Abalene Exterminating Co. Of N. J. Inc. v. Elges

• Decision Date: 03 July 1945
• Docket Number: 148/458.
• Citation: 43 A.2d 165
• Parties: ABALENE EXTERMINATING CO. OF N. J., Inc., et al. v. ELGES et al.
• Court: New Jersey Court of Chancery

43 A.2d 165

ABALENE EXTERMINATING CO. OF N. J., Inc., et al.

v.ELGES et al.

148/458.

Court of Chancery of New Jersey.

July 3, 1945.

Suit by Abalene Exterminating Company of New Jersey, Inc., and another against John F. Elges and others to enjoin solicitation of business from former customers of complainants. On order to show cause why ad interim restraints should not be maintained until final hearing.

Order to show cause dismissed and ad interim restraints discharged without prejudice.

Syllabus by the Court.

1. In the absence of a restrictive covenant, and when no fraud is practiced, a former employee will not be enjoined from soliciting the customers of his former employer.

2. The law distinguishes between an employee pirating his employer's trade by fraudulent means, and honestly competing with him for it.

3. Without proof implicating a direct or indirect breach of restrictive provisions of employment contracts, or involving the obligations of a confidential relationship, or the use of secret trade information surreptitiously obtained, or other like instances of fraudulent practices and infringements, the proposed exception to the general rule predicated upon the representation that the customers of the former employer are ‘occasional’ or ‘latent’ is not acceptable.

I. Herbert Levy, of Trenton, for complainants.

William Reich, of Trenton, for defendants.

JAYNE, Vice Chancellor.

The intermediate step in this cause requiring present consideration is the order directing the defendants to show cause why certain ad interim restraints should not be maintained until final hearing.

The bill of complaint introduces a cause of action which I have been inclined to believe occupies a doubtful place in the family of available equitable remedies. The complainants implore this court to enjoin the defendant Elges, a former employee of the complainant company, and his associates in A-1 Exterminating Co., Inc., from soliciting business from the former customers of the complainants except by means of general public advertising. Here is a case in which the defendant Elges in accepting employment from the complainant company expressly declined to incur any contractual obligation abridging his right to engage in a similar enterprise and to solicit the company's customers.

I apprehend it to be unwise in the field of jurisprudence to impose exceptions upon established general rules unless cogent considerations of justice or equity manifestly require them. It has long been the settled and frequently repeated general rule in our jurisdiction that ‘in the absence of a restrictive covenant, and when no fraud is practiced, a former employe will not be enjoined from soliciting the customers of his former employer.’ ‘The law distinguishes between an employee pirating his employer's trade by fraudulent means, and honestly competing with him for it.’ Newark Cleaning and Dye Works v. Gross, 97 N.J.Eq. 406, 128 A. 789; Lewitter v. Adler, 101 N.J.Eq. 74, 137 A. 541; Salomon v. Hertz, 40 N.J.Eq. 400, 403, 2 A. 379.

I add a typical quotation from the research of the editorial staff of American Jurisprudence: ‘In a majority of the cases in which the question has been raised it has been held that in the absence of an express contract, the employee may thus solicit the business of the former customers, and he will not be enjoined from so doing.’ 35 Am.Jur. ‘Master & Servant’ § 100. See, also, 28 Am.Jur. ‘Injunctions' § 113.

Consulting the comprehensive annotations of American Law Reports, the following survey of the pertinent decisions is discovered: ‘Thus as shown by the earlier annotation (23 A.L.R. 423), it is the general rule that in the absence of an express contract forbidding solicitation of a former employer's customers, an employee, in entering into competition with his former employer, either on his own account or on behalf of another in the same business, may solicit the business of his former customers, and will not be enjoined from such solicitation at the instance of his former employer. The majority of the later decisions are also to this effect.’ 126 A.L.R. 758.

I incline favorably toward the statements expressed by Vice Chancellor Bigelow in Haut v. Rossbach, 128 N.J.Eq. 77, at page 79, 15 A.2d 227, 228, affirmed 128 N.J.Eq. 478, 17 A.2d 165: ‘Sound public policy encourages employees to seek better jobs from other employers or to go into business for themselves. Contracts which hinder their so doing are strictly construed and rigidly scanned and are declared void unless necessary for the reasonable protection of the employer. In the absence of agreement, as the decisions above cited demonstrate, there must be a very strong case before the court will restrain the former employee from competing with his former employer. In most jurisdictions, there seems to be no exception to the rule that a former employee is at liberty to compete. * * * 23 A.L.R. 423; Note, 126 A.L.R. 758.’

It is observed that in Maas & Waldstein Co. v. Walker, 100 N.J.Eq. 224, on page 234, 135 A. 275, 279, affirmed 102 N.J.Eq. 328, 140 A. 921, Vice Chancellor Berry concluded: ‘They (the defendants) should not be restrained from representing that they can furnish lacquers and enamels equal in quality to those of the complainant, nor can they be restrained from soliciting business from the trade generally irrespective of whether or not that trade includes former or present customers of the complainant.’

To catalogue the employee's own knowledge of his employer's customers in a simple artless business as a ‘trade secret’ or ‘confidential information’ and thus perpetually enjoin the employee from thereafter honestly soliciting business from such customers in a competitive enterprise seem to me at the moment to be an unreasonable restraint of trade unsupported by any dominant social or economic justification. Bond Electric Corp. v. Keller, 113 N.J.Eq. 195, 166 A. 341.

Let it be at once understood that situation implicating a direct or indirect breach of restrictive provisions of employment contracts, or involving the obligations of a confidential relationship, or the use of secret trade information surreptitiously obtained, or other like instances of fraudulent practices and infringements are not within the scope of this memorandum.

It is nevertheless proposed that the general rule should be decimated by an exception where the customers of the employer are ‘occasional’ or ‘latent.’ It is noticed that such an exception has not been greeted with approval in most jurisdictions, and its adoption has not as yet made much headway in ours. Who is to decipher and elucidate the environment of a ‘latent customer’? If such an exception to the general rule is to be recognized, who is capable of informing the former employee of its boundaries? For example, in the present cause the complainant company is engaged in the business of exterminating rodents and insects of the family Blattidae, commonly known as cockroaches. The complainant has no solicitude to ensconce its means and appliances utilized in the extermination of the pests, or to conceal the nature of its business, but it avows that the sensibilities of its customers would be wounded if it were generally known that they were in need of such an accommodation. Therefore its customers are sought to be technically characterized as ‘occasional’ and ‘latent.’ One is therefore induced to conjecture whether the proposed exception to the general rule is promoted to conceal the intercourse of the customer who is not here complaining or to fortress the business of the former employer against competitors. If I were to pursue a course of reasoning on that plane, I would be driven to suppose that a clerk in a drug store who opened a pharmacy of his own could be enjoined from supplying pharmaceutical medications for venereal disorders, for example, to those customers of his former employer whom he knew to be in need of such medicaments, merely because ‘the information is not available to or could not readily be obtained by the public or any other individual.’ If, in such circumstances, the ambitious employee in the promotion of his own business presented to the customer a medicative that he represented to be more efficacious, should he be charged with deliberately endeavoring to pirate and capture the customer of his former employer? No. The application of the exception is restricted, it is said, to those businesses in which the customers in general are ‘occasional’ or ‘latent.’

The business of cleaning windows (Lewitter v. Adler, supra) and that of furnishing lunches (Haut v. Rossbach, supra) are to be excluded from that class because we are...