Defco, Inc. v. Decatur Cylinder, Inc.

Decision Date03 January 1992
Citation595 So.2d 1329
CourtAlabama Supreme Court

Gary C. Huckaby and Frank M. Caprio of Bradley, Arant, Rose & White, Huntsville, for appellant.

David R. Donaldson and D. William Rooks of Ritchie and Rediker, Birmingham, and Bingham Edwards, Decatur, for appellee.

ALMON, Justice.

This appeal comes from a summary judgment for the defendant, Decatur Cylinder, Inc., on three counts of a complaint filed by Defco, Inc. Count 1 sought damages, alleging tortious interference with contractual relations, breach of a contract whereby Decatur Cylinder agreed not to hire Defco's employees without Defco's consent, and "intentional and malicious" breach of that contract. Count 3 alleged an amount due on an account stated, and Count 4 alleged the same amount as being due on open account. Counts 3 and 4 were added by amendments 8 years after the cause of action arose, and, as ultimately amended, they alleged that Decatur Cylinder had promised to pay the amounts sought with no intention to perform the promises and that Defco, relying on those promises, had refrained from pursuing collection efforts. The principal issues before us are whether the contract alleged in Count 1 was void as a restraint of trade under Ala.Code 1975, § 8-1-1, whether an action will lie for intentional interference with contract or business relations under the facts alleged, and whether Counts 3 and 4 were barred by the statute of limitations.

Defco and Decatur Cylinder are cylinder-manufacturing corporations located on adjacent parcels of land in Decatur, Alabama. In August 1981 they entered into a contract pursuant to which Defco sold certain assets, including the inventory, operations, and good will of its Air-Dro division or subsidiary, to Decatur Cylinder. The agreement was structured partially as a sale and partially as a lease/purchase, with Decatur Cylinder obligating itself under several notes with annual payments and under a lease with quarterly payments for eight years and an option to purchase at the end of that time. Section 10 of the contract read: "Transfers of employees between the parties and/or employment of former employees of one party by the other party shall be by mutual agreement of the parties."

By December 1981, Decatur Cylinder had hired at least two of Defco's employees. Defco filed the original complaint in this action on January 6, 1982, naming two of the Defco employees whom Decatur Cylinder had hired and alleging that they were "highly skilled machinists who may not be replaced by the Plaintiff without causing immediate and irreparable injury to the business of the Plaintiff." The complaint sought a preliminary injunction against, or damages in the amount of $25,000 for, such hirings in breach of Section 10 of the contract. The parties quickly reached a settlement on the injunctive aspect of the case, filing an agreement on January 8 whereby Decatur Cylinder agreed not to hire any of Defco's employees as of that date, and Defco withdrew its application for a preliminary injunction.

Decatur Cylinder filed a motion to dismiss on February 5 and an answer on March 12, but no further proceedings occurred until the case was dismissed for lack of prosecution in December 1984. On January 3, 1985, Defco filed a motion to set aside the order of dismissal, and the court granted the motion on January 4. On August 5, 1988, Defco filed its first amended complaint, adding Count 2, which alleged that Decatur Cylinder had breached the August 1981 contract by failing to pay amounts due thereunder. On October 16, 1989, Defco filed its second amended complaint, adding Counts 3 and 4, which summarily claimed amounts due on account, and Count 5, which alleged breach of the lease by failure to make payments due thereunder.

On March 22, 1990, Defco filed its third amended complaint, "restating the count in the original complaint" by amending Count 1 to seek $1,500,000 damages for breach of Section 10 of the contract, for "intentionally and maliciously violat[ing] said agreement for the purpose of injuring the plaintiff and its business and for the purpose of taking business and production capability away from the plaintiff," and for intentionally interfering with the contractual and business relations between Defco and the two employees named in the original complaint. On May 7, 1990, Defco filed another amendment, amending Counts 3 and 4 to allege that Decatur Cylinder had induced it not to file this action by promising to pay the amount due on account. On June 1, 1990, Defco further amended those allegations.

During the period of Defco's amendments, Decatur Cylinder amended its answer several times, the amendments including a defense that Counts 3 and 4 were barred by the statute of limitations. Decatur also filed and amended a motion for summary judgment, supported by affidavits and depositions. The trial court entered a summary judgment for Decatur Cylinder on Counts 1, 3, and 4, and made the judgment as to those counts final pursuant to Rule 54(b), Ala.R.Civ.P.

Alabama Code 1975, § 8-1-1(a), provides:

"Every contract by which anyone is restrained from exercising a lawful profession, trade or business of any kind otherwise than is provided by this section is to that extent void."

Within certain limitations, paragraph (b) of that section allows the seller of the good will of a business to enter an agreement not to compete with the buyer and allows an employee to enter an agreement to refrain from engaging in a similar business and from soliciting old customers of the employer. Paragraph (c) allows partners to enter into similar agreements upon the dissolution of a partnership.

In their arguments regarding the summary judgment on Count 1, the parties concentrate on Dyson Conveyor Maint., Inc. v. Young & Vann Supply Co., 529 So.2d 212 (Ala.1988). In that case, Dyson Conveyer and Young & Vann entered into negotiations exploring the possibility that one of them would buy the other's conveyor belt business. Prior to the negotiations, the parties executed a confidentiality agreement that included a "no switching" provision whereby the companies agreed not to hire each other's employees for a specified period. This Court held that provision to be unenforceable because of the operation of § 8-1-1. Defco seeks to distinguish Dyson Conveyor by pointing to the evidence cited in that opinion that the only other employer engaged in similar work in Alabama was in Mobile and did not have any job openings. See 529 So.2d at 214. Defco argues that in this case there is no similar evidence, i.e., no evidence that its employees could not engage in their trade if they could not work either for it or for Decatur Cylinder.

Defco's argument overlooks the paragraph following the one it cites. That paragraph distinguishes cases allowing partial restraints of trade, as follows:

"This statement [that partial restraints of trade may be allowed] has always come in the context where the one who is restrained from engaging in some aspect of a trade or business has entered into a contract, for a consideration, with the party seeking to enforce the contract. We do not see how the principle that allows 'partial restraints' can apply to restrain employees from competing with their former employers without the employees' having entered into such an agreement."

Dyson Conveyor, 529 So.2d at 214-15. The opinion continues by saying that an agreement such as that between Dyson Conveyor and Young & Vann could have a field of operation to the extent that the employers had noncompetition agreements with their employees that were enforceable under § 8-1-1(b). Id., at 215.

Section 10 of the contract at issue here purported to at least partially restrain Defco's employees from engaging in their trade, and there is no evidence that those employees had entered into noncompetition agreements with Defco. Section 8-1-1 makes such agreements void unless they are shown to fit within one of the statutory exceptions. Under the circumstances, the trial court did not err in entering the summary judgment for Decatur Cylinder on the contract aspect of Count 1. Because Section 10 was properly held void, the summary judgment was also proper as to the portion of Count 1 alleging that Decatur Cylinder "willfully...

To continue reading

Request your trial
16 cases
  • Setliff v. Akins
    • United States
    • South Dakota Supreme Court
    • September 6, 2000
    ...relationship ... [was] not within the realm of protection afforded by this cause of action"). See also Defco, Inc. v. Decatur Cylinder, Inc., 595 So.2d 1329, 1332 (Ala.1992) (finding no basis existed for allowing an action for intentional interference under the circumstances of this case an......
  • Carr v. International Refining & Mfg. Co.
    • United States
    • Alabama Supreme Court
    • January 16, 2009 the extent that Dyson[ Conveyor Maintenance, Inc. v. Young & Vann Supply Co., 529 So.2d 212 (Ala.1988)], Defco[, Inc. v. Decatur Cylinder, Inc., 595 So.2d 1329 (Ala.1992)], and Sevier[ Insurance Agency, Inc. v. Willis Corroon Corp. of Birmingham, 711 So.2d 995 (Ala.1998),] conflict with ......
  • Carr v. International Refining & Manufacturing Company, No. 1070770 (Ala. 11/13/2008)
    • United States
    • Alabama Supreme Court
    • November 13, 2008 the extent that Dyson[Conveyor Maintenance, Inc. v. Young & Vann Supply Co., 529 So. 2d 212 (Ala. 1988)], Defco[, Inc. v. Decatur Cylinder, Inc., 595 So. 2d 1329 (Ala. 1992)], and Sevier[Insurance Agency, Inc. v. Willis Corroon Corp. of Birmingham, 711 So. 2d 995 (Ala. 1998),] conflict w......
  • Concrete Co. v. Lambert
    • United States
    • U.S. District Court — Middle District of Alabama
    • June 1, 2007
    ...on or engaging in a similar business. Files v. Schaible, 445 So.2d 257, 259-60 (Ala.1984). See also Defco, Inc. v. Decatur Cylinder, Inc., 595 So.2d 1329, 1330-31 (Ala.1992) ("Within certain limitations, paragraph (b) of that section allows the seller of the good will of a business to enter......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT