TruGreen v. Mower Brothers

2008 UT 81
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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TruGreen Companies, L.L.C., a No. 20070451
Delaware limited liability company,
and Trugreen Limited Partnership, a
Delaware limited partnership,
Plaintiffs and Petitioners,
v.
Mower Brothers, Inc., a Utah
corporation; Kevin D. Bitton dba Scotts
Lawn Service, a Utah entity; Greenside,
L.L.C., a Utah limited liability
company; Kevin D. Bitton, an
individual; Jean Robert Babilis, an
individual; Ryan Mantz, an individual;
Lary Gaythwaite, an individual; Jim
LeBlanc, an individual; David Stephensen,
an individual; Jason Hiller, an
individual; Matt Walker, an individual;
James Clogston, an individual; Rick
Deersfield, an individual; David Van
Acker, an individual; Shannon
Christensen, an individual; Paul Brower,
an individual; James Murray, an
individual; Richard Coffman, an
individual; Tammy Roehr, an individual;
Jessica Spencer, an individual; Margie
Smith, an individual; Alfreda Egbert,
an individual; Jason Beck, an
individual; and Isaiah Plumley, an F I L E D
individual;
Defendants and Respondents. November 25, 2008
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Certification from the Federal Court
Attorneys: Brian C. Johnson, Jacob C. Briem, William B. Ingram,
Salt Lake City, for petitioners
Richard M. Hymas, J. Mark Gibb, Erik A. Olson, Jason
R. Hull, Salt Lake City, for respondents
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No. 20070451 2
On Certification from the United States
District Court for the District of Utah,
The Honorable Paul G. Cassell
NEHRING, Justice:
INTRODUCTION
¶1 We consented to answer two questions that were
certified to us by the United States District Court for the
District of Utah. These questions are as follows:
1. Whether under Utah law a former employer is entitled to
an award of lost profits damages, or instead an award
of restitution or unjust enrichment damages, where a
former employee has breached contractual non-
competition, non-disclosure, and employee non-
solicitation provisions?
2. Whether Utah law recognizes an unjust enrichment
measure of damages for tortious interference with a
competitor’s contractual and economic relations?
¶2 We hold that lost profits is the correct measure of
damages but that an analysis of a defendant’s profits may be
appropriate when damages are difficult to ascertain. We also
hold, regarding the second question, that lost profits is the
measure of damages for pecuniary injuries due to tortious
interference with a competitor’s contractual and economic
relations.
BACKGROUND
¶3 TruGreen and Mower Brothers are competing lawn care
companies operating in Utah. The underlying litigation
originated when one of the defendants, Ryan Mantz, resigned from
TruGreen and within a few weeks began working for Mower Brothers.
Other TruGreen employees followed Mr. Mantz.
¶4 Several months later, TruGreen sent a letter to Mower
Brothers, stating that the former TruGreen employees, who were
employed by Mower Brothers, had signed non-compete agreements
with TruGreen. TruGreen alleged that following the departure of
these employees, it “suffered . . . a significant loss of
critical management and sales personnel, which has required the
transfer of veteran sales representatives from [other branches]
and the hiring and training of several new and inexperienced
employees.” In the meantime, Mower Brothers experienced

3 No. 20070451
impressive growth and revenue increases. TruGreen subsequently
sued the former employees and Mower Brothers for breach of
contract and tortious interference with prospective economic
advantage.
¶5 TruGreen sought a temporary restraining order and
preliminary injunction to enjoin its former employees from
working for Mower Brothers, but it was turned away by the court.
The parties then filed cross-motions for summary judgment. The
court granted summary judgment for the defendants on some of
their claims and denied TruGreen’s motion. As part of its
decision on summary judgment, the court dismissed TruGreen’s
allegations against several of the former employees.
¶6 At this point, only the following TruGreen claims
remain: (1) that some of TruGreen’s former employees breached
three provisions of the TruGreen employment contract--a non-
competition provision, a non-disclosure provision, and an
employee non-solicitation provision; (2) that Mower Brothers,
Jean Babilis and Kevin Bitton (Mower Brothers directors), and
some of the TruGreen former employees tortiously interfered with
TruGreen’s economic and contractual relationships; and (3) that
Mower Brothers, Bitton, and Babilis violated Utah’s Unfair
Competition Act. Utah Code Ann. § 13-5a-103 (2005). The
defendants denied all of the claims.
¶7 Following the court’s rulings on the summary judgment
motions, a controversy arose among the parties about potential
damages. TruGreen argues that an unjust enrichment or
restitution measure of damages is appropriate for all of its
claims. In essence, TruGreen contends that it is entitled to
recover the economic benefit realized by Mower Brothers
attributable to the breach of its employment contract. Mower
Brothers counters that a plaintiff’s lost profits, as sustained
by TruGreen, is the appropriate measure of damages. The federal
district court determined that there appears to be no controlling
Utah law in either contract or tortious interference addressing
the damages issue. The court therefore certified two questions
to us in aid of obtaining guidance concerning the proper measure
of damages. We have jurisdiction to answer these questions under
the authority granted us in Utah Code section 78A-3-102(1) (Supp.
2008).
STANDARD OF REVIEW
¶8 “When a federal court certifies questions of state law,
we answer the legal questions presented without resolving the
underlying dispute.” Tabor v. Metal Ware Corp., 2007 UT 71, ¶ 5,
168 P.3d 814 (internal quotation marks omitted).

No. 20070451 4
ANALYSIS
I. LOST PROFITS IS THE APPROPRIATE MEASURE OF DAMAGES FOR BREACH
OF CONTRACTUAL NON-COMPETE PROVISIONS
¶9 The first question we are asked to review is whether
under Utah law a former employer is entitled to an award of lost
profits damages, or instead an award of restitution or unjust
enrichment damages, where a former employee has breached
contractual non-competition, non-disclosure, and employee non-
solicitation provisions. We hold that lost profits is the
correct measure of damages for a breach of these types of
contracts.
¶10 Under Utah law it is well established that
the injured party in a breach of contract
action has a right to damages based upon his
expectation interest as measured by “(a) the
loss in the value to him of the other party’s
performance caused by its failure or
deficiency, plus (b) any other loss,
including incidental or consequential loss,
caused by the breach, less (c) any cost or
other loss that he has avoided by not having
to perform.”
Ford v. Am. Express Fin. Advisors, Inc., 2004 UT 70, ¶ 39, 98
P.3d 15 (emphasis omitted) (quoting Restatement (Second) of
Contracts § 347 (1981)). The purpose of these damages is to
compensate the nonbreaching party “for actual injury sustained,
so that [the nonbreaching party] may be restored, as nearly as
possible, to the position [it] was in prior to the injury.”
Mahmood v. Ross (In re Estate of Ross), 1999 UT 104, ¶ 19, 990
P.2d 933 (internal quotation marks omitted).
¶11 In an employment context, it is not uncommon for an
employer to require an employee to sign a contract stating that
the employee will not compete with the employer, disclose private
information, or solicit the employer’s customers. We have held
that such covenants are enforceable as long as they are supported
by consideration, negotiated in good faith, necessary to protect
a company’s good will, and reasonably limited in time and
geographic area. Allen v. Rose Park Pharmacy, 237 P.2d 823, 828
(Utah 1951). When such a contract is breached, the injured party
will often seek an injunction to prevent irreparable harm. We
have held that such a remedy is appropriate. See Sys. Concepts,
Inc. v. Dixon, 669 P.2d 421 (Utah 1983).

5 No. 20070451
¶12 In addition to an injunction, employers may also seek
to recover actual damages. Because we have not had the occasion
to rule on the measure of such damages, we look to our sister
jurisdictions for guidance. In our survey of employment contract
breach jurisprudence, we have found that the general rule for
measuring damages is “the amount that the plaintiff lost by
reason of the breach, not the amount of profits made by the
defendant.” Trilogy Network Sys., Inc. v. Johnson, 172 P.3d
1119, 1121 (Idaho 2007); see also Nat’l Bank of Alaska v. J.B.L.
& K. of Alaska, Inc., 546 P.2d 579, 590 (Alaska 1976) (“The
measure for breach of a covenant not to compete is generally not
the profits earned by the breaching party, but rather the lost
profits of the party asserting the breach.”); Robert S. Weiss &
Assoc., Inc. v. Wiederlight, 546 A.2d 216, 226 (Conn. 1988) (“The
proper measure of damages for breach of a covenant not to compete
is the nonbreaching party’s losses rather than the breaching
party’s gains.”); Hopper v. All Pet Animal Clinic, Inc., 861 P.2d
531, 547 (Wyo. 1993) (“‘[L]ost profits are generally recognized
as a proper element for breach of a covenant not to compete.’”
(quoting In re Isbell, 27 B.R. 926, 930 (Bankr. W.D. Wis.
1983))). We accept the lost profits rule as our own because it
complements our current contract law precedent.
¶13 Our adoption of a lost profits standard, however, does
not prevent a nonbreaching party from examining a defendant’s
profits in an attempt to assess its own economic loss. We find
persuasive the Idaho Supreme Court’s analysis of the issue in
Trilogy. There, the district court found that Johnson, a former
employee of Trilogy, had breached a non-compete contract. In
arguing its damages, Trilogy did not offer evidence of its own
loss but instead relied solely upon Johnson’s gains. The supreme
court found that Trilogy “failed to offer into evidence any proof
of what its costs and profits would have been” and instead relied
on “conclusory statements that Johnson and Trilogy would have
made similar profits.” Trilogy, 172 P.3d at 1122. It then
upheld the district court’s decision not to award damages because
Trilogy “failed to take the measure of its damages out of the
realm of speculation.” Id.
¶14 The Idaho Supreme Court discussed the difficulties that
can arise when attempting to approximate damages. It stated,
The measure of damages for loss of profits is
rarely susceptible of accurate proof. . . .
Therefore, the law does not require accurate
proof with any degree of mathematical
certainty. . . . Damages need be proved only
with a reasonable certainty[,] and this means

No. 20070451 6
that [the] existence of damages must be taken
out of the realm of speculation. The mere
fact that it is difficult to arrive at [an]
exact amount of damages, where it is shown
that damages resulted, does not mean that
damages may not be awarded; it is for the
trier-of-fact to fix the amount.
Id. (alterations in original) (citations and internal quotation
marks omitted).
¶15 We agree and find that our own contract jurisprudence
supports this analysis. We have held that “[w]hile the standard
for determining the amount of damages is not so exacting as the
standard for proving the fact of damages, there still must be
evidence that rises above speculation and provides a reasonable,
even though not necessarily precise, estimate of damages.” Atkin
Wright & Miles v. Mountain State Tel. & Tel. Co., 709 P.2d 330,
336 (Utah 1985). “Plaintiff, of course, has the burden to
produce a sufficient evidentiary basis to establish the fact of
damages and to permit the trier of fact to determine with
reasonable certainty the amount of lost . . . profits.” Sawyers
v. FMA Leasing Co., 722 P.2d 773, 774 (Utah 1986).
¶16 The Trilogy court concluded that “[t]he profits
realized by the defendant may be considered by the trier-of-fact,
if shown to correspond with the loss of the plaintiff.” 172 P.3d
at 1121. In making this rule, the court looked to the earlier
Idaho Court of Appeals’ decision of Dunn v. Ward. There, the
court stated that “the profits which a defendant realized in
violation of his agreement may be considered, in evidence, if
shown to correspond, in whole or in part, with the loss of
plaintiff.” Dunn, 670 P.2d 59, 61 (Idaho Ct. App. 1983).
¶17 We find Idaho’s reasoning persuasive and adopt it as
our own. In doing so, we are in line with other states that
recognize the difficulty of calculating damages in these
situations and thus allow a plaintiff to use as evidence a
defendant’s gains. See K.W. Plastics v. U.S. Can Co., 131 F.
Supp. 2d 1265, 1269 (D. Ala. 2001) (noting that a court may
consider “the defendant’s subsequent profit from enjoyment of a
comparable opportunity”); Wirum & Cash, Architects v. Cash, 837
P.2d 692, 711 (Alaska 1992) (“[T]he breaching party’s profits can
be a reasonable basis for estimating plaintiff’s damages.”); N.
Pac. Lumber Co. v. Moore, 551 P.2d 431, 435-36 (Or. 1976)
(holding that defendant’s profits “are a reasonable basis for
estimating plaintiff’s damages”). We would caution, as was noted
by the court in Trilogy, that a plaintiff must do more than
merely state a defendant’s profits when claiming damages. There

7 No. 20070451
must be some correspondence between the two so that the claim of
damages is more than mere speculation. Thus, it is the loss
sustained by the plaintiff that provides the core measure of
damages for the breach of non-compete clauses. The gains enjoyed
by the breaching employee can be relevant to that damage inquiry,
but cannot alone support a damage award.
¶18 By holding that lost profits is the appropriate measure
of damages in suits concerning breaches of covenants not to
compete, disclose, or solicit, we are also holding that
restitution or unjust enrichment is not an appropriate
measurement in these actions. As we have stated previously,
restitution and unjust enrichment are remedies found in quantum
meruit. Emergency Physicians Integrated Care v. Salt Lake
County, 2007 UT 72, ¶ 10, 167 P.3d 1080. As tools of equity,
they are used only when no express contract is present. Am.
Towers Owners Ass’n v. CCI Mech., Inc., 930 P.2d 1182, 1193 (Utah
1996); see also Davies v. Olson, 746 P.2d 264, 268-70 (Utah Ct.
App. 1987) (discussing quantum meruit as a tool to be used in
equity actions).
¶19 Additionally, as a policy matter, we do not wish to
adopt a remedy for breach of contract that punishes the breaching
party. Rather, our focus is on placing “the non-breaching party
in as good a position as if the contract had been performed.”
Anesthesiologists Assocs. v. St. Benedict’s Hosp., 884 P.2d 1236,
1238 (Utah 1994) (internal quotation marks omitted). Contract
law is amoral and, therefore, appropriate in a business setting
in which efficiency is valued. See Marcus, Stowell & Beye Gov’t
Secs., Inc. v. Jefferson Inv. Corp., 797 F.2d 227, 232 (5th Cir.
1986) (discussing the appropriateness of efficient breaches of
contract); Lake River Corp. v. Carborundum Co., 769 F.2d 1284,
1289 (7th Cir. 1985) (discussing how efficient breaches are
socially beneficial since both parties are either in the same or
better position than they would have been if the contract had
been performed). We have also held that punitive damages for
breach of contract, by themselves, are inappropriate “even if
intentional and unjustified.” Hal Taylor Assocs. v.
Unionamerica, Inc., 657 P.2d 743, 750 (Utah 1982). “[S]uch
damages are [only] allowable if there is some independent tort
indicating malice, fraud or wanton disregard for the rights of
others.” Id. Thus, we confirm our earlier holdings that any
measure of damages that punishes a breaching party is
inappropriate.
¶20 In sum, our answer to the first question is that when a
former employee breaches contractual non-competition, non-
disclosure, and employee non-solicitation provisions, the
appropriate measure of damages is the plaintiff’s lost profits.

No. 20070451 8
II. LOST PROFITS IS THE APPROPRIATE MEASURE OF DAMAGES FOR
TORTIOUS INTERFERENCE WITH CONTRACTUAL AND ECONOMIC RELATIONS
¶21 The second question the federal district court has
asked us to address is whether Utah law recognizes an unjust
enrichment measure of damages for tortious interference with a
competitor’s contractual and economic relations. In answering
this question, we narrow our analysis to pecuniary losses and not
injuries to reputation or mental anguish.
¶22 We begin our analysis by recognizing that the Utah
Court of Appeals adopted section 774A of the Restatement (Second)
of Torts, which defines the measure of damages for tortious
interference with a contract. See Sampson v. Richins, 770 P.2d
998, 1006-07 (Utah Ct. App. 1989). Section 774A states,
(1) One who is liable to another for
interference with a contract or prospective
contractual relation is liable for damages
for
(a) the pecuniary loss of the benefits
of the contract or the prospective
relation;
(b) consequential losses for which the
interference is a legal cause; and
(c) emotional distress or actual harm to
reputation, if they are reasonably to be
expected to result from the
interference.
Restatement (Second) of Torts § 774A (1979). We also recognize
that many courts in other jurisdictions have adopted section 774A
or similar rules. See Kforce, Inc. v. Surrex Solutions Corp.,
436 F.3d 981, 984 (8th Cir. 2006) (“The damages recoverable for
intentional interference are: the pecuniary loss of the benefits
of the contract; consequential losses for which the interference
is the legal cause; and, emotional distress or actual harm to
reputation if they are reasonably expected to result from the
interference.”); Marcus, Stowell & Beye Gov’t Secs., v. Jefferson
Inv. Corp., 797 F.2d 227, 231-32 (5th Cir. 1986) (holding that
lost profits is the measure of damages in tortious interference
and breach of contract); Rite Aid Corp. v. Lake Shore Investors,
471 A.2d 735, 741 (Md. Ct. App. 1984) (adopting section 774A);
see also Nora v. Safeco Ins. Co., 577 P.2d 347 (Idaho 1979)
(“[I]n cases of tortious interference with an established
business[,] . . . damages for loss of anticipated earnings or
profits must be shown with reasonable certainty.” (internal
quotation marks omitted)). We find the reasoning of these courts

9 No. 20070451
persuasive and hold that looking to the plaintiff’s losses is the
appropriate method of measuring damages in cases of tortious
interference with contractual and economic relations.
¶23 We find especially instructive the analysis in American
Air Filter Co. v. McNichol, 527 F.2d 1297 (3d Cir. 1975). The
Third Circuit held that where “there are no injuries alleged
other than pecuniary losses . . . the measure of damages for
interference with contractual relations will be identical to that
for breach of contract.” Id. at 1300. In that case, Michael
McNichol left American Air Filter to work for John F. Scanlan,
Inc., a direct competitor of American. Because McNichol had
signed a non-compete contract with American, American sued
Scanlan for tortious interference. The court refused to adopt
American’s argument that its damages should be measured by “an
accounting for profits earned by Scanlan from sales by McNichol.”
Id. The court stated that “[a]n accounting is an essentially
equitable remedy . . . [and] has not served as a substitute for
legal damages.” Id. The court then went on to say,
The basic failing of the plaintiff’s theory
is that the defendant’s profits are not
necessarily equivalent to the plaintiff’s
losses. The defendant’s profit margin may be
higher than plaintiff’s for any number of
reasons--e.g., product more efficiently made
or distributed. To compel defendant to
disgorge these profits could give plaintiff a
windfall and penalize the defendant, neither
of which serves the purpose of contract
damages.
Id.
¶24 By holding that purely pecuniary losses from tortious
interference are measured by the same standard as breach of
contract, we need only look to the Trilogy standard that we
adopted above for contract damages. The measure of damages,
therefore, is the plaintiff’s lost profits. Because proving lost
profits can be difficult, there may be times, as we discussed
above, when it is appropriate to look to the defendant’s gains if
such gains can be “shown to correspond with the loss of
plaintiff.” Trilogy Network Sys., Inc. v. Johnson, 172 P.3d
1119, 1121 (Idaho 2007).
¶25 We therefore reject TruGreen’s argument for unjust
enrichment damages in tortious interference with contract cases.
Thus, we also reject TruGreen’s reliance on National
Merchandising Corp. v. Leydon, 348 N.E.2d 771 (Mass. 1976). In

No. 20070451 10
Leydon, the court held that unjust enrichment might be a proper
remedy for tortious interference cases. It justified this
position in part
because an intending tortfeasor should not be
prompted to speculate that his profits might
exceed the injured party’s losses, thus
encouraging commission of the tort. Nor
should such a defendant be heard to say that
the unjust enrichment remedy is unfairly
“punitive” because the plaintiff may recover
more than his exact loss, when use of a tort
measure might allow the defendant to retain
some part of his ill gotten gains.
Id. at 776.
¶26 We are persuaded by the efficient breach arguments
discussed above. When an efficient breach occurs, a breaching
party may retain its profits in excess of a plaintiff’s losses as
long as the plaintiff is made whole. As was stated in Lake River
Corp. v. Carborundum Co., 769 F.2d 1284, 1289 (7th Cir. 1985),
such a standard is beneficial to both parties because the
nonbreaching party receives what it bargained for and the
breaching party is able to retain its profits made through its
more efficient business practices. In the realm of tortious
interference with contract or economic relations, “[i]t would be
inconsistent to require the party inducing the breach to disgorge
its excess profits while permitting the breaching party to retain
its excess profits.” Marcus, Stowell & Beye Gov’t Secs., 797
F.2d at 232.
¶27 In sum, we hold that the plaintiff’s lost profits is
the appropriate measure of damages for tortious interference with
a competitor’s contractual and economic relations. We recognize,
however, that lost profits may be difficult to ascertain and
therefore allow for the examination of a defendant’s gains when
there is a sufficient correspondence between them. We explicitly
state, however, that we are ruling on pecuniary losses and not
injury to reputation or mental suffering.
CONCLUSION
¶28 In response to the federal district court’s certified
questions, we first hold that when a former employee breaches
contractual non-competition, non-disclosure, and employee non-
solicitation provisions, the appropriate measure of damages is
the plaintiff’s lost profits. Second, we hold that the
plaintiff’s lost profits is also the appropriate measure of

11 No. 20070451
damages for pecuniary injuries from tortious interference with a
competitor’s contractual and economic relations.
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¶29 Chief Justice Durham, Associate Chief Justice Durrant,
Justice Wilkins, and Justice Parrish concur in Justice Nehring’s
opinion.