Labor & Employment Law Daily Wrap Up, CONTRACT CLAIMS—8th Cir.: Preliminary injunction to enforce restrictive covenants in employment agreement denied where term of agreement had expired, (Jun 2, 2025)

By Nicholas Kaster, J.D.

Key to the Eighth Circuit’s analysis in this case was the difference between the “term of employment” and the “term of the employment agreement.”

A preliminary injunction to enforce restrictive covenants in an employment agreement was denied because the term of the employment agreement had expired, ruled the Eighth Circuit, affirming the holding of a district court. The agreement did not contain a survival clause or any language to suggest the parties intended for the restrictive covenants to survive past the termination of the agreement. Accordingly, the district court’s denial of a preliminary injunction was affirmed. Judge Loken filed a separate concurring opinion (Wilbur-Ellis Company, LLC v. Jens, Nos. 23-3610 and 23-3749 (8th Cir. May 30, 2025)).

Employment agreement. In 2007, Wilbur-Ellis Air, LLC, purchased Krech Dakota Airspray, Inc., in which the employee was a minority owner and employee. As part of the acquisition, the employee and Wilbur-Ellis entered into an employment agreement. The agreement set an approximately three-year term of employment that would “continue through February 28, 2010.” Thereafter, the employee’s employment would “continue at will” and could be terminated upon written notice by either party.

The agreement contained a non-competition and non-solicitation provision (restrictive covenants), as well as a confidentiality and nondisclosure provision. Under these provisions, the employee agreed he would “not, at any time for a period of three (3) years following the date his employment is terminated, for whatever reason (the ‘Restriction Period’), directly or indirectly”: (a) engage in any business engaged in the marketing, distribution, sale or application of agricultural chemicals, fertilizers, seed and related products within 100 miles of the area served by Dakota Airspray; (b) solicit or divert or accept business from any customer of Wilbur-Ellis Air, LLC; or (c) solicit the employment of any person employed by Wilbur-Ellis Air, LLC, or its affiliates or subsidiaries.

Expiration of agreement. More than sixteen years later in June 2023, the employee resigned from Wilbur-Ellis. He then began working for a competitor, J.R. Simplot Company. Wilbur-Ellis then sued the employee and Simplot and sought a preliminary injunction to enforce the restrictive covenants in the employee’s employment agreement with Wilbur-Ellis and to prevent Simplot’s tortious interference with his employment agreement.

A federal district court for South Dakota denied the motion, determining Wilbur-Ellis was unlikely to prevail on the merits of the breach of contract claim against the employee because the restrictive covenants did not survive past the employment agreement’s expiration on February 28, 2010. Wilbur-Ellis appealed the district court’s holding.

Preliminary injunction. A preliminary injunction’s primary function is to preserve the status quo until a court may grant full relief upon a final hearing. The following factors are considered when reviewing whether a district court should have granted a preliminary injunction: (1) the threat of irreparable harm to the movant; (2) the balance between this harm and the injury that granting the injunction will inflict on other parties; (3) the probability the movant will succeed on the merits; and (4) the public interest. No factor is determinative, but the movant’s probability of success is the most significant. For this factor, the movant must show that it has at least a “fair chance of prevailing” on the merits.

Under South Dakota law, the court “must give effect to the intention of the contracting parties” when interpreting a contract and its terms. To determine intent, the court looks to the language that the parties used in the contract. In order to ascertain the terms and conditions of a contract, the court must examine the contract as a whole and give words their “plain and ordinary meaning.”

Term of employment agreement. Key to the Eighth Circuit’s analysis in this case was the difference between the “term of employment” and the “term of the employment agreement.” When an employment agreement terminates, the appeals court noted, a covenant to compete within the employment agreement generally becomes inoperable and unenforceable unless there is additional language in the contract to suggest the parties intended for the non-compete provision to survive past the term of employment. Even where by its terms, the non-compete provision survived the termination of the employee’s “employment,” the provision must still separately survive the termination of the employment agreement.

The agreement here, in Section Two, provides that: “The employment term shall commence on [March 16, 2007] and, unless otherwise terminated, shall continue through February 28, 2010. Thereafter, the employment of the Employee by the Employer shall continue at will and shall terminate upon written notice of such termination given by either party....” Wilbur-Ellis argued that this language suggested the term of employment requiring good cause for removal would last until February 28, 2010, not that the agreement itself expired at that time. However, the Eighth Circuit, like the federal district court, was not convinced.

When read within the context of the entire agreement, the appeals court stated, the “term” discussed in Section Two also established the term of the agreement, not only the term of employment subject to removal for cause. Section Eight, governing the bonus program, states that the employee was eligible for an annual bonus of up to $10,000 until 2009, “[s]ubject to Employee’s continued employment with Employer as of the last day of a calendar year during the term of this Agreement.” Further, Section Ten discussing other benefits and Section Eleven discussing confidentiality, also reference “the term of this Agreement.” These provisions, said the appeals court, suggested that the agreement had a term, which would naturally be set forth in Section Two entitled “Term.” By its plain meaning, Section Two intended the term of the agreement to be from March 16, 2007, to February 28, 2010, the Eighth Circuit concluded.

The agreement does not contain a survival clause or any language to suggest the parties intended for the restrictive covenants to survive past the termination of the agreement. The restrictive covenants therefore became inoperable after February 28, 2010, the Eight Circuit determined. The district court was therefore correct in determining Wilbur-Ellis was unlikely to succeed on the merits of the case, which is the most significant factor in determining whether to issue a preliminary injunction.

Accordingly, the Eight Circuit concluded that the district court did not abuse its discretion in denying Wilbur-Ellis’s motion for a preliminary injunction. The district court’s denial of the preliminary injunction was therefore affirmed.

Concurrence. In a concurring opinion, Judge Loken agreed with the court that the district court properly concluded that the employer failed to show “a fair chance of prevailing” on the merits of its breach of contract claim against the employee because the restrictive covenants it sought to enforce under South Dakota law were not enforceable when the employee resigned. But in his view, the court’s discussion of South Dakota contract law was incomplete. Here, the merits of the parties’ complex tort and contract claims were far from resolved. Loken was concerned that flawed law may be applied in resolving the merits unless more is said on this question.

The case is Nos. 23-3610 and 23-3749.

Judge: Grasz, L.

Attorneys: Michelle A. Christy (Littler Mendelson P.C.) for Wilbur-Ellis Co., LLC. Janell K. Broekemier (Goosmann Law Firm, PLC) for Brett Jens.

Companies: Wilbur-Ellis Co., LLC

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