Chambers-Dobson, Inc. v. Squier

• Decision Date: 26 July 1991
• Docket Number: INC,CHAMBERS-DOBSO
• Citation: 472 N.W.2d 391,238 Neb. 748
• Parties: , 6 IER Cases 1127 , a Nebraska Corporation, Appellee and Cross-Appellant, v. Charles D. SQUIER, Appellant and Cross-Appellee. 89-124.
• Court: Nebraska Supreme Court

Page 391

472 N.W.2d 391

238 Neb. 748, 6 IER Cases 1127

CHAMBERS-DOBSON, INC., a Nebraska Corporation, Appellee and Cross-Appellant, v. Charles D. SQUIER, Appellant and Cross-Appellee.

89-124.

Supreme Court of Nebraska.

July 26, 1991.

Syllabus by the Court

1. Injunction: Equity. An injunction is a remedy available through an equity action.

2. Equity: Appeal and Error. In an appeal of an equity action, an appellate court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court; provided, where credible evidence is in conflict on a material issue of fact, an appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

3. Appeal and Error. To be considered by the Supreme Court, an error must be assigned and discussed in the brief of one claiming that prejudicial error has occurred.

4. Contracts: Restrictive Covenants: Vendor and Vendee: Goodwill. A covenant not to compete which is contained in a contract for sale of a business is a seller's self-imposed restraint from trade and is frequently necessary to make goodwill in the seller's business a transferable asset and ensure that the buyer receives the full value of acquired goodwill.

5. Restrictive Covenants: Employer and Employee. Concerning enforcement of a postemployment restraint on competition by a former employee, the preliminary question is whether the restraint is necessary to protect the employer in some legitimate interest.

6. Restrictive Covenants: Employer and Employee. 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.

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.

10. Restrictive Covenants: Employer and Employee: Goodwill: Words and Phrases. A key for distinguishing "unfair competition" from "ordinary competition" is an employee's appropriation of "goodwill" properly belonging to the employer.

11. Restrictive Covenants: Employer and Employee: Goodwill. Goodwill is that value which results from the probability that old customers will continue to trade or deal with the members of an established concern.

12. Restrictive Covenants: Employer and Employee. There are three general questions relative to validity of 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? Third, is the restriction reasonable in the sense that it is not unduly harsh and oppressive on the employee?

13. Restrictive Covenants: Employer and Employee. In determining whether a postemployment covenant not to compete is unduly harsh or oppressive, a court must balance harshness and oppressiveness on the covenantor employee against protection of the covenantee employer's valid business interest.

14. Attorney Fees. In Nebraska, the general rule is that an attorney fee may be recovered only when authorized by statute, or when a recognized and accepted uniform course of procedure allows recovery of an attorney fee.

15. Contracts: Costs: Attorney Fees. A provision in a contract which provides that in the event of litigation involving the contract, the prevailing party shall be entitled to costs, including an attorney fee, is contrary to public policy and void.

Gene T. Oglesby, Oglesby, Brown, Thomas, Peterson & Orton, Lincoln, for appellant and cross-appellee.

David R. Buntain and Sonya S. Ekart, Cline, Williams, Wright, Johnson & Oldfather, Lincoln, for appellee and cross-appellant.

BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

SHANAHAN, Justice.

Chambers-Dobson, Inc., brought an action against Charles D. Squier to enjoin him from engaging in certain insurance business, in violation of covenants not to compete with Chambers-Dobson. From permanent injunctions granted by the district

court for Lancaster County and a judgment for damages, Squier appeals. Chambers-Dobson cross-appeals. We affirm.

STANDARD OF REVIEW

An injunction is a remedy available through an equity action. Burton v. Annett, 215 Neb. 788, 341 N.W.2d 318 (1983). In an appeal of an equity action, an appellate court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court; provided, where credible evidence is in conflict on a material issue of fact, an appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Hughes v. Enterprise Irrigation Dist., 226 Neb. 230, 410 N.W.2d 494 (1987); Gottsch v. Bank of Stapleton, 235 Neb. 816, 458 N.W.2d 443 (1990); American Sec. Servs. v. Vodra, 222 Neb. 480, 385 N.W.2d 73 (1986). See, also, Neb.Rev.Stat. § 25-1925 (Reissue 1989).

SALE TO CHAMBERS-DOBSON

Squier-McCashland Agency, a general partnership composed of Squier and Richard H. McCashland, was located in Lincoln, Nebraska, and operated as a general insurance agency and insurance brokerage business. On January 14, 1983, Squier, McCashland, and Chambers-Dobson signed an "Agreement to Purchase Assets" for sale of partnership assets to Chambers-Dobson for $189,825, which was allocated as follows: $5,825 for tangible property, $10,000 for goodwill, and $174,000 for an expiration list of the partnership's customers. In reference to the customer list of the Squier-McCashland Agency as an item of property, Chambers-Dobson, Squier, and McCashland considered an estimate submitted by an independent source and accepted 7 years as the "useful life" of the customer accounts reflected on the expiration list of customers. In addition to entitling Chambers-Dobson to use the name "Squier-McCashland Agency," the agreement also obligated Chambers-Dobson to pay Squier and McCashland $20,000, for which both Squier and McCashland promised that

for the period through 1990, or for so long as Buyer, its transferees or assigns are engaged in the operation of a general insurance agency and insurance brokerage business using the customer lists and other expirations which are purchased by the Buyer herein, whichever period is less, the Seller, Charles D. Squier and Richard H. McCashland, jointly and severally agree that neither the Seller nor any of the named individuals personally will in any manner, directly or indirectly, whether through agents, employees, corporations or through any means whatsoever, at any location solicit or receive applications for or write policies of insurance to or on account of any person, firm or entity with whom Seller has policies of insurance in force as of the date of closing....

Contemporaneous with the "Agreement to Purchase Assets," Squier, on January 14, 1983, signed an "Employment Agreement" with Chambers-Dobson, an agreement which, in relevant part, provided:

In recognition of the facts that the Employer is engaged in a personal service business involving confidential information and personal relationships with insureds, the success of which business is in large part due to the exclusive retention of such confidential information and undisturbed continuation of such personal relationships with insureds, the Employee does hereby covenant and agree as follows and acknowledges that the following covenants are reasonably necessary for the protection of the Employer and may be enforced to the extent set forth herein or to such extent as any court of competent jurisdiction may deem reasonable and proper:

(a) The Employee agrees that all information concerning the insurance of the Employer's clients, including expiration data in connection therewith, is confidential information constituting trade secrets and will be treated by him as such, and that both during and after the term of his employment, however, it may be (b) The Employee covenants and agrees that during the period of his employment hereunder he will not, directly or indirectly, on his own behalf or on behalf of anyone else, compete with the Corporation in any manner, and that for a period of forty-eight (48) months after the termination of his employment hereunder, however caused, he will not, directly or indirectly, solicit, attempt to obtain or accept insurance business from any of the Employer's customers nor act in the capacity of an adviser, consultant or risk manager to said customers, nor directly or indirectly, aid or assist anyone else in the solicitation of insurance business from such customers.

terminated, he will not, directly or indirectly, on his own behalf or on behalf of anyone else, make use of such information concerning the Employer's business nor divulge such information to anyong [sic] nor retain or create any lists of the Employer's customers for his own personal use nor reveal the same to anyone.

Squier and Chambers-Dobson...