Golden State Linen Service, Inc. v. Vidalin

• Decision Date: 15 April 1977
• Citation: 69 Cal.App.3d 1,137 Cal.Rptr. 807
• Court: California Court of Appeals Court of Appeals
• Parties: , 1977-1 Trade Cases P 61,439 GOLDEN STATE LINEN SERVICE, INC., a California Corporation, Plaintiff and Appellant, v. Robert VIDALIN et al., Defendants and Respondents. Civ. 38768.

Page 807

137 Cal.Rptr. 807

69 Cal.App.3d 1, 1977-1 Trade Cases P 61,439

GOLDEN STATE LINEN SERVICE, INC., a California Corporation, Plaintiff and Appellant, v. Robert VIDALIN et al., Defendants and Respondents.

Civ. 38768.

Court of Appeal, First District, Division 4, California.

April 15, 1977.

Hearing Denied June 9, 1977.

David B. Birenbaum, Birenbaum & Manning, A Professional Corp., San Francisco, for plaintiff and appellant.

James R. Mazzoni, Jr., Passalacqua & Mazzoni, Healdsburg, for defendants and respondents.

RATTIGAN, Acting Associate Justice.

Appellant Golden State Linen Service (hereinafter 'Golden State') is a corporation engaged in the linen supply, exchange and delivery business. Respondents Vidalin and Kingsborough left its employ and, with respondents Hodges and Frank, formed respondent Empire Linen Service ('Empire') as a similar corporate business. After Empire had directly competed with Golden State in the latter's trade area, Golden State brought the present action against the various respondents (Vidalin and Kings-borough in the first instance, the others by subsequent amendment of the complaint).

The relief sought in the complaint, as amended, included an injunction against the solicitation of Golden State's customers, damages for interference with its contractual relationships with the customers, and (as against Vidalin and Kingsborough) damages for their breach of written employment contracts under which they had worked for Golden State. After a nonjury trial, the court made findings of fact and conclusions of law adverse to Golden State and entered a judgment denying it any relief in the action. Golden State appeals from the judgment.

Facts

Viewed in the light most favorable to respondents, the evidence supports the following recitals: At pertinent times, Golden State operated a 'depot' in Santa Rosa from which its drivers served customers located in Sonoma County and the counties adjacent to it. Golden State's business depended upon a highly personalized relationship between each of its individual drivers and the customers he served, and his knowledge of their respective needs and preferences.

Respondent Kingsborough went to work for Golden State in 1957. He worked as a driver in the Santa Rosa area, and later as a manager of the 'depot' in that city. Respondent Vidalin went to work for Golden State, as a driver, in 1959. When each was first employed, he and Golden State entered into a written 'Agreement Of Employment.' Pertinent provisions of each of the agreements (which were substantially identical) are summarized or quoted in the margin. ¹

For some years prior to 1971, respondent Frank had been engaged in the linen supply business. During the same period, respondent Hodges had operated a related business in the Santa Rosa area. In 1971, they discussed forming a new business and bringing Vidalin and Kingsborough into it. Hodges testified that an important factor involving Vidalin and Kingsborough was their experience, not the area in which they had acquired it. At the end of February, 1972, after meetings among the four men, Vidalin and Kingsborough left the employ of Golden State to join in the new venture. Each was attracted to it by the prospect of sharing in its profits, as part owners, in addition to their earnings as its employees.

Commencing March 1, 1972, the four men organized Empire and bagan operations in the trade area in which Golden State continued to do business. During the first several months of operation, respondents' solicitation of new customers was primarily conducted by Vidalin and Frank with Kingsborough participating to a lesser extent.

Golden State lost some business, and many of its customers became customers of Empire, during these several months. The present action was commenced by Golden State on November 17, 1972.

Upon the foregoing evidence and other proof to be described, the trial court filed a 'Memorandum Of Intended Decision' to the effect that Golden State was to be denied any relief for specified reasons. ² In its formal findings and conclusions, and consistent with the memorandum, the court determined (1) that respondents had Not solicited customers of Golden State as the latter had alleged ³ and (2) that paragraph IV of the employment agreement (quoted in fn. 1, Ante) was void and unenforceable. ⁴

Sufficiency Of The Evidence

On its appeal from the judgment which followed, Golden State contends that respondents Did solicit its customers, directly or indirectly; and that, irrespective of contract, it is entitled to enforce its legal right to protect its good will and trade secrets. Both points are to be examined in light of the abundant authorities dealing with the 'delivery route' situation depicted by the evidence. The authorities establish that a former employer may obtain judicial relief, for a departed employee's use of information obtained during the employment, upon certain conditions. The conditions were stated as follows in Peerless Oakland Laundry Co. v. Hickman (1962) 205 Cal.App.2d 556, 23 Cal.Rptr. 105:

'. . . (A)n employer seeking injunctive relief against a former employee must show: (1) the information was confidential and not readily accessible to competitors; (2) the former employee solicited the customers with intent to injure his former employer; (3) the former employee sought out certain preferred customers whose trade is profitable and whose identities are not generally known to the trade; (4) the business is such that a customer will patronize only one concern; (5) the established business relationship between the customer and former employer would normally continue unless interfered with.' (Peerless Oakland Laundry Co. v. Hickman, supra, 205 Cal.App.2d 556 at p. 560, 23 Cal.Rptr. 105 at p. 108 (citing Aetna Bldg. Maintenance Co. v. West (1952) 39 Cal.2d 198, 246 P.2d 11 and Paraco, Inc. v. Owens (1959) 166 Cal.App.2d 777, 333 P.2d 360). See also Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 255--256, 67 Cal.Rptr. 19; Annot. (1969) 28 A.L.R.3d 7, 32--36 (California decisions at p. 32), 39--41, 80--82, 136--137, 216--217; Hays, The California Law of Unfair Competition Takes A Turn--Against The Employer (1953) 41 Cal.L.Rev. 51, 58--59.)

Appellant correctly cites further authority for the proposition that such information relative to customers (e.g., their identities, locations, and individual preferences), obtained by a former employee in his contacts with them during his employment, may amount to 'trade secrets' which will warrant his being enjoined from exploitation or disclosure after leaving the employment. (Empire Steam Laundry v. Lozier (1913) 165 Cal. 95, 99--102, 130 P. 1180; New Method Laundry Co. v. MacCann (1916) 174 Cal. 26, 30--32, 161 P. 990; Peerless Oakland Laundry Co. v. Hickman, supra, 205 Cal.App.2d 556 at p. 559, 23 Cal.Rptr. 105.)

It is equally clear, however, that the proscriptions inhibiting the ex-employee reach only his Use of such information, not to his mere possession or knowledge of it. (New Method Laundry Co. v. MacCann, supra, 174 Cal. 26 at p. 30, 161 P. 990 ('utilize'); Peerless Oakland Laundry Co. v. Hickman, supra, 205 Cal.App.2d 556 at p. 559, 23 Cal.Rptr. 105.) The term '(s)olicit,' as a form of such use or otherwise, is literally defined by its common dictionary meaning. (Aetna Bldg. Maintenance Co. v. West, supra, 39 Cal.2d 198 at pp. 203--204, 246 P.2d 11. See Leffel v. Municipal Court (1976) 54 Cal.App.3d 569, 575, 126 Cal.Rptr. 773.)

As pertinent to the subject of Empire's 'solicitation,' so defined, the four individual respondents testified as next indicated. Hodges testified that, before Empire was organized, he and the three men had 'a general discussion in leaving customers of the place where you had worked alone for a period of time.' Vidalin had avoided Golden State customers in his solicitations on behalf of Empire. He had introduced himself to a Golden State customer on one occasion, but had 'bowed out' when he realized the fact. Kingsborough had 'stayed away from Golden State accounts' and had never knowingly solicited a Golden State customer. Frank has recognized the 'likelihood' (or 'possibility') that he and his associates would find themselves soliciting Golden State customers on occasion, 'but we were certainly determined to get away from it as quickly as possible.'

Respondents called at least eight former Golden State customers, or representatives of customers, who had transferred their accounts to Empire during the period in question. Each of these witnesses testified that the change had been made for various reasons, but Without any solicitation by Empire or any of the individual respondents.

There was some conflict in the evidence, or conflicting inferences might have been drawn from some of it, as to whether or not respondents had engaged in the 'solicitation' negated by the testimony just summarized. In that testimony, however, we find substantial evidence in support of the trial court's findings 7, 8, and 9, and its conclusion of law no. 1 (quoted in fn. 2, Ante). Having identified such evidence, we may not disturb the court's essential determinations. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881, 92 Cal.Rptr. 162, 479 P.2d 362; Associated Creditors' Agency v. Davis (1975) 13 Cal.3d 374, 382--383, 118 (Cal.Rptr. 772, 530 P.2d 1084.)

The Covenant In The Employment Contracts

The trial court's finding no. 12 and its conclusion of law no. 4 (quoted in fn. 4, Ante) reflect its further determination that the provisions of paragraph IV of Vidalin's and Kingsborough's employment contracts with Golden State were void and unenforceable by reason of Business and Professions Code section 16600 and were not within the exception provided in section 16601. ⁵ Golden State's challenge of this conclusion requires separate analysis of the three passages of the paragraph which we have previously enumerated. (See fn. 1, Ante.)

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