23 LTD, d/b/a Bradsby Group, a Colorado corporation, Plaintiff-Appellant and Cross-Appellee,
Tracy Herman, Defendant-Appellee and Cross-Appellant.
and County of Denver District Court No. 14CV34518. Honorable
J. Eric Elliff, Judge.
Sherman & Howard, L.L.C., Tamir I. Goldstein, William R.
Reed, Denver, Colorado, for Plaintiff-Appellant and
McElroy, Deutsch, Mulvaney & Carpenter, LLP, Kristi L.
Blumhardt, Lily Ramirez, Englewood, Colorado, for
Defendant-Appellee and Cross-Appellant.
Judges: Opinion by JUDGE BERGER. Dunn and
Navarro, JJ., concur.
[¶ 1] This case presents an employment law issue of
first impression in Colorado -- when, if ever, is a court
required to blue pencil a noncompete or
nonsolicitation agreement to conform it to
[¶ 2] 23 LTD, d/b/a Bradsby Group (Bradsby),
sued former employee Tracy Herman for breach of noncompete
and nonsolicitation provisions in her employment agreement. A
jury determined that Herman had not breached the noncompete
provision. The jury returned a verdict (and awarded nominal
damages of one dollar) in favor of Bradsby on the
nonsolicitation claim, but the district court set aside that
verdict and entered judgment in favor of Herman because the
nonsolicitation provision violates Colorado law and because
the court declined to narrow the provision to render it
enforceable. Despite entering judgment in favor of Herman on
both claims, the court denied her request for attorney fees
under the agreement's fee-shifting provision. Bradsby
appeals the merits judgment, and Herman cross-appeals the
denial of attorney fees.
[¶ 3] We conclude that the record supports
the jury's verdict on the noncompete claim and that the
court did not err or abuse its discretion in declining to
blue pencil the nonsolicitation provision. Thus, we affirm
the court's merits judgment. We also conclude that Herman
is entitled to attorney fees because she prevailed on both
breach of contract claims, and we therefore reverse the
court's order denying attorney fees and remand with
Relevant Facts and Procedural History
[¶ 4] Bradsby hired Herman in 2009 as a
legal recruiter. When she was hired, she signed an Account
Executive Employment Agreement that included noncompete and
nonsolicitation provisions (agreement). The noncompete
provision states, in relevant part:
Upon termination of his/her employment with Bradsby, Account
Executive . . . shall not . . . within the Restricted Area
from a period of twelve (12) months from the date of
termination of employment become an owner, partner, investor,
or shareholder in any entity that competes with Bradsby
without prior written consent of Bradsby . . . .
[¶ 5] The agreement defines the "
Restricted Area" as any place " within 30 miles of
Bradsby's principal place of business," which is in
[¶ 6] The nonsolicitation provision states,
in pertinent part:
Upon termination of his/her employment with Bradsby, Account
Executive . . . shall not within the Restricted Area, for a
period of twelve (12) months from the date of termination of
employment, contact or solicit the business of any person,
entity, applicant, client, employer or prospective employer
who Bradsby has contacted or solicited during the twelve (12)
months prior to the Account Executive's termination . . .
[¶ 7] The agreement also includes provisions
prohibiting Herman from disclosing Bradsby's confidential
information or using it for her own benefit (the
confidentiality provisions) without the prior written consent
[¶ 8] While employed by Bradsby, Herman worked with
one of Bradsby's clients, the law firm Vranesh and
Raisch, LLP, to fill various hiring needs. She also worked
with a lawyer applicant to help him find a job. Her efforts
included setting up an interview with Vranesh. Vranesh
offered the applicant a job in 2012, but the applicant
declined the offer.
[¶ 9] For reasons not relevant to our
analysis, Bradsby terminated Herman's employment in 2014.
At termination, Bradsby reminded Herman of her noncompete and
nonsolicitation obligations. Herman sought clarification as
to the scope of those obligations and requested that the
Restricted Area be reduced from a thirty-mile radius to a
twenty-eight mile radius (Herman's home at the time was
twenty-eight miles from Bradsby's main office). Bradsby
refused to modify the terms of the agreement.
[¶ 10] Not long after, Herman formed
Touchstone Legal Resources, LLC. She obtained a mailbox at a
UPS store in Monument, Colorado -- outside the Restricted
Area -- and listed this as the new company's address in
its organizational documents (though she later testified that
she did non-recruiting work for Touchstone from her home). At
trial, she described Touchstone's business as " 10
percent" recruiting and " 90 percent"
everything else, including law firm succession planning.
[¶ 11] After starting her new business, she
reached out to the prior applicant to see if anyone in his
network would be interested in an open position with the City
of Fort Collins (the applicant had significantly more
experience than the position required).
[¶ 12] The applicant then inquired whether
Vranesh still had a position open. As a result of this
inquiry, Vranesh ultimately hired the applicant and paid
Herman (or Touchstone) $12,000 for her role in the hiring.
[¶ 13] When Bradsby learned that Herman had
played a role in Vranesh's hiring of the applicant,
Bradsby sued her for breach of the noncompete and
nonsolicitation provisions, arguing that enforcement of those
provisions was necessary to protect its trade secrets.
[¶ 14] Both parties moved for summary
judgment. The district court granted Herman's motion for
summary judgment, concluding that the nonsolicitation
provision " effectively prevents [Herman] from competing
at all for a one year period unless she effectively removes
herself from the Denver metropolitan area" because it
" prohibits [Herman] from contacting any person
or entity in any of the industries to which
[Bradsby] provides recruiting services if that person or
entity had contact with any Bradsby employee."
The court further concluded that the nonsolicitation
provision is so broad that it renders the noncompete
provision superfluous and concluded, as a result, that both
provisions are " void and in violation of Colorado
law." The court " decline[d] to 'blue
pencil' the Agreement in order to bring it into
compliance," stating that the agreement's
confidentiality provisions adequately protect Bradsby's
[¶ 15] Bradsby appealed to this court. A
different division held that the enforceability of the
noncompete provision turned on the existence of Bradsby's
alleged trade secrets and remanded the case for a
determination of, among other things, whether Bradsby held
trade secrets. 23 LTD v. Herman, (Colo.App. No.
16CA1095, Aug. 3, 2017) (not published pursuant to
C.A.R. 35(e)) (Bradsby I ). The division also held
that the nonsolicitation provision is " fatally
overbroad" and directed the district court on remand to
" revisit its decision not to blue pencil [the
nonsolicitation provision] based on the trade secret
findings." Bradsby I, [slip op.] at ¶¶
23, 28. Finally, the division rejected the district
court's analysis that the nonsolicitation and
confidentiality provisions are coterminous with respect to
trade secret protection.
[¶ 16] On remand, the jury determined that
Bradsby possessed trade secrets, but that Herman had not
violated the noncompete provisions. The jury also found that
Herman had violated the nonsolicitation provision and awarded
Bradsby damages of one dollar. On post-trial proceedings, the
district court declined to blue pencil the overly broad
nonsolicitation provision (recall the district court
concluded and Bradsby I held that, without
modification, the nonsolicitation provision violates Colorado
law) and entered judgment in favor of Herman on all claims.
[¶ 17] The court denied Herman's request
for attorney fees because it concluded that
Herman had violated the confidentiality provisions of her
employment agreement -- a violation that was not pleaded ...