Ideal Laundry Co. v. Gugliemone

• Decision Date: 20 October 1930
• Docket Number: No. 104.,104.
• Citation: 151 A. 617
• Parties: IDEAL LAUNDRY CO. v. GUGLIEMONE.
• Court: New Jersey Supreme Court

151 A. 617

IDEAL LAUNDRY CO.

v. GUGLIEMONE.

No. 104.

Court of Errors and Appeals of New Jersey.

Oct. 20, 1930.

Syllabus by the Court.

Courts of equity will protect an employer against a breach of a written agreement, founded upon a good consideration, and reasonable in its terms, made by an employee, not to engage with a rival after the termination of the employment, where the services of the employee have been of such a character that he gained knowledge of his employer's business methods and secrets, the disclosure of which to a rival would result in irreparable injury to the employer, and where it further appears that the purpose of the subsequent employment, resulting in the breach, was to obtain the benefit of those methods and secrets and that there is imminent danger that through such subsequent employment such secrets would be disclosed.

Syllabus by the Court.

Where an employment is of such a character as to inform the employee of business methods and secrets, a contract of employment at a stated salary is a sufficient consideration for the condition that the employee will not engage in a similar employment within a reasonable time and territory after the termination of such employment.

Syllabus by the Court.

Where a person is employed as assistant floor supervisor of the float-ironed department of a laundry business carried on in and extending over the counties of Hudson and Bergen in the state of New Jersey, his agreement, in consideration of such employment, that, for two years after the termination of his contract, he would not engage, directly or indirectly, or as an employee, in the laundry business or similar business in such counties, is not unreasonable in point of time nor in point of space.

Syllabus by the Court.

Where an employee breaches a valid contract not to engage with a rival after the termination of the employment, and where the services of the employee have been of such a character that he gained knowledge of his employer's business methods and secrets, and where the purpose of the subsequent employment, resulting in the breach, was to obtain the benefit of those methods and secrets, the court may presume that irreparable injury will ensue.

Syllabus by the Court.

While the general rule is that a preliminary injunction will not issue where the material fact in complainant's bill and affidavits, on which the complainant's right depends, is met by a full, explicit, and circumstantial denial under oath, yet, where the denial lacks those essential qualities, and upon the entire showing from both sides it appears reasonably probable that the complainant had the right claimed, the injunction may issue.

Appeal from Court of Chancery.

Suit by the Ideal Laundry Company, a corporation, against Joseph Gugliemone. From an order of ad interim restraint, defendant appeals.

Affirmed.

Lichtenstein, Schwartz & Friedenberg, of Hoboken (Harry Schwartz, of Hoboken, of counsel), for appellant.

Wolber & Gilhooly, of Newark (Merritt Lane, of Newark, of counsel), for respondent.

TRENCHARD, J.

The defendant below, an employee of the complainant Ideal Laundry Company, as a condition to his continued employment, made a contract in writing, whereby he accepted employment by the company at its plant at West New York, Hudson county, N. J., from September 28, 1928, to September 28, 1930, as assistant floor supervisor, at a stated salary. The contract further provided: "That in the event of the termination of this agreement for any cause whatsoever (employer being the sole judge as to whether this said agreement is terminated) that the employee should not enter into, manage, engage, concern himself, operate or conduct, directly or indirectly, either personally or otherwise, or as an employee in the laundry business or similar business as that conducted by Ideal Laundry Company, in the entire Counties of Hudson and Bergen, in the State of New Jersey, for a term of two years from the date of the termination of this agreement."

On December 10, 1929, complainant filed its bill to enforce the negative terms of that contract and to enjoin the disclosure of secret information. An order to show cause was made containing ad interim restraint enjoining defendant from violating such negative covenant and from disclosing secret information. The matter was heard on bill and affidavits, and answering affidavits, and, on January 2, 1930, an order was made which enjoined defendant, in the language of the negative covenant, "from entering into, managing, engaging himself in, concerning himself in, operating or conducting, directly or indirectly, either personally or otherwise, or as an employee in the laundry business or similar business as that conducted by complainant in the entire Counties of Hudson and Bergen, in the State of New Jersey" until the further order of the court. This is the defendant's appeal from that order.

We think that such preliminary injunction should stand until final hearing.

It is admitted that complainant, for twenty-three years, has been engaged in the general laundry business throughout the counties of Hudson and Bergen; that defendant was employed as assistant floor supervisor of the float-ironed department; that on November 25, 1929, he voluntarily left the employ of complainant, and that he immediately entered into the employ of the Holland Laundry Company, conducting a general laundry business in Hudson county, a direct competitor of complainant.

Courts of equity will protect an employer against a breach of a written agreement, founded upon a good consideration, and reasonable in its terms, made by an employee, not to engage with a rival after the termination of the employment, where the services of the employee have been of such a character that he gained knowledge of his employer's business methods and secrets, the disclosure of which to a rival would result in irreparable injury to the employer, and where it further appears that the purpose of the subsequent employment, resulting in the breach, was to obtain the benefit of those secrets, and that there is imminent danger that through such subsequent employment such secrets would be disclosed. McCall v. Wright, 198 N. Y. 143, 91 N. E. 516, 31 L. R. A. (N. S.) 249; Harrison v. Glucose Sugar Refining Co., 53 C. C. A. 484, 116 P. 304, 58 L. R. A. 915; Sarco Co. v. Gulliver, 129 A. 399, 3 N. J. Misc. R. 641, affirmed 99 N. J. Eq. 432, 131 A. 923; Scherman v. Stern, 93 N. J. Eq. 626, 117 A. 631; Owl Laundry Co. v. Banks, 83 N. J. Eq. 230, 89 A. 1055; Fleckenstein Brothers Co. v. Fleckstela, 76 N. J. Law, 613, 71 A. 265, 24 L. R. A. (N. S.) 913; Myers v. Steel Mach. Co., 67 N. J. Eq. 300, 57 A. 1080, affirmed 68 N. J. Eq. 795, 64 A. 746.

Without regard to what may possibly appear upon final hearing, we feel constrained to say that the complainant's affidavits, even when considered in connection with those of the defendant, bring this case within that rule, and justify the preliminary injunction.

L2] Where, as here, an employment is of such a character as to inform the employee of business methods and secrets, a contract of employment at a stated salary is a sufficient consideration for the condition that the employee will not engage in a similar employment within a reasonable time and territory after the termination of such employment.

We think the agreement was not unreasonable with respect to time or space.

Where, as here, a person is employed as assistant floor supervisor of the float-ironed department of a laundry business carried on in and extending over the counties of Hudson and Bergen in the state of New Jersey, his agreement, in consideration of such employment, that, for two years after the termination of his contract, he would not engage directly or indirectly, or as an employee, in the laundry business or similar business in such counties, is not unreasonable in point of time nor in point of space. Sternberg v. O'Brien, 48 N. J. Eq. 370, 22 A. 348; Scherman v. Stern, 93 N. J. Eq. 626, 117 A. 631....