Heyer-Jordan & Associates, Inc. v. Jordan
| Decision Date | 12 September 1990 |
| Docket Number | HEYER-JORDAN,No. 27,27 |
| Citation | 801 S.W.2d 814 |
| Parties | & ASSOCIATES, INC., Plaintiff-Appellee, v. Louis V. JORDAN and Calvin H. Brown, Jr., Defendants-Appellants. |
| Court | Tennessee Court of Appeals |
John J. Heflin, III, James C. Branum, Jr., Memphis, for plaintiff-appellee.
John W. Chandler, Jr., Beth Weems Bradley, Memphis, for defendants-appellants.
This case involves the enforcement of a noncompetition clause in an employment contract.
Defendants, Lewis V. Jordan and Calvin H. Brown, Jr., appeal from the judgment of the chancellor awarding a money judgment to plaintiff, Heyer-Jordan & Associates, Inc., and granting injunctive relief.
In its complaint, Heyer-Jordan & Associates, Inc. avers that it is engaged in the business of acting as a manufacturer's sales representative. Plaintiff avers that the defendants Calvin Brown and Lewis Jordan, as employees of Heyer-Jordan, were each acting under a 1980 Sales Representative Agreement at the time just prior to their resignation. These agreements, which were identical, except for the sales territory and rate of commission, included the following provisions:
For three (3) years following his termination ("Post-Termination Period") as a sales representative of Agent 1, Sub-Agent shall not undertake any employment or activity competitive with Agent's Business wherein the loyal and complete fulfillment of the duties of the competitive employment or activity would inherently call upon Sub-Agent to reveal, to base judgments upon or otherwise to use, any confidential business information of Agent's Business to which Sub-Agent had enjoyed access at Agent's Business.
While acting as a sales representative of Agent, Sub-Agent shall not and agrees that he will not undertake planning for or organization of any business activity competitive with Agent's Business, or combine or conspire with other employees or sales representatives of Agent's Business for the purpose of organizing any such competitive business activity. (Emphasis supplied).
Plaintiff avers that, by letter dated March 15, 1989, Louis Jordan resigned from Heyer-Jordan and that by letter dated March 14, 1989, Calvin Brown resigned. Their resignations became effective April 15, 1989.
The complaint alleges that prior to their resignations, defendants engaged in activities in violation of their respective agreements. Plaintiff avers that defendants willfully conspired and planned to go into business together in competition with plaintiff and that they solicited the business of manufacturers which were represented by Heyer-Jordan. Plaintiff also alleges that defendants breached their duty of loyalty by contacting manufacturers represented by Heyer-Jordan while still contractually obligated to Heyer-Jordan.
Plaintiff alleges that subsequent to their resignations, defendants breached the terms of their agreements by soliciting the business of the manufacturers represented by Heyer-Jordan and that defendants have used confidential business information in violation of their agreements in setting up and conducting a competing business. Plaintiff alleges that this confidential business information consisted of customer lists, brochures, product information, administrative procedures of Heyer-Jordan as well as the long-standing personal relationships established through Heyer-Jordan.
Subsequently, plaintiff amended its complaint to allege that defendants unlawfully procured the breach of a contract, and alleged a cause of action for treble damages under the common law of T.C.A. § 47-50-109. Plaintiff alleges that by contacting manufacturers while still contractually obligated to Heyer-Jordan, defendants urged, induced and persuaded one or more of Heyer-Jordan's accounts to terminate their contract with Heyer-Jordan and enter into contracts with the new company established by the defendants.
In their answer, the defendants admit that they had acted under the Sales Representative's Agreement in question, but assert that they each signed their agreements "under the duress of a threat of losing of his job." In any event, the defendants deny that they breached any provision of the agreement. They admit that, prior to their resignations, they contacted manufacturers represented by Heyer-Jordan for the purpose of formulating an offer to purchase the company which Lloyd Jordan, the sole shareholder in Heyer-Jordan had requested them to make. They assert that the plaintiff, Heyer-Jordan, waived its right to enforce the covenants in the sales representative's agreement when the sole shareholder in the company requested that they make this offer.
The defendants counterclaimed for the commissions which they allege they are due under their sales agreement for sales orders which they placed prior to April 15, 1989, the effective date of their resignation. In its answer to the counter-complaint, Plaintiff denied that it had agreed to pay commissions on all sales made by the defendants, but rather asserted that it had agreed to pay commission on all sales actually shipped prior to the effective date of the defendants' resignation.
The material facts are basically undisputed and the record consists of the various exhibits and the testimony of Lloyd Jordan, the sole stockholder and chief operating officer of plaintiff and the testimony of the defendants, Jordan and Brown. We will briefly review the testimony of these witnesses:
LLOYD JORDAN
He is the sole shareholder and President of Heyer-Jordan & Associates, Inc., which is a manufacturer's sales representative company covering the states of Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Kentucky and northwest Florida. Heyer-Jordan had contracts with various manufacturers to sell their products to retailers and these contracts are all subject to termination, by either party, on thirty days notice. The business started in 1950 and he took over the business in 1972.
In 1976, he hired his brother Louis Jordan as a sales person for the company. Prior to this, Louis Jordan had not had any experience as a manufacturer's representative and Lloyd taught him all the things he needed to know to succeed. He taught Louis about traveling, analysis of potential customers, and the various manufacturers as well as how to place orders. Louis was a salaried employee until 1978 when he went on a commission basis. Louis Jordan signed the 1980 agreement in question because the commission structure it contained was a better deal for him than the 1978 contract under which he was working.
Calvin Brown was hired in 1977 and he trained Calvin in much the same manner as he had trained Louis. Calvin Brown was also salaried until he went on commission under the 1980 agreement.
About February 8, 1989, Calvin Brown and Louis Jordan approached him and complained that they were unhappy with their commissions. He told them that if they wanted more money they should sell more. When they did not find that response satisfactory, he told them that they could make an offer to buy their territories from him. He did not authorize them to contact any manufacturers in the process of formulating such an offer. Upon cross examination, it was revealed that in his deposition, Lloyd Jordan testified that he requested them to "make me an offer," which could be interpreted to be an offer for the whole company. Calvin Brown and Louis Jordan made such an offer together for the purchase of Heyer-Jordan. He rejected their offer on its merits, but did not object to Brown and Jordan making a joint offer. Louis Jordan and Calvin Brown sent letters of resignation to Heyer-Jordan dated March 14th and March 15th with an effective date of resignation of April 15, 1989.
He testified several actions taken by defendants were in violation of the agreement and caused damages to Heyer-Jordan. He received notice of the defendants' resignation from Bob Cornetti of Norton Consumer Products, before receiving notice from the defendants. He felt it was harmful to Heyer-Jordan for the defendants to contact manufacturers about their resignation before he personally had the opportunity to assure the manufacturers of the quality of continued representation that Heyer-Jordan could provide them. There was no reason why the defendants had to contact manufacturers before making their offer to him rather than making an offer contingent upon future acceptance by the manufacturers.
Lloyd Jordan also testified as to what is encompassed in the term "confidential business information" as used in the employment contracts, we quote from the record:
That I would think is probably one of the most important confidential things they have, to have them knowledgeable of all the principals at the various factories and how to work with them, the knowledge of where to take these particular products, to what specific accounts in the territory. It is not something that you can go out and just hire anybody off the street and have them know where to take the products and how to get along with the principals at the various factory levels.
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... That's everything from the president of the company to a vice-president, to a national sales manager, to a regional manager, any of the people involved with representing a manufacturer.
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Well, confidential information is the knowledge and the exposure that they get with the factories that we represent while they are representing Heyer-Jordan. That is confidential information its not something that you just come by over night.
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Well, how to make a sale, the people at the customer level, be it a distributor or a retail dealer. All these people that you come into contact with are very important, and if you don't have the knowledge of who they are, and who is the decision-maker at various companies, then you are at a tremendous disadvantage, and the only way you get...
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