Centorr-Vacuum Industries, Inc. v. Lavoie, CENTORR-VACUUM

• Decision Date: 17 June 1992
• Docket Number: Nos. 91-455,91-489,CENTORR-VACUUM,s. 91-455
• Citation: 135 N.H. 651,609 A.2d 1213
• Parties: , 7 IER Cases 982 INDUSTRIES, INC. and another v. Gerard H. LAVOIE and another.
• Court: New Hampshire Supreme Court

Page 1213

609 A.2d 1213

135 N.H. 651, 7 IER Cases 982

CENTORR-VACUUM INDUSTRIES, INC. and another v. Gerard H. LAVOIE and another.

Nos. 91-455, 91-489.

Supreme Court of New Hampshire.

June 17, 1992.

McLane, Graf, Raulerson & Middleton P.A., Manchester (Thomas J. Donovan, on brief and orally and Dawn B. Brown, on the brief), for plaintiffs.

Beasley & Ferber P.A., Concord (David H. Ferber, on brief and orally), for defendants.

JOHNSON, Justice.

The issue in this interlocutory appeal is whether the Superior Court (Dalianis, J.) erred in finding that the defendant, Gerard H. Lavoie, did not violate an enforceable noncompetition covenant in his "Employment and Consulting Agreement" with the plaintiff, Centorr-Vacuum Industries, Inc. (Centorr). We remand to the superior court for further findings in accordance with this opinion.

The superior court made the following findings of fact. In 1962, the defendant founded Centorr, a manufacturer of sophisticated, high-temperature furnaces. The defendant is recognized worldwide as an expert in the specialized furnace industry, and, under his leadership, Centorr attained a twenty percent share of the world market.

On January 4, 1985, the defendant sold his entire interest in Centorr to Thermal Scientific, Inc., a multinational conglomerate, for approximately $4,900,000. Desiring to remain active in the industry, however, the defendant simultaneously entered into an employment agreement with Centorr whereby he would remain a highly-paid consultant. The agreement contained the following noncompetition covenant:

"Section 3.6. Noncompetition. Lavoie shall not engage in any business activity in competition with the business then being conducted by [Centorr] at any place within the United States of America, Canada, or the United Kingdom, whether directly or indirectly, for his own account or as an employee, partner, officer, director, consultant or holder of more than 5% of the equity interest in any other person, firm, partnership or corporation for a period of three years after the termination for any reason or expiry of the Term hereof...."

(Emphasis added.) Both the defendant and Centorr agree that this noncompetition covenant is currently enforceable.

The defendant, who by early 1990 had received over $614,700 from Centorr as a consultant, regretted selling his business and sought to reenter the specialized furnace industry. He began negotiating with Centorr for some arrangement whereby he could participate in the formation of a competing business without violating the terms of the noncompetition covenant. These negotiations soon broke down, and in March 1990, the defendant terminated his employment relationship with Centorr.

Shortly thereafter, the defendant met with Donald Lavoie (his younger brother and a former Centorr employee), Peter Sanborn (his son-in-law and a former Centorr employee), and several other individuals to discuss the formation of a corporation that would produce furnaces similar to those produced by Centorr. In October 1990, this entity was incorporated in New Hampshire as Materials Research Furnaces, Inc. (MRF). Donald Lavoie acquired thirty shares of MRF stock and became its first president. MRF has since entered the specialized furnace market in direct competition with Centorr.

The defendant provided significant financing for the start-up of MRF. He supplied various family members with $60,000 in loans and gifts so that they could acquire MRF stock. He also lent Donald Lavoie and Peter Sanborn approximately $240,000. They, in turn, lent this sum to MRF. Finally, the defendant expressed his willingness to lend money to other MRF employees for the purchase of stock.

The defendant is also associated with MRF through his interest in the Suncook Business Park. In 1989, he gave the land on which the business park is located to various family members. He then provided $2,000,000 in financing for the business park and, with the assistance of Donald Lavoie, supervised its construction. The defendant holds a mortgage on the property. Donald Lavoie and various other family members are the sole stockholders. The business park rents approximately one-third of its space to MRF for a sum of $4,000 per month. The remaining two-thirds of the complex is vacant. For the purposes of this appeal, we accept the defendant's contention that his relationship to the business park does not make him MRF's "landlord."

Centorr filed a petition with the superior court seeking injunctive relief and other damages. Citing the above relationship between the defendant and MRF as well as evidence that the defendant assisted MRF in various other ways, Centorr contended that the defendant violated the terms of the noncompetition covenant. The superior court found that the defendant did not violate the noncompetition covenant when he loaned money to family members associated with MRF. Relying on cases from New Hampshire and other jurisdictions, the court determined that "those cases where the Court has found a violation of a non-competition clause seem to involve direct actions taken by the covenantor on behalf of the competitive business." The defendant, it concluded, did not engage in "direct action" in loaning money to his family members because such assistance was merely ...