Toro Company, The v. Sutterlin

Background

Steve Sutterlin and Tim Angel worked for The Toro Company selling zero-turn Spartan Mowers. After Toro purchased Intimidator, LLC, Sutterlin signed a Confidentiality, Invention, and Non-Compete Agreement and received a $6,000 bonus. Angel’s agreement was a condition of his employment, and the opinion states that Angel did not receive a bonus because he was being hired as a new employee.

The agreements barred Sutterlin and Angel from using or disclosing Toro’s confidential information, including customer and dealer information. They also contained one-year non-compete and non-solicitation restrictions covering certain geographic areas and customers, vendors, and suppliers with whom they had business-related contact during their last three years of employment. The agreements further prohibited intentional interference with Toro’s business relationships and attempts to employ Toro employees. Claims arising from the agreements were subject to Arkansas law and were to be litigated exclusively in Minnesota.

Sutterlin and Angel resigned on August 25, 2023, and immediately began working for Yakta, Inc., doing business as Yakta Mowers. Toro alleged that, while still employed, the two planned to have one another solicit their former dealers for Yakta, contacted dealers, and transferred Toro dealer information to personal accounts. Toro also alleged that Sutterlin sent a copy of his agreement to Yakta and that Yakta knew about the agreements and encouraged or allowed the alleged dealer solicitation.

Toro asserted breach-of-contract and breach-of-duty-of-loyalty claims against Sutterlin and Angel, and a claim for tortious interference with a contractual relationship against Yakta. Toro sought a temporary restraining order or preliminary injunction. The defendants moved to dismiss.

Motion to Dismiss

The defendants argued that the court lacked subject-matter jurisdiction because Toro had not shown that the amount in controversy exceeded $75,000. The court rejected that argument. Toro alleged that Sutterlin’s sales to Dealers A, B, and C totaled more than $2.4 million during his last three years with Toro, and that Angel’s sales to Dealers D, E, F, and G totaled more than $4.444 million. Because Toro alleged that those dealers were now Yakta dealers as a result of the alleged agreement violations, the court concluded that the employees’ past performance with those dealers could reasonably estimate the value of Toro’s claims. The defendants had not established to a legal certainty that the claims were worth less than $75,000. The motion to dismiss for lack of subject-matter jurisdiction was therefore denied.

The defendants also argued that the court lacked personal jurisdiction over Yakta. Toro relied on the agreements’ Minnesota forum-selection clauses and argued that Yakta was closely related to the dispute and had therefore implicitly consented to jurisdiction. The court declined to apply that doctrine. It emphasized that Yakta was not a shareholder, officer, or director of Toro, was not a voluntary plaintiff, had not negotiated the agreements, had not benefited from them, and had no legal relationship with the parties when the agreements were negotiated. The court also noted that Yakta had no minimum contacts with Minnesota, which Toro did not dispute. The court concluded that it lacked personal jurisdiction over Yakta.

Because it dismissed Yakta for lack of personal jurisdiction, the court did not decide whether Toro had adequately stated its claim against Yakta. The court granted the motion to dismiss Yakta for lack of personal jurisdiction, dismissed Toro’s claim against Yakta without prejudice, and denied as moot the request to dismiss that claim for failure to state a claim. Yakta was terminated as a defendant.

Preliminary Injunction

The court applied the four-factor test for preliminary injunctive relief: irreparable harm, the balance of harms, the likelihood of success on the merits, and the public interest.

The court found sufficient evidence of irreparable harm. Toro presented evidence that Sutterlin and Angel contacted dealers while still working for Toro and that their text messages described a plan to arrange indirect solicitation of their former dealers. Dealers A through G were listed as Yakta dealers. The court concluded that the evidence was enough to show irreparable harm from solicitation in violation of the agreements.

The court also concluded that Toro was likely to succeed on its claims against Sutterlin and Angel. It found that Toro had likely shown breaches of the duty of loyalty and the agreements, based on the alleged efforts to sell Yakta mowers to Toro dealers while still employed and the plan to have Sutterlin and Angel solicit one another’s former dealers. The court also considered evidence that Sutterlin contacted a Toro sales employee about obtaining remote work for her at Yakta.

The defendants argued that the agreements were invalid because they were contracts of adhesion, lacked adequate consideration, or unlawfully eliminated competition. The court did not find those arguments persuasive on the current record. It noted Sutterlin’s $6,000 bonus, Angel’s agreement being a condition of employment, and the agreements’ limits to specified geographic regions and dealers. The defendants had not shown at that stage that they were likely to prove the agreements invalid.

Toro asked the court to prohibit Sutterlin and Angel from continuing to work at Yakta. The court found that request too broad. Instead, during the action, Sutterlin and Angel were prohibited from working directly or indirectly with Dealers A, B, C, D, E, F, and G. They were also ordered to comply with their non-compete agreements, and Angel was required to certify to Toro that he had permanently deleted the spreadsheets sent to his personal email. The court concluded that the public interest supported this limited injunction.

Under the federal rule governing injunction bonds, Toro was required to provide security for costs and damages if the injunction were later found wrongful. The court set the bond at $150,000. The preliminary injunction would take effect when Toro filed that bond.

Disposition

Judge Donovan W. Frank granted in part and denied in part the defendants’ motion to dismiss. He denied dismissal for lack of subject-matter jurisdiction, granted dismissal of Yakta for lack of personal jurisdiction, dismissed Toro’s claim against Yakta without prejudice, and denied as moot the request to dismiss that claim for failure to state a claim.

Judge Frank also granted in part and denied in part Toro’s motion for a temporary restraining order or preliminary injunction. The order imposed the dealer-contact restrictions, required compliance with the non-compete agreements, required Angel’s deletion certification, and required Toro to file a $150,000 bond. The order also directed the parties to contact Magistrate Judge Wright’s chambers within 10 days regarding discovery or scheduling issues.