Flammer v. Patton

• Decision Date: 17 March 1971
• Docket Number: No. 38827,38827
• Citation: 245 So.2d 854
• Parties: Russell B. FLAMMER, Petitioner, v. Glenn E. PATTON, William E. Thompson, Robert A. Tucker, Benjamin P. Frye and Francis X. Crowley, as Trustees in charge of the Employees' Pension and Death Benefit Plan of Beneficial Finance Co., Respondents.
• Court: Florida Supreme Court

Page 854

245 So.2d 854

Russell B. FLAMMER, Petitioner, v. Glenn E. PATTON, William E. Thompson, Robert A. Tucker, Benjamin P. Frye and Francis X. Crowley, as Trustees in charge of the Employees' Pension and Death Benefit Plan of Beneficial Finance Co., Respondents.

No. 38827.

Supreme Court of Florida.

March 17, 1971.

J. A. McClain, Jr., of McClain, Turbiville & Heller, Tampa, for petitioner.

Thomas C. MacDonald, Jr., of Shackleford, Farrior, Stallings & Evans, Tampa, for respondents.

CARLTON, Justice:

We now consider whether respondents, as trustees of a loan corporation's pension fund, have the power to withhold petitioner's pension payments so long as he is employed by the loan department of a national bank. In a declaratory judgment proceeding initiated by petitioner, Circuit Court, Hillsborough County, ruled that the trustees were properly exercising powers reserved to them under a provision in the loan corporation's pension plan. The provision permitted the trustees to suspend or terminate benefits to any retiree considered by the trustees to be in the employ of a competitor.

The District Court of Appeal, Second District, affirmed upon petitioner's appeal through an opinion reported at 223 So.2d 750 (2nd D.C.A. Fla.1970). Our jurisdiction results from a conflict between the District Court's opinion and Davis v. Ebsco Industries, Inc., 150 So.2d 460 (3rd D.C.A. Fla.1963). Article V, Section 4(2), Florida Constitution, F.S.A. By our decision today, we reverse the District Court and remand this cause with instructions for further proceedings.

Petitioner retired on December 31, 1964, after thirty-three years of service with Beneficial Finance Company, or with one of its subsidiary small loan companies. He was eligible for monthly pension benefits in the amount of $256.38 under a noncontributory pension plan, known as the 'Employees' Pension and Death Benefit Plan,' which was put into effect after he had been with Beneficial for several years. The plan included the following provision under Section 2A(6):

'Any right or claim to any Retirement Allowance which any employee, retired employee or his beneficiary may have (a) shall terminate, or shall be discontinued or suspended for such periods as the Trustees may determine, if the Trustees shall find that such employee or retired employee has been engaged in a business or occupation in competition with that of the Corporation or any subsidiary thirty days or more after the Trustees have given him written notice to cease his participation in such business or occupation * * *.'

Several months after his retirement, petitioner was taken on by the National Bank of Tampa as a loan officer, discharging duties as head of the installment loan department. The respondent Trustees notified petitioner that he was considered as 'employed by a competitor' under Section 2A(6), and that his benefits would be suspened unless he left the National Bank. Petitioner gave the Trustees the following response: (1) that the National Bank did not seek or solicit the kind of loan business offered by Beneficial; (2) that a check of transactions indicated that Beneficial's clients very rarely did business with the National Bank's loan department; (3) that the National Bank had never advertised his presence or sought to make capital by drawing attention to his employment with the Bank. The Trustees adhered to their position, pointing out that they could not monitor his activities, and that to make an exception in his case would be to create an undesirable precedent. Petitioner's benefits were suspended. ¹

In declaratory judgment proceedings, petitioner questioned the sufficiency of the evidence of competition and attacked Section 2A(6) of the pension plan as void under Fla.Stat. § 542.12, F.S.A., a statute controlling contracts in restraint of trade. The Circuit Court held that the plan was analogous to an employment contract, and that under Barr v. Sun Life Assurance Company of Canada, 146 Fla. 55, 200 So. 240 (1941), such contracts, by analogy, would not be considered in violation of Fla.Stat. § 542.12, F.S.A. The Circuit Court also held that sufficient evidence was introduced into the record to support a finding of competition by the Trustees. The District Court affirmed the judgment rendered below, finding that the analogy was valid and that the evidence of competition was sufficient. Petitioner contests both of these holdings.

In our view, this case is to be distinguished from Barr, because two inherently different concepts are involved. In Barr, an insurance agent left one insurance company for employment with another, and then sought to obtain commissions on policies he had handled for the first company. The commission contract stated that commissions would be given to agents for the first ten years of the policy life as each yearly renewal payment from the policyholder was received. The contract also stated that these renewal commissions would be forfeited if the agent left and took work with a competitor.

In its review of the case, this Court held that this was not a contract in restraint of trade because nothing in it precluded the agent from working elsewhere, and that by contract the agent had agreed to cooperate with the company for a period of ten years for each policy. Two significant factors regarding Barr should be recognized. First, the contract referred to specific policies which the company would have to continue servicing even while the agent was working for a competitor. Second the period of each contract obligation was for a specific period of ten years, after which the agent was free to do whatever he wished.

In the instant case, the benefits were not the result of specific policies or negotiations or contracts, but rather the benefits accrued as the result of Years of service; thus, no contract was being protected as in Barr. Also, in Barr an agent was free to receive benefits For a specific period, and then to join another company without loss, whereas in the instant case, the restrictions on receipt of benefits continue until the death of the petitioner.

This last factor--that the restrictions are unending--brings us to the paramount issue in this case: whether Fla.Stat. § 542.12, F.S.A., embraces non-competition provisions in pension plans. Under the common law, courts historically have been hostile to contracts of any nature which place restaints upon former employees. Contract provisions restraining or hindering a man's right to follow his calling were considered as void against public policy. See Standard Newspapers, Inc. v. Woods, 110 So.2d 397 (Fla.1959); Capelouto v. Orkin Exterminating Co. of Fla., 183 So.2d 532 (Fla.1966). Before enactment of Fla.Stat. § 542.12, F.S.A. in 1953, this Court consistently treated non-competition provisions harshly. Arond v. Grossman, 75 So.2d 593 (Fla.1954); Love v. Miami Laundry Co., 118 Fla. 137, 160 So. 32 (1934), aff'd on rehearing, 1935; Simms v. Burnett, 55 Fla. 702, 46 So. 90 (1908). Only when mutuality and fairness were demonstrated beyond peradventure of doubt, would non-competition provisions be enforced. See Thompson v. Shell Petroleum Corp., 130 Fla. 652, 178 So. 413 (1938).

The common law's animosity to non-competition restraints was based upon sound reasoning, but frequently the results unfairly discriminated against sound business practices. Note the dissenting opinion of Mr. Justice Drew in United Loan Corporation of Tampa v. Weddle, 77 So.2d 629 (Fla.1955). Employers seeking to temper the immediate impact of a former employee's potential competitive advantage found that the question of how this might legally be done was clouded with uncertainty.

In 1953, the Legislature responded to this situation by enacting Fla.Stat. § 542.12, F.S.A., which modified the common law to a considerable extent, although the basic policy of the common law was preserved. Section 1 of the statute announced:

'(1) Every contract by which anyone is restrained from exercising a lawful profession, trade or business of any kind, otherwise than is provided by subsection (2) and (3) hereof, is to that extent void.'

Subsections (2) and (3) provided that restrictions were henceforth allowable, although enforcement was discretionary with the judiciary, where they embraced 'a reasonably limited time and area':

'(2) One who * * * is employed as an agent or employee may agree with his employer, to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer Within a reasonable limited time and area * * *. Said agreements may, in the discretion of a court of competent jurisdiction be enforced by injunction.

'(3) Partners may, upon or in anticipation of a dissolution of the partnership, agree that all or some of them will not carry on a similar business Within a reasonably limited time and area.' (Emphasis supplied.)

Precisely what will be considered a 'contract by which anyone is restrained' is not defined by the statute, but the breadth of the statutory language clearly implies a wide range of applicability. Certainly this Court has taken a broad view of the statute's application; compare our recent decision in Akey v. Murphy, 238 So.2d 94 (Fla.1970), with Bergh v. Stephens, 175 So.2d 787 (1st D.C.A. Fla.1965). The pertinent question is whether the contract in effect impedes or restrains a former employee from exercising his lawful profession, trade or business. If a contract has this effect, it violates public policy as announced through the statute, unless it conforms to the statutory requirements of reasonable limitation as to time and area.

Did the pension plan give rise to a substantial impediment or restraint upon petitioner's further employment? We think it did. After more than three decades of continued service, petitioner was entitled to $256.38 in monthly benefits. Whether petitioner could not live on this amount, or...