Reier Broadcasting Company, Inc. v. Kramer
72 P.3d 944 (2003)
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Rule of Law:
Under Montana Code Annotated § 27-19-103(5), an injunction cannot be granted to enforce a negative covenant, such as an exclusivity clause, within a personal services contract because doing so would indirectly compel specific performance of the contract, which is legally prohibited.
Facts:
- In January 2001, Reier Broadcasting Company, Inc. (Reier) and Michael Kramer, the head football coach at Montana State University (MSU), entered into an employment contract at MSU's suggestion.
- Under the contract, Reier agreed to pay Kramer $10,020 per year in exchange for Kramer serving as an announcer on a weekly program and recording commercials.
- The contract contained an exclusivity clause prohibiting Kramer from performing for or allowing his name to be used by any other radio or television station without Reier's written consent.
- This contract was set to remain in effect until November 2004.
- In the summer of 2002, MSU's separate, broader athletic broadcasting rights contract with Reier expired.
- MSU then awarded new broadcasting rights to Clear Channel Communications, a competitor of Reier.
- MSU notified Kramer that he was expected to provide interviews and participate in programs with Clear Channel, which would violate the exclusivity clause in his contract with Reier.
Procedural Posture:
- Reier Broadcasting Company, Inc. filed a Complaint and Application for a Temporary Restraining Order (TRO) against Michael Kramer in the Eighteenth Judicial District Court, Gallatin County (trial court).
- The District Court granted the TRO, pending an evidentiary hearing.
- The TRO was subsequently amended to allow Kramer to fulfill media obligations directly related to his coaching job.
- After an evidentiary hearing to determine if the TRO should be converted into a preliminary injunction, the District Court concluded that a Montana statute prohibited issuing the injunction.
- The District Court dissolved the TRO.
- Reier Broadcasting filed a motion to alter or amend the judgment, which the District Court denied.
- Reier Broadcasting (appellant) appealed the District Court's order to the Supreme Court of Montana.
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Issue:
Does Montana Code Annotated § 27-19-103(5), which prohibits injunctions to prevent the breach of a contract that cannot be specifically enforced, also prevent a court from enjoining an employee from breaching a negative covenant in a personal services contract?
Opinions:
Majority - Justice Leaphart
Yes, the statute prevents a court from enjoining an employee from breaching a negative covenant in a personal services contract. Montana law, specifically § 27-19-103(5), MCA, explicitly prohibits granting an injunction to prevent the breach of a contract that cannot be specifically enforced. Because personal services contracts cannot be specifically enforced under § 27-1-412(1), MCA, an injunction cannot be used to prevent their breach. Enforcing the negative exclusivity clause against Kramer would prevent him from performing for Clear Channel, effectively forcing him to perform for Reier if he wished to perform at all. This constitutes an indirect enforcement of the affirmative obligations of the personal services contract, which is precisely what the statutes are designed to prevent. This interpretation aligns with precedents from California and Arizona, which have construed nearly identical statutory language to prohibit the enforcement of negative covenants in personal services contracts via injunction.
Dissenting - Justice Cotter
No, the statute should not be interpreted to prevent the enforcement of a bargained-for negative covenant. The majority's conclusion that an injunction would amount to indirect specific performance is a 'stretch.' Reier is not seeking to compel Kramer to perform his duties, but is simply trying to prevent him from violating the non-competition provisions of the contract. Furthermore, MSU and Kramer should be estopped from challenging the contract's enforceability. MSU instigated the contract for Kramer's benefit, and both parties accepted its benefits; they should not now be permitted to invalidate the contract's burdens simply because it has become inconvenient.
Analysis:
This decision establishes a clear, statute-based rule in Montana that diverges from the common law approach in many other jurisdictions, which often allow injunctions to enforce negative covenants for unique personal services. By strictly interpreting its statutes, the Montana Supreme Court eliminates the possibility of using equitable remedies like injunctions to enforce exclusivity in personal services contracts. The ruling provides certainty for employees but limits the recourse available to employers, who must now rely on suits for monetary damages for such breaches. This holding underscores the power of specific statutory language to override general equitable principles and creates a potential trap for out-of-state parties contracting with Montana-based individuals.
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