Ed Bertholet & Associates, Inc. v. Ed Stefanko

Indiana Court of Appeals · 1998 · Contracts

690 N.E.2d 361 (1998)

Updated July 26, 2026

ContractsCovenants not to competePreliminary injunctionspreliminary injunctionequitable discretionnoncompeteirreparable harmadequate remedy at law

Facts

In December 1994, Stefanko entered into an employment contract with Bertholet to work as a bail bondsman. The contract contained a covenant not to compete, a provision calling for an injunction upon breach, and a liquidated damages clause requiring Stefanko to pay Bertholet 15% of any bonds he wrote while violating the covenant. In April 1997, Stefanko voluntarily left Bertholet and soon began working as a bail bondsman for a local competitor. Bertholet sued to enforce the covenant and sought injunctive relief, but the trial court denied the preliminary injunction.

Issue

Whether a trial court must grant a preliminary injunction when the parties' contract provides for injunctive relief upon breach of a covenant not to compete. If not, whether the trial court erred in denying Bertholet's request for a preliminary injunction for failure to show irreparable harm and inadequacy of legal remedies.

Rule

The decision to grant or deny a preliminary injunction rests within the trial court's equitable discretion. A party seeking a preliminary injunction must show: (1) inadequate remedies at law causing irreparable harm pending resolution of the action, (2) at least a reasonable likelihood of success at trial, (3) that the threatened injury to the plaintiff outweighs the potential harm to the defendant from the injunction, and (4) that the public interest will not be disserved. Contract provisions requiring issuance of an injunction are not binding on the trial court because parties may not contractually oust the court's inherent jurisdiction to decide whether equitable relief is appropriate.

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In Indianapolis, Nora Kim signed an employment agreement with Lakeview Recovery Services, a fictional collections firm. The agreement stated that if Nora competed within one year after leaving, Lakeview 'shall be entitled to immediate injunctive relief,' and it also set liquidated damages at 10% of any competing revenue Nora generated. After she joined a rival firm, Lakeview moved for a preliminary injunction.

If Lakeview argues the court must issue the injunction solely because the contract says it is entitled to injunctive relief, how should the court rule?

Explanation. A contractual provision requiring issuance of an injunction is not binding on the trial court. The decision to grant or deny a preliminary injunction remains within the court's equitable discretion, and parties may not contractually oust the court's inherent jurisdiction. The movant must still satisfy the ordinary preliminary injunction requirements. (Derived from Ed Bertholet & Associates, Inc. v. Ed Stefanko (1998).)