Republic Sys. & Program., Inc. v. Computer Assist., Inc.

• Decision Date: 15 January 1970
• Docket Number: Civ. No. 13586.
• Citation: 322 F. Supp. 619
• Court: U.S. District Court — District of Connecticut
• Parties: REPUBLIC SYSTEMS AND PROGRAMMING, INC. v. COMPUTER ASSISTANCE, INC., Computer Assistance of Hartford, Inc., Andrew N. Vignola, and Roger Geddes.

322 F. Supp. 619

REPUBLIC SYSTEMS AND PROGRAMMING, INC. v. COMPUTER ASSISTANCE, INC., Computer Assistance of Hartford, Inc., Andrew N. Vignola, and Roger Geddes.

Civ. No. 13586.

United States District Court, D. Connecticut.

January 15, 1970.

COPYRIGHT MATERIAL OMITTED

S. Robert Jelley, Wiggin & Dana, New Haven, Conn., for plaintiff.

William J. Secor, Jr., Donald McPartland, Upson, Secor, Greene & Cassidy, Waterbury, Conn., for Computer Asst. of Hartford, Inc. and Andrew Vignola.

Lewis Segal, Donald Richter, Murtha, Cullina, Richter & Pinney, Hartford, Conn., for Computer Asst., Inc.

Richard P. Zipoli, Jeremiah M. Keefe, Waterbury, Conn., for N. Roger Geddes.

RULING ON APPLICATION FOR PERMANENT INJUNCTION

BLUMENFELD, District Judge.

In this diversity action, plaintiff seeks damages for and an injunction against allegedly unlawful conduct of two former employees, the competing corporation those former employees organized following their resignation from plaintiff's employ, and another competing corporation, already in existence at the time the events complained of here occurred. Plaintiff complains of the following allegedly unlawful conduct by the defendants: (1) approaching plaintiff's customers to induce them to terminate their contracts with plaintiff and to transfer the work contracted for to defendants; (2) soliciting and inducing plaintiff's employees to resign from plaintiff's employment and enter defendants' employ, and thereafter to refuse to revoke their resignation and return to plaintiff's employ; (3) taking from plaintiff's files documents relating to prospective business and work in progress; (4) appropriating to themselves plaintiff's business and good will.

On December 12, 1969, a temporary restraining order was issued prohibiting defendants from (1) approaching any of plaintiff's present customers for whom plaintiff had work in progress under contract and attempting in any way to induce them to terminate their contracts with plaintiff and transfer the work to defendants; (2) soliciting or inducing any of plaintiff's employees to disclose any information concerning work in progress or prospective business; (3) disclosing any information concerning work in progress or prospective business; (4) soliciting or inducing any of plaintiff's employees to resign from plaintiff's employment; (5) soliciting or inducing any of plaintiff's former employees to refuse to revoke their resignation from plaintiff and to refuse to return to plaintiff's employment; (6) engaging directly or indirectly in unfair competition with plaintiff "in the manner complained of in plaintiff's complaint."

An order to show cause why a preliminary injunction should not issue was filed simultaneously, and a hearing was set for December 19. By agreement of counsel, the hearing on a preliminary injunction was consolidated with the hearing on a final injunction, with only the issue of damages being reserved. At the conclusion of that hearing, defendants having consented, the temporary restraining order then in effect, with the exception of one paragraph, was extended until January 15, 1970. The scope of the permanent injunction sought by plaintiff is somewhat broader than the terms of the temporary restraining order now in effect.

For the reasons set forth more fully herein, the temporary restraining order is dissolved and the applications for preliminary and permanent injunctions are denied.

FINDINGS OF FACT

1. Plaintiff, Republic Systems and Programming, Inc., is organized under the laws of Texas and has a principal place of business in New Jersey. Defendants Vignola and Geddes are citizens of Connecticut and defendants Computer Assistance, Inc. and Computer Assistance of Hartford, Inc. are Connecticut corporations with principal places of business in Connecticut.

2. The amount in controversy exceeds $10,000, exclusive of interest and costs.

3. The business of all the parties may be generally described, as it was by various witnesses, as the data processing services business or the computer software business. In general, the parties are engaged in analyzing problems which might be solved by the use of computers and other data processing equipment, designing a solution to those problems, and implementing the solution by the use of computer programs on the premises of the client, who in most cases would already own a computer.

4. The computer software or data processing services business is relatively new and rapidly expanding. One of its most salient characteristics is the fierce competition for new business and, of special relevance here, for technically competent personnel.

5. Perhaps because of the keen competition for technically qualified personnel, it is not uncommon for those in this field to move frequently from one employer to another, developing in some instances more loyalty to the industry and to the customers than to their employers.

6. Plaintiff Republic Systems, in addition to its home office in East Orange, New Jersey, has branch offices in Secaucus, New Jersey, and Cheshire, Connecticut, the latter being established in 1967.

7. Defendant Andrew Vignola was, prior to December 5, 1969, assistant vice-president of plaintiff and manager of plaintiff's Cheshire office, in charge of the day-to-day operation of plaintiff's business at that office.

8. Defendant Roger Geddes was, prior to December 5, 1969, senior staff manager of plaintiff's Cheshire office, with general supervisory authority over the "technical" staff members there.

9. Prior to December 5, 1969, there were, including defendants Vignola and Geddes, approximately 25 employees at plaintiff's Cheshire office. Among the other 23 were 3 staff managers, 2 account managers, 13 technicians, 2 marketing managers, and 1 full-time and 2 part-time secretaries.

10. None of plaintiff's officers and none of its employees at the Cheshire office was bound by an employment contract.

11. In addition to the plaintiff's 3 branch offices listed above, there were at one time 2 other branches, 1 located in New Hampshire and 1 in Old Greenwich, Connecticut, both organized in late 1968.

12. Sometime in March 1969 plaintiff's New Hampshire and Old Greenwich offices were closed for lack of business.

13. At approximately the same time, March of 1969, defendant Vignola held a meeting at his home attended by defendant Geddes and the three staff managers. At that meeting, the financial straits of plaintiff were discussed, as were alternatives to remaining in plaintiff's employ. Specifically the possibility of leaving plaintiff to form a new company was explored. The discussion included the possibility of asking some of plaintiff's other employees to join them and of securing the business of some of the plaintiff's then present customers.

14. In April of 1969 defendant Vignola again chaired a meeting at his home, this time with defendant Geddes, two of the three staff managers and one of the two marketing managers present. The decision was made to leave the plaintiff and form a new company. A week later, the participants were notified that the whole thing was off.

15. In May of 1969, following these two meetings, Mr. Vignola went to plaintiff's home office in New Jersey to submit his resignation to plaintiff's president. He was unhappy with the company and its performance. After gaining some concessions from plaintiff's president, however, Vignola agreed to stay on at his position. It was agreed that the Cheshire office would become a separate corporation, a wholly owned subsidiary of plaintiff, and that defendant Vignola would be an officer, director, and shareholder in the new company. Some steps were taken to initiate that reorganization, but many more which were contemplated had not been taken by December 5, 1969, when the conduct complained of in this action occurred.

16. Defendant Computer Assistance, Inc. had for some time been a competitor of plaintiff Republic Systems and Programming, Inc. in the computer software business.

17. Sometime in early November 1969 Mr. Thomas McDonagh, president of defendant Computer Assistance, Inc., acting pursuant to rumors of unrest in plaintiff's organization, called defendant Vignola at the latter's home to feel him out as to the extent of his dissatisfaction and as to the chances of getting him to come with Computer Assistance.

18. McDonagh's telephone call precipitated an extended series of further conversations and meetings between him and Vignola at various locations through the balance of the month. The early conversations might be described as cautious, exploratory, boasting sessions. Later they developed into more substantive discussions of the means by which Vignola might in some capacity join forces with McDonagh if and when he were to leave plaintiff.

19. Among the relevant points of discussion were: (a) Vignola's compensation for joining McDonagh; (b) the possible forms their alliance might take, including (i) installation of Vignola as president of a subsidiary of defendant Computer Assistance, Inc.; (ii) employment of Vignola directly as an employee of McDonagh's, or (iii) formation by Vignola of his own corporation, which would then be merged with Computer Assistance, Inc.; (c) the name of Vignola's separate corporation, if one were to be formed; (d) indemnification by McDonagh of legal expenses incurred by Vignola in the event of suit by plaintiff; (e) the employees of plaintiff Republic's Cheshire office and whether and how they could fit into McDonagh's organization; and (f) Republic's clients and whether Vignola could bring their business to Computer Assistance.

20. At some point late in November, Vignola informed defendant Geddes that he was thinking of leaving plaintiff. Geddes was invited to and did attend the meeting between Vignola and McDonagh on December 1, 1969. His proposed role as a technical manager in McDonagh's organization was discussed. Two of McDonagh's top assistants also...