American Pamcor, Inc. v. Klote
| Decision Date | 18 February 1969 |
| Docket Number | No. 33313,33313 |
| Citation | 438 S.W.2d 287 |
| Parties | AMERICAN PAMCOR, INC., Plaintiff-Appellant, v. Robert KLOTE, d/b/a Modern Electrical Devices, Defendant-Respondent. |
| Court | Missouri Court of Appeals |
Edmund C. Rogers, John T. Rogers, Kingsland, Rogers, Ezell, Eilers & Robbins, St. Louis, for plaintiff-appellant; William J. Keating, AMP Inc., Harrisburg, Pa., of counsel.
Marvin S. Wood, St. Louis, for defendant-respondent.
CLEMENS, Commissioner.
Suit for injunction and an accounting, brought by a distributor of electrical devices against its former sales manager. Basis of the suit is a non-solicitation clause in an employment contract whereby the defendant agreed not to solicit from plaintiff's customers, within a limited area and time, after his employment ended. The trial court denied relief and plaintiff employer appeals. We reverse and remand for determination of plaintiff's damages.
Our decision rests on two issues, one of fact and one of law: Did the defendant violate his non-solicitation agreement? Is it a reasonable restraint on employment enforceable in equity by injunction? We say yes to both questions.
First we note the scope of our review. We rule the case upon both the law and the evidence, weigh the evidence, and render such judgment as the trial court should have rendered. (Civil Rule 83.13(c), V.A.M.R.) The judgment shall not be set aside unless clearly erroneous, and although we make our own finding of facts we give due regard to the trial court's opportunity to judge the witnesses' credibility. (Civil Rule 73.01(d), V.A.M.R.) We also consider that injunction is a harsh remedy, granted only in clear cases. (Prentice v. Rowe, Mo.App., 324 S.W.2d 457(8).)
We find little conflict in the evidence. The plaintiff's witnesses were the defendant, one of his employees, and its own sales manager, who followed the defendant in that position. The defendant offered no evidence. We find these facts:
Plaintiff sells electrical products, including terminals, connectors and tools for various purposes. The defendant formerly sold such products as plaintiff's employee and is now selling similar products on his own account.
All this began in 1956, when defendant started work as plaintiff's salesman. After eight years as a salesman he was promoted to sales manager for the 'St. Louis District', composed of Missouri, Kansas, and designated adjoining counties. As an incident to this employment as district sales manager, plaintiff and defendant entered into an employment contract for the year 1967. Thereby defendant was to get a salary of $1,000 a month, an 'override' on sales in the St. Louis district, and reimbursement for his business expenses.
This 1967 agreement incorporated by reference an earlier agreement, of 1963, whereby defendant promised:
'To keep confidential during and subsequent to the period of said employment, except for those whom his authorized activities for the Company require should be informed, all information relating to the Company's business, its research or engineering activities, its manufacturing processes or trade secrets, its sources of supply or lists of customers and its plans or contemplated actions; and
(Our emphasis.)
As district sales manager the defendant became acquainted with plaintiff's customers and their needs for electrical products. He called on customers with plaintiff's salesmen and handled customer complaints and credit inquiries. Most of his contacts with plaintiff's customers came from traveling with the salesmen. This was part of his job and he spent two or three days a week traveling with them. The defendant, as district sales manager, 'lent prestige' to the salesmen's calls on customers and to plaintiff's products.
While employed by plaintiff, defendant made weekly reports itemizing calls on customers and money spent for business purposes. These reports show that in twenty-six weeks, selected at random, defendant called on fifty-one prospects and plaintiff reimbursed him for $3,041 for business expenses.
In September, 1967, as permitted by a termination clause in the employment contract, plaintiff summarily discharged defendant. The only reason it gave him was 'a reduction in force.' Defendant took no records or customer lists when he left.
Soon after his discharge defendant went into business for himself. He operated under the fictitious trade name of Modern Electrical Devices from an office on Gravois avenue in St. Louis. He had two salesmen, James Fritchman and William Craig, both of whom had been salesmen for plaintiff. As defendant's salesmen, Fritchman and Craig solicited orders for terminals, connectors and tools in the St. Louis district. Fritchman said he was now calling on all plaintiff's St. Louis customers. He has sold electrical terminals and connectors to some of plaintiff's customers whom defendant had contacted while he was plaintiff's sales manager.
Defendant's present mode of operation is to buy and stock electrical products, including terminals and connectors, from other suppliers, such as the Hollingsworth Company, one of plaintiff's competitors. Hollingsworth's products are similar to and have the same uses as plaintiff's products which defendant sold when employed by plaintiff. Defendant's salesmen transmit orders to him, by mail or telephone. He fills the orders and ships the products from his St. Louis office, and his customers make payments there. Defendant pays his salesmen their commissions by personal checks.
Those were the facts and we now recall defendant's agreement: '* * * For a period of one year from the termination of his employment not to directly or indirectly, as to products competitive to those sold by the Company, solicit or accept business from any of the Company's customers that he had contact with in the territory he last serviced for the Company prior to the termination of his employment.'
We find factually that the defendant has breached that part of the employment contract. This leads to the issue of law: whether the non-solicitation clause is a reasonable restraint on employment enforceable by injunction.
This court discussed the limitations on post-employment restrictions in Renwood Food Products v. Schaefer, 240 Mo.App. 939, 223 S.W.2d 144(1--4). Although in early cases contracts restricting employment were generally considered against public policy, in time courts came to realize that an employer had a proprietary interest in its established business. So, courts allowed an employer to protect this interest by imposing reasonable restrictions upon an employee to prevent him from using confidential information, such as customer lists, to go into competition with his employer. To be reasonable, post-employment restrictions generally must be qualified as to time and place, and not be greater than required to protect the employer. (Renwood case, 223 S.W.2d l.c. 151, citing Restatement of the Law of Contracts, § 515.) This has been Missouri law for at least a hundred years. (See Long v. Towl, 42 Mo. 545, l.c. 549.)
In Renwood the plaintiff hired the defendant to sell its frozen foods in St. Louis. He agreed that for a year after leaving plaintiff's employment he would not engage in the frozen food business, or any competitive business, in St. Louis or any adjoining Missouri or Illinois county. We pointed out that the defendant salesman would naturally obtain a personal knowledge of plaintiff's customers and could entice them away if he went into business for himself. We found that the employment contract reasonably met the qualifications of time and place, and we upheld the injunction.
Similarly, in Farmers Underwriters Assn. v. Reid, Mo.App., 425 S.W.2d 247, the defendant insurance agent agreed that on termination of his agency he would not solicit from or sell to any of plaintiff's policyholders within the agency's district or any adjoining county for one year. The court found this non-solicitation clause was valid and enforceable by injunction. For other cases upholding similar restrictions, see Prentice v. Rowe, supra, 324 S.W.2d 457; City Ice & Fuel Co. v. Snell,...
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