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Osborne v. Brown & Saenger, Inc.

Supreme Court of North Dakota

December 7, 2017

Dawn Osborne, Plaintiff and Appellant
v.
Brown & Saenger, Inc., Defendant and Appellee

         Appeal from the District Court of Cass County, East Central Judicial District, the Honorable Thomas R. Olson, Judge.

          Joel M. Fremstad, Fargo, N.D., for plaintiff and appellant.

          Vanessa L. Lystad (argued) and Robert J. Udland (on brief), Fargo, N.D., for defendant and appellee.

          OPINION

          Tufte, Justice.

         [¶ 1] Dawn Osborne appeals from the district court's order granting Brown & Saenger, Inc.'s motion to dismiss for improper venue. We reverse under N.D.C.C. § 28-04.1-03(5), concluding the forum-selection clause in the parties' employment agreement violates North Dakota's public policy against non-compete agreements. The non-compete clause is unenforceable under N.D.C.C. § 9-08-06 to the extent it limits Osborne from exercising a lawful profession, trade, or business in North Dakota.

         I

         [¶ 2] In 2011, Brown hired Osborne as a sales representative in its Fargo office to sell office supplies to businesses. Brown is headquartered in South Dakota, but operates as a foreign business corporation in North Dakota. Osborne signed yearly employment contracts with Brown. The parties agree that the 2015 Employment Agreement is the controlling contract for this action, and it was the only one brought before the district court.

         [¶ 3] The two clauses at issue in deciding the motion to dismiss are the "Agreement Not to Compete" ("non-compete clause") and the "Choice of Law/Forum" clauses. The non-compete clause states, in relevant part:

[E]mployee agrees not to engage directly or indirectly, either personally or as an employee, associate, partner, or otherwise, or by means of any corporation or other legal entity, or otherwise, in any business in competition with Employer and, in addition, not to solicit customers of Employer for Employee's own benefit or for the benefit of any third party, during the term of employment and for a period of two (2) years from the last day of employment, within a 100 mile radius of employment location.

         The "Choice of Law/Forum" clause states: "The parties agree that this agreement is governed by the laws of the State of South Dakota and that the state circuit court situated in Minnehaha County, South Dakota, shall be the exclusive jurisdiction of any disputes relating to this Agreement."

         [¶ 4] In January 2017, Brown terminated Osborne. Osborne sued Brown, alleging retaliation, improper deductions, and breach of contract. Osborne also sought a declaratory judgment declaring the non-compete clause to be void. Osborne moved for a preliminary injunction seeking to prevent Brown from enforcing the covenant-not-to-compete against her. Brown responded to that motion and moved to dismiss the action for improper venue. Brown argued the forum-selection clause in the employment agreement was valid and therefore a North Dakota court was an improper venue. Brown argued that the clause required the case to be heard by the South Dakota court specified in the agreement. The district court, without ruling on the motion for preliminary injunction, agreed with Brown and granted the motion to dismiss.

         [¶ 5] Additionally, Brown has sued Osborne in the state circuit court situated in Minnehaha County, South Dakota, seeking a preliminary injunction against Osborne restricting her actions under the non-compete clause.

         II

         [¶ 6] We have not previously addressed the standard of review of a district court's granting of a N.D.R.Civ.P. 12(b)(3) motion on the basis of a forum-selection clause. Because Rule 12 is derived from Fed.R.Civ.P. 12, we view federal interpretations of Fed.R.Civ.P. 12(b)(3) as highly persuasive authority. See Unemployment Comp. Div. v. Bjornsrud, 261 N.W.2d 396, 398 (N.D. 1977) ("[W]hen we adopted the Federal Rules of Civil Procedure we did so with knowledge of the interpretations placed upon them by the Federal courts, and although we are not compelled ...


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