Auto. Club of S. N.J. v. Zubrin

• Decision Date: 15 April 1940
• Citation: 127 N.J.Eq. 202,12 A.2d 369
• Parties: AUTOMOBILE CLUB OF SOUTHERN NEW JERSEY v. ZUBRIN.
• Court: New Jersey Court of Chancery

12 A.2d 369

127 N.J.Eq. 202

AUTOMOBILE CLUB OF SOUTHERN NEW JERSEY

v. ZUBRIN.

Court of Chancery of New Jersey.

April 15, 1940.

Syllabus by the Court.

Complainant and defendant agreed that upon termination of defendant's employment by complainant, defendant would not engage in competitive business "anywhere in Southern New Jersey south of Trenton."

Held void as unreasonable, being beyond the requirements of fair protection to complainant, whose business was confined to only a portion of "Southern New Jersey."

Held also that the contract may not be construed as divisible.

Suit by the Automobile Club of Southern New Jersey against Ralph Zubrin to enjoin defendant from alleged violation of employment agreement that upon termination of employment defendant would not engage in competitive business in certain portion of the state and to enjoin defendant from disclosing alleged confidential information acquired during the course of his employment.

Decree for defendant.

Samuel P. Orlando, of Camden, for complainant.

Harry Adler, of Bridgeton (Samuel Adler, of Bridgeton, of counsel), for defendant.

SOOY, Vice Chancellor.

Complainant seeks to enjoin defendant from alleged violation of the provisions of an employment agreement, as well as from disclosing alleged confidential information as to complainant's business acquired by the defendant during the course of his employment.

Complainant is engaged in the business of soliciting memberships among automobile owners and selling to them "accident liability insurance." The members thus obtained have the advantage of garage service through members operating garages, entitling the car owner member to "brake and headlight adjustments and service in the event of accident on the highway," and the complainant is able "to furnish its members with the most reliable insurance at the most reasonable rates."

Defendant accepted employment on June 15, 1935 and was discharged on April 19, 1939. Before being employed, defendant signed an application for employment, as follows: "And I further agree that in the event of the acceptance of my application for position by The Automobile Club of Southern New Jersey, that I will not in the event of termination of my employment for any reason, engage in the insurance business or in the automobile club business either directly or indirectly for a period of three years anywhere in the State of New Jersey south of Trenton, it being my intention and agreement that in the event my services are terminated with The Automobile Club of Southern New Jersey not to engage either by myself or for anyone else in a competitive business anywhere in Southern New Jersey south of Trenton, New Jersey."

Defendant admits that unless enjoined he intends to sell automobile owners insurance policies, including all classes of coverage, thus to compete with complainant insofar as the sale of insurance is concerned. It is obvious that defendant does not intend to and could not sell memberships in the "Club" business of complainant corporation.

The case was tried on stipulation of facts, which need not be recited in full.

Defendant argues that the agreement aforesaid is unreasonable and not necessary for the protection of complainant and is, therefore, unenforcible.

The test to determine the question before me is well established by numerous decisions, such as Gordon Supply Co. v. Galuska, 113 N.J.Eq. 353, 166 A. 700, 701, in which the case of A. Fink & Sons v. Goldberg, 101 N.J.Eq. 644, 139 A. 408, is cited, in which latter case Vice Chancellor Berry has collated other supporting authorities.

The cases above cited hold that the test is whether the restraint imposed on the employee "is such only as to afford a fair protection to the interest of the party in favor of whom it is given, and not so large as to interfere with the interest of the public."

The parties stipulate that complainant's business is confined to Camden, Gloucester, Salem and Cumberland Counties, and that it does not operate in Burlington, Cape May or Atlantic Counties, or in those parts of Mercer and Ocean Counties which the parties stipulate are included within "Southern New Jersey south of Trenton." It does not appear that complainant contemplates any extension of its business into these last mentioned counties.

Applying the above test of law to this stipulated factual situation, there may be no doubt but that the attempted restraint imposed on the defendant at the inception of his employment was beyond that necessary to afford complainant fair protection and is, therefore, void as against public policy, unless the restrictive clause above quoted is susceptible to a "selective construction," as was done in Trenton Potteries Co. v. Oliphant, 58 N.J.Eq. 507, 43 A. 723, 46 L.R.A. 255, 78 Am.St.Rep. 612, and Fleckenstein Bros. Co. v. Fleckenstein, 76 N.J.L. 613, 71 A. 265, 24 L.R.A.,N.S., 913, which cases are commented upon by the Court of Errors and Appeals in Wyder v. Milhomme, 96 N.J.L. 500, 115 A. 380.

While there are other cases than the above dealing with the so-called "selective construction" of contracts in restraint of trade, the comment in the Wyder case seems dispositive of the issue before me and the question to be answered is—is there room for "selective...