The Arizona Court of Appeals has ruled that profits earned by a contemnor can be considered when determining the actual loss suffered by a complainant in civil contempt cases. This decision affects how businesses can seek remedies when former partners violate injunctions, particularly in cases involving restrictive covenants.

In the case of VIIRL, LLC, and Marcus Piazzisi against Kellen Moen, the court granted special action relief, reversing a lower court's ruling that limited the recovery to out-of-pocket losses. The ruling allows VIIRL to potentially recover profits Moen earned after violating an injunction against him.

This case highlights the ongoing legal complexities that arise in business partnerships, especially when one partner seeks to leave while competing against the company. The decision is significant for businesses in Arizona and could influence how similar cases are handled in the future.

Background

The parties involved in this case are VIIRL, LLC, a digital marketing agency, and Kellen Moen, a former co-owner. Marcus Piazzisi founded VIIRL in 2018, and Moen joined shortly after as a member and employee. In November 2022, Moen expressed his desire to sell his membership interest and leave the company.

After negotiations, both parties signed a Redemption Agreement in March 2023, which outlined the terms for the purchase of Moen’s membership interest, and an Amended Operating Agreement that included restrictive covenants. These covenants prohibited Moen from competing with VIIRL and required him to refer business opportunities to the company.

However, after signing the agreements, Moen began pursuing a competing business, leading VIIRL to terminate the Redemption Agreement and invoke its rights under the Operating Agreement. Moen then initiated arbitration proceedings in September 2023, which concluded in January 2025 with an award that included an injunction against Moen's competing activities.

The Ruling

The Arizona Court of Appeals, led by Judge Veronika Fabian, ruled that the superior court erred in stating that disgorgement of profits was not an available remedy in civil contempt proceedings. The court noted, “We hold that a contemnor’s profits may be used to measure a complainant’s actual loss.” This ruling allows the Company to seek Moen's profits from his violation of the injunction.

The court clarified that the previous ruling in Trombi v. Donahoe did not preclude the consideration of a contemnor's profits in measuring actual loss. The court stated, “Trombi does not define ‘actual loss’ nor explain how to measure it,” allowing for a broader interpretation of what constitutes actual loss in civil contempt cases.

Impact

This ruling has significant implications for businesses facing similar disputes. It allows companies to seek not only out-of-pocket losses but also profits earned by former partners who violate injunctions. This change could lead to more stringent enforcement of non-compete clauses and restrictive covenants in business agreements.

Furthermore, the decision may set a precedent for how courts interpret actual loss in civil contempt cases, potentially leading to increased accountability for individuals who breach agreements. Businesses may now have a stronger legal basis to pursue claims against former partners or employees who engage in competitive practices after leaving the company.

What's Next

The court has remanded the case for further proceedings consistent with its opinion. It remains to be seen how the superior court will determine the actual loss suffered by VIIRL as a result of Moen's actions and how much, if any, of Moen's profits will be disgorged as a remedy.