EXCELLENCE COMMUNITY MANAGEMENT, LLC, A NEVADA LIMITED LIABILITY COMPANY, Appellant,
KRISTA GILMORE, INDIVIDUALLY; AND MESA MANAGEMENT, LLC, A NEVADA LIMITED LIABILITY COMPANY, Respondents
Appeal from a district court order denying a preliminary injunction in an employment matter. Eighth Judicial District Court, Clark County; Michael Villani, Judge.
Durham Jones & Pinegar and Michael D. Rawlins and Bradley S. Slighting, Las Vegas, for Appellant.
Alessi & Koenig, LLC, and Huong X. Lam, Las Vegas, for Respondents.
BEFORE HARDESTY, C.J., PARRAGUIRRE and CHERRY, JJ.
In this appeal, we must determine whether the sale of 100 percent of the membership interest in a limited liability company affects the enforcement of an employee's employment contract containing a restrictive covenant. We conclude that it does not because such a sale does not create a new entity. Thus, we extend our holding in HD Supply Facilities Maintenance, Ltd. v. Bymoen, 125 Nev. 200, 210 P.3d 183 (2009), and agree with the Pennsylvania Superior Court that the sale of membership interests in a limited liability company is " akin to a sale of stock [in a corporation] rather than an asset sale." Missett v. Hub Int'l __ Pa. __, LLC, 2010 PA Super 178, 6 A.3d 530, 537 (Pa. S.Ct. 2010). Accordingly, the employer limited liability company may enforce a restrictive covenant in an employment contract without its employee's consent of assignment. However, we conclude that the district court in this case did not abuse its discretion in denying a preliminary injunction because appellant failed to demonstrate irreparable harm for which compensatory damages are an inadequate remedy. We affirm.
FACTS AND PROCEDURAL HISTORY
Excellence Community Management (ECM) is a Las Vegas-based Nevada limited liability company (LLC) that provides condominium and homeowners' association (HOA) management services. Respondent Krista Gilmore was employed by ECM as a community association manager from 2005 to 2012 and was directly responsible for managing multiple associations. In April 2011, Gilmore signed an employment agreement that prohibited her from revealing trade secrets and disclosing ECM's confidential information for a period of 24 months after termination of her employment. The employment agreement also included an 18-month nonsolicitation clause and an 18-month noncompetition clause, requiring Gilmore to refrain from soliciting persons or entities contractually engaged in business with ECM. The employment agreement did not include an assignment clause.
At the time Gilmore signed the employment agreement, ECM was owned and operated by Jamie and Warren McCafferty. In May 2011, 90 percent of the McCaffertys' membership interest in ECM was purchased by First Service Residential Management Nevada (FSRM). One year later, the McCaffertys sold or relinquished their remaining membership interest in ECM to FSRM. The purchase agreement between the McCaffertys and FSRM specifically stated that the McCaffertys " will sell, assign and transfer the [p]urchased [i]nterest to [FSRM], and [FSRM] will purchase the [p]urchased [i]nterest from the [McCaffertys], free and clear of any [e]ncumbrance."
In early June 2012, Gilmore submitted her resignation to ECM and informed ECM that, upon final termination of her employment, she would begin working for respondent Mesa Management, LLC. Upon receiving Gilmore's notification, ECM's president decided to terminate Gilmore. Approximately three weeks later, ECM sent Gilmore a cease-and-desist letter, which alleged that Gilmore violated her 2011 employment agreement by contacting ECM's clients to inform them she was no longer employed by ECM and soliciting them to hire Mesa. Notwithstanding ECM's cease-and-desist letter, Mesa's owner sent a solicitation letter to numerous HOA boards announcing the start of Gilmore's employment with Mesa.
ECM filed a complaint seeking damages and injunctive relief against Gilmore and Mesa, and subsequently filed a motion for a preliminary injunction to enforce the employment agreement pending the district court's resolution of the case. During the preliminary injunction hearing, the district court asked ECM whether, if successful on its case, money damages could be calculated and could make ECM whole. Counsel conceded that money damages would make ECM whole, but also pointed to caselaw from other jurisdictions holding that irreparable harm is presumed where an employee has breached a restrictive covenant.
The district court denied ECM's motion for preliminary injunction for two reasons. First, the court relied upon Traffic Control Services, Inc. v. United Rentals Northwest, Inc., 120 Nev. 168, 87 P.3d 1054 (2004), to conclude that the agreement was not assignable to FSRM absent a clause permitting the assignment or an agreement with the employee consenting to the assignment. Second, the district court determined that a preliminary injunction was ...