Antitrust Law Daily Wrap Up, ANTITRUST—Ky. Ct. App.: Raising rule of reason post granting of summary judgment doomed appeal, (Sep 24, 2024)

By Martin A. Steinberg, J.D.

Appellant argued that competitor breached agreement not to open a car wash in Appellant’s territory.

A Kentucky appellate court affirmed dismissal of claims filed by Chris Harrison d/b/a Speedwash Car Washes (Appellant) alleging that three members of the Rather family and their businesses violated an agreement not to establish car washes in areas where Speedwash already operated. The appellate court rejected Appellant’s argument that the trial court erred by failing to apply the “rule of reason” analysis to the Sherman Act claims. The court held that the rule of reason argument was not reviewable because it was raised after summary judgment was granted (Harrison v. Rather, No. 2023-CA-1357-MR (Ky. Ct. App. Sept. 20, 2024)).

Speedwash owns and operates several car washes in Bowling Green, Louisville, and Somerset, Kentucky. In 2016, Robert Rather sought Appellant’s help in locating markets in Florida where Rather, his brother, and their father could establish car washes. Appellant agreed to help the Appellees enter the car wash business in Florida, and allegedly agreed to do so only on the condition that the Appellees agreed not to establish car washes where Appellant was already established. Appellees, however, were unable find a suitable location in Florida.

Appellant then assisted the Appellees in finding three locations in Frankfort, Kentucky. Those car washes were constructed and began operating. Appellant characterized himself as a distributor to them, having provided them operating systems, handbooks, and training manuals.

Sometime thereafter, Appellant learned that the Appellees were planning to operate car washes in Bowling Green, Kentucky, which Appellant viewed as a violation of their agreement. Appellant then filed the instant action against Appellees and their associated entities to halt their plans. The complaint was later amended to include the Appellees’ business partner, Timothy Hogue, and set out claims of breach of agreement, violation of the KUTSA, and tortious interference.

The amended complaint sought a declaratory judgment and injunctive relief. It asserted that, 1) there was an enforceable agreement that Appellees would not operate car washes in the same locations; 2) that Appellees individually or jointly breached the agreement by way of their intent to operate car washes in those areas; 3) that Appellees intended to use Appellant’s proprietary information, which constituted a misappropriation of Appellant’s trade secrets in violation of KUTSA (Kentucky Revised Statutes 365.880 – KRS 365.990); 4) that Appellant was entitled to injunctive relief; and, 5) a claim of tortious interference. The amended complaint focused on an email exchange, which Appellant argued was a binding and enforceable non-compete contract.

After a hearing, the trial court entered an order temporarily enjoining Appellee Robert Rather from constructing a car wash in Warren County, Kentucky. Appellees subsequently moved for summary judgment seeking dismissal of all claims. The trial court determined that it did not have to consider whether the email exchange at issue constituted a binding contract If the email exchange constituted a binding contract, it was void as an unlawful restraint on trade in violation of the Sherman Act. Conversely, if the email exchange was not a binding contract, then there was nothing to enforce, and the matter was moot.

Rule of reason argument. Appellant’s rule of reason argument was not reviewable on appeal because Appellant only raised the argument after the July 20, 2023, final judgment. A basic general principle of the Rules of Civil Procedure is that a party is not entitled to raise an error on appeal if he has not called the error to the attention of the trial court and given that court an opportunity to correct it.

The trial court’s order granting summary judgment stated that the court “agrees that the Defendants are entitled to judgment as a matter of law on all counts because the email exchange, as either an alleged contract or non-compete [agreement] constitutes an unlawful restraint of trade in violation of the Sherman Act.” Because Civil Rules of Procedure CR 54.01 employs disjunctive “or” language (“adjudicating all the rights of all the parties... or a judgment made final under Rule 54.02”), the court did not need to consider whether the judgment was made final and appealable under CR 54.02.3. The requirement that the judgment state that it is a final judgment and there is no just reason for delay applies only to a judgment adjudicating fewer than all claims or against fewer than all parties. CR 54.02(1). This requirement did not apply to the July 20, 2023, order granting summary judgment because it disposed of all claims against all parties.

Uniform Trade Secrets Act. The court held that the trial court’s findings and conclusions were supported by the record and the law. In disposing of Appellant’s trade secrets claim, the trial court found that Appellant “admits he voluntarily disclosed information to Robert Rather and there is no showing of misappropriation which is fatal to a claim under the Act.” The court also determined that because such voluntary disclosures were made in 2016 or 2017, and the three-year filing period closed no later than 2020 per KRS 365.890, Appellant’s February 15, 2021, complaint was not timely.

Motion to amend. Lastly, Appellant argued that the trial court erred in failing to grant his CR 59.05 motion to alter, amend, or vacate the summary judgment. However, an order denying a CR 59.05 motion to alter, amend, or vacate is interlocutory and not appealable.

Concurring opinion. One of the judges on the panel did not necessarily agree with the majority that Appellant failed to preserve the “rule of reason” argument. Regardless, the judge agreed with the majority affirming the trial court. In an effort to escape the per se rule, Appellant asserted that his agreement with Appellees was a “vertical agreement” as he was a distributor not merely a competitor. To this end, Appellant asserted that he sold Appellees some equipment, and that he characterized himself as a “distributor” during his deposition. Appellant’s unilateral characterization of his business relationship to Appellees was not dispositive.

The Case is No. 2023-CA-1357-MR.

Judge: Thompson, L.

Attorneys: David F. Broderick (Broderick & Davenport, PLLC) for Chris Harrison d/b/a Speedwash Car Washes. Eric A. Hamilton (Coleman, Lochmiller & Bond) for Robert Rather, RHR Development, LLC, Manage My Wash, LLC, Fred BG Fairview, LLC and Fred BG Gary Farms, LLC.

Companies: Speedwash Car Washes; RHR Development, LLC; Manage My Wash, LLC; Fred BG Fairview, LLC; Fred BG Gary Farms, LLC

Cases: Antitrust KentuckyNews