Josephson v. Fremont Industries, Inc.
| Decision Date | 15 November 1968 |
| Docket Number | No. 41078,41078 |
| Citation | 282 Minn. 51,163 N.W.2d 297 |
| Parties | Bernard D. JOSEPHSON, Respondent, v. FREMONT INDUSTRIES, INC., et al., Appellants. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
Upon a review of the record in an action to recover damages claimed to have been caused by improper restrictions imposed upon plaintiff and his assignors by the issuance of an ex parte temporary restraining order, the evidence is sufficient to support a verdict awarding damages for loss upon sale of equipment, rental expense, and loss of earnings based upon the jury's conclusion that the improper restrictions caused such losses.
Erickson, Popham, Haik & Schnobrich, and Rolfe A. Worden, Minneapolis, for appellants.
Brill & Brill, Minneapolis, for respondent.
Heard before KNUTSON, C.J., and MURPHY, OTIS, ROGOSHESKE and SHERAN, JJ.
The sole question raised on this appeal from an order denying defendants' post-trial motion is whether the evidence is sufficient to support a jury verdict awarding damages to plaintiff claimed to have been caused by improper restrictions imposed on him and his assignors by a temporary restraining order.
Defendant Fremont Industries, Inc., is in the business of developing, manufacturing, and selling industrial chemical detergents and other specialized chemical products. During late August and early September of 1961, plaintiff and two of his assignors, Roland H. Hicks and John R. Quist, joined together in organizing Chem Tech Corporation to compete with defendant. Plaintiff was to supply all of the capital, while Hicks, who had previously been employed by Fremont as a chemist, was to be the new company's chemist, and Quist, who had previously been employed by Fremont as a salesman, was to serve Chem Tech in the same capacity. Chem Tech then hired another of plaintiff's assignors, Gareth N. Iverson, who had also been employed by Fremont, as a salesman. Both Quist and Iverson had employment agreements with Fremont which contained covenants restricting them from engaging in any manner whatsoever in the soap or chemical cleaning-compound business in Minnesota or certain other states within 2 years after the termination of their employment with Fremont. After Chem Tech had been operating for about 6 weeks, Fremont learned of Chem Tech's existence and heard reports that it was using Fremont's secret chemical formulas to manufacture competing products. Fremont thereupon, on October 25, 1961, obtained an ex parte restraining order which comprehensively restrained Chem Tech, plaintiff, Quist, Iverson, and Hicks from, among other things, soliciting any of Fremont's customers, and Quist, Iverson, and all persons acting under them from selling or dealing in or in any manner engaging in the manufacture or sale of soap products or chemical cleaning compounds.
Upon the issuance of this retraining order, the parties restrained suspended operations, having been advised by counsel that they could not proceed with their business until the restraining order could be challenged and possibly narrowed in scope. On January 4, 1962, after a hearing, the court ordered that a temporary injunction be issued which would eliminate any restriction on the activities of Quist and Iverson on the ground that the noncompetition covenants in their employment agreements were too broad and, therefore, illegal. The court also eliminated all of the restrictions on the solicitation of Fremont's customers. 1
Chem Tech never resumed operations, and on about January 10, 1962, the individuals involved decided to go out of business entirely. Plaintiff took an assignment of the claims of those associated with him in Chem Tech and brought this action against defendants on the $10,000 restraining order bond for damages allegedly resulting from the wrongful restrictions imposed by the ex parte temporary restraining order and, independent of the bond, for damages resulting from malicious prosecution. At trial, plaintiff conceded that he was unable to prove that the restraining order caused any loss of profits since Chem Tech had not been in business long enough to establish a pattern of profits. The trial judge therefore limited plaintiff's possible recovery to (1) any loss on the sale of office and shop equipment caused by the difference in the scope of the two orders; (2) the reasonable rental expense of Chem Tech's building between October 25, 1961, and January 4, 1962; and (3) the reasonable value of the loss of time of Iverson and Quist caused by the temporary restraining order. The jury awarded the following damages: (1) $1,000 for the loss on the sale of office and shop equipment (2) $241 for rental expense; and (3) $1,250 each for the loss of earnings of Quist and Iverson.
The trial court granted defendants' motion for a directed verdict on the issue of malicious prosecution, thereby limiting plaintiff's recovery to an action on the bond under Minn.St. 585.04. AMF Pinspotters, Inc. v. Harkins Bowling, Inc., 260 Minn. 499, 110 N.W.2d 348.
In order to recover damages on the bond in this type of case, plaintiff must establish that Fremont was not entitled to the restraints imposed by the ex parte order and that plaintiff or his assignors suffered damages proximately caused thereby. 2 Since the trial court in the injunction action determined that the restrictions on the activities of Quist and Iverson, as well as the restrictions on the solicitation of Fremont's customers, were improper, the question presented on this appeal narrows to the sufficiency of the evidence to sustain the verdict awarding damages as to each of the claims submitted.
Loss on the sale of equipment.
Plaintiff recovered $1,000 for loss upon sale of Chem Tech's office and manufacturing equipment. If supported by adequate evidence of causation, damages of this nature are recoverable. Adams v. National Auto. Ins. Co. 56 Cal.App.2d 905, 133 P.2d 657. Since this loss was occasioned by the decision to go out of business, plaintiff was required to prove a two-link chain of causation: (1) That the decision to go out of business was proximately caused by the suspension of Chem Tech's operations, and (2) that the restraining order was the proximate cause of the suspension of operations. Defendants argue that plaintiff failed to establish either of these links, thereby precluding his right to recover not only this loss but also his claims for rental expense and loss of earnings of his assignors for the 10-week period operations were suspended.
Plaintiff testified that Chem Tech went out of business because of accumulated indebtedness (largely for back salaries), inadequate capital, and the loss of customer goodwill--all due to the cessation in operations necessitated by the restraining order.
Defendants contend that the evidence conclusively shows that the decision to liquidate the business--made shortly after the temporary injunction was issued--was due solely to its provisions properly prohibiting the use of any of Fremont's formulas and requiring Chem Tech to keep detailed records of all formulas used in the manufacture and sale of products similar to Fremont's which restrictions would not have prevented a resumption of operations were it not that defendant's formulas were in fact being used. Upon this record, the cause of liquidation was a question of fact for the jury, and since the evidence would support a decision either for or against the plaintiff, the jury's conclusion must be sustained.
Similarly, the jury's implicit finding that suspension of operations was caused by the comprehensive restrictions of the restraining order has sufficient evidentiary support.
Plaintiff testified that this order made it impossible for Chem Tech to do business since the parties restrained had been advised by counsel that they would face contempt penalties if they sold products, even inadvertently, to Fremont's customers.
One who is enjoined is required to obey an injunction implicitly both in letter and in spirit. Hatch v. National Surety Corp., 105 Mont. 245, 72 P.2d 107. If an injunction is ambiguous or imprecise, leaving the party enjoined in doubt as to his obligations, it is up to the...
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