Expo Chemical Co., Inc. v. Brooks

• Decision Date: 25 May 1978
• Docket Number: No. 17122,17122
• Parties: EXPO CHEMICAL CO, INC., Appellant, v. Joan BROOKS, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 8

572 S.W.2d 8

204 U.S.P.Q. 171

EXPO CHEMICAL CO, INC., Appellant, v. Joan BROOKS, Appellee.

No. 17122.

Court of Civil Appeals of Texas, Houston (1st Dist.).

May 25, 1978.

Rehearing Denied June 22, 1978.

Gerald E. Hopkins, Houston, for appellant.

James E. Ross, Houston, for appellee.

COLEMAN, Chief Justice.

This is a trade secrets case involving a confidential customer list. The trial court refused a temporary injunction.

Joan Brooks, the defendant, was employed by Expo Chemical Co., Inc., the plaintiff, as a commissioned broker, buying and selling bulk and drum chemical products nationwide. While she was employed by another chemical broker she developed a list of some 200 potential customers and a set of product cross-reference cards for use with the customer list. After her employment with this broker terminated, Mr. Elton Dornbusch, president of the plaintiff firm, secured the customer list previously prepared by Joan Brooks and furnished her a copy of the list for use in his business. Mrs. Brooks was required to pay for the cost of copying the list.

During the period of her employment by Expo, Mrs. Brooks expanded the list and added additional information on the sheets with reference to certain firms with which they did business. In addition to the names and addresses of firms that used or sold bulk chemicals the more complete sheets contained the names of key purchasing agents, credit data, preferred or screened or single source customer, and pricing margins or arrangements. Most of this information was gathered by Mrs. Brooks, but Mr. Dornbusch also contributed information. Both Mrs. Brooks and Mr. Dornbusch testified that the list was considered confidential.

Before leaving the employment of Expo Chemical, Mrs. Brooks made copies of the customer list which she took with her together with either a copy or the original product cross-reference file. She secured employment with a firm engaged in buying and selling bulk chemicals and has used the materials which she took with her in actively soliciting business for her new employer.

An employee unless prohibited by contract may, upon termination of his employment, compete with his former employer and may do business with his former employer's customers, providing such competition is fairly and legally conducted. A former employee may freely use general knowledge, skills, and experience acquired during his employment, but he has a duty not to use or disclose, to the detriment of his former employer, trade secrets and other confidential information acquired in the course of his previous employment. See Annotation, Customer List As Trade Secret-Factors, 28 A.L.R.3d 7.

The Restatement of Torts, Sec. 757, states:

"A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be . . . a list of customers . . ."

This section of the Restatement was quoted with approval by the Supreme Court of Texas in Hyde Corporation v. Huffines, 158 Tex. 566, 314 S.W.2d 763 (1958).

The owner of a business may protect a trade secret although he has no contract with his employees which prohibits divulging or using the confidential material. Texas Shop Towel v. Haire, 246 S.W.2d 482 (Tex.Civ.App. San Antonio 1952, no writ).

In the absence of a covenant not to compete, "the law will imply as part of the contract of employment an agreement not to disclose information which the employee receives as an incident of his employment, if the employee knows that his employer desires such information kept secret, or if, under the circumstances, he should have realized that secrecy was desired." Lamons Metal Gasket Co. v. Traylor, 361 S.W.2d 211, 213 (Tex.Civ.App. Houston 1962, writ ref'd n. r. e.).

In the area of confidential relationships between employers and employees, the injured party is not required to rely upon an express agreement to hold the trade secret in confidence. The basis for relief in such a case can be the wrongful disregard of a confidential relationship. K & G Oil & Tool Service Co. v. G & G Fishing Tool Service, 158 Tex. 594, 314 S.W.2d 782 (1958).

The Supreme Court of Connecticut cited Section 757 of the Restatement of Torts as a source from which some of the factors to be considered in determining whether given information is a trade secret, including (1) the extent to which the information is known outside the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and to his competitors; (5) the amount of effort or money expended by the employer in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Town and Country House and Homes Service, Inc. v. Evans, 150 Conn. 314, 189 A.2d 390 (1963).

In describing what a customer contact sheet is, Mrs. Brooks testified: "They contain the names of the companies, the addresses, the phone numbers, usually a person, a purchasing agent or sales manager, someone I knew and had spoken to there and on some occasions products they used, which information I got from usually books or from the people themselves, whatever." She testified that while she did not count the sheets she believed she prepared from 250 to 270 sheets while she was employed at Chellect Corporation, her former employer.

In describing the chemical cross-reference cards she stated: "When I first started in the chemical business, in this business, I had no knowledge of chemicals, so I went to a book called Merk Manual and I picked out certain chemicals with which the companies dealt and did research on them in Merk Manual. And then I researched the supplier of those chemicals...