Boisen v. Petersen Flying Service, Inc.

• Decision Date: 14 March 1986
• Docket Number: No. 84-707,84-707
• Parties: , 60 A.L.R.4th 953 Douglas BOISEN, Appellee, v. PETERSEN FLYING SERVICE, INC., Nebraska Corporation, Appellant.
• Court: Nebraska Supreme Court

Page 29

383 N.W.2d 29

222 Neb. 239, 60 A.L.R.4th 953

Douglas BOISEN, Appellee, v. PETERSEN FLYING SERVICE, INC., Nebraska Corporation, Appellant.

No. 84-707.

Supreme Court of Nebraska.

March 14, 1986.

Syllabus by the Court

1. Contracts. When neither the terms of a contract nor facts and circumstances demonstrating the intent of the parties are disputed, construction of a contract is a question of law.

2. Appeal and Error. Regarding a question of law, the Supreme Court has an obligation to reach its conclusion independent from the conclusion reached by a trial court.

3. Restrictive Covenants: Employer and Employee. There are three general requirements relating to partial restraints of trade: First, is the restriction reasonable in the sense that it is not injurious to the public; second, is the restriction reasonable in the sense that it is no greater than is reasonably necessary to protect the employer in some legitimate interest; and, third, is the restriction reasonable in the sense that it is not unduly harsh and oppressive on the employee.

4. Restrictive Covenants: Employer and Employee. Not every employer-employee relationship infuses validity and enforceability into a postemployment restraint on competition by a former employee.

5. Restrictive Covenants: Employer and Employee. Regarding a postemployment covenant not to compete, an employer has a legitimate business interest in protection against competition by improper and unfair methods, but an employer is not entitled to enforcement of a restrictive covenant which merely protects the employer from ordinary competition.

6. Restrictive Covenants: Employer and Employee. Where an employee has substantial personal contact with the employer's customers, develops goodwill with such customers, and siphons away the goodwill under circumstances where the goodwill properly belongs to the employer, the employee's resultant competition is unfair, and the employer has a legitimate need for protection against the employee's competition.

7. Restrictive Covenants: Employer and Employee. An employer has a legitimate need to curb or prevent competitive endeavors by a former employee who has acquired confidential information or trade secrets pertaining to the employer's business operations.

8. Restrictive Covenants: Employer and Employee. Ordinarily, an employer has no legitimate business interest in postemployment prevention of an employee's use of some general skill or training acquired while working for the employer, although such on-the-job acquisition of general knowledge, skill, or facility may make the employee an effective competitor for the former employer.

9. Restrictive Covenants: Employer and Employee. A covenant not to compete, as a partial restraint of trade, is available to prevent unfair competition by a former employee but is not available to shield an employer against ordinary competition.

Jerry C. Stirtz of Martin, Stirtz & Martin, Minden, for appellant.

Michael R. Snyder, Kearney, for appellee.

KRIVOSHA, C.J., and BOSLAUGH, WHITE, HASTINGS, CAPORALE, SHANAHAN, and GRANT, JJ.

SHANAHAN, Justice.

Douglas Boisen commenced an action for declaratory judgment, see Neb.Rev.Stat. §§ 25-21,149 et seq. (Reissue 1979), seeking determination that a postemployment covenant not to compete, contained in Boisen's employment contract with Petersen Flying Service, Inc., was invalid. We affirm the judgment of the district court for Kearney County declaring the postemployment restraint unenforceable.

The basic facts bearing upon disposition of Petersen Flying's appeal are not disputed. When neither the terms of a contract nor facts and circumstances demonstrating the intent of the parties are disputed, construction of a contract is a question of law. See, Bishop Cafeteria Co. v. Ford, 177 Neb. 600, 129 N.W.2d 581 (1964); Grantham v. General Tel. Co., 191 Neb. 21, 213 N.W.2d 439 (1973); Don J. McMurray Co. v. Wiesman, 199 Neb. 494, 260 N.W.2d 196 (1977). Regarding a question of law, this court has an obligation to reach its conclusion independent from the conclusion reached by a trial court. See, Ranger Division v. Bayne, 214 Neb. 251, 333 N.W.2d 891 (1983) (construction of federal regulations to determine whether, as a matter of law, absence of a disability waiver was an absolute defense to an applicant's claim concerning an employer's alleged discrimination against the physically disabled); OB-GYN v. Blue Cross, 219 Neb. 199, 361 N.W.2d 550 (1985) (declaratory judgment action to determine validity of a nonassignment provision in health care contracts).

Douglas Boisen, 35 years old and a lifetime resident of Kearney County, lived near Minden with his wife and children. Douglas, a farmer since 1971, formed a farming partnership in 1974, Boisen Farms, with his father. Douglas obtained a private pilot certificate in 1977. Charles O. Petersen, president and sole shareholder of Petersen Flying, was a flight instructor for Douglas in obtaining the private pilot certificate. The business of Petersen Flying, incorporated in 1976, consisted of aerial spraying for application of agricultural chemicals--herbicides and insecticides. Boisen Farms was one of Petersen Flying's customers.

In 1979 Douglas began training toward a commercial pilot certificate. Petersen again instructed Douglas and indicated an interest in Douglas' future employment by Petersen Flying as a spray pilot, after Douglas obtained his commercial pilot certificate. Douglas received a commercial pilot certificate in 1981 and arranged with Petersen for special instruction in flying a spray plane. Petersen supervised several low-altitude practice runs made in a Grumman "Ag-Cat," one of Petersen Flying's spray planes used in Douglas' efforts to develop skills as an aerial applicator. When Douglas became proficient in flying an Ag-Cat, Petersen, on behalf of Petersen Flying, submitted to Douglas a written agreement denominated "Contract for Use of Aircraft, Employment as Pilot and Agreement Not to Compete." The submitted contract contained a provision:

It is expressly understood and agreed, that for the consideration provided herein by employer, employee agrees that in the event he does not enter the employment of employer, or in the event he does enter employment with employer, but later leaves such employment for any reason, whether at his own instance, or at the instance of the employer, then, in any of such events, employee agrees that he shall not enter any occupation or employment, whether working for someone else or as a self-employed person, as owner, operator, employee, salesman, representative, pilot, instructor, advisor or consultant in, with or to any business which is in competition with any business presently performed or performed at any time during the employment of employee, by Petersen Flying Service, Inc., employer herein, within a radius of 50 miles of Minden, Kearney County, Nebraska, for a period for 10 years from the date of this agreement, or from the date such employee shall leave the employment of employer, which ever is later.

Douglas and Petersen signed the agreement on July 6, 1982. After signing the agreement Douglas did some aerial spraying for Petersen Flying in 1982 and during the first few weeks of the "spraying season" in 1983. While employed by Petersen Flying, Douglas did not contact any of Petersen Flying's customers regarding aerial spraying, that is, did not solicit orders for spraying or make collections for chemicals applied by Petersen Flying. As a result of his growing up in Kearney County and acquaintance with other members of the farming community, Douglas knew the identity of some customers by location of their farms. For identification of sites to be sprayed, Douglas and other spray pilots of Petersen Flying were given names of customers immediately before spraying operations. Douglas' only on-the-job training, knowledge, or skill acquired related to operating the Ag-Cat, mixing chemicals to be sprayed, and applying chemicals on fields of customers. Chemicals were mixed according to the manufacturer's label on the container.

Late in 1983, Petersen Flying discharged Douglas from employment, claiming that Douglas never developed into a good spray pilot.

In his petition Douglas alleged:

The restraint purportedly imposed by [the employment contract] is unreasonable concerning the nature of employment or occupation purportedly prohibited, the area within which such employment or occupation is prohibited, and the length of time during which such employment or occupation if [sic] prohibited, and as such, the restraint does not correspond with the need, if any, for protecting the legitimate interests of [Petersen Flying].

By his petition Douglas prayed that the covenant not to compete, contained in the agreement of July 6, 1982, be "declared invalid and of no force or effect."

In its answer Petersen Flying claimed that the contract with Douglas constituted "a bargain by an assistant, servant or agent not to compete with his employer, after termination of employment, within such territory and during such time as may be reasonably necessary for the protection of the employer without imposing undue hardship on the employee." Petersen Flying also filed a cross-petition, alleging that the restrictive covenant was "valid and enforcable [sic] and should be enforced against [Douglas]" and praying that the restrictive covenant be determined valid and enforceable or "that in the event said Contract cannot be fully enforced, that the Court determine and reform the same to be equitable between the parties."

At trial Douglas testified he wanted to enter the aerial spraying business. As described by Charles Petersen, the aerial spraying of Petersen Flying was not fly-by-night. Petersen Flying owned six aircraft and obtained customers through "personal contact, word of mouth, advertising [and a] lot of hard work." Petersen testified that the aerial spraying...