McCombs v. McClelland

• Decision Date: 20 July 1960
• Citation: 354 P.2d 311,223 Or. 475
• Parties: Philip N. McCOMBS and Lewis Allan, dba Allen's Press Clipping Bureau, a copartnership, Respondents, v. Ruth L. McCLELLAND, Appellant.
• Court: Oregon Supreme Court

Page 311

354 P.2d 311

223 Or. 475

Philip N. McCOMBS and Lewis Allan, dba Allen's Press Clipping Bureau, a copartnership, Respondents, v. Ruth L. McCLELLAND, Appellant.

Supreme Court of Oregon, Department 2.

Argued and Submitted June 16, 1960.

Decided July 20, 1960.

William J. Masters, Portland, argued the cause for appellant. On the brief were Masters & Masters, Portland.

Alan H. Johansen, Portland, argued the cause for respondents. With him on the brief were Krause, Lindsay & Nahstoll, Portland.

Before McALLISTER, C. J., and PERRY, SLOAN, O'CONNELL and MILLARD, JJ.

MILLARD, Justice pro tem.

This is an appeal by defendant from a decree of the circuit court of Multnomah county wherein defendant, who was a former employee of a press-clipping service operated by plaintiffs, was enjoined from disclosing any information relating to plaintiffs' business affairs, including data relating to customers' requirements, trade secrets and customer lists, which defendant may have acquired by reason of her employment by the plaintiffs, and further enjoining her until October 31, 1959, from working as a reader or assisting in any press-clipping service which served former customers of the plaintiffs.

It appears from the evidence that the plaintiff copartnership operates a press-clipping service for the benefit of a large number of subscribers, with branch offices in Los Angeles, San Franciso, Seattle and Portland. In connection with this business it is necessary to employ readers who require about six months' training before they become adept at their work. Defendant was employed by plaintiffs as a reader about October, 1948, and continued in their employ until about October 31, 1958, becoming highly proficient at her job. As a part of her duties she necessarily became acquainted with customer requirements and in some instances with the identity of the customers served, although she testified in effect that was not true in most cases. Until about 1957 plaintiffs were without any business competition, at least in the Portland area. At about that time the Northwest Clipping Bureau entered the field and became active and aggressive competition; in fact, so much so that plaintiffs felt compelled to revise their methods to meet competition. It is evident that the employment and retention of proficient readers became of prime importance to both firms. Plaintiffs, in order to meet this situation, sought to enter into contracts with various of their employees, including defendant. Accordingly, on March 8, 1957, Walter Collins, who was then the branch manager of the Portland office where defendant worked, presented her with a form of written agreement. Nothing was promised defendant to induce her to sign, nor was there any suggestion of continued employment or of discontinuance of employment if she did not execute the agreement. The evidence of defendant is uncontradicted that all the manager ever said to her was, 'Here it is, sign it if you want to.' Defendant then signed the agreement hereinafter set forth:

'Employment Agreement

'In consideration of the mutual benefits of employment between Employer and Employee, and in consideration of the confidential nature of the business operated by Allen's Press Clipping Bureau, the undersigned Employee agrees that Employee will not, without the prior written consent of Employer, during the term of Employee's [sic] employment, or at any time thereafter, disclose to any person, firm or corporation any information including but not limited to, data concerning customers' requirements, trade secrets and customer lists, concerning the business or affairs of Employer which Employee may acquire in the course of, or as incident to employment by Allen's Press Clipping Bureau.

'In addition, Employee agrees that Employee will not, for a period of one year next following the termination of employment for Allen's Press Clipping Bureau, become employed by or render services to any other organization or individual providing press clipping services within the territory which continues to be served by Allen's Press Clipping Bureau.

'Dated, March 8, 1957

'Allen's Press Clipping Bureau

'By [Sgd.] Philip N. McCombs

'Employer

'[Sgd.] Ruth McCelland

'Employee.'

Defendant continued in plaintiffs' employ until October 31, 1958, when she voluntarily terminated her employment. She testified in effect that she did so because of the constant pressure on her to increase her production, and through solicitation of a former coemployee who was then employed by Northwest Press Clipping Bureau and at the instigation of its manager. Thereupon she entered into the employment of the rival firm at the same basic monthly wage of $265. It appears that her former employer in addition to her salary sometimes paid her a small bonus for meritorious service. Plaintiffs contend that not only has defendant violated her contract by taking other employment, but that she has given information in the nature of business secrets pertaining to plaintiffs' business to the rival employer and competitor and by reason thereof seeks injunctive relief.

As her first assignment defendant contends the court erred in enjoining defendant as hereinabove set forth and in one particular urges that the agreement relied upon by defendant is unenforceable in that it is not supported by any consideration. Generally such agreements, being partially in restraint of trade, to be enforceable as contracts must be: (1) partial or restricted in their operation either as to time or place; (2) must be for good consideration; and (3) must be reasonable. Kelite Products, Inc. v. Brandt et al., 206 Or. 636, 651, 294 P.2d 320; Eldridge et al. v. Johnston, 195 Or. 379, 403, 245 P.2d 239. Had defendant signed the agreement at the time she first became employed, no problem regarding consideration would arise, as a benefit would accrue to her by reason of obtaining employment. Here she was already employed, so no present benefit could accrue to her solely because of that fact. Some courts attempt to sustain such agreement on the theory that unilateral contracts are intended, i. e., a promise for an act. But under that theory it appears that there is always either an express promise of continued employment or one can be implied from the circumstances or some other consideration is present. Where the employee under such circumstances continues to perform, it has been held that there is sufficient consideration. Other cases appear to proceed on the theory of executed consideration; that is, when a contract voidable for want of mutuality because by the terms it does not bind one of the parties is performed by such party on demand made by the other, it becomes obligatory. See Harvester King Co. v. Mitchell, Lewis & Staver Co., C.C., 89 F. 173. But an examination of the cases relating to employment agreements of this type indicates that when contracts have been sustained on that basis the courts have always found a promise of continued employment, or one could be implied from the circumstances. Here there was no express promise of continued employment. On the contrary the expressed consideration had reference to a pre-existing contract of employment. Plaintiffs could have discharged defendant immediately after she signed the contract. Nor can any promise of continued employment be implied, as plaintiffs were not requiring her to sign as a condition of employment. On the contrary, plaintiffs' manager only told her to 'sign it if you want to.' Defendant further testified without contradiction that 'we weren't forced to sign it.'

In 152 A.L.R. 415 appears an annotation entitled 'Validity and enforceability of negative restrictive covenant in contract for services as affected by fact that it was not included in original contract of employment but in a subsequent contract for continuance of employment.' It is pointed out that:

'There is a difference of opinion as to the validity and enforceability as against the employee of a covenant of the kind herein discussed, where the covenant was made subsequently to the beginning of the employment. Some of the courts hold that, under the circumstances, there is no consideration for the covenant, and that it is, therefore, unenforceable as against the employee; on the other hand, it has been held that the continuance of the employment is a sufficient consideration for such a covenant.'

As supporting the theory of lack of consideration in a like type of situation defendant cites Kadis v. Britt, 224 N.C. 154, 29 S.E.2d 543, 152 A.L.R. 405, 413; May v. Lee, Tex.Civ.App., 28 S.W.2d 202, 204; Schneller...