653 F.2d 175 (5th Cir. 1981), 80-7917, Barnes Group, Inc. v. Harper

Docket Nº:80-7917.
Citation:653 F.2d 175
Party Name:BARNES GROUP, INC., Plaintiff-Appellant, v. James W. HARPER, Defendant-Appellee.
Case Date:August 10, 1981
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 175

653 F.2d 175 (5th Cir. 1981)

BARNES GROUP, INC., Plaintiff-Appellant,

v.

James W. HARPER, Defendant-Appellee.

No. 80-7917.

Unit B

United States Court of Appeals, Fifth Circuit

August 10, 1981

Page 176

James M. Thomas, Savannah, Ga., for plaintiff-appellant.

Arnold C. Young, Ralph O. Bowden, III, Savannah, Ga., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Georgia.

Before HILL, FAY and HENDERSON, Circuit Judges.

JAMES C. HILL, Circuit Judge:

Appellant Barnes Group, Incorporated (Barnes) brought suit against its former salesman, appellee James W. Harper, alleging breach of a restrictive covenant contained in Harper's employment contract. The district court has determined that the covenant is void under controlling state law and has denied Barnes' prayer for injunctive relief. We reverse and remand.

I.

The facts are not in significant dispute. Harper commenced employment with a division of Barnes, a Delaware corporation with principal offices in Connecticut, in August 1968 as a commissioned sales agent. The division that employed Harper was engaged in the nationwide marketing of some 12,000 items including screws, nuts, bolts, automobile replacement parts and the like. This line of business is highly competitive, in part owing to the lack of product differentiation. Accordingly, the contact between salesman and customer with resulting good will, is absolutely critical to business success. Indeed, the Barnes' division in which Harper worked maintained no house contacts, transacted no catalogue sales, and looked to its salesmen as its sole customer contact. Barnes without question invested some time in training Harper to work the sales territory assigned to him, although the exact nature and value of this training is the subject of differing testimonial accounts. 1

The terms of Harper's employment by Barnes were to be governed by an employment contract entitled "Salesman's Agreement." Of particular concern here are two paragraphs of the contract:

Page 177

1. Territory

The Company hereby appoints the Salesman the Company's sales representative in its Territory No. 196-4. Said territory consists of certain specific or generally described accounts, which are hereby assigned to the Salesman, located in a defined geographical area. Said accounts are set forth or described in a certain document on file in the Company's office, called "Territory Description," bearing the Salesman's name and territory number. Said Territory Description contains also a list of or description of accounts, if any, which, although within the aforesaid geographical area, are excluded from the Salesman's territory. The accounts which are included in the Salesman's territory are hereinafter referred to as "territory." If said Territory Description shall include any general classification(s) of accounts declared to be "Open to all salesmen", the accounts within such classification(s) shall not be included in the Salesman's territory unless and until so included by supplemental agreement. The aforesaid Territory Description is now in existence and is incorporated herein by reference and is hereby made a part of this agreement to the same extent as if fully rewritten herein. A copy of said Territory Description has been delivered to the Salesman who hereby acknowledges its receipt.

...

6. Restrictive Covenant

The salesman agrees that (1) if he shall voluntarily leave the Company's employ hereunder, or (2) if he shall be discharged by the Company for just cause, he will not, for a period of two (2) years thereafter, sell or attempt to sell any products of the same or similar kind as those sold by the Company, to any of the customers to whom he made one or more sales for the Company within the last two years of his employment. The Salesman agrees that his promise herein made so to refrain from selling or attempting to sell means that he will not, directly or indirectly, either as an individual on his own account or as a partner, employee, agent or salesman of or for any person, firm, association or corporation, or as an officer, director or stockholder of any closely-held corporation as hereinafter defined, engage in selling or attempting to sell any of said products to any of the customers hereinabove designated. This covenant shall not be deemed violated by the Salesman's engaging in the business of a manufacturer or retailer of said products, but is shall be deemed violated by any sale of said products to any of said customers by the Salesman in or for a business combining retail and wholesale sales if the wholesaling is a substantial part of such combined business. For the...

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