Haut v. Rossbach

• Decision Date: 18 September 1940
• Docket Number: 129/459
• Citation: 15 A.2d 227,128 N.J.Eq. 77
• Parties: HAUT et al. v. ROSSBACH et al.
• Court: New Jersey Court of Chancery

15 A.2d 227

128 N.J.Eq. 77

HAUT et al.

v. ROSSBACH et al.

129/459

Court of Chancery of New Jersey.

Sept. 18, 1940.

Syllabus by the Court.

1. Unless prohibited by valid contract, a former employee may sell to customers of his late employer, in competition with him.

2. Where an employer is a manufacturer or wholesaler dealing with jobbers or retailers or where an employer sells to members of a readily ascertainable class, the knowledge of the names of the employer's customers which an employee has, is not a trade secret.

3. Where an employer sells a class not readily ascertainable, e. g. property owners needing the service of an insect exterminator, the names of his customers are a trade secret.

4. Complainant is in the box lunch business, selling principally to factory workmen. His former routeman, who is not bound by a restrictive covenant, will not be enjoined from competing with him.

Suit by Frieda Haut and others against William Rossbach and another, to have the defendants enjoined from selling to customers of the complainants. On motion by defendants to dismiss the bill.

Bill dismissed.

Harry Krieger, of Newark, for complainants.

Larkey, Mareiniss & Snyder (Barney Larkey), of Newark, for defendants.

BIGELOW, Vice Chancellor.

Defendants move to dismiss the bill on the ground that it discloses no cause of action.

Complainants, for many years, have been engaged in the box lunch business. They prepare sandwiches and other foods which they pack and then sell at retail, principally to factory workmen. Complainants distribute their lunches on several routes, by automobiles which they station, at the lunch hour or before work starts in the morning, near some large factory or other. In some instances, they are permitted to go into the factory to sell their lunches.

Defendants were two of the salesmen of complainants until last month, when they quit their employment and embarked in a competing box lunch business of their own.

They offer their lunches for sale in the same manner and at some of the same factories as complainants. Complainants charge that such competition is inequitable and pray that defendants be enjoined from selling "to any of the customers of the complainants on any of the routes or stops heretofore served by complainants."

The general rule is well established that, unless prohibited by a valid contract, a former employee may properly sell to customers of his late employer, in competition with him. Salomon v. Hertz, 40 N.J. Eq. 400, 2 A. 379; Newark Cleaning & Dye Works v. Gross, 97 N.J.Eq. 406, 128 A. 789; Maas & Waldstein Co. v. Walker, 100 N.J. Eq. 224, 234, 135 A. 275; Id., 102 N.J.Eq. 328, 140 A. 921; Lewitter v. Adler, 101 N.J. Eq. 74, 137 A. 541; Bond Electric Corp. v. Keller, 113 N.J.Eq. 195, 166 A. 341; Automobile Club v. Zubrin, 127 N.J.Eq. 202, 12 A.2d 369. By exception to the rule Vice Chancellor Backes, in the Gross case, observed that there are cases where courts have interfered to protect the owner of a business "against invasion upon list and route customers by former drivers and solicitors, where the customer is latent or the field potential."

The general rule, and not the exception, applies, where the former employer is a manufacturer or wholesaler dealing with jobbers or retail merchants. The names of the customers are not a trade secret for everyone knows they buy from someone. The Salomon, Maas & Waldstein and Bond Electric cases are examples. Likewise, where the complainant sells to members of a readily ascertained class, even though some of the class do not buy like services or articles from anybody. Thus the Newark Cleaning & Dyeing Company was a wholesaler. Defendant's knowledge of the names of the company's customers, gained through his employment by it, was not considered a trade secret, since any interested person could readily compile a list of retail cleaners and dyers, although he would be ignorant, until he made inquiry,...