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Pope v. Rosenberg

Supreme Court of Wyoming

November 12, 2015

DAVID A. POPE, CPA LLC and DAVID A. POPE, individually, Appellants (Petitioners),
MARY C. ROSENBERG, Appellee (Respondent)

Page 825

Appeal from the District Court of Fremont County. The Honorable Marvin L. Tyler, Judge.

For Appellants: Jeffrey S. Pope, Attorney at Law, Cheyenne Wyoming.

For Appellee: Joel M. Vincent of Vincent & Vincent, Riverton, Wyoming.

Before BURKE, C.J., and HILL, KITE[*], DAVIS, and FOX, JJ. DAVIS, J., delivers the opinion of the Court; FOX, J., files a dissenting opinion, in which KITE, J. (Ret.), joins.


Page 826

DAVIS, Justice.

[¶1] Mary C. Rosenberg executed a non-compete agreement restricting her ability to compete with the accounting firm she sold to David A. Pope, CPA PC. Before the expiration of the non-compete agreement, Ms. Rosenberg secured employment with a former client as an office manager. Mr. Pope alleged that this was a violation of the non-compete agreement and stopped payments on a promissory note which was part of the parties' purchase agreement. Ms. Rosenberg brought suit alleging breach of contract and requesting that the district court declare that she had not violated the non-compete agreement. On cross-motions for summary judgment, the district court determined that Ms. Rosenberg had not violated the non-compete agreement and further found that Mr. Pope breached the terms of the promissory note and guarantee by stopping payment. We affirm.


[¶2] The sole issue on appeal is whether the district court erred when it found Ms. Rosenberg had not violated the non-compete agreement.[1]


[¶3] The facts of this case are generally undisputed, although they are perhaps not entirely clear in certain respects. James D. Soumas and Ms. Rosenberg were partners in the accounting firm of Soumas and Rosenberg, P.C. (S& R), which operated in Riverton, Wyoming for many years. On April 22, 2004, Mr. Soumas and Ms. Rosenberg signed an Offer for Purchase and Sale of Assets, Earnest Money Receipt and Purchase Agreement (Purchase Agreement), which governed the sale of the business to David A. Pope, CPA PC.[2] The total purchase price was $350,000, with all but $70,000 to be paid by closing. On June 30, 2004, Mr. Pope signed a $19,000 promissory note naming Rosenberg as Lender (as assigned by S& R)[3] and David A. Pope, CPA, LLC as the Borrower (as assigned from David A. Pope, CPA PC).[4] Mr. Pope personally guaranteed the " performance and timely payment of the above promissory note." The district court determined that the Purchase Agreement and promissory note formed a single contract with each incorporating the other.[5]

[¶4] The Purchase Agreement allocated the $350,000 to specific components of the

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assets purchased, assigning $160,000 to good will and $15,000 to a non-compete agreement precluding Mr. Soumas and Ms. Rosenberg from competing with the business for a number of years following the sale.[6] The non-compete agreement states:

12. Covenant Not to Compete and Limited Covenant Not to Compete: For a period of five (5) consecutive years from the closing date, the seller (including its present Partners, Principals, Members, or Shareholders) agrees to not directly nor indirectly:
A. Compete with the buyer or engage in the practice of public accounting within 100 miles of the present location of the practice purchased;
B. Aid or assist anyone else, except buyer, to do so within these limits;
C. Solicit in any manner or provide any public accounting services for any past or present clients or solicit or hire any employees of the practice;
D. Have any interest in a public accounting practice within these limits;
E. Request or advise any present or future clients to withdraw or cancel its business with the buyer.
For a period of five (5) consecutive years from the end of the Covenant Not to Compete, there shall be in effect a Limited Covenant Not to Compete. During this period, Seller (including its present Partners, Principals, Members, or Shareholders) shall pay to buyer within 30 days of receipt, 25% of his or her gross receipts from the practice of public accounting within the limits outlined above, but only those receipts derived from providing public accounting services to clients that Buyer has provided services during the term of the first Covenant Not to Compete. Payments by Seller to Buyer under this provision will cease 30 days after the tenth anniversary of the date of closing for all amounts due through the tenth anniversary of the date of closing.
Nothing contained herein is intended to prohibit the seller from employment as a controller, bookkeeper, CFO, Treasurer, or similar function with a private company or government entity, so long as it is not a client of the practice.
. . . Each partner, Principal, Member or Shareholder, by signing this agreement, accepts and agrees to be bound by this covenant not to compete and this limited covenant not to compete.

(Emphasis added). The agreement thus prohibited certain forms of competition for a total of ten years.

[¶5] Rosenberg worked for Pope after the sale until November 2005, when she left and took a job with Wyoming Senior Citizens, Inc. In that position, she was not required to perform any accounting services, and she therefore placed her CPA permit on inactive status, and then upon reaching the age of 55, she placed her permit on retired status, which she was entitled to do if not engaged in activities that required a CPA license. Rosenberg continued to work for Wyoming Senior Citizen's, Inc. until the summer of 2008, when she applied for and was awarded the position of office manager for the Fremont County Fire Protection District (District).

[¶6] The District was one of S& R's most lucrative clients at the time of the sale. It continued to retain Pope's services for three years afterward, but terminated the relationship in June 2007. The record tells us little about the reason that the District chose another accountant. However, there is nothing in the record which would suggest that either Rosenberg or Soumas had anything to do with that decision.[7] Rosenberg described her limited contact before the District changed accounting firms. She attested by affidavit that on one occasion in 2006, its office manager contacted her to ask questions about how she had prepared the District's budget when she was with the accounting firm. She answered the questions, but

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also suggested that they meet with the Pope employee who had replaced her. At the meeting, she explained how she had approached the budget in the past. She did not charge either the District or Pope for her time. She had no other contact with the District after leaving Pope until she applied for the office manager position.

[¶7] The District retained another accounting firm to provide the services previously rendered by S& R and then Pope. Still another accounting firm audited the District's financial records before and after the sale and the District's change of accountants.

[¶8] About a year after the District changed accounting firms, it advertised for a new office manager. Rosenberg applied and was hired. She was asked to perform certain accounting services for the District's manager in her role as office manager, including preparing the annual budget and preparing for the annual audit.

[¶9] Rosenberg attested by affidavit that she consulted with the Director of the Wyoming Board of Certified Accountants, who advised her that she could not keep her license on inactive status if she performed any functions that might fall within the broad definition of the practice of accounting.[8] She either had to return it to active status, or surrender it.

[¶10] Rosenberg was inclined to surrender her license, as she was not required to be a CPA to be the District's office manager. However, the District and the accounting firm which had replaced Pope felt that a CPA license would add credibility to the various state and federal reports she had to prepare, and the District agreed to pay the fee for the license and Rosenberg's continuing CPA education. Rosenberg therefore reactivated her license.

[¶11] Mr. Pope learned of Ms. Rosenberg's employment by the District and informed her that he believed this to be a violation of the non-compete agreement. They exchanged letters stating their respective positions, but were unable to come to a compromise. The default and remedies provision in the Purchase Agreement provides that: " In the case of Seller breach, Buyer may immediately cease performance and avail itself of any and all remedies available hereunder or at law or equity for such breach or default, including Buyer's right to damages and specific performance." Mr. Pope stopped making payments on the promissory note based on that provision, claiming that Rosenberg ...

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