C & C Products, Inc. v. Premier Indus. Corp.

• Decision Date: 21 December 1972
• Court: Alabama Supreme Court
• Parties: C & C PRODUCTS, INC., a corporation and Roy A. Marlow v. PREMIER INDUSTRIAL CORPORATION, a corporation. SC 92.

Page 124

275 So.2d 124

290 Ala. 179

C & C PRODUCTS, INC., a corporation and Roy A. Marlow v. PREMIER INDUSTRIAL CORPORATION, a corporation.

SC 92.

Supreme Court of Alabama.

Dec. 21, 1972.

Rehearing Denied Feb. 1, 1973.

Cabaniss, Johnston, Gardner & Clark and Drayton Nabers, Jr., Birmingham, for appellant C & C Products, Inc.

Bainbridge & Mims, Birmingham, for appellant Roy A. Marlow.

Rives, Peterson, Pettus, Conway & Burge and W. Eugene Rutledge, Birmingham, for appellee.

HARWOOD, Justice.

Premier Industrial Corporation filed a bill in the Circuit Court of Jefferson County, in Equity, against C & C Products Corporation, and Roy A. Marlow. The bill sought injunctive relief and damages.

The bill allages in substance that Premier and C & C are Ohio corporations engaged in the business of designing, developing and marketing various types of maintenance products.

C & C was organized by Leo Chaplin and his son Lee Chaplin in April 1966. It is a family owned corporation, and in direct competition with Premier.

Premier markets its products through independent sales agents who are assigned specific territories. The bill avers that these agents are carefully selected and trained and are equipped with customer lists and customer record books (dossiers on individual customers) at great expense to Premier.

Leo Chaplin was first employed by Premier in 1951. He was promoted several times, and was a Vice President of Premier at the time he voluntarily left the company in 1965.

Leo Chaplin, during his entire time with Premier, was responsible for the recruitment of independent sales agents, which included explaining the employment contracts and obtaining the prospective agent's signature to such contract.

Lee Chaplin likewise was employed by Premier from 1958 until 1964. He served first as an independent agent and had been promoted to a district manager when he left Premier. His duties during at least a part of the time he was with Premier included recruitment and training of independent agents, and obtaining their signatures to agency contracts.

The respondent Marlow was employed by Premier in July 1956 as an independent agent. He received various promotions and his position from 24 January 1969 to 29 February 1972, was that of District Manager for Premier in a territory assigned him in Alabama.

Both of the Chaplins and Marlow had each signed agency contracts with Premier, and had required numerous agents they had recruited to sign such contracts.

Such contracts contained a covenant that the employee, during the term of the contract, and for two years after its termination, would not directly or indirectly, enter into or engage in any business in competition with Premier.

The bill further avers that despite their knowledge of the contracts between Premier and its independent sales agents, Leo Chaplin and Lee Chaplin, since 1965, have persuaded and recruited independent sales agents of Premier to leave Premier and work for the Chaplins, or their businesses in the territories assigned to such agents by Premier.

It was further alleged that during the week of 11 October 1971, Leo Chaplin, and/or Lee Chaplin, acting for C & C, entered into a conspiracy with respondent Marlow, then a district manager for Premier, that Marlow would continue to 'represent' himself as district manager for Premier, but at the same time would assist C & C in obtaining the services of independent sales agents of Premier; that in pursuance of this conspiracy the Chaplins, acting for C & C, and with Marlow's assistance, attempted to induce several of Premier's independent sales agents to leave Premier and go with C & C, and in fact did induce four of such agents to leave Premier and work for C & C in the territory assigned to them by Premier. The four agents were S. Forest Barker, George Max Sides, Robert C. McMillan, and Verdery A. Clark. These agents were to sell for C & C in the same territory assigned to them by Premier the same type of products they had formerly sold for Premier.

The bill prayed for injunctive relief, and since the Chancellor's preliminary injunction was in the identical language of the prayer, we will not here set the prayer out.

Upon the filing of the bill, and its presentation to the Chancellor, he forthwith granted a preliminary injunction as prayed for, and the respondents C & C and Marlow were thereby enjoined from:

'(a) Soliciting, attempting to solicit, or inducing, procuring, attempting to induce or attempting to procure further breaches of contract between complainant and any of its sales agents and/or management personnel.

'(b) From continuing to employ or attempting to employ former sales agents or management personnel of complainant in violation of their contracts with complainant, specifically: S. Forest Barker, George Max Sides, Robert C. McMillan and Verdery A. Clark.

'(c) From accepting any sales or orders obtained by, submitted by or from the territory assigned by C & C to any of the former sales agents or management personnel of complainant in violation of their contract with complainant, specifically: S. Forest Barker, George Max Sides, Robert C. McMillan and Verdery A. Clark.'

Upon being served with a copy of the preliminary injunction, the respondents each filed identical pleadings consisting of, (1) a demurrer to the bill based on some 192 grounds, (2) a motion to discharge the injunction, (3) a motion to dissolve the injunction, and (4) a sworn answer specifically providing that the demurrers and motions to discharge and dissolve were not to be deemed as waived.

The answers in substance deny that the respondents individually or jointly, sought to induce any salesman to begin work with C & C in breach of any enforcible provision of the contract between the salesman and Premier, and each of the facts constituting the basis of Premier's complaint is separately denied.

The answers also assert several affirmative defenses. First, it is asserted that for years Premier has done business in Alabama. The bill itself asserts that Premier does business in each state of the United States. The answer further asserts that Premier is not qualified to do business in Alabama, which allegation is supported by Exhibit A attached to and made a part of the answer, which exhibit is a certificate of the Secretary of the State of Alabama that Premier is not qualified to do business in Alabama. It is further averred that the present complaint seeks to specifically enforce in this State contracts to be wholly performed in the States of South Carolina, Florida, and Mississippi, i.e., the non-competition provisions of the employment contracts between Premier and George M. Sides, whose assigned territory was in Mississippi, Robert C. McMillan, whose assigned territory was in South Carolina, and S. Forest Barker and Verdery A. Clark, whose assigned territories were in Florida.

It was further averred that in February 1972, Premier had instituted a suit against C & C and its chief executive officer in Ohio, and that a comparison of the allegations made in the Ohio suit with those made in the present suit, shows that the complaint in this case is virtually the same as the complaint in the Ohio case; that on 26 April 1972, Premier filed an action in Richland County, South Carolina, against Robert C. McMillan, seeking to enforce the non-competition provision of his contract with Premier, McMillan being a resident of South Carolina, and the territory assigned him under his contract with Premier being in that State; that on 18 May 1972, Premier filed proceedings in the United States District Court for the Southern District of Mississippi against George M. Sides. Sides was a resident of Mississippi, and the territory assigned him under his employment contract with Premier was in Mississippi.

Preliminary injunctions were denied in the South Carolina and Mississippi proceedings, and the suit in Ohio was dismissed on motion of Premier.

It should also be noted that all of the contracts between Premier and its agents purport that they were made in Ohio and are to be governed both as to interpretation and performance by the laws of Ohio.

After a hearing on the respondents' motion to dissolve and to discharge the preliminary injunction, the Chancellor overruled each motion separately and severally.

This appeal is from said ruling overruling the motions to discharge and dissolve the temporary injunction.

At the threshold of a consideration of this appeal, the true nature of the cause of action made by the bill must be determined, that is, whether it sounds in tort or in contract. The appellants (respondents below) contend that the action arises in contract, while counsel for the appellee insists that the action arises in tort. The necessity for determining the nature of this cause of action is that if in truth and in fact the cause does sound in contract, the action of the court in refusing to dissolve or discharge the preliminary injunction must be deemed erroneous for reasons hereinafter set forth.

There can be no doubt that counsel for the appellee has attempted to frame the bill as sounding in tort. The allegations of the bill are that the respondents entered into a conspiracy to induce the sales agents of Premier to breach their contracts with Premier and enter the employment of C & C. Typical of the averments of this lengthy complaint are paragraphs 22 and 23 which read as follows:

'22. Complainant avers that the said Leo M. Chaplin and Lee J. Chaplin have for several years prior hereto engaged in the practice of attempting to unlawfully and maliciously procure a breach of the contractual relationship between complainant and many of its independent agents. Complainant further avers that at least during the period November 1, 1971, until the present time the said Leo M. Chaplin and Lee J. Chaplin, acting for and on behalf of the respondent C & C, have engaged in the practice of unlawfully and maliciously...