Davis v. Ebsco Industries, Inc., 62-366
| Decision Date | 26 February 1963 |
| Docket Number | No. 62-366,62-366 |
| Citation | 150 So.2d 460 |
| Parties | Shepard W. DAVIS, Appellant, v. EBSCO INDUSTRIES, INC., Appellee. |
| Court | Florida District Court of Appeals |
Levey & Sirkin, Miami, for appellant.
Creel & Glasgow, Miami, for appellee.
Before PEARSON, TILLMAN, C. J., and BARKDULL and HENDRY, JJ.
This is an appeal by the defendant from a final decree enjoining and restraining the defendant, until January 1, 1973, from entering into or being connected with any magazine publication or subscription agency anywhere in the world unless such magazines business it paid for and entered through the plaintiff, except for orders from Florida residents; and further enjoining the defendants, until January 1, 1973, from engaging in any business activity of any kind similar or identical to the recreational equipment business being carried on by a division of the plaintiff wherever military installations of the United States or United Nations may be located.
The defendant and his wife were members of a partnership engaged principally in the business of soliciting and selling subscriptions for magazines, books or periodicals. On April 6, 1953, the defendant sold his business to a predecessor of the plaintiff for $75,000.00, of which $3,000.00 was allocated to office furnishings and $72,000.00 to good will. Two contracts were signed on that date, the first containing a provision by which the defendant agreed not to compete for a period of 20 years in certain business activities previously engaged in by him, principally the solication and sale of magazines and periodicals, and the second containing the same provision and in addition, providing for employment of the defendant by the plaintiff for a period of five years, as manager. Both contracts extended to an area within or outside the territorial limits of the United States or where any United States or United Nations military personnel are stationed.
On April 1, 1958, the date the employment contract ended, the parties entered into a third agreement, a franchise agreement, wherein it was provided that the defendant would operate independently of the plaintiff, for five years, remitting orders through the plaintiff. The defendant was to receive a certain percentage of the profits depending upon the publication sold. This agreement incorporated by reference that paragraph of the April 6, 1953 employment contract wherein the defendant agreed not to compete with the plaintiff for twenty years in the areas previously mentioned but expressly interpreted such paragraph as now allowing the solication and sale of magazines by the defendant so long as the subscriptions were 'paid for and entered through' the plaintiff. In addition, this new contract provided that the defendant would not compete with any business now being carried on by a certain division of the plaintiff.
About two years after this third agreement was executed, the defendant elected to cancel said agreement in accordance with its terms, and thereafter, the defendant resumed the solicitation and sale of magazines in Florida and other states.
The plaintiff then filed this action seeking to enjoin the defendant from violating the covenants not to compete with plaintiff as contained in the above mentioned agreements. The defendant answered admitting the execution of the contracts but alleging that the covenants not to compete were unreasonable, illegal, and against public policy.
On final hearing, the chancellor entered the final decree described in the first paragraph of this opinion. The defendant appealed contending that the restrictions were against public policy as they were too long in duration and too broad in area; and further, that the third agreement merged all prior agreements and terminated when cancelled by the defendant pursuant to its terms. The plaintiff contends that the final decree was properly entered but asserts, by cross-assignment of error, that the injunction should not have excluded Florida from its scope.
The first question for our determination is whether this particular covenant not to compete, as contained in the third agreement, is valid. In making this determination we are governed by the laws of New York since the language of the covenant in question was extracted from the employment contract, which the parties had agreed would be controlled by New York law. This clear intention that New York law control the validity of this contract, coupled with the fact that the contract was substantially connected with New York in that the headquarters of the business was and still is located there, warrants the application of New York law. 1
While New York has a statute 2 declaring contracts or agreements for monopoly or in restraint of trade illegal and void, this statute is aimed at agreements for monopoly or in restraint of trade between different manufacturers or merchants engaged in a particular business and does not apply to a situation where the agreement is only between a single company and certain individuals. 3 Further, the rule that covenants restraining one from entering into certain employment will not be enforced where the services are not special, unique, or extraordinary does not apply where the restrictive covenant is made in connection with the sale of a business. 4
This leaves us with the question of whether this particular covenant was reasonable under the facts presented.
In the case of Goldstein v. Maisel, supra, a covenant by a former partner in a shoe stamping business not to compete for twenty years was enforced by the court. Since the parties had failed to designate an area in which the restriction was to operate, the covenant was enforced as was necessary to protect the remaining partners from competition from the retiring partners.
In Kolton v. Dinetz, 19 Misc.2d 1084, 191 N.Y.S.2d 175 (1959), a ten year covenant not to compete 'within the States of New York, New Jersey, Pennsylvania and all of the New England States' was considered enforceable.
In Fintz v. Levy, 221 App.Div. 583, 224 N.Y.S. 494 (1927), a covenant not to compete for four years anywhere in the United States, except Utah, was enforced where such covenant was contained in a contract for the sale of a Christmas Tree outfit manufacturing business, and its good...
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