Ex parte Knox Kershaw, Inc.

• Decision Date: 12 April 1990
• Citation: 562 So.2d 250
• Parties: 1990-2 Trade Cases P 69,093 Ex parte KNOX KERSHAW, INC., a Corporation. (Re: KNOX KERSHAW, INC. v. Royce KERSHAW, Jr., and Kershaw Manufacturing Company, Inc.) 88-1200.
• Court: Alabama Supreme Court

Page 250

562 So.2d 250

1990-2 Trade Cases P 69,093

Ex parte KNOX KERSHAW, INC., a Corporation (Re: KNOX KERSHAW, INC. v. Royce KERSHAW, Jr., and Kershaw Manufacturing Company, Inc.)

88-1200.

Supreme Court of Alabama.

April 12, 1990.

William H. Mills of Redden, Mills & Clark, Birmingham, for petitioner.

Oakley Melton, Jr. and James E. Williams of Melton, Espy & Williams, Montgomery, for respondent.

Robert A. Huffaker of Rushton, Stakely, Johnston & Garrett, Montgomery, for amicus curiae Miriam M. Kershaw.

ADAMS, Justice.

Petitioner, Knox Kershaw, Inc. (hereinafter "KK, Inc.), requests this Court to compel the Honorable Mark G. Monteil of the Circuit Court of Montgomery County, Alabama, to order the defendants, Royce Kershaw, Jr. (hereinafter "Royce, Jr.") and Kershaw Manufacturing Company, Inc. (hereinafter "KM, Co."), to respond to discovery in a civil contempt proceeding. For the reasons set forth below, the writ is granted.

We recognize that this is not the first time we have been called on to review the non-competition agreements made the basis of this contempt proceeding. Although the facts have been well recited with particularity on two previous occasions by this Court, a brief recitation of the facts is necessary to afford a better grasp of the issues in this appeal.

On March 1, 1985, Knox Kershaw (hereinafter "Knox"), and KK, Inc. filed a complaint seeking a declaratory judgment and an injunction enjoining and restraining Royce, Jr. and KM Co. from leasing railroad maintenance equipment in alleged violation of a covenant in the non-competition agreements. The covenant restricted Royce, Jr. and KM Co. from engaging in any business that was either directly or indirectly competitive with the business conducted by KK, Inc.

After a hearing, the trial judge entered an order in favor of Knox and KK, Inc. on the grounds that the covenant not to compete was valid, and that Royce, Jr. and KM Co. had violated the agreement by attempting to enter into lease agreements. The trial judge's order stated, in part:

"Royce Kershaw, Jr. and KM Co. [are] hereby restrained from offering for straight leasing, undercutters, shoulder cleaners, yard cleaners and switch undercutters for that period and under the geographic restrictions as set forth in the noncompetition agreement executed by Royce Kershaw, Jr. on September 1, 1983, and for any extensions of time that may be granted in subsequent Orders of the Court."

On rehearing, the trial judge further clarified the scope of its order granting injunctive relief. That order stated, in part:

"As used herein, the term 'straight leasing' means a transfer of the possession of the said machines by KM Co. for a consideration and for a specified term to a lessee without any agreement or option that the lessee may acquire legal title or ownership of the said machines. The term 'straight leasing' does not include lease-purchase agreements, leases with options to purchase or demonstration-purchase agreements entered into by KM Co. with any of its customers."

On appeal, in Kershaw v. Knox Kershaw, Inc., 523 So.2d 351 (Ala.1988), this Court modified that part of the trial judge's order pertaining to the validity of the territorial language in the covenant. In all other respects, we affirmed the trial judge's order to the extent that it prohibited Royce Jr. and KM Co., for a five-year period, from leasing anywhere in the United States or Canada where KK, Inc. did business prior to September 1, 1983. ¹

On August 24, 1988, the petitioner, KK, Inc., filed a petition asking that KM Co. and Royce, Jr. be held to be in civil contempt for an alleged violation of the non-competition agreement and the injunctive order. The petition enumerated eight specific instances of alleged violations by Royce and KM Co. On September 23, 1988, KM Co. and Royce filed an answer asserting that the eight instances involved transactions that were lease purchase or demonstration-purchase agreements, which were authorized by the trial judge's order.

At the same time KK Co. filed its contempt petition, it served interrogatories and a request for production of documents on the defendants. That discovery sought information and production of certain documents pertaining to KM Co.'s transactions alleged in the contempt petition.

KM Co. did not answer any of the interrogatories or produce any of the documents, but rather on October 7, 1988, filed objections to the petitioner's interrogatories and request for production of documents. KM Co. objected to the discovery on the ground that the discovery sought information which, it says, "was totally irrelevant, illegal, and immaterial, and which was not reasonably calculated to lead to the discovery of admissible evidence" and on the ground that "the information and documents sought were private, confidential, proprietary, commercial information which Plaintiff was not entitled to obtain as a competitor in the marketplace with these Respondents."

On October 19, 1988, KK, Inc. filed a motion to compel the discovery. On April 11, 1989, KK, Inc. filed a second motion to compel, and a hearing was held on its motion. At the hearing KM Co. and Royce, Jr. provided certain documents for an in camera inspection by the trial judge. Although KK, Inc. contends that it was not aware of the identity, description, or content of the documents, it contends that the documents were evidence of the relationships between KM Co. and the railroads that were made the basis of the contempt proceeding. These documents were purportedly the documents that petitioner sought to discover.

The record indicates that at the hearing the trial judge said that he would "review the documents in camera to determine whether the documents on their face violated the injunctive order." On June 6, 1989, the trial judge entered an order denying the motion to compel all the...