Dps Electronics, Inc. v. Transportation Products Sales Company, Inc.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DPS ELECTRONICS, INC.,
Plaintiff - Appellant,
v.
TRANSPORTATION PRODUCTS
SALES COMPANY, INC.,
Defendant - Appellee.
No. 12-35703
D.C. No. 2:08-cv-00082-SEH
MEMORANDUM*
Appeal from the United States District Court
for the District of Montana
Sam E. Haddon, District Judge, Presiding
Argued and Submitted November 4, 2013
Portland, Oregon
Before: ALARCÓN, M. SMITH, and HURWITZ, Circuit Judges.
In this diversity action, DPS Electronics, Inc. (DPS), appeals from a
judgment entered after a three-day bench trial in favor of Transportation Products
Sales Company, Inc. (TPSC). DPS claimed that TPSC breached the non-compete
clause of an Independent Representative Agreement (Agreement) by representing
FILED
NOV 15 2013
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

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Mu-Del Advanced Technologies, LLC (Mu-Del). The non-compete provision
prohibited TPSC, during the term of the Agreement and for a period of twelve
months thereafter, from representing “any company, organization or person, which
directly or indirectly competes with the Company or any Company Products and
Services.”
The district court found that the Agreement extended only to the DPS
products and services that TPSC had agreed to promote, and did not extend to
“products in development or not yet ready for market.” Based on this reading, the
court held that TPSC did not breach the Agreement by representing Mu-Del. The
district court also held that DPS had not proved a breach of the implied covenant of
good faith and fair dealing or that the Agreement created a fiduciary relationship
between the parties.
We affirm the district court’s holdings as to the covenant of good faith and
fair dealing and breach of fiduciary relationship. We disagree, however, with the
court’s construction of the non-compete provision. The court improperly conflated
the scope of TPSC’s representation of DPS, which was limited to products listed
on Exhibit E of the Agreement, with the scope of the non-compete provision,
which did not contain such a limitation.
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Because of this error, the district court never determined whether Mu-Del
directly or indirectly competed with DPS or with any of its products and services.
Nor did the court address whether the non-compete provision was reasonable under
Montana law. See Mungas v. Great Falls Clinic, LLP, 221 P.3d 1230, 1237 (Mont.
2009). We therefore vacate the judgment, and remand for a determination of the
provision’s applicability to TPSC’s representation of Mu-Del, and, if applicable, its
reasonableness.
VACATED in part, AFFIRMED in part, and REMANDED in part. Each
party is to bear its own costs.
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