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
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 Colorado law?
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
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 directions.
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
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 downtown Denver.
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 of Bradsby.
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
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
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 trade secrets.
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 or at issue in the case.
18 Bradsby argues that the district court erred in declining
to blue pencil the "fatally overbroad"
nonsolicitation provision because the agreement required the
court to do so. Bradsby I, slip op. at ¶ 23. To
the extent the agreement did not actually require the court
to blue pencil the agreement, Bradsby contends the court
abused its discretion in declining to do so. Finally, Bradsby
argues that the record does not support the jury's
verdict that Herman did not violate the noncompete provision.
We reject all these contentions.
19 On cross-appeal, Herman argues that the court abused its
discretion in declining to award her attorney fees under the
agreement's fee-shifting provision. We conclude that the
court's reasoning was improper and that, under these
facts, Herman is the prevailing party entitled to attorney
fees under the fee-shifting provision.
District Court Did Not Err or Abuse Its Discretion in
Declining to Blue Pencil the Unenforceable Nonsolicitation
20 As a general matter, "[a]greements not to compete,
with some narrow exceptions, are contrary to the public
policy of Colorado." Saturn Sys., Inc. v.
Militare, 252 P.3d 516, 526 (Colo.App. 2011). "The
core policy underlying the unenforceability of noncompetition
provisions is a prohibition on the restraint of trade or . .
. the right to make a living." Phoenix Capital, Inc.
v. Dowell, 176 P.3d 835, 844 (Colo.App. ...