Becker v. Bailey

• Decision Date: 08 February 1973
• Docket Number: No. 151,151
• Citation: 299 A.2d 835,268 Md. 93
• Parties: Charles E. BECKER v. John R. BAILEY.
• Court: Maryland Court of Appeals

Page 93

268 Md. 93

299 A.2d 835

Charles E. BECKER v. John R. BAILEY.

No. 151.

Court of Appeals of Maryland.

Feb. 8, 1973.

Bill L. Yoho, Lanham (Robert S. Hoyert, Robert A. Diemer, Roy W. Hooten, Joseph F. McBride, Kenneth A. Lechter, C. Frederick Fiege and Hoyert, Diemer, Yoho, Hooten & McBride, L. E. Funk, Lanham, on the brief), for appellant.

Victor L. Crawford, Rockville (Crawford & Goldberg, Rockville, on the brief), for appellee.

Argued before MURPHY, C. J., and BARNES, McWILLIAMS, SINGLEY, SMITH, DIGGES and LEVINE, JJ.

DIGGES, Judge.

The appellant, Charles E. Becker, filed his bill of complaint in the Circuit Court for Prince George's County against the appellee, John R. Bailey, seeking to enjoin the appellee from competing against Becker following the termination of his employment. In addition to the injunction, monetary damages were requested. The bill alleged that Bailey, who was once employed by appellant, was in violation of the employer-employee restrictive covenant contained in his employment contract. That contractual provision reads:

'in the event this agreement is terminated, either voluntarily, involuntarily or by mutual consent, that (Bailey) will not engage in a similar or competitive business for himself or for any competitor or in any capacity for any competitor, in the District of Columbia, Prince George's County, Anne Arundel County, and Montgomery County for a period of two (2) years from the date this Agreement is terminated in any manner.'

After a full hearing, Judge James F. Couch issued an order in which he denied the requested relief. From that order, this appeal followed.

The facts disclose that Becker is the sole proprietor of the Becker Title Service which for thirty-four years has provided a tag and title service to automobile dealers located in Washington, D. C. and Anne Arundel Prince George's and Montgomery Counties of Maryland. This service consists of visiting various car dealers, picking up their customers' applications for tags and title, taking the papers to the Department of Motor Vehicles for processing, and then delivering the tags and title to the dealers who in turn forward them to their customers. The importance of this service, which takes about four days, is that it is much swifter than mailing and the saving of time is a significant factor since the temporary tags supplied to the purchaser by the dealer have a short life span. In May 1963 Becker hired Bailey to work for him as a tag and title courier. This employment continued uninterruptedly until February 4, 1972 when Becker terminated it, giving as a reason the fact that he had learned that appellee was 'moonlighting' with some customers of the Becker Title Service.

Shortly after leaving, Bailey set up his own tag and title company, operating out of his home in Waldorf, Charles County, Maryland. He, at the time of trial, serviced about eighteen dealer accounts-fifteen of these are customers that never used the Becker service, but three are former clients of the appellant. However, there is no evidence that Bailey solicited the business of these former customers of Becker; and, in fact, the testimony indicates just the opposite. One customer had left Becker's service a long time before Bailey was fired and had tried another tag and title company before going to Bailey; the other two were dissatisfied with the length of time it took Becker to perform his service and one contacted Bailey while he was still employed by appellant, but the other did not contact him until after it learned he was no longer with appellant. We note, as did the trial judge, that the information that Bailey had left Becker's was not supplied by appellee; but rather, his employer notified his customers of this fact eight hours before he terminted Bailey's employment. Further testimony adduced at trial shows that appellee is forty-nine years old, in a poor financial condition and is not trained for any other type of work except possibly, to a limited degree, farming. Faced with this factual beckground the chancellor concluded that:

'It seems to the Court, on the evidence before it, that this case falls within the class or type of cases holding that there is no justification for restraint where a former employee does no more than become an efficient competitor of his former employer, and does not do so by exploiting his personal contacts with customers or clients of his former employer.

Further, the Court feels that to find the restriction justified would in fact work an undue hardship on (Bailey).

Accordingly, the Court will deny the injunctive relief prayed.

As far as damages are concerned, this issue is moot in view of the Court's ruling above and secondly they were not proved in fact.'

The main issue presented to this Court is whether, under the facts of this case, the non-competition covenant contained in the contract of employment is enforceable against the appellee. We agree with the chancellor that it is not. The general rule in Maryland is that if a restrictive covenant in an employment contract is supported by adequate consideration and is ancillary to the employment contract, an employee's agreement not to compete with his employer upon leaving the employment will be upheld 'if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on the employee or disregard the interests of the public.' Ruhl v. Bartlett Tree Co., 245 Md. 118, 123-24, 225 A.2d 288, 291 (1967); MacIntosh v. Brunswick, 241 Md. 24, 215 A.2d 222 (1965). While such restrictions may be enforced under some circumstances, there is no sure measuring device designed to calculate when they are. Rather, a determination must be made based on the scope of each particular covenant itself; and, if that is not too broad on its face, the facts and circumstances of each case must be examined. Ruhl v. Bartlett Tree Co., supra. When such an analysis is made, some restrictive covenants are deemed enforceable while others are not. Compare Tuttle v. Riggs-Warfield-Roloson, 251 Md. 45, 246 A.2d 588 (1968); Ruhl v. Bartlett Tree Co.,supra; Western Md. Dairy v. Chenowith, 180 Md. 236, 23 A.2d 660 (1942); Tolman Laundry v. Walker, 171 Md. 7, 187 A. 836 (1936); and Deuerling v. City Baking Co., 155 Md. 280, 141 A. 542 (1928), with MacIntosh v. Brunswick, supra; Silver v. Goldberger, 231 Md. 1, 188 A.2d 155 (1963); and Tawney v. Mutual System of Md., 186 Md. 508, 47 A.2d 372 (1946).

While the determination of enforceability depends on the facts and circumstances present in each particular case, a comparative examination of the cases in this State which have considered this issue indicates a consistency in the holdings of this Court. These decisions demonstrate that Maryland follows the general rule that restrictive covenants may be applied and enforced only against those employees who provide unique services, or to prevent the future misuse of trade secrets, routes or lists of clients, or solicitation of customers. ¹ Ruhl v. Bartlett Tree Co., supra; Silver v. Goldberger, supra; Tawney v. Mutual System of Md., supra.

In Tuttle v. Riggs-Warfield-Roloson, supra, a restrictive covenant was held enforceable so as to prohibit an employee (Tuttle) from insuring a client that was previously insured by Tuttle's former employer. This holding was based on a distinction noted in Ruhl

'between the cases where business success is attributable to the quality of the product being sold, and those where the personal contact of the employee with the customer is an important factor. In the latter case, the employer has a stronger need for protection against diversion of his business to the former employee who has had personal contacts with customers which the employer lacks. Accordingly, restrictive covenants to protect the employer's interest are upheld when found to be reasonable as to duration and area.'

In Tuttle this Court found the employer had a protectible interest since the employee had obtained the disputed insurance account because of the personalized service given the insured while employed by Riggs-Warfield-Roloson, Inc. Here, that is not the case. Rather, dissatisfaction with Becker and not personal contact with the employee led to the few defections of customers that occurred. Apparently Bailey's success is 'attributable to the quality of the product being sold.'

In Ruhl v. Bartlett Tree Co., supra, the employee was enjoined from engaging in the tree service business and competing against his former employer for two years in five Eastern Shore counties and a contiguous county in Delaware. That injunction was...