1st American Systems, Inc. v. Rezatto, 13189

Decision Date14 October 1981
Docket NumberNo. 13189,13189
Citation311 N.W.2d 51
Parties1982-1 Trade Cases 64,681 1ST AMERICAN SYSTEMS, INC., Plaintiff and Appellant, v. Brian J. REZATTO, Defendant and Appellee.
CourtSouth Dakota Supreme Court

James A. Wyly of Richardson, Groseclose, Kornmann & Wyly, Aberdeen, for plaintiff and appellant.

Thomas P. Tonner of Maynes, Tonner, Maynes & Tobin, Aberdeen, for defendant and appellee.

MORGAN, Justice.

Plaintiff, 1st American Systems (appellant), appeals from a summary judgment and jury verdict for defendant, Brian Rezatto (appellee). Appellant prayed for injunctive relief and damages resulting from appellee's breach of contract and misuse of trade secrets. The trial court held that the contract was void as a restraint on trade and ordered summary judgment for appellee on that count. The action in tort, however, for misuse of trade secrets proceeded to trial. The jury found for appellee. Appellant raises numerous issues contesting the judgment and verdict which we treat severally. We hold for appellant, reversing and remanding this case to the trial court for proceedings consistent with this opinion.

Appellant, a corporation, owns an agency, Insurance Counselors of Aberdeen, which employed appellee for almost seven years. During appellee's employment, he began as a salesman and later managed appellant's Aberdeen office. In June 1979, appellant terminated appellee.

The employment contract in force at the date of termination provided appellee with a salary and bonus for the sale of insurance contracts. In addition, it contained several post-employment restraints, as follow:

7. The Employee (appellee) acknowledges that as a result of his employment he will have and be given access to information as to renewal dates of insurance policies and to prospective customers which is usually and ordinarily kept confidential by the Company (appellant), and the Employee acknowledges that he understands that competition with the Company in the event of termination of this agreement would be unfair due to disclosures and confidences involved in the employment of this nature ... The Employee hereby agrees that in the event his employment with the Company is terminated ... that he shall not and will not for a period of ten (10) years following the date of the termination of his employment ... engage in the soliciting of general insurance business as follows:

(a) The Employee shall not canvass, solicit, or accept any business from any customer or customers who have been named in the books or records of the Company during the period of the Employee's employment.

....

(c) The Employee shall not directly or indirectly in any way request or advise any customer or customers whose names are on the books and records of the Company during the period of the Employee's employment, to withdraw or cancel or divert his, or her or any of their business with the Company or then owner of such business.

....

(e) The Employee further agrees that he will not reveal any information concerning any policy or policies of insurance, or the expiration dates thereof, to any person whomsoever, except to officers of the Company, and that he will not solicit renewals of any insurance that is for any person or organization other than the Employer. The Employee further agrees that upon the termination of his employment for any cause whatsoever, he will not directly or indirectly solicit the insurance customers of the Company, either verbally or in writing, nor will he keep in his possession a list of customers of the company nor contact the customers of the Company in any manner, not use the names and addresses of the customers of the Company for solicitation by him or his agents after the termination of his employment....

(f) The Employee shall not canvass, solicit or accept any business from any person, partnership, corporation or other entity, whatsoever, who is listed or has been listed at any time during the Employee's employment with the Company, as a prospect by any person, firm, partnership, corporation or other entity with which the Company has a franchise agreement or any exclusive listing agreement.

8. It is further agreed that in the event of termination of the Employee's employment, the Employee will not engage directly or indirectly, either personally or as an employee, associate, partner, manager, agent or otherwise, or by means of any corporation or other legal entity or devise, in the same business as that of the Company, or in any casualty, life, health and group insurance sales business or occupation, or in any way compete with the Company or the Company's successor, if any, within the City of Aberdeen, South Dakota, or within a radius of twenty-five (25) miles from the City of Aberdeen, South Dakota, for a period of ten (10) years from the date hereof, or from January 1 of each year hereafter (the renewal date of this agreement) whichever is later. The Employee further agrees that in consideration for the continued employment with the Company that this provision shall be deemed renewed as of the first day of January of each year hereafter for so long as he remains in the employ of the Company.

It is further agreed that this entire paragraph and all the subparagraphs thereof, shall be the proper subject for injunctive relief in addition to any other remedies available in equity or in law.

9. It is agreed that if any part, term, paragraph or provision of this agreement is by the courts or any tribunal held to be illegal, void or unenforceable, or to be in conflict with any law or the state of South Dakota, the validity of the remaining portions or provision shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this agreement did not contain the particular part, term, paragraph or provision held to be invalid, illegal, void or unenforceable.

Appellee received an attorney's advice before signing this agreement.

While employed, appellee sold approximately ninety percent of the insurance at Insurance Counselors. Consequently, he had access to allegedly confidential customer data, including customer names and the type and amounts of insurance purchased by each, policy expiration dates, pricing data, premium amounts and the insurance company issuing the policy.

Although appellee offered to purchase Insurance Counselors, negotiations broke down. Subsequently, appellee was terminated. Shortly thereafter, he associated with Stellner-Rivett Agency, then, a few months later, opened Rezatto Agency. These agencies were both located in Aberdeen and directly competed with Insurance Counselors.

At the time of trial, appellee had 101 insurance customers, 49 of which were former customers of Insurance Counselors. The former customers supplied more than fifty percent of the total premiums generated by the Rezatto Agency. Although Insurance Counselors usually experienced a normal attrition rate of about ten percent, the rate increased to twenty-six percent after appellee began work elsewhere. Appellee admitted using customer data to solicit former customers of Insurance Counselors. Moreover, he admitted obtaining the data from the files of Insurance Counselors after his termination. Finally, appellant informed appellee and appellee admitted knowing that the information he used was deemed confidential by appellant.

First, we address whether the noncompetition clause, in paragraph 8 of the employment contract, is a restraint on trade void under SDCL 53-9-8. This statute voids contracts which generally restrain a profession, trade or business unless enumerated exceptions apply. One such exception provides,

An employee may agree with an employer ... not to engage directly or indirectly in the same business or profession as that of his employer for any period not exceeding ten years from date of such agreement and within any specified territory not exceeding a radius of twenty- five miles from the principal place of business of the employer, ... but such contracts between employee and employer shall apply only to those engaged in some profession, the practitioners of which must be duly licensed in the state of South Dakota.

SDCL 53-9-11 (emphasis added).

Since paragraph 8 of the contract in question parallels the statute's territorial and temporal terms, our only concern is construction of the last phrase of the statute. Although SDCL 53-9-11 uses the term "business or profession," the final proviso uses only the word "profession." Our inquiry focuses on whether the sale of insurance contracts is a profession as that term is used in SDCL 53-9-11. We hold that such an occupation is not a profession, since the legislature has not referred to insurance agents as professionals or their business as a profession.

The procedural history of SDCL 53-9-11 enlightens our construction of the statute. See Oahe Conservancy Subdistrict v. Janklow, 308 N.W.2d 559 (S.D.1981). The statute began as Senate Bill No. 17. When the South Dakota Senate passed this bill, it did not contain the proviso at issue here. The House specifically modified the Senate version by adding the proviso. Thereafter, the Senate confirmed the amendment. Based on this history, the maxim, expressio unius est exclusio alterius, the express mention of one thing is the exclusion of another, applies. Bergh v. Stephens, 175 So.2d 787, 790 (Fla.App.1965); Odess v. Taylor, 282 Ala. 389, 395, 211 So.2d 805, 811 (1968); Dickerson, The Interpretation and Application of Statutes, 234-235 (1975). Although application of this maxim creates only a negative implication that SDCL 53-9-11 applies to professions, not businesses and professions, our decision is also supported by rules of construction.

In dealing with statutory exceptions, this court construes the language strictly resolving doubt in favor of the general provision. Lien v. Rowe, 77 S.D. 422, 426, 92 N.W.2d 922, 924 (1958). Moreover, we construe the...

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