND

In 1991, Puertas Norma, S.A.

(a Spanish door-making company)

hired defendant Jaime Ribas as Managing Director. Plaintiff JeldWen owns Norma. In 1994, Ribas was appointed as a board member of
Norma. In March 2003, Jeld-Wen notified Ribas of his eligibility
in Jeld-Wen's stock purchase program. Ribas voluntarily signed a
Stockholder Agreement. Ribas financed the stock purchase with
$16,048 in cash and a loan from Jeld-Wen of $70,000.
The 2003 agreement did not contain a provision regarding
Jeld-Wen's confidential information. The 2003 agreement did not
contain a covenant not to compete. The 2003 agreement lacked a
forum selection clause.
In March 2004, Jeld-Wen offered Ribas and other key managers
a gift of 25 shares of stock (worth $12,724). Although the gift
was contingent on Ribas remaining employed with Jeld-Wen for
three years, the gift carne with no restrictions on Ribas'

future

employment with competitors of Jeld-Wen or Norma. Ribas
voluntarily agreed to accept the stock gift.
In April 2005, Jeld-Wen decided to revise its stock
ownership program. Jeld-Wen produced a revised stockholder
agreement

(the "Agreement")

for Ribas to sign. The 2005 Agreement

is the Agreement Jeld-Wen argues Ribas is now violating. The
Agreement's confidentiality portion states:
Stockholder recognizes and acknowledges that Company
maintains trade secrets and proprietary information and
2

- ORDER

know-how, i
uding information relating to cost data,
formulas, patterns, compilations, programs,
ces,
Company polic s and procedures and
r
ial
data ("
idential Information"). Stockhol r
acknowl
s that this information
sents valuable,
special and unique assets of Company's
iness.
Stockhol r will in perpetuity or
longest
duration allowed by law treat such in
ion as
strictly
dential and as trade secrets and not
discuss or dis ose it to any outside party under any
circumstances whatsoever.
Stockholder Agreement,

~

The 2005

5.
also contained a Restrictive Covenant:

Stockho
r agrees and acknowledges t
any
unautho zed disclosure or release
Confidential
Informat
in any form would irreparably harm Company.
Furthermore, Stockholder agrees that
usted Book
Value
Goodwill. Consequently, to protect
Company's Confidential Information and goodwill, and in
exchange
r mutual promises cont ned
rein,
Stockhol
agrees that during Stoc
r's holding of
Shares
three years following
rchase of the
Shares, Stockholder shall not:
a.

b.

3

approach, couns
or attempt to induce any
person who is then
employ of Company
(or its affiliates) to leave his or her
employ or employ or att
to employ any
such person or any
on who at any time
during the preceding twe
(12) months was
the employ of Company (or its affiliates);

c.
Stockhol

rectly or indirectly compete with Company
(or any of its affiliates) or
rwise
approach, solicit or accept
s from any
customer, supplier or vendor
Company (or
any of its affiliates) in
rect or indirect
competition with Company (or any of its
affiliates) ;

aid, assist or counsel any
person, firm
or corporation to do
of the above.

r Agreement,

- ORDER

~

6.

Unlike the 2003 stockholder agreement, Jeld-Wen's memo to
shareholders
shareholders had

the new 2005 Agreement did not state
option of not signing

2005 Agreement.

Instead, the memo simply tells the stockho

r to sign the new

agreement and return it to HR. April 25, 2005 Memo, 1.
The 2005 memo

lained the confident

lity and covenant not

to compete provisions:
de more

Our plan over the next 2 years is
information to our shareholders.

, we have
added a confi
iality paragraph in
r to provide
better protection for our confidential proprietary
informat
trade secrets. In
ion, we have
added a non-compete provision, wh
rrors the 3-year
. We feel it
period we
in our management
is important that our key managers commit to not go to
work for t
competition and these
sions are more
enforceable
a shareholder
than a
management agreement.
April 25, 2005 Memo, 2,
In 2007,

~

5.

s became Chairman of t

of Directors of

Norma.
In April 2010, Ribas and Norma entered into a severance
agreement, te

ing Ribas' emplo

agreement, Norma

id Ribas 240,000 euros. Jeld-Wen was not a

. Under the severance

party to the 2010 severance agreement. In June 2010, pursuant to
the 2005 Agreement, Jeld-Wen repur

Ribas' shares of stock

for $114,000.
In early 2011, Ribas (apparently) began working for
Norma's main competitor in Spain. Several Norma employees

4

- ORDER

observed Ribas staffing a Art
in Barcelona. Norma alleges it

s "since lea

show

booth at a May 2011 t
its

employees and agents, or from customers
that Norma's customers are doing bus

liers themselves,
because

ss with Art

Ribas is affiliated with that company. Norma lists
customers now doing business with Art

former

Norma also lists other

customers who have been contacted by
STANDARDS

A party seeking a preliminary i

unction "must establish

that he is likely to succeed on the merits,

is likely to

suffer irreparable harm in the absence of

nary relief,

that the balance of equities tips in his

an

injunction is in the public interest."
Resources Defense Council, Inc., 129 S. Ct. 365, 374 (2008). The
plaintiff "must establish that i

rm is

not

just possible." Alliance for the Wild Rockies v. Cottrell, 2011
WL 208360, at *3 (9th Cir. Jan. 25, 2011) (

is

The court may apply a sliding scale test,

er

1) .

r whi

seeking an injunction must demonstrate a

or

irreparable harm as the probability of success on
decreases. Id. at *4. The court's

party
of
merits

ision on a motion for a

preliminary injunction is not a ruling on t

merits.

Sierra

On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1422 (9th
Cir. 1984).

5

- ORDER

DISCUSSION

1.

Personal Jurisdiction

As noted, Ribas argues this court lacks personal
jurisdiction over him. A party may waive its defense based on
lack of personal jurisdiction. Insurance Corp. of Ireland, Ltd.
v. Compagnie, 456 U.S. 694, 703-05

(1982). The 2005 Agreement

states any claim relating in any way to the Agreement "shall be
settled in a court of competent jurisdiction in the State of
Oregon. Each party consents and agrees to submit to the exclusive
jurisdiction of said court and that the County of Klamath shall
be designated as the venue for resolving any claim arising
hereunder." As Jeld-Wen's claim alleges a breach of the 2005
Agreement, Ribas waived any personal jurisdiction defense upon
signing the 2005 Agreement. Therefore, Ribas' motion to dismiss
for lack of personal jurisdiction (#13) is DENIED.
2.

Preliminary Injunction

ORS 653.295 severely limits the enforcement of a
noncompetition agreement between an employer and employee.
Assuming the 2005 Agreement is not subject to the restrictions of
ORS 653.295, the Agreement is indisputably a covenant in
restraint of trade. North Pac. Lumber Co. v. Moore, 275 Or 359,
364

(1976). Therefore, to be enforceable under Oregon law, the

contract must:
place;
6

(1) be restricted in operation as to time or

(2) be on some good consideration; and (3) be reasonable.

- ORDER

Nike, Inc. v. McCarthy, 379 F.3d 576, 584

(9th Cir. 2004) (citing

Eldridge v. Johnston, 195 Or. 379, 245 P.2d 239, 250

(1952). In

Oregon, a general, unrestricted contract in restraint of trade is
"clearly against public policy." Eldridge, 195 Or. at 404.
The Oregon Supreme Court upheld the ten-year non-compete
covenant at issue in Eldridge only as to four counties within the
state of Oregon.

Id. at 409. Ribas has worked in the Spanish

door industry for the past 20 years. The noncompetition agreement
here will force Ribas to remain unemployed for three years and
prevent Ribas from competing "directly or indirectly" with Jeld­
Wen or any of Jeld-Wen's subsidiaries. At oral argument, Jeld-Wen
stated it had representatives in France as well. It is unclear if
Ribas could work in the door business in any location in the
world without, in Jeld-Wen's view, competing "directly or
indirectly" with Jeld-Wen or any subsidiary of Jeld-Wen. I
conclude the 2005 Agreement is not restricted as to place.
Contracts are severable and courts are able to limit
enforcement of unreasonable non-compete agreements to the extent
that they are reasonable.

Eldridge, 195 Or. at 409.

However, In

cases where the non-compete agreements are over-broad to the
point where enforcement becomes unreasonable, some courts advise
voiding the entire agreement, rather than simply striking down
the most egregious clauses. Konecranes, Inc. v. Sinclair, 340 F.
Supp. 2d 1131 (D. Or. 2004). Jeld-Wen apparently seeks to

7

- ORDER

I

Ribas from working,

in any capacity,

the sole

s, and in the sole location, Ribas has worked
20

t

st

Such a restriction is unreasonable.
though not necessary to my conclusions,

I question

2005 Agreement was supported by good consideration. Jeld-Wen

a

pursuant to the 2005 Agreement, Ribas gai

access

to more company secrets and secured the opportunity to purchase
more stock. Ribas, however, never purchased addit

1 stock.

ionally, Jeld-Wen provided no evidence that

- as oppos

to Norma - ever provided any "Confidential Informat
As not
2005,
In

, Jeld-Wen informed stockholders

to Ribas.
start

in

d-Wen intended to share additional "Confidential
ion" with shareholders. April 25, 2005 Memo, 2, ,

Stockholder Agreement, ,

5;

5. Jeld-Wen appears to simply assume the

court will acknowledge Ribas received "Confidenti

In

from Jeld-Wen. The customer lists and pricing

ion"
whi

seem to lay at the heart of this case, however, appear to belong
not to Jeld-Wen, but to Norma. Jeld-Wen
its

at

f from Norma, noting four degrees of s

y

stanced

ration separate

Jeld-Wen from Norma. Although taking pains to

stance

self

Norma, Jeld-Wen seems to merge the two companies for the
ses of "Confidential Information" and

s.

The party in whose favor the covenant cuts must show a
"1

8

imate interest" entitled to protect

ORDER

, North Pac. Lumber,

275 Or. at 364, and the burden of proof is upon the employer to
establish the existence of trade secrets, information or
relationships which pertain particularly to the employer, or
other special circumstances sufficient to justify enforcement of
such a covenant. Rem Metals Corp. v. Logan, 278 Or. 715, 721-22
(1977). Protect able interests include "information pertaining
especially to the employer's business," such as client
information, customer lists and purchase history. Nike, 379 F.3d
at 585. As noted, Jeld-Wen produced no evidence that it - as
opposed to Norma - ever provided any "Confidential Information"
to Ribas.
Additionally, Jeld-Wen provided no evidence that it - as
opposed to Norma - conducts any business at all in Spain. As all
of Ribas' actions occur in Spain, I am not convinced that Jeld­
Wen has demonstrated a likelihood of establishing any damages
from Ribas' alleged breach. A current suit in Spanish courts by
Norma against Ribas and Artevi alleging unfair competition seems
more appropriate for any damages from allegedly improperly
stealing Norma's clients and employees.
I conclude Jeld-Wen failed to demonstrate either the
likelihood of success on the merits, or the likelihood of
irreparable harm absent an injunction. My conclusions here are
not rulings on the merits. See Sierra On-Line, 739 F.2d at 1422.

9

- ORDER

CONCLUSION

Jeld-Wen's request

r a preliminary

DENIED. Jaime Ribas motion to dismiss
jurisdiction (#13)

r

unction (#5)

is

ck of personal

is DENIED.

IT IS SO ORDERED.
DATED this

of August, 2011.

t;~J«i~_

OWEN M. PANNER
U.S. DISTRICT JUDGE

10 - ORDER